When an individual or family is in the market to buy a home, it often causes them to increase their focus on their credit score. A borrower’s credit score is still a major determinant of whether they will qualify for a loan and the interest rate that they may have to pay on that loan if they are approved. In today’s highly competitive housing market, a high credit score may be the difference in determining if a buyer can afford a large enough mortgage to be able to make a high enough offer to have a chance of getting into a home.
While credit scores will continue to be a major factor for borrowers along with other items that may be included on their credit report, there is now a new movement to include additional information, such as the borrower’s history of paying their rent on time.
Fannie Mae, one of the nation’s giant mortgage funding firms, has announced that it will now allow borrowers to use bank records showing a history of timely rent payments to help them qualify for a mortgage.
So, what does this mean for people who hope to buy a home one day? To start, it is still important to have a strong credit history and a high credit score. But in addition, it is advisable to build a strong history of documented rent payments. A renter may want to make sure that they pay their rent in a way that is trackable such as through a bank account in their name rather than by cash or money order. And of course, make sure to pay the rent on time perhaps by using autopay or a direct debit.