Millions of homeowners who had difficulties paying their mortgages after the housing bubble burst are nearing a point at which they could once again qualify for a home loan, according to new analysis from TransUnion. In 2015, 700,000 U.S. consumers will be capable of re-entering the housing market, and within the next five years, that population (called “Boomerang Buyers”) is expected to grow to 2.2 million.
TransUnion, one of the three major credit reporting agencies, studied the population of credit-active U.S. adults over the course of several years — the end of 2006 (the end of the bubble, when prices began to decline), the end of 2009 (when the bubble burst) and the end of 2014 — to determine the figures. Between 2006 and 2014, TransUnion was able to track 180 million consumers, and in 2006, 48% (78 million) of that population had a mortgage, and 8% (7 million) of that group had trouble repaying that loan between 2006 and 2009. By December 2014, 18% (about 1.3 million) had rebuilt their credit to meet Fannie Mae underwriting guidelines, and TransUnion estimates 2.2 million of the remaining 5.7 million former homeowners will rebuild their credit to that point within the next five years.
To be considered eligible to re-enter the mortgage market, consumers have to have no unpaid judgments, garnishments or outstanding liens; no accounts past due; a FICO credit score of at least 620; and enough time elapsed between the negative event occurred and when they wish to re-enter the mortgage market (i.e. four years after a short sale and seven years after a foreclosure), according to TransUnion. Even among the 18% of consumers who have rebounded from the credit damage they sustained during the financial crisis, the majority (58%) have yet to re-enter the mortgage market.
“As boomerang buyers who experienced foreclosures or other negative impacts become eligible to re-enter the mortgage market, they may not immediately do so if they are not aware they are eligible again, or feel daunted by their prior experience,” said Joe Mellman, vice president and head of TransUnion’s mortgage group, in a news release about the data.
Rehabilitating your credit after missing payments on your mortgage or losing your home to foreclosure can certainly be intimidating, and it requires a lot of patience. That doesn’t mean you should stay away from the mortgage market if you desire to own a home. When working toward your goal of becoming a homeowner again, regularly monitor your credit (you can do that for free on Credit.com) to track your progress and understand how your financial behaviors affect your credit scores. The foundation of a good credit score is making loan and credit card payments on time, paying other bills so they aren’t sent to collections and keeping your balances of revolving lines of credit (such as credit cards) as low as possible.
More on Mortgages & Homebuying:
- Why You Should Check Your Credit Before Buying a Home
- How to Get Pre-Approved for a Mortgage
- How to Search for Your Next Home