Renting is often thought of as easier than buying a home. After all, there seem to be all kinds of rentals and lots of options. You can rent a home, a condo, a townhome, heck even a mobile home. But some things are very clear. You have to qualify to rent a home just like you do to buy a home and sometimes that process is more difficult than buying a home.
When a potential tenant applies to rent a home several things have to happen. Landlords and property managers want an application complete with employment history, rental history, financial questions, and references. Also required most of the time is a credit history and background check.
Credit history will contain mortgage payment information, revolving credit, joint records and single credit records, among other things that can challenge a FICO score. If you experienced a short sale or foreclosure, that will show up, too.
Credit Reports can show late payments, missed payments and more along and these lower your FICO score. FICO scores can be determining factors for both renting and buying a home and sometimes lower than what a landlord is willing to accept. (photo courtesy of Experian)
I've run across landlords who require a 700+ FICO score, end of story. I can't get past the gatekeeper, aka listing agent, to state my case that maybe someone had a medical issue. And just maybe everything snowballed.
Recently, I've been working with someone who has a 590 FICO score. It has been impossible to help them to rent a home, but a lender tells me that they can buy a home. Their story includes medical issues that led to a bankruptcy. Since the bankruptcy is four years old, they now qualify to buyer but no landlord has accepted this type of history.
There are programs and lenders that will allow for a buyer to buy a home with a 580 FICO score, with extenuating circumsances, aka medical issues. There are lenders who will allow a buyer to borrow money if they are seeing that an applicant received a raise and is continuing to advance.
Oh and, there are programs where all you need is 1/2% down and sometimes nothing down. So if you haven't saved for a downpayment, that's not a problem either. Closing costs aren't always required either since I can negotiate a contract wherein the seller pays the closing costs.
So if you don't think you can buy a home, guess again. Sometimes it's easier to buy a home than renting!
Bear in mind that some of these programs have income limits, but for the most part those aren't that low.
It's always wise to discuss all of this with a loan officer before looking for a home. Determine your purchasing power and know all of your options. Also seek the advice of a reputable credit repair company that can work through your issues without charging you a monthly subscription for their services.