Your landlord just informed you that he is in trouble financially. He's not been making mortgage payments in the home you are renting from him. He just knows he's headed to foreclosure. Maybe he suggests that, since he is not making mortgage payments, that you don't have to keep making rental payments. Or maybe, you get so angry knowing that your rental checks aren't going to pay the mortgage that you say, "Screw it! Why should I keep paying him?"
Awesome! Free rent! Right? WRONG!
If you have plans of buying a home, your rental history will come into question. Cancelled checks made out to your landlord will be requested. The underwriters for the loan will want to know you have a good payment history. They don't care that your landlord was headed to foreclosure. They want to know you will pay your bills no matter what!
How do I know? I had a buyer in turmoil for this very scenario. Landlord said, "You don't need to keep paying rent. I'm going to let that house you are in go to foreclosure. Start looking for another place."
So my buyer found a home to buy. This was the second landlord to go to foreclosure. Time to take his housing situation into his own hands and buy. Problem was, there were not twelve months of cancelled checks to string together to present a full year of payment history for the underwriter.
This could also happen just going to another rental home. Landlord asks for payment history. You better have a good one!
So when you are contemplating taking the free rent option and waiting for the bank to come and ask you to leave the rental property you are in, think twice. No matter what the landlord is doing with the money, the fact that you wrote the check is what is most valuable. Your housing future may depend on it.
Sounds like good advice, but couldn't it just be expained to the underwriter. If the landlord tells you to stop paying (I've never had that experience) then a simple explanation should explain the reason you do not have 12 months of cancelled checks.
Comments(8)