Rental Verification: VOR


What Is Rental Verification?

Rental verification is an extremely credit tradeline that will add strength to the mortgage loan borrower credit profile.  First time home buyers normally live with family or rent an apartment or home.  For those first time home buyers who are renting, proof of renting and showing the mortgage lender that they are paying their monthly rents on time is extremely important.  The mortgage loan underwriter will require at least 12 months of timely rental payments to the landlord.

How Is Rental Verification Proven?

If you are a first time home buyer and are renting an apartment or home, how are you paying your monthly rental payments?  If you are paying your monthly rent with cash, the rental verification cannot be used.  Cash in the mortgage world is non-existent.  If you are renting from a private landlord and you are paying your landlord cash and getting a paid receipt every month, that still cannot be used as proof of rental verification.

Canceled Checks To Prove VOR

If you are renting your apartment or home from a private landlord, the only way you can show proof of rental verification is by providing the mortgage lender 12 months of cancelled checks.  If you pay part with check and part with cash, you do not have rental verification under the mortgage lenders eyes.  If you are a first time home buyer and are planning on purchasing a home in the near future and have been paying your landlord with cash, you need to start paying your monthly rent payments starting with checks effective immediately.

Exception Where Cash Monthly Rental Payments Will Count Towards Rental Verification

If you are a first time home buyer and are renting an apartment or home from a registered property management company and are paying them with cash every month, then a letter from the property management manager can be used towards rental verification.  Registered property management companies are exempt from the checks only rental verification rule.   It needs to be a professional property management company and a letter stating that you have been timely on your monthly rental payments for the past 12 months will be sufficient proof to be used as rental verification.

Why Is Rental Verification So Important?

Rental verification is extremely important because it shows the mortgage lender that you have been making timely rental payments for at least 12 months and that you are used to paying housing payments.  Also, if you were living rent free with family or friends and paying no monthly rent, then the new proposed mortgage payment will be a big financial surprise to first time home buyers.  Mortgage lenders view this as payment shock where first time home buyers are going from paying zero monthly rent to, for example, a new $1,500 mortgage payment.  However, if you are a first time home buyer and are currently paying $1,400 per month monthly rent and your new proposed mortgage payment will be3 $1,500, then there is hardly any payment shock.

By Gustan Cho

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