Is Rental Verification Necessary To Buy House?

When Is Rental Verification Necessary To Buy House?

Is Rental Verification Necessary To Buy House? What if you are living with your parents to save up money for the down payment on home purchase ? What if you are living with a room mate and you are paying the utilities on the home and your room mate is paying for rent? Many first time home buyers often ask the question is rental verification necessary to buy house? The answer to is rental verification necessary to buy house depends on what your credit scores are and whether your mortgage loan application needs a manual underwriting .

What Is Rental Verification?

Rental Verification , also called verification of rent and VOR, is only valid if the renter can provide the mortgage lender 12 months of on time canceled checks that has been paid to their landlord. If the renter does not pay their monthly rental payments with a bank check, 12 months copy of cashier’s check and/or money order is permitted. Online bank funds transfer from the renter’s bank account to the landlord’s bank account is also allowed as long as the renter can provide 12 month’s bank statements showing timely rental funds transfer. You cannot be late on your monthly rental payments in the past 12 months. Those who are renting from a property management company can have the property manager of the property management company sign a verification of rent form that is provided by the mortgage lender and that can be used in lieu of bank statements and/or canceled checks. Cash rental payments does not count even though the renter can provide cash paid receipts by the landlord. Verification Of Rent is extremely important because it shows the amount of  payment shock the new home buyer will have. Payment shock is the amount of increase of the new housing payments will be to the new home buyer over the rent they have been paying. For example, if a renter was paying $1,500 rental payments and the new mortgage payment will be $1,500, then there is no payment shock because the new P.I.T.I. ( Principal, Interest, Taxes, Insurance ) is the same as the rental payment was. If the new mortgage payments are $2,250, then the payment shock is 50% because the new P.I.T.I. is 50% more than what the rental payments were. Home Buyers who used to live with family rent free are going from paying zero in monthly rent payments to a new housing payment which mortgage lenders question on whether the home buyer can take the sudden payment shock. Is Rental Verification Necessary To Buy House? We will answer this key question that many home buyers, especially first time home buyers, often ask.

Is Rental Verification Necessary To Buy House: Automated Underwriting System

Every mortgage loan applicant needs to complete a 4 page mortgage loan application called the 1003. The mortgage loan originator will carefully review the mortgage loan application and make sure that all the information on the application is correct, especially income information, liabilities, assets, and public records such as whether the loan applicant had any prior bankruptcies and/or foreclosures. The mortgage loan officer will then pull a tri-merger credit report and will populate the credit report to the mortgage loan applicant’s file. The loan officer will then submit the mortgage loan applicant’s file to the Automated Underwriting System where the automated system will render a decision. The three readings will either be approve/eligible, refer/eligible, or refer/ineligible. Refer/Ineligible per automated findings means that the mortgage loan applicant does not qualify. Approve/Eligible Per DU Findings  means that the mortgage loan applicant is set to go. Refer/Eligible Per DU Findings means that the mortgage loan applicant is eligible for a home loan, however, the mortgage loan application needs to be a manual underwrite . The decision rendered by the Automated Underwriting System will list of conditions that the mortgage loan borrower will need to provide. If the automated findings state that rental verification is required, then verification of rent needs to be provided by the mortgage loan borrower. However, if the borrower’s credit scores are 620 FICO or higher, then the chances are that RENTAL VERIFICATION WILL NOT BE REQUIRED . If the mortgage loan borrower has credit scores of under 620 FICO, verification of rent will be required. Home Buyers who do not have rental verification and have credit scores of under 620 FICO, please contact me at 262-716-8151 or email me at gcho@gustancho.com so I can either help you boost your credit scores over 620 FICO or go over a strategy where you can qualify without verification of rent.

Manual Underwriting Requires Rental Verification

If your mortgage loan file needs to be manually underwritten, then rental verification will be required. All mortgage loan applications after Chapter 13 Bankruptcy discharge are manually underwritten loans so verification of rent will be required. FHA Back To Work Extenuating Circumstances mortgage loans are all manually underwritten loans. Mortgage loan applications with credit disputes that cannot be retracted or those who are identity theft victims and there are errors on their credit reports are manually underwritten loans.

The information contained on Gustan Cho Associates website is for informational purposes only and is not an advertisement for products offered by The Gustan Cho Team @ Gustan Cho Associates or its affiliates. The views and opinions expressed herein are those of the author and/or guest writers of Gustan Cho Associates Mortgage & Real Estate Information Resource Center website and do not reflect the policy of Gustan Cho Associates Lenders Network, its officers, subsidiaries, parent, or affiliates.

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