PEORIA, Ill. (WMBD) – Lender Fannie Mae and three major credit bureaus recently announced that rent payments can be factored into credit scores and mortgage applications.
Positive Rent Payment History (PRPH) allows consistent rent payments to be considered in credit scores and loan applications, allowing applicants with limited credit but high rent payments to easier to get approved for a loan.
“Things like this just give more people more access to credit,” said Nathan Durst, owner and president of Home Mortgage Specialists in Peoria.
Durst said the HPRP will open the doors to homeownership for those who previously did not qualify.
“With the addition of rent payments, one-time rent payments, to a person’s credit score, it could positively reflect and actually give a millennial or someone a credit score that may not have -have not had a credit score in the past,” he said.
Hugh Frater, CEO of Fannie Mae, wrote a comment welcoming the new provision, which came into effect in September 2021.
“It seems obvious that if someone is paying their rent regularly, it is likely that they could and will also be paying their mortgage on a consistent basis. Yet, we believe this will be the first time that a large-scale automated mortgage underwriting system will leverage data from electronic bank statements to account for positive rent payment history,” he said. .
Frater said 17% of applicants refused by Fannie Mae could have received a loan if their rental payment history had been taken into account.
But even with more eligibility, buying a home can still be a challenge. Durst said real estate inventory in Peoria is near an all-time high. He said there are programs to help people get into a home with little or no credit.
The Federal Housing Administration, part of the Department of Housing and Urban Development, offers a first-time homebuyer program with a 3.5% down payment.