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How Renting Can Shorten Your Journey Toward Home Ownership

How Renting Can Shorten Your Journey Toward Home Ownership

Many Connecticuters consider homeownership as the American Dream, so renting can evoke a sense of incompleteness. This statement may ring true if you have been a tenant for so many years.

If you are like many American adults these days, your student loan debt may have been hindering you from qualifying for low mortgage rates in Guilford, Woodbridge, Bethany, or Orange. You may have been renting longer than you wanted, but being a tenant can actually help a more attractive home loan borrower.

Below are the ways you can use your renting days to your shorten your path toward homeownership.

Make Sure Your Rental Payments Are Reported

Did you know that your punctual rental payments can appear on your credit reports? They may even be more impressive in the eyes of mortgage lenders than on-time credit card payments since they are not optional.

Furthermore, the latest credit scoring models include rental payments into the equation. In other words, they can now increase your FICO scores, which are the three-digit numbers mortgage lenders value the most.

Regardless of the size of your rent, it can give your credit a boost as long as it is reported to the major credit bureaus. It is imperative to choose a landlord that submits your payment history to Experian, Equifax, and TransUnion to ensure that your positive financial behavior is known.

If your landlord or the property management company that is in charge of your rental property does not report to credit bureaus, you can sign up for a paid service, like Cozy, RentTrack, or ClearNow, to make your rental payments count.

rental agreement contract

Do Not Break Your Lease

Moving out before your lease ends does not directly affect your credit scores. After all, this behavior does not get reported. However, breaking your lease may involve certain fees you need to pay, or else they may get sold to a collection agency. The new owner of your debt may open an account that may be reported to credit bureaus, which can hurt your credit.

Ask Your Landlord to Remove Derogatory Items from Credit Reports

If you wish your rent-related negative items to disappear from your credit reports, you can ask your landlord or the property management company to remove them. If they are accurate, you can write a goodwill letter to formally request their removal. You are not entitled to get rid of them, but you have a good chance of receiving a favorable response if you have generally been a good tenant and if you ask nicely.

Make the Most of Seller Financing

You can begin occupying the house you want to buy even if you do not qualify for a mortgage yet. You can ask the seller to “finance” your purchase through a lease option.

It will be some kind of rent-to-own arrangement where some or all of your rental payments can be used to lower the purchase price when you do qualify for a mortgage eventually. In exchange for an upfront cost, the other party may agree to let you stay in the property and not entertain any buyer as long as you pull the trigger on the purchase within a specified time in the future.

Owning a house is not always better than renting, but being a renter is not a hurdle toward homeownership. It can be the other way around, so play your cards right to realize your American Dream sooner rather than later.

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