The Importance Of VOR And How Underwriters View Rental Verification
How Underwriters View Rental Verification
Most people who are planning on buying a home do not realize how underwriters view rental verification and how important verification of rent is. Rental Verification or Verification of Rent, also known as VOR, is proof that the renter has been paying his or her rent on time to his or her landlord for at least 12 months. Renters planning on buying a home in the near future need to make sure that they pay their rental payments with a check or wire the funds from their bank account to the landlord’s account on a timely manner and never be late on their monthly rental payments. Many renters pay their rental payments with cash and get a paid cash receipt by their landlord. Unfortunately, cash payment to their landlord cannot be used for rental verification proof and does not validate verification of rent. Never ever pay your monthly rent payments with cash. Always pay it with a bank check. Unfortunately, those renters who are timely with their monthly rental payments every month for the past many years but do not pay their rental payments with a check and pay it with cash cannot have their verification of rent used by their mortgage lender. Verification Of Rent may be required in many cases by mortgage lenders in order for the mortgage borrower to qualify for a mortgage loan. All manual underwriting FHA Loans require verification of rent. Most FHA borrowers with under 620 FICO Credit Scores may be required to provide verification of rent the Automated Underwriting System conditions report. Many mortgage lenders will have mortgage lender overlays on rental verification even though the Automated Underwriting System may not require it. Rental Verification is normally not required by the automated underwriting system, or AUS, however, many mortgage lenders will require it as part of their mortgage lender overlays on verification of rent. If your mortgage lender is requiring verification of rent and your credit scores is 620 FICO credit scores or higher, then choose another mortgage lender that does not have rental verification on verification of rent. I do not have any lender overlays on FHA Loans and Conventional Loans and as long as your credit scores are 620 FICO or higher, rental verification will not be required unless it states that VOR is required by the Automated Underwriting System.
How Underwriters View Rental Verification: Payment Shock
Many home buyers often wonder how something so small like paying your rental payment with a check instead of making your rental payment with cash can make or break a deal in getting a home loan. There is no other business out there that is as much regulated like the mortgage industry is and there never seems to be an end in new rules a and mortgage regulations that gets added daily, monthly, and annually. Rules are the rules and mortgage loan officers and mortgage lenders need to abide them in order to stay in business and mortgage loan borrowers need to provide what is requested by mortgage lenders if they want to secured a mortgage loan. Some rules and regulations seem so ridiculous and many often wonder who in their right mind would ever come up with such rules and regulations. The way how underwriters view rental verification is to determine payment shock. Payment Shock is when a renter is paying a certain amount of rent for the past twelve months and what the new housing payment will be after the renter buys a new home. For example, if a renter is paying $1,000 per month on his or her monthly rental payments and the new mortgage payment will be $1,000 per month, there is zero payment shock where there are no changes in the new home buyers housing payments. However, if a renter is paying $1,000 per month and the new housing payment on their new home purchase is $2,000 per month, then the rental shock is 100% where the housing payment is double than the rental payment the new home buyer was used to paying which is not good. If the case scenario was reversed where the renter was paying $2,000 per month for their monthly rent and the new housing payment was $1,000 on their new home purchase mortgage payment, this will be a great compensating factor and viewed extremely favorably. However, those living rent free with family and/or friends cannot provide verification of rent and this will not be viewed favorably for mortgage borrowers with lower credit scores or higher debt to income ratios.