Renters ready to buy their first home finally can get credit for consistently paying their rent on time. The Federal Housing Finance Agency (FHFA) recently announced that good rental payment histories will be considered in Fannie Mae underwriting calculations. This change is effective immediately.

That’s great news for renters hoping to become homeowners. In the past, a lack of credit may have been what prevented some would-be homeowners from securing a mortgage, even though they never missed a rent payment. Considering that rent is often a large expense, a solid record of timely payments will finally matter when seeking a mortgage. At the same time, if you’ve struggled to pay your rent on time, it won’t be held against you.

Expanding Credit for Low-Income and Minority Borrowers

According to Fannie Mae research, about 20 percent of the U.S. population –– disproportionately Black and Hispanic consumers –– doesn’t have an established credit history, and fewer than 5 percent of renters have rent payments reflected in their credit report. This move by the FHFA is expected to increase low-income and minority homeownership. Why?

• Insufficient credit score or credit history was the biggest obstacle to getting a mortgage for almost 30 percent of Black consumers, compared with 18 percent of White consumers, based on Fannie Mae research.
• A Fannie Mae study found that 17 percent of would-be homebuyers would have been approved if their rental history was considered.

The first step in understanding how this change could impact you and your quest for homeownership, consult with a loan officer. They should be able to explain the benefits of the announcement.