Lenders Requiring Verification Of Rent For Mortgage
This BLOG On Lenders Requiring Verification Of Rent For Mortgage Was UPDATED On July 17, 2017
Lenders Requiring Verification Of Rent:
Mortgage Loan Applicant applying for a new purchase or refinance mortgage loans, the lender may require mortgage lenders require verification of rent. There are two ways that Verification Of Rent is required:
- The Automated Underwriting System (AUS) may require it as part of the Automated Findings
- Mortgage Lender may require it as a lender overlay
All manual underwriting requires Verification of Rent (VOR).
Risk Assessment is what determines a borrower’s loan approval. Mortgage Underwriters need to determine whether the borrower has the ability to re-pay their new mortgage.
- The mortgage lender will determine whether to approve a borrower for a new mortgage loan by analyzing the borrower’s income, debt, assets, and credit score.
- There are minimum mortgage guidelines on credit scores plus lenders can have their own overlays.
- Mortgage lenders have cutoff minimum credit scores as part of their overlays on credit scores.
- Most mortgage lenders want a minimum of a 640 FICO credit score.
- Other mortgage lenders have lower credit score requirements.
- Cutoff limits are set at 680 FICO, 640 FICO, 620 FICO, 600 FICO, 580 FICO, and 530 FICO.
- The lower your credit scores are, the more mortgage guidelines that will apply to you.
- Verification of rent can be one of the conditions on AUS.
- There are many instances where AUS will condition VOR for mortgage applicants with credit scores below 620 FICO.
When Do Lenders Require VOR?
The probability is high that AUS will request VOR for borrowers with credit scores below 620, Verification of rent can be requested by the mortgage underwriter even if not requested by AUS.
- Verification of rent is proof that the mortgage applicant is currently paying rent and have done so in the past year.
- A rental receipt is not good enough for proving verification of rent.
- Verification of rent, also known as VOR, is proven by supplying a 12 month history of cancelled bank checks and/or 12 months bank statements.
- Renters who are paying cash to landlord and getting a monthly receipt cannot be accepted as proof of verification of rent.
Renting From Property Management Company
Another option instead of cancelled checks that a verification of rent will be valid is if the landlord is a property management company.
- A written letter verifying rent for the past year from a property management company will be a valid verification of rent even though the renter have paid them in cash.
- For those folks who are intending in buying a new home, make sure to pay monthly rental payments with a check.
- There are enough obstacles to overcome in the mortgage application process and verification of rent is one of them.
- It is a shame to be paying rental payments on time with cash and not getting credit for verification of rent.
What Happens If I Cannot Prove Verification Of Rent
If mortgage lender request verification of rent, it must be provided.
- They will make exceptions if borrowers do not have verification of rent but there will be certain guidelines and restrictions on the terms of the loan.
- The mortgage process cannot proceed further if borrowers do not have verification of rent and VOR is requested.
- All manual underwrites require VOR.
- Low payment shock is considered a compensating factor.
- An increase of up to 5% from rent to mortgage payment or $100 whichever is lesser is considered low payment shock and compensating factor.