Homeowners with previous foreclosures boomerang back as buyers

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Minnesota homeowners who experienced a foreclosure, short sale or bankruptcy during the housing collapse and recession are returning to the market in droves.

The Star Tribune has a front page story on how these so-called “boomerang buyers” are restoring credit ratings and obtaining mortgages. Real estate agents say they’re reaching out to former clients who lost their homes to let them know that homeownership is again a possibility.

One in 10 home buyers this year has gone through a foreclosure or short sale, more than double the rate in 2012, according to John Burns, a national research firm on the housing industry. In Minnesota, where more than 150,000 homes fell into foreclosure from 2005 to 2012. But many of those homeowners have returned to full employment and can afford a down payment and qualify for a new mortgage.

For those who lost homes in a foreclosure or short sale, there is a waiting period to return to the market. To qualify for an FHA mortgage, the waiting period is three years after a foreclosure or short sale, but can be abbreviated with proof that circumstances, including lack of employment or medical conditions, led to the default. For conventional financing, the wait period is four years, but can be shorter with extenuating circumstances.

Still, nearly one in five Minnesota homeowners remain underwater on their mortgage and more than 16,000 received preforeclosure notices in the first six months of 2013.

“The number [of foreclosures] is still three times higher than it was before the crisis began,” said Julie Gugin, executive director of the Minnesota Homeownership Center.

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