rental history?

[Anonymous]

Hoping someone can help me on this. I have been living rent free for the past 3 years so I don't have any rental history in that time frame. I have rented prior to that with no problems. Does anyone know if it is required to have rental history in order to get a mortgage approval? I've heard conflicting info on this. I was told by one lender that if I had a 640 score I wouldn't need rental history, another lender told me I had to have 6 months cash reserves. I was also told by someone else that I can just write a letter stating why I don't have rental history in the past 12 months.  Just trying to get some facts so I can do whatever I need to do to work toward buying a home.

[cdtotten]

You should be fine without verfiable rental history. There are legitimate reasons why people wouldn't. In example, when I first got back from college I bought a house immediately (with no rental history obviously). Never even came up, never had to write a letter, etc. If you had a bad mortgage history, or something on your credit reports to indicate such, then an explanation might be necessary.

For FHA, 6 months cash reserves is not required; however, for conventional lending that may be the case with your lender.

[Anonymous]

There is a catch here.  It is not always so much that they want to prove rental history (which of course they do like to do for obvious reasons) but it also comes into play due to sticker shock.  People who have not had to pay rent (especially for long periods of time) or pay into house maintenance, utilities, etc have a problem with payment shock when all of a sudden they have all these bills.  Often times it takes them too long to adjust their spending to the new situation and they end up in trouble.  If you are the type that has worked the last 3 years, saved a bunch of money, has some reserves built up and a solid job this will not be an issue.  If you are coming straight out of college this is usually not an issue.  If you have been making 50K per year living with your parents and have not saved a penny and/or have any even remotely recent credit issues then it become problematic.  THye do not mind lack of rental history, but they often want to see some pattern of fiscal repsonsibility to compensate for that lack of history. 

[Anonymous]

Payment shock was an issue when I tried for a loan back in December. I live with my wife in a townhome that she purchased prior to us getting married and she pays that out of her income from a separate account in her name. I contribute to all the utilities (all in her name) out of our joint account, but cannot show any rental history. Wells Fargo just had her write a letter stating that I was living with her rent free and they didn't seem all that concerned with it. We can't buy our new home together because 1) she has too high of a DTI because she has a mortgage on her own already plus other debts, 2) her credit scores are too low. I also don't have a lot of recent good credit history. I have about 6 months of good history on two credit cards and 3 months on an auto loan and store card. All those are $0 balances right now (except the auto loan obviously). I do have 2 old accounts (7 years old) that are charge offs but nothing else negative. The bank didn't seem concerned with those old accounts but were worried about not having a solid 12 months of good credit history (I'm working on that lol). I think I'm in relatively decent shape for a mortgage other than the rental history and my recent credit history not being very long. We have enough saved up for a downpayment but not a lot of reserves. We need a bigger place because of our growing family so I'm trying to figure out if it's best to go ahead and start renting a bigger place (to get rental history) or to try again with what I've got. I'd much rather buy than have to rent somewhere and have to move twice but if that's the only way I can get a new home I guess that's what we'll do. I just don't know what else I can do in this situation.

[Anonymous]

Honstly, if you have little recent established credit, no rental history, and are going to experience significant "payment shock" then you are going to have issue buying right now with out some serious reserves.   I would not recommend it.  I would either find a way to make the current home work (better to live tightly for a year to give your credit time to age), or if that is just not possible (and it usually is) then rent a place.  Just keep in mind that renting a place is going to be expensive and also means you are going to incur all the moving costs, etc twice instead of once (if you think you could by a home in a year).  The thing is that maybe the best thing is to compromise.  You may not need to wait a whole year, just until you can show the year of credit history.  Also, get some serious reserves saved up in that time.  IF your wife's income is seriously covering the curent mortgage, and you expect the bank to allow you to buy a home just on your salary as it is now, then you should have plenty of money (close to or equal to your expected mortgage payment) free to put into savings.  If not, you guys are probably not ready to buy a second property.  I am assuming you plan to rent out the 1st one which can be a money pit at times as well so you will need reserves.   

[Anonymous]

I did qualify based on my income alone and really that's what we wanted anyways. We don't want to be house poor lol. The townhouse is up for sale right now, and may end up being a short sale the way things are here (and pretty much everywhere).  We have been saving up money for downpayment/reserves, just don't have enough for both yet. My CC's will be a year old in September and the other two (auto loan and store card) will be 9 months old at that point. I'm hoping that will be good enough... and by then my scores should be higher and we should have enough saved up. So, as nice as it would be to get a house now (baby #2 is due in May!) we're likely going to just stick it out for a few more months and hopefully have better luck then. Who knows! Thanks for the input, it's good to get some outside perspective on things.