Does an Eviction Impact Your Homebuying Ability?

Transitioning from being a renter to being a homeowner is quite exciting because it seems like a brand new phase. However, the two aren’t as disconnected as most people think, and buying a home can be complicated when you have a less than perfect history as a tenant. In other words, an eviction can follow you long after you move out and determine the way lenders view you.

Bay Property Management Group San Antonio Texas can provide insights to tenants and help them avoid situations that could harm their housing goals. Read this article as we quick dive into how evictions impact your homebuying ability.

What is an Eviction and Why Does It Appear on a Renter’s Record?

An eviction is the legal process by which a landlord formally and legally removes a tenant from a rental property. It’s very different from a landlord asking you to move out because they’re no longer renting. It is a court-ordered process forcing you off the property due to a breach of your lease agreement. 

For most landlords, non-payment of rent is easily the most common reason for eviction. You can also get evicted for causing significant property damage, remaining in the property after the lease expires, or even prohibited subletting. Thus, since your rental record is quite public, an eviction record will appear in your background check when you’re ready to buy a home. 

Since the reasons for eviction often point to a pattern of irresponsible behavior, it’s likely to taint your case when a potential lender reviews your loan application. It may also pop up indirectly by lowering your credit score through unpaid debt and or a lawsuit. As a result, eviction-related credit issues may affect your ability to buy a house, and limit access to conventional loans.

Impact of Eviction on Your Credit Score

Collection Accounts to Lower Your Score

If you owe unpaid rent, fees, or damages, landlords often send the balance to a collection agency. Once that collection hits your credit report, your score can drop sharply.

Why? Because it shows that you have unpaid debt, and collections are one of the most damaging entries on a credit file, and can stay there for up to seven years. If you try to buy a house in that period, any lender that looks up your report will see the trail of unpaid fees and reasonably conclude you’re a high lending risk that might default on your loan payments. 

Missed Payments Hurt Your Payment History

Speaking of missing loan payments, if the eviction started because of unpaid rent, those late or missed payments may already be reported by the landlord or property management company. Payment history makes up the largest part of your credit score, so repeated late payments cause long-term damage.

After all, most lenders want a guarantee that you’ll meet your mortgage obligations, and a track record of missing your rental payments is not a good sign. Missed payments also reduce your credit score, which can make it harder to qualify for a loan. 

Should Tenants Rebuild Rental History Before Considering Homeownership?

The short answer is yes. A stable, positive rental history shows you can manage monthly housing costs responsibly, which are often less expensive than paying off a mortgage. On the other hand, if you have gaps, late payments, or an eviction, you appear as a risky option for lenders. Rebuilding your rental record helps prove you’re financially reliable. Here’s how:

Stronger Rental History Improves Your Credit Profile

Consistent, on-time rent payments help stabilize your credit over time. Since payment history is a major part of your credit score, showing a long stretch of responsible renting boosts your score and increases your chances of qualifying for a mortgage with better terms.

Rebuilding Shows Financial Stability

Landlords and lenders both look for stability. When you rebuild your rental history, you’re also rebuilding your overall financial picture. Having a steady income, responsible budgeting, and reliable monthly payments show that you’re responsible and good with money.

In other words, lenders will feel you’re prepared for the long-term commitment of homeownership. After all, if you have a steady rental history of reliably paying your rent, lenders will feel confident that you can handle your mortgage payments.

Conclusion 

If you’re looking to go from paying rent to paying off your mortgage, an eviction can certainly throw a wrench in your plans. Aspiring homeowners with a record of unpaid rent, missed payments, and a lower credit score are riskier candidates for home loans.

As a result, being forcefully removed from your apartment as a tenant can have a big impact on your cost of home ownership. It’s essential to understand what an eviction is, why it appears on your record, and how it affects you long term. With that information, you can take steps toward rebuilding your rental history before applying for a loan.