When obtaining a home loan, you’ll receive two important documents from your lender: a loan estimate and a closing disclosure. On the surface, these documents are very similar, but they both serve different purposes. Here’s what you need to know about the differences between these two forms and what each means for you:
What to Check When Loaning to a Boomerang Buyer
Back in the housing crisis of 2007, millions of homeowners lost their homes to foreclosure. Now that the years have passed, they’re looking to buy a home again and are subsequently called “boomerang buyers”—someone who has foreclosed on their home or experienced a short sale and are now eligible to buy a home again. As a loan officer working in a Kansas City mortgage company, you must know a few things before you can provide a loan to a boomerang buyer.
Who Backed Their Loans?
When the boomerang buyer foreclosed on their home, who backed their loans? If it was a government program like the FHA, they won’t be eligible for a loan until they have fully paid off their debt to the government. They must also be off the Credit Alert Verification Reporting System (CAIVRS) list, “a government list of people who have defaulted or had a loan foreclosed within the last three years or currently delinquent on a debt owed to the Federal government.”
A boomerang buyer’s removal from CAIVRS doesn’t mean that they will automatically be eligible for another loan. They must also have completed the required waiting time for their specific loan, and repaired their credit history.
Have They Repaired Their Credit History?
When a homeowner forecloses on their home, their credit takes a big hit, and the foreclosure stays on their credit history for up to seven years. If the seven year period has passed, you need to check that they have repaired their credit and have a good history of paying their bills on time. If they haven’t, then you will need to inform them that they need to fix their credit and how they can do that.
Can They Pay Their Loan?
When discerning if a boomerang buyer is eligible for a home loan, you must know if they have the ability and willingness to pay off that loan. Since there is the possibility that they may have trouble paying their loan payments on time, you will have to check their debt-to-income ratio as well as if they’ve made any large purchases recently.
If a boomerang buyer comes to you looking for a home loan, make sure that you check these three things to determine if they’re a risky applicant or not. If you find that they aren’t eligible for a home loan, discuss what they need to do to get approved for a loan in the future.