How New Rule Helps Homebuyers Qualify For A Mortgage

Q: Is it true now that your rent payment history can help you qualify for a mortgage loan now? Connie, Elmwood Park, NJ

A: The Federal Housing Finance Agency (FHFA) announced that Fannie Mae and Freddie Mac will both consider rent payment history as part of their underwriting process so that buyers with limited credit histories can more easily get home loans. The new rule will factor on-time rent and utility payments into mortgage underwriting decisions. This gives renters an easier path to homeownership.

Desktop Underwriter is an automated system used by Freddie Mac and sometimes the FHA for mortgage underwriting that calculates if a loan meets approval requirements—Freddie Mac adjusted its Desktop Underwriter system to identify rent payments in mortgage applicants’ bank records.

Fannie Mae and Freddie Mac are federal government-sponsored entities that are designed to stimulate homeownership. They do this by buying mortgages originated by other companies, so those other companies can originate more mortgages. Nearly half of all mortgages issued in the United States are backed by the federal government.

It’s important to note that lenders and mortgage brokers look at your full credit history when making decisions on mortgage loan approvals. It remains to be seen whether this new rule will add any additional time to the mortgage application process for homebuyers.

Thanks for your question, Connie.

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