Helping More Renters Become Homeowners

Launching in mid-September, Fannie Mae will allow single-family lenders to immediately identify rent payments in the applicant’s bank statements which will ultimately help in providing an underwriting decision. This will be beneficial for applicants for many reasons, which we will dive into below.

A Shift to Include Borrower's Rent

A lot of renters feel that they won’t be able to own a home due to not enough information on their credit reports. This allows borrowers to have a sigh of relief, now knowing that the underwriting decision is not solely based on the applicant’s credit history or what’s in their bank account. Borrowers who are renting and looking to purchase fall into a tough spot due to the fact that rent payments are typically not reported on credit reports, which really puts them at a disadvantage. By implementing this new feature to include borrower’s rent will give them much more hope of being able to purchase that home that they’ve always dreamed of.

More Inclusivity of Prospective Homeowners

We feel that this will bring more home buyers to the market knowing that they are not being evaluated on just their credit history. For many households in the United States, rent is their biggest monthly expense, and the fact that on-time payments have not been considered in the approval process, has hurt renters in purchasing a home. "With this update, Fannie Mae is taking another step toward understanding how rental payments can more broadly be included in a credit assessment, providing an additional opportunity for renters to achieve the dream of sustainable homeownership." Said FHA Acting Director Sandra L. Thompson in an article from FHFA.

Consistent Payments Matter

Only consistent rent payments will be considered to improve a prospective borrower’s eligibility. Missed or untimely rent payments in the borrower’s bank statements will also not negatively affect the prospective borrower’s eligibility to qualify for a loan that will ultimately be sold to Fannie Mae. If rent is paid via check or electronically, it will be identified in the underwriting process. This will be most beneficial to first-time homebuyers. If borrowers do not have a sufficient credit history, but do have a qualifying credit score to purchase a home, taking rent payments into effect will greatly help these first-time homebuyers in getting approval.

Fannie Mae is transforming the approval process for millions of people across the country and will have a positive impact on the housing market.  This will give many applicants who were at a disadvantage a strong chance of getting approved for a mortgage and getting them set up in the home they’ve always dreamed of having.