Renting, Thinking of Buying?

If you are renting and thinking of buying there are several things that you should know. When you get involved in the buying a house process, you will be asked to provide information about your rental situation.
A short time ago when all types of mortgage loans were plentiful you might be able to slide by without having to prove or verify much about your rental situation. Due to the implosion of the Subprime side of the mortgage world the emphasis will swing back to the Conforming side of the mortgage business.
The conforming side of the mortgage business has always been there in the sense that people that had good credit, a sizeable down payment, were good candidates for financing from an institution that provided mortgage financing.
There are two sides to the mortgage business. The conforming side, that I just mentioned and the non-conforming side that I'll discuss now. Another way to label those two sides is "prime" and "sub-prime." As you might guess the prime is the label for the conforming side and "sub-prime" is for the non-conforming side.
It has been the "Sub-prime" business that has fallen on hard times as of late. I'm sure you've seen the news reports about the massive job losses, layoffs, and closings that have occured there recently. There is an entire other story that can be devoted to what happened there.
Many apartment buildings or complexes are managed by a management company. In most cases, a lender will accept a verification of rent from the management company. If you have paid on time, you'll have no worries, but the lender will be looking to see where you've lived for the last two years, and how you've paid. One thing that can hurt you here is that if you've signed on a lease with another party and the rent ends up not getting paid as agreed, it can come back to bite you. The management company might turn it in to the credit bureaus as a collection, worst case they go to small claims court and a judgement is obtained. In either case it spells trouble for you.
If you are renting a single family residence or another type property from a private owner, absolutely never pay CASH! When you pay by cash, a paper trail is not established. Your loan underwriter has to see proof. People can go get a receipt book and make up fake receipts. Now you see why they will not accept rent receipts. The two best things you can do is pay by check or money orders, the best way being by check. The lender will want to see the front and back side of the cancelled check. Checking accounts show stability. If you don't have one, please get one. Ask for your checks to begin with a high number.
If you don't get your cancelled checks you can still prove your rent history by getting copies from where you do your banking. You should never throw away your bank statements. Many banks, credit unions, will want to charge you for those documents. If the underwriter is asking for 24 months worth, it can get costly. Ask your mortgage person if the underwriter will accept your own copies of your bank statements where you can prove the same amount came out of your account every month.
In the coming month's it will become increasingly tougher to get approved for financing. If you know what will be required and you plan for it, you'll be okay.