Rental Payment History Can Help You Reach Homeownership Goals in 2022

Fannie Mae is making homeownership more accessible for prospective homebuyers in 2022!

I’m happy to announce that rental payment history can now be considered as a part of mortgage eligibility. 

In this month’s blog, we’ll go over the details of this new program and explain how this new inclusion can help some attain the goal of homeownership this year.

About The Rental Payment History Program

The ultimate goal of this program is to make the mortgage application process more accessible and fair to individuals and families, especially those with modest credit history.

It will be done under its automated, desktop underwriting system to add rent payments to their mortgage evaluation process. With permission from applicants, the underwriting system will automatically find recurring rent payments in bank statement data to deliver a more inclusive credit statement.

“We believe this will be the first time any large-scale automated mortgage underwriting system will leverage electronic bank statement data to consider positive rent payment history, “ said Hugh R. Frater, the Chief Executive Officer of Fannie Mae.

An essential part of the new system is that it counts an applicant's positive rental history -- so missed payments will not count against your application. Rent payments of at least $300 made over a year consecutively will now count towards your financial standing on a mortgage application.

What Does This Mean for Realtors and Homebuyers?

This new inclusion opens doors for those looking for homes, particularly those with millennials and limited or no credit history. 

Many millennials learned from their parents' mistakes and opted not to amass debts as their parents did, which led to the mortgage meltdown. Although it was a smarter decision, this choice to not borrow money hurt them instead of helped them.

Credit history is crucial in evaluating an individual's ability to make mortgage payments, and those with limited or no credit history may experience more obstacles because of it when looking for a home.

Also, many things like cell phone bills, rent, or other utilities typically do not appear on credit reports; they are considered “alternative credit” or “alternative tradelines”. Before this DU enhancement, all loans with “alternative” credit had to be manually underwritten.

These “alternative” tradelines – in this case, rental payments – will allow more borrowers to show that they do have a positive credit history, as well as make alternative credit more streamlined. Overall, Fannie Mae's DU enhancement will create new opportunities for homeownership while promoting safe and sound lending for applicants with a limited credit history but a strong rent payment history.

How to Keep Track of Your Rental Payments

For you to take advantage of this new update, It is all about the records. This is true with any bill or payment in general, but it is very important for using rental payments as credit.

Here are four tips to keep track of your rental payments:

1. Paying by check: If you can write a check, keep a copy of the canceled check.
2. Paying online to a management company: Many apartment complexes allow you to pay them online via their website. If you pay rent via the website, there is typically a small charge for the service. This means that the amount on your lease is different from the monthly deduction. Save these email confirmations to be safe.
3. Paying by Zelle, Venmo, or Cash App: If your landlord has you pay them via Zelle, Venmo, Cash App, or some other app, make sure that you are tracking these payments and they show the landlord's name.
4. Paying by money order: If you pay by money order, you need to be able to show the withdrawal from your account and then save copies of the money order.

Let’s Get You Started on Your Journey

Buying a home is one of the best ways to build generational wealth. You may have concerns, but you can talk to me. That’s what I’m here for.

Let me help you to accomplish the goal of homeownership. If you feel that you’re eligible for a home with this new update, give me a call or send me an email with your questions or to get started on your home buying process at sam@mindfulmoneyusa.com!

Mortgage Brokers have your back! In fact, did you know that brokers provide hopeful homeowners with more personalized service?

We can also offer the most diverse loan options tailored to your unique situation or needs.

I’m proudly licensed in Arizona, California, Colorado, and Florida and am happy to help you, a loved one, or anyone you’d like to see have a positive experience on the path to homeownership.

* Specific loan program availability and requirements may vary. Please get in touch with your mortgage advisor for more information.