More Renters May Qualify for a Loan After July 10
If renters paid their landlord on time for a year, they can share that info with Freddie Mac to improve their chance for mortgage approval or a lower interest rate.
MCLEAN, Va. – Freddie Mac will consider on-time rent payments as part of their loan-purchase decisions starting on July 10, 2022.
After that date, mortgage lenders that plan to sell loans to Freddie Mac can add an applicant’s rent-payment history automatically through Freddie Mac Loan Product Advisor (LPA), the company’s automated underwriting system.
“This extremely important initiative will help many renters move closer to achieving the dream of homeownership,” says Michael DeVito, CEO of Freddie Mac. “Millions of American adults lack a credit score or have limited credit history. By factoring in a borrower’s responsible rent payment history … we can help make home possible for more qualified renters, particularly in underserved communities.”
Lenders won’t automatically see whether a borrower has paid their rent on time. To gain this advantage, borrowers must give their lender permission to submit bank account data that verifies on-time rent payments for 12 months.
Designated third-party service providers who already verify assets, such as income and employment information, will use that same automated process to verify the rent payments. Eligible rent payment data includes check, electronic transactions or digital payments made through Zelle, Venmo or PayPal.
“One of the first steps to purchasing a home is a positive credit history, and Freddie Mac is committed to helping consumers achieve that goal,” says Freddie Mac President Mike Hutchins. “Factoring on-time rent payments into our automated underwriting system will help create even more opportunity for families across the nation.”
Last year, Freddie Mac announced an initiative to help renters build credit by encouraging operators of its multifamily properties to report on-time rental payments to the three major credit-reporting bureaus. Since then, it says 70,000 households in more than 816 multifamily properties have been enrolled, more than 15,000 new credit scores have been established, and 67% of renters with an existing credit score saw their scores increase.
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