There is no doubt that the current economic climate has brought upon many challenges for homebuyers. Of course, perhaps no group has been met with more challenges than first-time homebuyers. In addition to high home prices and a tight inventory, these buyers are also contending with mortgage interest rates that are double where they were a year ago. Add in out-of-control inflation and this makes saving for a home even more difficult. With this said, it is not all doom and gloom for first-time homebuyers.
FHA to consider rent payments of first-time homebuyers
One of the biggest challenges that first-time homebuyers face is the ability to build strong enough credit to qualify for a home loan. As a result, many are unable to qualify for traditional mortgages. The Federal Housing Administration (FHA) provides mortgage insurance on loans made by FHA-approved lenders nationwide. As part of the U.S. Department of Housing and Urban Development (HUD), they also insure mortgages on single family homes, multifamily properties, residential care facilities, and hospitals. Since qualifying for traditional mortgages can be quite challenging for first-time homebuyers, FHA loans provide a great opportunity for buyers to purchase a home with very low down payments.
Given the fact that establishing strong credit is a particular challenge for many of these homebuyers, the FHA recently published a letter to its lenders urging them to consider including a borrower’s positive rental payment history when applying for FHA-insured financing. Essentially, the FHA believes that if you are paying your rent on-time, this is a good indication that you will pay for your mortgage on time. Ultimately, this announcement is expected to help more than 45 million U.S. adults that have a weak or nonexistent credit score.
Summary
Overall, the inclusion of rental payment history is welcomed news for first-time homebuyers. Furthermore, this also underscores the importance of paying your rent on time, as well as any other bills. As always, avoiding additional debt such as high interest rate credit card debt will be critical in your ability to qualify for and purchase your first home. Are you in the South Florida market and have questions about buying your first home? Contact Natasha at Live South Florida Realty, Inc. today! Also, be sure to download the free Florida Home Search app for your mobile device. This app will not only allow you to have the South Florida MLS right on your device, but you can contact our team right from the app!
