Ask an Expert

I pay my rent on time every month. Can that help me get a mortgage?

By Alanna Schubach | July 11, 2022 - 12:30PM

If you have a limited credit history, 12 months of on-time rent payments can help you qualify for a mortgage.

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Question:

I'm interested in buying and will need financing. I read that 12 months of on-time rent payments can help buyers qualify for a mortgage. How does this work? Does it apply to jumbo loans?

Answer:

Proof of regular, on-time rent payments can be useful when applying for a mortgage, our experts say.

Freddie Mac, the Federal entity which buys mortgages from lenders, recently announced it will now consider a history of regular rent payments to help applicants qualify for a mortgage, following last year's move by Fannie Mae, which is good news for first-time buyers who lack a credit score, or have a limited credit history. 

"Previous rent history will help in the loan application process," says Mary Alex Blanton, senior vice president at National Cooperative Bank (a Brick Underground sponsor). "You must still meet lending criteria for credit and assets as well." 

A strong credit score can be an important asset to qualifying for a mortgage, but many renters planning to buy for the first time may lack a robust credit history. In lieu of that, proof of at least 12 months of on-time rent payments can be shown to lenders via apps like PayPal or Zelle, or other methods. 

"You can provide a copy of your lease, plus 12 months of rent checks, or ACH or wire payments," says Melissa Cohn, regional vice president at William Raveis Mortgage. "The lender can also obtain a verification of your rental history by going directly to your landlord and getting the information." 

Many NYC buyers need jumbo loans in order to buy here—mortgages that are too large to qualify under guidelines set by Fannie Mae and Freddie Mac. If that's you, a history of on-time rental payments will still work in your favor.

"Banks are obviously interested in understanding your payment history on a home, and there's a tacit understanding that if you can show you paid rent on time, that is one way to enhance your credit history," Cohn says. 


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