Lots Of Expectations In The Housing Market As Formerly Distressed Owners Return
What are the number of creditworthy borrowers expected to enter the housing market in the coming few years? Statistics shows that about 9 million homeowners that received short sold or deed-in-lieu or underwent foreclosure between 2006 and 2014 are yet to return to the housing market. These homeowners are expected to enter the market soon but lender overlays and poor credit scores will impair most of them from buying new homes. Nevertheless, some of the homeowners who were affected by the foreclosure crisis have already bought new homes. About a million of the formerly distressed homeowners will be eligible to get mortgages but it’s sad as millions of them will likely not be able to buy homes for the next decade.
The Cause and Effect
Some years back as the world ushered in the new millennium with lots of goals and expectations, loose lending standards hit the lending industry which gave most low income buyers a chance to buy homes. This in turn made home prices to fall and this effect when it was coupled with the rising unemployment rates, prime borrowers defaulted or went through a short sale. With time, some of the borrowers became distressed homeowners. But with a better economy now and good home prices, these homeowners are reentering the housing market of which, most of them will be eligible to buy a home as times goes by.
Factors Affecting the Re-Entry Process
About a million of the former distressed homeowners, who were prime borrowers have already purchased homes again. They are eligible to FHA loans and other loans from various financial institutions after repairing their damaged credits. The number of distressed owners expected to reenter the housing market in the next five years may double those who have already purchased again. The rate at which these homeowners enter the market largely depends on their credit status. For those whose score fell below historic standards, it will be difficult for them to get repair their credit score. The housing and economic environment is tougher, and it would be hard for some of the distressed owners to escape overlays. For real, it will take time for these borrowers to repair their scores and some factors such as missed credit card payments or auto loan payments will limit the number of former distressed homeowners from borrowing in the current tight credit environment.
A Sigh of Relief
Many the distressed homeowners will improve their credit scores easily because of the new credit scoring models (Vantage Score 3.0 and FICO 9). This is true especially for those who rented their homes and those who’ve been paying utility bills. The new model also allows lenders to examine keenly credit risk and the current market situation. The housing market let’s say for the next decade, will get more homebuyers as more and more distressed borrowers become eligible to borrow and buy again.