If you are a renter interested in becoming a homeowner, your rental history could now have an impact on the mortgage rate that you are able to obtain. The Federal Housing Agency is now considering consistent timely rental payments as part of a borrower’s credit history. If you are a current renter looking to buy a home in Knoxville, Maryville, Lenoir City, Oak Ridge, or Gatlinburg, Tennessee, and want to better understand how to qualify for a home loan, Foundation Mortgage can help. Read on to learn more about how paying your rent on time could help you get a lower mortgage rate.
Rental History and Its Impact Qualifying For a Mortgage
In order for most renters to obtain a mortgage, they must have decent credit, and most landlords do not report rental payments to credit bureaus. Previously, even if tenants made consistent rental payments on time, it did not improve their credit score. Fortunately, Fannie Mae has recently begun considering rental payments as a factor of a borrower’s credit history as part of the underwriting process in an attempt to help more first time home buyers enter the housing market. Mortgage lenders can now use a borrower’s bank account information to identify up to twelve months of rental payments with the borrower’s permission. This helps to remove certain barriers for some potential borrowers who may not have adequate credit history and improve their credit score, which would help lead to a higher number of mortgage approvals.
Ways To Get Your Rental Payment History Added To Your Credit File
Your credit score will determine your ability to obtain a mortgage, as well as the interest rate and terms you can qualify for, and paying your rent in a timely manner can help to improve your credit score. You will not be able to self report your rental payments to credit bureaus yourself, however, the major credit bureaus will accept your rental history information from a third party servicers such as Experian RentBureau, Rental Kharma, and Rent Reporters. Before you sign up for these reporting services, you will want to know how much it will cost and which credit bureau they send the report to. Once all three of the major credit bureaus (Equifax, Experian, and TransUnion) receive your rental information, they will include it in your credit score. You can also help to improve your credit by obtaining a credit card and paying your rent with it, and ensure that you pay off the balance each month. You can also try to reduce your debt-to-income ratio and attempt to save more for a down payment.
If you need help getting a mortgage in Knoxville, Maryville, Lenoir City, Oak Ridge, or Gatlinburg, Tennessee, contact Foundation Mortgage today for a consultation.