When completing a loan application, most lenders will present you with three housing choices: rent, own, or neither.
For many people, selecting which type of housing best suits you is easy, and straightforward.
- Rent: If you live in a house or an apartment building and pay a landlord monthly rent.
- Own: If your name is on a mortgage that you pay to a bank, credit union, or finance company.
However, life isn’t always easy and straightforward. Sometimes, when life throws curveballs we may end up living with friends or family until we’re back on our feet. If this applies to you, it’s important to know how to represent this living situation on your loan application.
Living with Family or Friends?
If you find yourself living with family or friends, it’s best to select “rent” as your housing situation. Why? Because not every lender accepts applications where “neither” has been selected as housing type. Every lender’s requirements are different, but choosing neither may get you an automatic decline before the rest of your information is even reviewed. Therefore, choosing “rent” could actually increase the number of lenders who may approve you. It may even make you eligible for lower interest rates.
Worried about proving you have a lease? Lenders do not have the time, resources, or right to request confirmation of your lease from a landlord.
What if I’m not Paying?
If you are not actually paying rent, or you’re simply contributing to monthly expenses, it is entirely okay to use $0 as your rent amount.
Native Canadians
For Native Canadians who live on a Reserve where their Band owns their home and provides free housing, contact the lender directly. If you explain your situation before submitting your application, they can advise you which housing type to select. Every lender handles this situation differently. But by understanding your individual circumstance, they can work with you to improve your chances of approval.
When Does “Neither” Apply?
There are still circumstances where “neither” is the correct housing choice to select. If you are living in a hotel/motel, a hostel, couch surfing, or at a shelter, select “neither”. Although this unfortunately limits the number of lenders open to reviewing your application, it doesn’t necessarily mean an automatic decline.
In the end, not every lender will provide loans for all housing types. Ensuring you’re making the right choice for your situation can possibly open you up to more lenders, so be sure to choose wisely.
Other Application Mistakes
While housing choices is a big mistakes I see, it’s not the only one. Continue reading how other areas of your application could also be restricting your approvals, and/or rates.
- Income – Read part 2 of my series now and why your income source is important
- Preventing errors – Read part 3 of my series and understand how taking your time could actually save you time
- Loan types – Read part 4 of my series around why loan types may not be as interchangeable as you may think
