Foreclosures and your Perspective Tenants

My Prospective Tenant has a Foreclosure – What Should I Do?

 

With the decline in the housing market, more renters are coming off recently foreclosed properties and looking for leases. Since their credit is already too poor to apply for another mortgage, they have no choice but to rent a home or apartment until they can rebuild a positive credit history. Though they may not have a choice, as a landlord you do, but deciding how to handle a prospective tenant with a past foreclosure is not as simple as “yes” or “no”.

 

Current Credit History

Hundreds of Americans have lost their home since the housing market crash, but that does not mean they are financially irresponsible. Most of these individuals suffered from high interest rates, ridiculous payments and purchasing homes well above what they were worth. When the market crashed and adjustable rates skyrocketed, a lot of these individuals were forced to pay double what their current home was worth and worse, they couldn’t sell it to get a little financial relief. Therefore, when you see a past foreclosure on a tenant’s credit report, you need to ask yourself why they had the foreclosure and how the remainder of their credit history is. If the prospective tenant has positive credit history and only defaulted on their mortgage, it is likely they will pay their lease obligation.

 

Your Property Policy

There is a fine line on how you can use credit history to reject a tenant. Though the Fair Housing Act does not provide tenants with protection against rejection for poor credit history, they do provide protection against discrimination. Therefore, if you reject one tenant for a past foreclosure, you must reject all prospective tenants for past foreclosures – there is no in between.

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