topic Re: Renting vs. Buying: Impact on future borrowing? in Mortgage Loans

Renting vs. Buying: Impact on future borrowing?

Anonymous — Fri, 05 Apr 2013 16:20:19 GMT

Pretty simple.

I've held off buying a house because I do not want the mortgage on my credit. However, I still have to pay a rent payment which, while it doesn't appear on my credit, does affect my DTI when it comes to borrowing.

I'm in the middle of borrowing for my business and it involves property I own free and clear. I am using that property as collateral. I will be taking out a mortgage on that property soon.

Have I been lying to myself all this time about rent vs. buying when I can buy a house and pay 25% per month compared to what I am paying now? It's always been my understanding that not purchasing a home right now makes me more qualified to lend to. I am starting to wonder if I am wrong.

Re: Renting vs. Buying: Impact on future borrowing?

Anonymous — Fri, 05 Apr 2013 16:27:22 GMT

In short, probably. Having a mortgage is usually seen as a good thing, credit-wise, as long as it doesn't make your debt-to-income crazy. FICO scores are usually positively affected by having a mortgage in good standing on your credit report. The idea is that you have to be well-qualified to obtain a mortgage, and if you were able to get a mortgage, then you're seen as generally being overall more "worthy" of lending to. Plus, you have an asset, which you're building equity in. If you default on another debt, you now have an asset that another creditor can potentially put a lien on. Or, you could have access to that equity via a HELOC, giving you cash in case of emergency. That all makes you look better to another lender.

Re: Renting vs. Buying: Impact on future borrowing?

Adalen — Fri, 05 Apr 2013 16:31:12 GMT

I think the opposite is true. Having a mortgage is not going to negatively effect your credit in the long run unless you fall behind.

Re: Renting vs. Buying: Impact on future borrowing?

Anonymous — Fri, 05 Apr 2013 16:32:53 GMT

Well, considering how far into the process I already am, I can't really turn back now. If I have to shelve my plans, I'm going to buy a house. If things go as planned, I'll have a mortgage on my and my DW's credit soon enough, thereby raising scores. Maybe that will help when I go for the mortgage to actually purchase a house next year.