That rent payment you make every month? Yes, it goes right into your landlord’s pocket. But now it can open a path for you to buy a home.

Renters who want to buy a house or condo soon can benefit from a new tool from Zillow that reports their payment history to credit companies — and that could help them get a mortgage for their first home.

Renters often pay more than 30% of their income for housing — anything more could amount to a financial burden for a family.

But because rent payments often go unreported, 26 million Americans are “credit invisible,” according to the Consumer Financial Protection Bureau. That means that the credit bureaus — Equifax, TransUnion and Experian — don’t have a credit history, even if people are paying their rent on time.

Recent Zillow research highlights the importance of this issue, particularly in Black communities, where residents often pay more in rent than they would pay for a mortgage. Zillow’s tool is also crucial for Hispanic families, because 15% are considered invisible in terms of credit history, according to the Consumer Financial Protection Bureau.

“Hispanics and African Americans are denied mortgage loans twice as often as whites, which is why this tool is so important, as it allows them to improve their credit score and prepare themselves to buy a home,” Marta Rey Babarro, vice president of research and insights at Zillow, told el Nuevo Herald.

Zillow reports rental payments

Rey Babarro said that to benefit from the rent payment tool, people must make their payments digitally through Zillow.

Here’s how it works:

▪ Renters must access the Renter Payments Dashboard, where they can choose the option to participate in the service that reports the payment.

▪ Once a tenant opts in, Zillow identifies on-time rent payments, defined as payments made within 30 days of due date.

▪ Payments made on time are reported monthly to Experian. In turn, Zillow doesn’t report late payments — those made 30 days after the deadline.

The service works automatically after sign-up, although a tenant can choose to leave at any point.

Rey Babarro points out that Zillow’s tool for renters is “a simple and free way to improve your credit score,” which is key to getting better mortgage interest offers from banks and lenders. That’s even more crucial in a competitive real estate market where low inventory and high mortgage rates make the buying process difficult.

The typical renter pays $2,902 a month in Miami-Dade, according to the most recent rental data from Zillow. That means that if renters can demonstrate they have been paying that amount for a long time, it raises the profile in the eyes of banks and lenders.

To get a conventional loan to buy a home, people must have a credit score above 620, according to the Rocket Mortgage portal, and 580 for an FHA loan.

Credit, key to buying real estate

One piece of advice real estate agents give to people planning to buy a home is to find out about their credit status. Credit companies offer one free credit score report each year. You can check your FICO score and see the debts you have, and if necessary make a payment plan to eliminate credit card debt.

If you improve your credit with the help of the Zillow tool, you’re not only more prepared to buy a home but can get better interest rates on a loan.

If the goal is to buy or invest in South Florida real estate, avoid acquiring new debt and pay off existing debt as much as possible to qualify for a higher mortgage loan. That’s critical in Miami-Dade, where the median sales price is $650,000 for a house and $445,000 for a condo.

Real estate market trends

Zillow has identified other trends that shape buyer interests and purchasing possibilities in 2024:

“House hacking” is a way to generate income with the purchase of a property, and this generally means buying a multi-family home, such as a duplex or triplex, to rent one part and live in the other while paying the mortgage with the rental income.

Buyers are also acquiring a property among several people, to qualify for the mortgage and afford the payment.

Rey Babarro said this is a resource for millennials because many are entering the real estate market at a difficult time.

She also pointed to another resource: renting a room or part of the house, what developers call an annex, which helps buyers pay the mortgage.

Previously, the Federal Housing Finance Agency paved the way for many renters to purchase a home, when Fannie Mae began considering tenants’ payment history when granting mortgage loans in 2021.