In early August 2021, Fannie Mae announced that they were planning on introducing new underwriting criteria into their preapproval process.
Beginning on September 18th, 2021, Fannie Mae will incorporate consumer’s rent payments in the mortgage credit evaluation process. This change hopes to bring a more inclusive credit assessment for homeownership. This means if an individual has a solid history of paying their rent on time but may not have a lot of credit to support a mortgage, they may still be able to qualify as a buyer.
This change will give renters across the country access to homeownership without compromising safety in the lending process.
Fannie Mae will only consider rent payments as a way to boost eligibility. In other words, renters will not be penalized for missed or late payments when it comes to their mortgage applications. This new criterion can only help more renters become homeowners and will have no negative impact on renters who qualify based on their income or credit score but who may have some missed payments in their rental history.
Roughly 20% of Americans do not have a sufficient credit history to qualify for a mortgage and people of color are impacted at a much higher rate. This new policy hopes to create more equality in the home buying process and give the dream of homeownership to people who never believed they would qualify.
As a real estate agent, I have worked with countless buyers who are eager to become homeowners and take advantage of record-low interest rates but simply do not have the credit history to qualify for a mortgage. For those individuals, I give them advice on how to build up their credit, however, building credit takes time. I talk to several renters every week who feel discouraged about their chances of becoming homeowners in the next year or two. This new underwriting criterion could change this.
According to the CEO of Fannie Mae, Hugh R. Frater,
“This will be the first time any large-scale automated mortgage underwriting system will leverage electronic bank statement data to consider positive rent payment history. It is but one important step in correcting the housing inequities of the past, creating a more inclusive mortgage credit evaluation process going forward, and encouraging the housing system to develop new ways of safely assessing and determining mortgage eligibility in order to fairly serve all potential homeowners. We look forward to working with our industry partners to do what we can together to address this and other barriers to homeownership.”
If you or someone you know is interested in becoming a homeowner and believes they can take advantage of this new policy, please reach out to me here or give me a call at 614-738-2048. I will be happy to walk you through the process, connect you with a lender who can get you preapproved, and find you the right home!