Make yourself homebuying-ready

During the Great Recession, the NationalAssociation of Realtors found that nearly 9.3 million homeowners underwent a foreclosure, deed-in-lieu of foreclosure, or a short sale. After sitting out of the market for several years to rebuild their credit, these former homeowners are slowly coming back to the market looking for another chance at homeownership. In fact, nearly a million former owners have likely already purchased a home and another 1.5 million are likely to purchase over the next five years.

In spite of the difficulties and hardships they faced, these return buyers still aspire to homeownership. And homeownership has many social benefits, such as fostering strong communities. The benefits of owning a home are still obvious to these return buyers. They still see homeownership as one of the best ways to build equity over the long term.

Here are some tips for return buyers hoping to once again become homeowners:

Make sure your credit is clean. All buyers should carefully evaluate their finances before beginning the search process. A homeowner who has experienced a foreclosure on a conventional loan can expect to be negatively impacted for at least seven years if the future loan will be purchased by Fannie Mae (the Federal National Mortgage Association) and five years if purchased by Freddie Mac (Federal Home Loan Mortgage Corporation). The impact is three years for a foreclosure on a Federal Housing Administration loan if the consumer wants to obtain subsequent financing through FHA, though thatwait can be waived if the borrower qualifies for FHA’s Back toWork program.

The impact for an owner in a short sale can vary widely, but it can be a much shorter timeframe if the owner was current on his or her mortgage payments and has an otherwise favorable credit history. Return buyers should look at their income, savings, and credit report, and collect documentation of income and cash available to prepare for the mortgage application process. If you are re-entering the market after a foreclosure, it is even more important that you have all of your financial ducks in a row.

Get preapproval foramortgage. Preapproval is a written statement from a lender stating the amount of money you have been approved to take out as a loan. Having this information will help the home-buying experience go much smoother and make you a more attractive buyer to sellers.

Have a down payment ready. Many return buyers purchased their first home when little-to-no down payments were needed. Having a sizable down payment is now an important part of the home-buying process. An FHA loan requires a down payment of at least 3.5 percent of the purchase price and a conforming loan without mortgage insurance is a minimum of 20 percent of the purchase price.

Find a Realtor. Most importantly, contact a Realtor, a member of the Santa FeAssociation of Realtors. They are the most trusted resource for real-estate in- formation and can give return buyers the advantage they need in today’s market.

As the leading advocates for homeownership, Realtors believe that anyone who is able and willing to assume the responsibilities of owning a home should have the opportunity to pursue that dream, and return buyers are coming back to the table with a thorough understanding of the challenges and rewards of homeownership.

Paco Arguello is chief executive of the Santa Fe Association of Realtors. Contact him at 982-8385 or paco@sfar.com.