What you need to know about your rent and what mortgage lenders check when buying a home.
We all know that a good credit score can help you get a better interest rate on your mortgage. But did you know that your lender may also look at how you pay your rent?
While it might not seem like it, paying your rent on time is essential when applying for a mortgage. That's because lenders want to see if you have responsible habits and whether or not you're able to manage your money well.
Here are some tips for ensuring your rent history will help you get the best terms at the best rate.
1) Pay by check or cash if you get receipts.
If you pay by cash, confirm with your landlord or management company that they document cash forms of payment in advance so that there are no surprises when the time comes (most do). But some just pocket the cash and don't report the income. If you can't get documentation, it's as if it never happened. Also, be aware that some landlords will only accept cash payments. This is okay, as long as you get and keep receipts of your payments.
2) The verification of rent form.
Lenders require management companies and private landlords to complete a verification of rent payments form before processing an application for a mortgage loan. This means getting contact information from them and being prepared to fax or email over copies of canceled checks or proof of direct deposit into their account(s). Also, make sure they are prepared to answer the phone on your behalf if the underwriter calls.
3) Non-QM loans may require more.
Some Non-QM lenders want more than just a verification form. They may ask for canceled checks and/or receipts of payment. If you've been paying cash, now might be a good time to start writing a check for your rent. By writing checks now, you will create a paper trail of payments for the future. As credit gets tighter, you want to protect yourself by having good documentation of your financing.
If you want to stop renting and buy a home, call us at (727) 784-5555. We know how to get you approved and help you understand how much you can afford.
If you have any questions about buying a home, use the form below, and one of our mortgage experts will be in touch to answer your question.
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