PHOENIX (3 On Your Side) -- Homeownership could soon be more attainable for thousands of Arizonans. Starting Sept. 18, mortgage giant Fannie Mae will consider rent payments on mortgage applications. Matt Baker with Fairway Mortgage in Phoenix says between 80% and 85% of all loans through Fannie Mae. He believes this new change could remove hurdles some renters face when trying to become homeowners. "This opens up a lot of opportunity for a lot of people that have been sort of wanting to go conventional that haven't been able to," he said.
Until now, rent typically is not counted in the mortgage approval process. "So, now you have the ability to include rent in that equation; it is going to change the game for a lot of first-time homebuyers," Baker said.
If you have a limited credit history but always pay your rent on time, Fannie Mae's new policy could help you qualify for a home loan. "The mortgage rating is the No. 1 thing for compensating factors when it comes to the automated system, so adding a 12-month rental history is equivalent," Baker explained. It's leveling the playing field for those first-time homebuyers that previously had lower scores and couldn't get approved."
Baker says every loan runs through an automated underwriting system. With your permission, Fannie Mae can now peek into your bank account to see if you pay your rent regularly. "I think it's a game-changer. I think it's going to help a lot of Arizonans," Baker said.
Fannie Mae says creating a more inclusive mortgage evaluation process will help to correct housing inequities. "Many renters believe they will never be able to buy their own home because of insufficient credit," Fannie Mae CEO Hugh R. Frater said in a news release. "We can responsibly expand mortgage eligibility by including positive rent payment history in underwriting risk assessments."
If you're a renter with a lower credit score who wants to buy a home, Baker suggests paying your rent through your bank account. "The way that this new system is going to work is that you do a third-party check through your bank records to show that you've been making the payment," he explained. "It's not going to be a verification of rent from a landlord. It's going to be verifying your bank account information, so don't Venmo. Don't, you know, use a cashier's check or money order. Try to do it through your bank account because that's going to give you the best shot for that system to recognize you've been making the rent on time."
If you have a limited credit history or a low score, Baker says you should talk to someone who can walk you through the process, like a licensed mortgage banker or broker.
This is an opt-in feature. It's meant to help, not hurt, potential homebuyers.
"If they don't know if they made their payments on time -- you hope maybe you would know if you had a misstep -- but if you didn't, we would be able to review it, and then include or not include based on the decision," Baker said.