Top Reasons to Buy a Home vs. Rent
Paying Your Rent on Time Can Now Help You Qualify for a Mortgage
Good News! Renters who consistently pay their landlords on time may start finding it easier to get a mortgage. Last weekend, home loan investor Fannie Mae introduced a tool that allows lenders to factor in a renter's on-time payments and use that information to help them qualify for a mortgage. This shift is designed to help more people with limited credit histories or low credit scores become homeowners sooner than later.
Here’s how it works: After applying for a mortgage the lender runs it through Fannie Mae’s underwriting software to determine if Fannie Mae would buy the loan. If the answer is “no” based on traditional inputs like credit score, etc., renters can get another shot by submitting their bank statements for review. Fannie Mae’s automated system will then scan for a record of 12 consecutive months of on-time rental payments. This system can identify check or electronic rent payments regardless of how it is made (ie. landlord’s payment portal, digital payment platform such as Venmo, Paypal, etc.).
Fannie Mae estimates that 17% of recent applicants who weren’t recommended for a mortgage under traditional inputs would qualify if rental payments had been taken into consideration.
Another Change in Mortgage Qualifying
Up until now, lenders evaluating a loan application from co-borrowers have only considered the lowest credit score to determine creditworthiness, which means if one of the co-borrowers has a score below 620, the pair wouldn’t qualify for a mortgage.
Now, lenders...
