Renters that may be considering a home purchase now have another tool at their disposal. In a recent update, Fannie Mae now includes rental histories in its automated mortgage underwriting process. The system, called the Desktop Underwriter, is used by lenders to evaluate the creditworthiness of mortgage applicants. Ultimately, this means that approximately 17% of buyers who couldn’t qualify for a mortgage previously should have better luck now that Fannie Mae includes rent history in its lending decisions.
More access to mortgages
As a predictive tool, rental history is the closest approximation to whether a person is likely to pay their mortgage. Although some lenders have been including rental history already, the process was more labor intensive since they were forced to enter this payment history manually. This new updated and automated system should make it much easier for lenders to access this information. This is welcomed news for responsible renters that have been staying up-to-date with their monthly rent payments.
Building credit is essential when considering a home purchase. It is recommended that prospective home buyers have a credit score of at least 620 to expect good rates for home loans. Of course, the decision to ultimately approve a loan is up to the lender. In some cases, Fannie Mae purchases loans to “guarantee” them, which means they are responsible for the debt if the borrower defaults. In order for rental history to be captured in the Desktop Underwriter system, payments must be made via check, electronically through a rental management’s payment portal and through other electronic methods such as Venmo, Paypal or Zelle in order to be eligible for consideration in this program. In addition, these forms of payment must be connected to a bank account. Borrowers will have to give lenders permission to access and verify these banking records while applying for a home loan. In the end, whether you are applying for rental housing or a home mortgage loan, good rental history is a critical part of the equation.
At Live South Florida Realty, Inc. we have assisted many clients with their real estate needs. Are you looking to buy or sell a property in South Florida? Now more than ever, it is critical to have a qualified real estate team and the proper search tools behind you. Live South Florida Realty, Inc., has been a leader in the South Florida market for many years. Let our team of professionals assist you with buying or selling your piece of paradise today! In addition, our recently launched “Florida Home Search” app is now available on the Apple App Store and Google Play Store. With real-time MLS feeds, this app lets you set your own alerts to notify you as soon as a property meeting your needs hits the market. Furthermore, it will also let you know of recent closed sales in your area so that you may be even more educated on the market. Be sure to download this app for your smartphone or tablet today!