The Federal Housing Administration (FHA) recently published a letter to lenders, recommending they consider a borrower's positive rental payment history as part of their application for FHA-insured financing.
"If you're regularly paying your rent on time, that's a good indication you will also pay your mortgage on time," says Julia Gordon, Federal Housing Commissioner. "We hope that adding this positive factor to all of the characteristics currently considered in an FHA credit evaluation will increase access to affordable FHA-insured mortgages for first-time home buyers."
The FHA will consider good rental payment history under the terms of the lease agreement.
Verification of the borrower's timely rental payments is required and added to their TOTAL Mortgage Scorecard, an analysis the FHA uses to evaluate borrower credit history and application information when underwriting loans.
"This change makes FHA requirements more flexible and can help remove barriers to homeownership, particularly for those with nontraditional credit or thin credit files," says Julienne Joseph, deputy assistant secretary for single-family housing.