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The Secret To Leveraging Your Rent History For An Easier FHA Mortgage Approval

Certified Mortgage Advisor
NMLS 1701021
November 8, 2022

How can we use positive rental history

Now, let me show you how you can use your positive rental history, so your on-time rental payments count towards an FHA loan approval to help get you into a home easier. Because unfortunately, your credit score and credit history do not include your rental history most of the time, unless your landlord isn't reporting that or you're using some service and your credit score is one of the biggest factors in getting approved for a loan. Okay, so here is how it works.

Higher approval rate using your positive rental history

So positive rental history counts towards your approval chances of getting an FHA loan. The way this works is FHA loans, no matter what lender you'd use, use a software called Total or Technology Open To Approved Lenders. That doesn't really matter the name of it, but basically, it's an underwriting software where they're going to take your application, run it through the application, and it's going to give you kind of a thumbs up or a thumbs down on if your loan is approved or not.

So for people who initially got a thumbs down, adding on positive a rental history can help turn that into a thumbs up. Now, this obviously depends on tons of different factors that FHA doesn't disclose. But if you're at that point, if you're talking with a loan officer and you aren't able to get approved with an FHA loan, talk with them about exploring this option to see if you can use your rental history for the past 12 months to flip that no into a yes.

620 FICO credit score

So you will need a 620 minimum FICO credit score. One little side note as well is if you do have late rental payments, just let your loan officer to not include your rental history. So it's not going to count against you.

If your loan officer asks you about your rental history and you have late payments on your rental history or you paid it late, that's okay. It won't include it and it won't count against you if you disclose that. The only thing this can do is help. It cannot hurt you.

Must be a first-time home buyer

So to use this, again, a 620 minimum credit score, and also at least one borrower on the loan. It has to be a first-time home buyer. That means you haven't been on title to a home in the past three years.

How it's documented

Also, you need 12 months of on-time payment history. The way this is documented is you need a rental agreement or a lease agreement, and one of the following, either a written verification of rent from a landlord, it can't be a business, or a family that you know that you're related to or you own.

Twelve months it canceled rent checks, 12 months of bank statements or payment service statements. So, we're expecting things like Venmo, or Cash App if you're paying rent through those ways or Zelle to be included in those, or a landlord reference from a rental management company.

If you are renting from a family member, checks or bank statements are your only options.

Reach out to my team!

If you wanna go through this process and look at getting approved for a loan with your rental history with an FHA loan, or you just wanna explore other loans, reach out to me and my team. We would love to help you.

We're licensed in all 50 states

You can start an application. It's very quick, and then we can give you quotes and walk you through your options. You can just go to Win The House You Love, or click on get Pre-Approved.

Main Benefit

So here's the main benefit of this. This kind of nudges the approval in the right direction. Again, this is not going to hurt you. There's no negative impact if you don't have on time rental history.

The only thing this is going to do is if the initial answer from the underwriting software was that your loan isn't approved, adding rental history could help flip that into an approval given the extra boost that your application needs to get an approval.

Also, it's a more full indication of your ability to repay a loan than just a credit score. It's amazing that like credit scores are so important in getting a loan, but your rental history normally isn't included. So this is kind of FHAs the next step in helping that rental history to actually impact you're payment cuz you've been making. You know, I hear this all the time from people, they're like, I'm gonna go buy a home that's $2,000 a month. I've already been paying, you know, $2,500 a month in rent for the past five years. So how is it difficult for me to get approved for a loan in this way?

One quick side note

FHA loans, a lot of people kind of get this confused with the credit score. If you have anywhere between a 500 to a 579 credit score, you will need 10% down. You can still get approved for a loan with a 500 credit score and 10% down on an FHA loan.

Feel free to reach out to us and we'd love to help. If you have a 580 plus credit score, you will need 3.5% as a down payment, and of course, with this program to use your rental. For that approval, you will need a 620. This is only part of the picture.

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Kyle Andrew Seagraves is Federal Mortgage Loan Originator (NMLS 1701021) licensed in all 50 states with the Dan Frio Team at Allied First Bank (NMLS 203463), an Equal Housing Lender. Separately, Kyle owns Win The House You Love LLC, an education company. Win The House You Love LLC is not a lender, does not issue loan qualifications, and does not extend credit of any kind. This website is only for educational usage. All calculations should be verified independently. This website is not an offer to lend and should not directly be used to make decisions on home offers, purchasing decisions, nor loan selections. Not guaranteed to provide accurate results, imply lending terms, qualification amounts, nor real estate advice. Seek counsel from a licensed real estate agent, loan originator, financial planner, accountant, and/or attorney for real estate, legal, and/or financial advice.

Allied First Bank is not affiliated with the VA, FHA or any other government agency. This site has not been approved by any government agency.
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