For people who rent rather than own a home, rent is often the largest monthly expense. Late payment of rent entails consequences, such as the risk of eviction. But often tenants who consistently pay their landlords on time see no reflection of this positive activity anywhere. The situation is changing now and it could help more people to qualify. mortgage…
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Rent payments will soon carry more weight
The Federal Housing Finance Agency announced that timely rent payments will now be factored into Fannie Mae’s mortgage underwriting calculations. The change will take effect immediately and become part of Fannie Mae’s digital underwriting system.
A recent study by Fannie Mae found that less than 5% of renters report rent payments on their credit reports. But since rent payments are the largest monthly expense for many people, missing them on their credit reports can hurt their chances of getting benefits. home loan… So this is a positive change that could make it easier for more borrowers to get approval.
Improve Your Chances Of Getting A Mortgage Loan
Paying your rent on time can now help you get your mortgage approved. But this is not the only step you need to take to get a home loan. Here are a few more things you will want to do.
Maintain a high credit score
You will need a minimum of 620 points to qualify for ordinary mortgagebut some lenders require higher scores. And if you want to catch a competitive interest rate on a mortgage, aim for a GPA of 700 or higher.
If you are serious about buying a home in the near future, check credit ratingand if it’s not as strong as you’d like, work on strengthening it. You can do this by paying off your existing credit card balance and correcting mistakes in your credit report…
Reduce your debt
Lenders look at your debt-to-income ratio when deciding if you are eligible for a mortgage. This ratio measures your monthly debt in relation to your income. Lenders usually do not want this ratio to exceed 28% for your housing payments or 36% for all of your debt payments combined, including housing payments.
Try not to take on extra debt if you think you will be applying for a mortgage soon. And if possible, try to pay off as much of your existing debt as possible.
Save on your down payment
Ordinary lenders require a certain amount of money to close a deal. You can find a lender willing to accept as little as 5% for advance paymentbut most lenders want 10% to 20%. And if you don’t give that 20%, you have to pay private mortgage insurance, an expensive insurance premium that is added to your home payments.
It is a good thing that timely rent payments will be taken into account when determining eligibility for a mortgage. But paying the homeowner on time doesn’t guarantee that you can borrow money to buy a home whenever you want. Work on these steps to improve your chances, and if you’re lucky, your efforts will lead to a mortgage – and affordable.