Following up on boomerang buyer

Recently, a reader from California asked for an update to the Boomerang Buyers column from Sept. 12. Specifically, the reader asked, “Are any lenders really creating loan products for this category of buyer (a buyer that has filed for bankruptcy)?”

According to Jamie Tyndall, branch manager for Mortgage Master in our area, the time allowed for a borrower to obtain a mortgage after a single bankruptcy filing varies.

The Federal Housing Administration (FHA) will be the most lenient lender. As of Aug. 15, the FHA updated lending guidelines to include economic events as extenuating circumstances for bankruptcy — other lenders do not use this definition.

The FHA defines an “economic event” as any occurrence beyond the borrower’s control that results in loss of employment, loss of income, or a combination of both that causes a reduction in the borrower’s household income of 20% or more for a period of at least six months.

Recovery from an economic event is the re-establishment of satisfactory credit for a minimum of 12 months.

The FHA will lend to those who have filed Chapter 13 after 12 months of its discharge and have permission from the court to enter into a mortgage transaction.

The FHA will lend to those having filed Chapter 7 between one and two years of its discharge provided it receives evidence that the bankruptcy was caused by extenuating circumstances and recovery was made.

FHA will disregard the bankruptcy after two years from the discharge date.

The maximum FHA loan for Fairfield County is $708,750.

Fannie Mae and Freddie Mac look at single bankruptcy Chapter 7 and 13 as similar and will lend two years after discharge, if it was caused by extenuating circumstances. But they do not consider an economic event an extenuating circumstance as listed above.

Fannie Mae and Freddie Mac both lend to applicants four years after discharge if the bankruptcy was caused by financial mismanagement. The maximum loan in Fairfield County is $601,450.

Jumbo loans will tend to follow the Fannie Mae and Freddie Mac guidelines in terms of time frames with need for establishment of new trade lines — no derogatory credit since the bankruptcy, review of rental history, and savings history since the bankruptcy event.

Another reader is preparing to list her home for sale and asks, “What can be done to improve resell value while making a home more attractive to buyers?”

At the top of the list is to neutralize the color scheme of the home. Interior designers don’t recommend painting trim a different color than the walls.

Textured walls are not recommended, nor are themes in children’s rooms. Converting bedrooms for other uses and removing closets are also not recommended. To sell the home, these rooms should be returned to a bedroom having closets.

Hot tubs are also not valued by prospective buyers.

Lastly, it is not recommended to have too much landscaping, as buyers are concerned about maintenance.


Mary Ann Clark is a Realtor with Coldwell Banker at 177 West Putnam Avenue in Greenwich. Questions or comments may be emailed to [email protected]

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