If you have been regularly making your rental payments on time, you understandably want your solid efforts to pay off when you apply for a mortgage. Until recently, however, a mortgage applicant’s diligence in making timely rent payments played no significant role in their odds for loan approval. Thanks to technological advancements, underwriters can now take this into consideration on both conventional and government-backed loans. By doing so, it can strengthen your application and showcase your great payment record.
Specifically, an update to the Desktop Underwriter program that many lenders use has enabled a positive rent payment history to be included in an applicant’s overall risk assessment. Two factors must fall into place. First, your monthly rent must be more than $300. Second, the lender must obtain a Verification of Asset report for the last 12 months. In addition to these factors, several other requirements apply. For example, you must be a first-time homebuyer who is buying a principal residence. You also must have a credit score from the three bureaus.
Keep in mind that this will be just one of many factors that your underwriter will use to complete a risk assessment. For example, your full credit history will be reviewed, so making on-time credit card and loan payments is also crucial. The lender will also determine if you have enough funds to close on the loan and to cover any post-closing reserve requirements. Your employment and income history will also be reviewed.
It can be intimidating to apply for your first home loan. While you understandably want to do everything possible to present a strong application to underwriting, you also may be eager to close on your new home. Are you wondering if you are ready to buy your first home? Contact our MortgageDepot lending team to get prequalified and to explore your loan options in detail.
Connect with one of our loan consultants to learn more.