How Your Rental History Affects Your Home Mortgage Application

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How Your Rental History Affects Your Home Mortgage Application

Staff Writer · Nov 28, 2009

If you have decided to take the plunge and purchase your first home, you are probably wondering how your rental history will affect your mortgage application. Your rental history is of vital importance when applying for a home loan.

Do Landlords Report to a Credit Bureau?

While this may come as a surprise, most landlords and apartment complexes do not report to a credit bureau under normal conditions. If you have never paid rent late, or never defaulted on a rental agreement, it is not likely that you will see your landlord on your credit report next to a long line of “pays on time”. Rental companies are sometimes operating on a relatively small staff. It is not in their best business interest to report their lessees every month, when they are paying well.

However, if you are on the other side where you are either paying your rent late, owe your landlord money or are in default of your rental agreement, you can certainly expect to see negative remarks on your credit report. Any time you have unpaid debt or negative payment history, you can expect it show up on your credit report.

How Good Rental History Affects Your Mortgage Application

Although in most cases you will not have the benefit of positive feedback on your credit report from your landlord, he is still a valuable reference when trying to buy a home. Credit history and financial income are only two parts of a home mortgage application.

If you are in good standing with your previous landlords, than you will have some good references to employ on your mortgage application. It is common practice for mortgage lenders to check out your references. Although they may not see any notations from your previous landlords on your credit report, they will certainly call on them to determine your credibility.

How Bad Rental History Affects Your Mortgage Application

An outstanding debt or unacceptable payment history with a landlord will show up on your credit report, especially if money is still owed to them. That is what can hurt you on a mortgage application. It can send up a red flag to the mortgage lender that you are still in debt to a previous landlord and that you may be a high risk for a loan. This is how bad rental history affects your mortgage application.

If you are not in good standing with previous landlords, you cannot expect them to give you a viable reference. Not only is credit history and financial income important, but what previous landlords have to say about your ability to pay is equally important. If a mortgage lender suspects that you have had problems making payments in the past, they will equally assume that you are a high risk for the money you are requesting.

Check Your Credit Report Annually

Because you know that your rental history can affect your ability to secure a home loan, you should make sure that there are no errors on your credit report. If a previous landlord has unfairly reported you for non-payment or a balance due, you will want to make sure that it is cleared up prior to applying for a home loan. By doing an annual credit check on yourself, you can avoid that situation arising when you are applying for a mortgage.

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