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Rent: Still Paying Cash?

If you need a mortgage, but you do not have established credit – i.e., at least two active credit cards or a car loan/lease, then all you can do is demonstrate that you are honoring your rent obligations. Sign a lease, pay rent via check each month, and retain your bank statements and cancelled rent checks for at least 12 months. Without these items, you better have a good relationship with your landlord – because you’ll need a letter confirming you consistently pay rent on time.

Here are some statements which will fall on deaf ears at the bank:

“I’m sharing an apartment with a friend and I pay him cash for my share. He then sends the full amount of rent by check to the landlord on time every month.”

⇒That’s nice, but you need to show consistent cash withdrawals from your bank account every month in the exact amount of your share.

“I live at my daughter’s place and I cook, clean, and I timely pay for most utilities every month. And lately I have covered all of the capital improvement and repair costs.”

⇒That’s nice, but you need consistent outflow of your contributions, and to show that the utility receipts match the corresponding withdrawals from your bank account.

“I’m renting from my aunt. She trusts me so there has been little point in drawing up a lease contract.”

⇒That’s nice, but without a contract you can neither demonstrate that you have any obligations nor lived up to them!

Here’s the Point: To obtain a mortgage without established credit lines, the lender will require at least 12 months of cancelled rent checks and/or a landlord “Verification of Rent” letter.


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