Interest rates continue to hover around 3.0% and now Fannie Mae has added another means to aid people in becoming homeowners. They will allow a home buyer’s rent payment history as a part of the approval process. The change is effective immediately, but the underwriting system won’t be complete until September. This is especially important for borrowers with limited credit histories looking to finance a home. In my opinion, this is one of Fannie Mae’s better moves as it proves a borrower’s ability to consistently pay a home-related payment. In many markets today, monthly rent costs more than a mortgage payment given the low-interest rates. It only makes sense that a good history of making rent payments is proof of creditworthiness.
Most landlords do not report residential rent payments to credit reporting firms, which can be a problem. However, Fannie Mae’s underwriting system will soon allow it to automatically identify rent payments from an applicant’s bank account information. If 12 months of consistent rent payments are proven, it can help the borrower qualify for the mortgage. One caveat is it could have an adverse impact on those that don’t consistently pay their rent on time. Note: The borrower will need to give permission for their bank account information to be shared.
Fannie Mae will not make it a requirement that a lender look at a borrower’s rent if a borrower meets their criteria otherwise. However, if they need the rental history to prove their creditworthiness the option is available.
Now that purchasing a home just got a little easier, contact Stutesman Action Realty for all your real estate needs, 833.286.8400.