Recently, Fannie Mae launched a brand-new feature in its automated mortgage underwriting system. The goal was to incorporate their customers’ rent payments in the mortgage credit review process. Let’s explore this new underwriting technology and what it means for mortgage loans in the future.
Beginning in September of this year, Fannie Mae’s Desktop Underwriter (DU) will automatically allow single-family lenders to recognize recurring rent payments in applications. With permission from the applicant, this can deliver a more inclusive credit review. Imagine how this could change the process for hopeful first-time home buyers!
Limited Credit History No Longer a Determining Factor
Qualified renters with limited credit history but a solid rent payment background could be approved for home loans they couldn’t have qualified for before this change. Not only does this promote safe and sound lending, but it also makes home buying accessible for those that have always made paying for housing a priority. What a positive change for eligibility nationwide!
Only consistent rent payments can improve eligibility. However, this doesn’t mean a missed or late rent payment will negatively affect an applicant’s chances at loan approval. It will simply not be included in the approval criteria. Rent payments will appear in the payment history of the borrower’s bank account data and will easily be found by the new underwriting technology. This could completely change the game for first-time homebuyers and buyers who have a lapse in their borrowing history.
Making Home Buying More Accessible
According to Fannie Mae, this new mortgage underwriting technology will make a big difference in who can qualify for home loans. Lenders factoring in consistent and reliable rent payment history are opening homeownership to those who may have otherwise been turned down. In a recent sample of first-time homebuyer mortgage applicants who did not receive a favorable recommendation through DU, 17% could have been approved if their rental history was considered. Wow!