Puyallup First Time Home Buyer Seminar - Part IV

Puyallup & Pierce County First Time Home buyer Guide - Part IV

The fourth and final requirement for home loan approval is an adequate housing history. Once you have proven acceptable Credit, Employment, and Income, you still have one last hurdle to clear - an acceptable housing history. This can be as simple to verify as a single phone call followed up with a fax, or it can mean coming up with two years worth of canceled checks, and hoping your landlord cashed them in a timely manner.

When buying a Puyallup, or Pierce County home with an FHA loan, the underwriter will almost always require proof that the rent was paid on time over the last 24 months. FHA considers a timely rental payment history a good indicator that the borrower will continue to be smart enough to make their housing payment a priority. Remember, mortgage payments are typically the most significant factor of a person's credit score because it is normally the highest monthly payment as well as the longest-term loan on your credit record. Rent is similar for many people in that there are seldom any borrowers who have something showing in their credit with a higher monthly payment although it does not show on the credit report.

So how is this timely payment verified? If the borrower either has a 24-month history of living in apartments, or homes under the control of a property management company, it is merely a matter of contacting that company for a signed verification. The property manager traditionally has no interest in losing a tenant so their independent verification is acceptable.

The same is not true for a private party. If you have been living in a home or apartment where the rent is paid directly to an individual, further verification is typically necessary. This is because there is no way of knowing whether that individual has any relationship to either the buyer or the seller. While the landlord, or proprietor of the property might not have any personal relationship with either buyer, or seller, there is no way of knowing for sure. They could easily be friends, or business partners with either party, and often are. Because of this, it is not uncommon for the underwriter to ask for proof of payment by means of canceled checks, or bank statements showing the transfer of funds on a regular basis. This can be difficult if the landlord is not diligent about depositing the rent checks. If the check does not clear the bank until the 20^th of the month, there is no way to know if the check was simply back dated to the 1^st of the month, and turned in to the landlord on the 19th, or if the landlord simply held it in his wallet for 3 weeks.

The bottom line is if you are renting from a private party, you should be saving copies of your canceled checks to verify your rental payment, and making sure your landlord is cashing those checks in a timely manner.