Rent Free Options Explained
It is very popular these days for people to move back in with parents. Additionally, many even live with other family members or friends. Therefore these buyers cannot prove an on-time housing history. This is called a “rent free” scenario. A recent blog posted by the National Association of Home Builders called “More than half of young Millennials move back in with parents”, states 90% of those born between 1980 and 1984 left home before the age of 27 – but then more half returned to their parents’ homes. Read the entire article here.
All mortgage products allow for a prospective buyer to purchase a home without rental history. Although this assumes the borrower has enough compensating factors to support approval. So when there is a rent free scenario, a solid credit history is important. Higher credit scores help too. This doesn’t mean someone needs perfect credit to qualify though. But it does help tremendously to have 12 months of on-time rent history.
Programs available for rent free buyers:
There are several programs where prospective buyers can have no housing history. Additionally these programs offer very low to no down payment as well. Click each to learn more about the programs available
- USDA – allows up to 100% financing
- VA – allows up to 100% financing to veterans, active military, or qualifying surviving spouse
- FHA – as little as 3.5% down payment which can be a gift from a family member
- My Community Mortgage – 3% down payment which may be a gift from a family member
- Down Payment Assistance products – interest & payment free for first time or move up buyers
Suggestions for documenting rental history if applicable:
If a borrower has limited credit, rent history may be required for approval. Plus if paying rent, it is always best to pay rent on-time and by check. Always make sure that the landlord cashes the rent check in a timely manner. Because lenders go by the date the check cleared the bank rather than the date it was written. Paying by check would provide proof of payment in a dispute. Furthermore, when renting from an individual, cancelled checks could be required.
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Author: Russell Smith
Team Move OVM Financial loan officer success is Russell’s primary focus. He provides the tools and techniques he used as a top producing loan officer. Additionally he offers the Team Move OVM Financial Agent Training Program. Sharing is so important to Russell so he works diligently to be a resource to loan originators and Realtors.