The Federal Housing Administration (FHA) offers loan guarantees to qualified borrowers in order to make mortgages more affordable. The FHA writes these guarantees as a promise to a conventional lender, essentially insuring the loan on the borrower's behalf. If you'd like the FHA to insure your loan, you must provide documentation of your eligibility. Part of this documentation includes verification of your residence for the past 12 months.
The FHA does not issue high-risk loans. It is insuring the loans with taxpayer money, so it will be very cautious in approving your application. In order to qualify, you will be expected to have acceptable credit, a stable income, and no recent debt problems, and pay some applicable upfront costs. In meeting these requirements, you prove you are creditworthy and unlikely to default on your loan.
The FHA does not simply take your word on your application. You must provide additional documentation proving your application is accurate; part of this required documentation is the name, address, and contact information of your landlord in the past 12 months.
The FHA may contact your landlord to see if you made your rental payments on time in the past year. This is an indicator of your ability to pay your mortgage in the future. Further, if you were able to make rental payments equal to or above your anticipated mortgage payments, the FHA has proof you can afford the loan.
What should you do if you did not have a landlord in the past 12 months? For example, what if you lived at the home of a parent or relative? In this case, you will still provide the name, address and contact information of that individual as a reference, but this person will be a character reference rather than a financial reference. If you did not have a landlord because you owned your previous residence, you will need to show ownership by providing a copy of the deed, your property tax bill, home insurance, and mortgage payment coupon. This will only apply to you if you are refinancing or own a rental property, as the FHA does not permit loans on second residences.