Getting a mortgage will be easier if you pay your rent on time.

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Getting a mortgage will be easier if you pay your rent on time.

Getting a mortgage will be easier if you pay your rent on time.

With a shortage of houses for sale and rising prices, it is already quite difficult to become a home buyer for the first time.

But if you have a limited credit history, many lenders will take advantage of this fact to charge you a higher mortgage interest rate – so your foray into the housing market will seem like it’s over before you even have a chance of being thrown over. your first 20 homes.

Now one of the nation’s largest mortgage players wants to change that by rewarding responsible tenants with increased access to affordable mortgages

Paying your rent each month may not get you any closer to becoming a homeowner. But in a little over a month, it could actually happen.

Pay your rent, increase your chances of getting a mortgage

Fannie Mae website

Gil K./Shatterstock

State-funded mortgage giant Fannie Mae has announced that, effective September 18, the underwriting system used by its lender partners will take into account timely lease payments when assessing borrowers’ creditworthiness.

Single-family lenders who have received permission from mortgage applicants will be able to include recurring rent payments in their bank statement details. Lease payments can be flagged if they are made electronically or by check and appear in the borrower’s payment history.

“For qualified renters who may have a limited credit history but a good rental history, Fannie Mae’s [underwriting] the improvement creates new opportunities for homeownership while promoting safe and secure lending, ”Fannie said in a statement.

Fannie Mae itself does not create mortgages, but because it buys and guarantees loans for much of the US mortgage market, it has a significant impact on industry standards and practices.

Tom Wind, executive vice president of consumer lending at US Bank, says the inclusion of rent data will allow his company “to expand sustainable home ownership opportunities for underserved markets and consumers.”

If you are currently delaying your rent due to the pandemic, please be aware that billions in emergency rentals is still available at the state and local level thanks to the COVID Stimulation Bill signed in March by President Joe Biden.

Why Fannie’s Move Should Help Home Buyers

Mortgage application rejected

Doubletree Studio / Shutterstock

While recurring rental payments are considered a relatively reliable indicator of reliability and financial stability, less than 5% of renters see their rental history on their credit reports, Fannie Mae reported.

This often results in borrowers having much shorter credit histories, which works against them when they apply for a mortgage. When you do not have established experience as a borrower, lenders have little evidence of your ability to pay off debt to lenders – and little incentive to offer you favorable mortgage rate

Adding 12 high-profile examples of responsible behavior to your credit history each year, i.e. monthly rent payments, can make a difference.

According to Fannie Mae’s own research, lenders who took into account the history of consistent rental payments of first-time home buyers in the past would have led more borrowers to qualify for mortgages.

“In a recent sample of mortgage applicants who have not owned a home in the past three years and have not received positive references through [underwriting], 17% would have received an Approve / Meet Eligibility recommendation if their rental history had been accounted for, ”the company said in a statement.

Only systematically timely rental payments will count towards your assessment as a borrower. The missed payments won’t have the same negative impact, Fannie Mae said.

Other Ways to Improve Your Chances of Home Buying

Husband and wife are celebrating in front of their new home.

@cookienanster / Twenty20

If you are a responsible renter with a short credit history, Fannie Mae’s decision to help lenders account for your rent can be overwhelming. But there is more you can do to make a good impression.

Your rental history will still not affect how your credit score is calculated after September 18th. Even if your rent is always paid on time, your bill won’t necessarily be as high as the lenders want it to be.

If you haven’t seen your result for a long time, today is easy check your credit score for free… The lowest mortgage rates are usually obtained by the borrowers with the highest credit ratings; you may find that you need to improve a little before applying for a mortgage.

Maybe you pay your rent on time, but at the expense of other debts. If you have multiple high-interest debt that you cannot pay off, consider turning it into low interest debt consolidation loan… You will pay less interest, pay off your debt faster, and improve your cash flow.

Do not apply for a mortgage with the very first lender to offer you. Instead of, compare offers from at least five lenders to find the best rate for your area and for the person with your credit profile.

And, if saving your down payment is your biggest hurdle when buying a home, try earning some extra income. A popular app can help you make a profit in the still popular stock market using little more than “Little thing” from your everyday purchases

This article provides information only and should not be construed as advice. Provided without warranty of any kind.

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