Qualifying for a Mortgage Without Rental History

Last Updated 6/11/2015

Many first time home buyers find themselves in a situation of having no rental history when they apply for a mortgage. They choose to stay living at home with their parents or guardians while working and building up savings for a downpayment. Often times, they feel it is a waste of their money to rent and they find they can save money at a much quicker rate by living at home. Does this decision help or hurt them when the time comes for mortgage applications?

Why Rental History Matters on Mortgage Applications

Rental history is a big factor on a mortgage applications. Lenders analyze the rental history to see how much of a housing payment the applicant has afforded in the past and the timeliness of their payments. Lenders feel that rental history can be a sign of how an applicant will handle their mortgage payment each month.

How to Qualify Without Rental History

Although rental history is a big part of mortgage applications, it does not mean you can’t qualify for a mortgage without it. As long as your application is strong in all other areas you should be able to get pre-approved for a mortgage loan.

Establish Strong Credit History

First you’ll want to make sure that you have a strong credit history. Since you have no track record of paying rent each month, a credit report will show how you handle payments. It is best if you have a variety of trade lines on your credit report including revolving lines of credit and installment loans. Read our article, “How to Get Your Credit Ready to Buy a House” to get more ideas on how to build a strong credit history.

Build Your Savings Account

Before applying for a mortgage you should also build up a large savings account. You’ll want to save enough money to cover a down payment, closing costs, and a couple months of reserves. The cash reserves should amount to 3-6 months of the new mortgage payment. Without this money in savings the application may be denied due to insufficient rental history and lack of cash reserves.

Get Stable Employment

Lastly, you’ll need to have stable employment with at least 2 years of history before applying for a mortgage. Since you have no rental history to show, lenders will want to see that you at least have stable employment. Preferrably lenders will want to see that you’ve worked for two years with the same employer, and at least two years in the same profession.

Qualifying for a mortgage without rental history is possible as long as you have a strong application in all the other areas. Before applying for a mortgage build up a solid savings account, a strong credit profile, and stable employment history. These three factors should help you get pre-approved for a mortgage and make the process of mortgage applications smooth and easy.