It’s hard to reject someone who is facing foreclosure. After all, this is why the person wants to rent from you in the first place. It’s a very depressing situation to be in – they are losing their home, have no place to go and their credit is shot due to several late payments.
In order to consider a person going under foreclosure, you need to do some very basic math: What you’re looking for is to compare their monthly mortgage amount against what you are charging for rent. If you don’t see your rent being at least 30% (preferably 40% or more) less than the mortgage payment they couldn’t afford, then the rent probably won’t arrive on time for too long.
It’s a basic money management issue that many just don’t get – and one which you see all the time. A person can’t afford to make a $3,500 mortgage payment (inclusive of principal, interest, taxes and insurance), so they lose the home and apply for a $3,000 rental – smooth move, right? Chances are, if money was that tight to begin with and the person was willing to be that late on their mortgage, then what’s the big deal being late on your rent?
If the foreclosure occurred more than two years ago, comparison calculations aren’t really necessary. You just need to keep an eye out for those who continue making late payments on their other accounts years after being foreclosed upon. If you are willing to lower your standards once in a while, there are plenty of people out there who have demonstrated a good effort to bounce back and deserve another chance to feel at home again.