Verification of Rent Required By Mortgage Lenders
| |

Verification Of Rent Required By Mortgage Lenders

ByGustan Cho

In this article, we will cover the verification of rent required by mortgage lenders on manual underwriting. VOR is one of the most important factors and probably the most important compensating factors that homebuyers can provide lenders.

Verification of rent is required on FHA and VA Manual Underwrites. Many renters who rent an apartment or home pay their monthly rental payments with cash. They often get a receipt from their landlord.

Renters pay cash to their landlord, and they feel that the receipt of the monthly rental payment is sufficient as verification of rent required by lenders. However, any cash rental payment to the landlord cannot be used as rental verification. In the following paragraphs, we will discuss verification of rent guidelines on manual underwriting borrowers.

Rental Verification By Registered Property Management Company

If renting an apartment or home from a registered property management company, then a VOR Form provided by the lender can be completed by the property manager.

Executed VOR Form can be used as a rental verification in lieu of 12 months of canceled checks or bank statements of rental payments. If you are not renting an apartment or home from a registered property management company, you need to provide 12 months of consecutive canceled checks.

You cannot have missed payment. Need 12 months of on-time payment to be provided to the mortgage processor and underwriter. If late on rent payment in the past 12 months, the verification of rent will be void and cannot be used. Verification of rent cannot be used if you made most of your rent payments with checks, but in a few months, you have made it with cash.

Why Do Lenders Make Such a Big Deal Requiring Verification of Rent

Rental payment history is not reported on the credit bureaus. Rental payment history is considered one of the most important, if not the most important, factors in whether the borrower qualifies for manual underwriting.

Many homebuyers do not understand why lenders make such a big deal about rental verification.

This is because of the PAYMENT SHOCK. VOR shows how much rent the borrower has been paying and compares it to his or her new housing payment

For example, here is a case study:

  • if a mortgage loan borrower has a VOR of $1,000 per month
  • can prove it by providing 12 months of canceled checks
  • the borrower’s new housing payment on his or her new home purchase, which includes principal, interest, taxes, and insurance ( PITI ), is $1,100
  • payment shock is only a 10% increase
  • This is not a bad compensating factor
  • 5% or less payment shock is considered a great compensating factor

If the borrower cannot provide VOR, the payment shock will go from zero to $1,100, which is a major negative.

Is Verification Of Rent Required On All Mortgage Applicants?

Is Verification Of Rent Required On All Mortgage Applicants?

No, proof of rental payment is not required on all mortgage loan applicants, but if the borrower can provide it, it is a huge compensating factor and goes a long way. There are many times when the rental proof is mandatory. Especially if it states the automated approval of the Automated Underwriting System ( AUS ). VOR is normally requested on all manual underwriting mortgage applications. Borrowers with under 600 credit scores may also be required to provide rental proof.

Home Loan With Bad Credit: Verification Of Rent Required If Requested By AUS

For borrowers with lower credit scores or bad credit history, the Automated Underwriting System Findings may state that Verification of Rent is Required. If the AUS requires VOR, the borrower must provide it, or else the borrower cannot qualify for the mortgage.

If currently renting and have been paying rental payments with cash, stop paying with cash and start paying with checks. Renters can also pay it online as well. We will need to provide 12 months’ bank statements showing the money being transferred from the bank account to the landlord’s bank account.

If you are planning to be a home buyer shortly or currently have bad credit or low credit scores, please get in touch with us at FHA Bad Credit Lenders at 800-900-8569 or text us for a faster response. Or email us at gcho@gustancho.com. Or click this link, GET PRE-APPROVED NOW, to get pre-approved. We are available seven days a week, evenings, weekends, and holidays.

Similar Posts