Verification Of Mortgage Guidelines And Requirements By Lenders

This Article Is About Verification Of Mortgage Guidelines And Requirements By Lenders.

A Verification of Mortgage, commonly known as VOM, is crucial documentation that reflects a borrower’s overall mortgage payment history. Verification of Mortgage Guidelines emphasizes the importance of reviewing a borrower’s prior mortgage payment history when considering a new mortgage loan application.

All lenders require insight into a borrower’s past housing payment history. For homebuyers who have recently sold their home and are applying for a new mortgage, lenders need to verify the timeliness of their prior mortgage payments. Timely payments over the past 12 months are critical for eligibility for a new mortgage, particularly in the most recent 12 months.

When a mortgage loan applicant applies for a new mortgage—whether it’s a refinance, a second home, or an investment property—a VOM is required. According to Verification of Mortgage Guidelines, borrowers must have made timely payments on their prior mortgage to receive an approve/eligible status per the automated underwriting system (AUS) on a new mortgage for the past 12 months.

While receiving an approved/eligible status with one 30-day late mortgage payment in the past 12 months is possible, any late payments within the past 12 to 24 months are significantly detrimental. Thirty-day late payments are among the most damaging derogatory credit tradelines that can appear on a borrower’s credit report. A VOM will disclose any late mortgage payments within the past 12 to 24 months, providing critical information for lenders to assess the borrower’s creditworthiness. Talk to our loan officer for Mortgage Loans

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How do Mortgage Lenders Verify?

Income Verification

Pay Stubs: Lenders typically request recent pay stubs (usually the last two or three months) to verify current income.
W-2 Forms: These forms verify annual income for the past two years.
Tax Returns: Self-employed borrowers or those with other sources of income might need to provide tax returns for the past two years.
Employer Verification: Lenders often contact the borrower’s employer to confirm employment status, income, and job stability.

Credit Verification

Credit Report: Lenders obtain a credit report from one or more major credit bureaus (such as Experian, Equifax, or TransUnion) to assess the borrower’s credit history, score, and outstanding debts.
Credit Inquiries: They examine recent credit inquiries to understand if the borrower has applied for new credit accounts.

Asset Verification

Bank Statements: Borrowers must provide bank statements for the past two to three months to show available funds for down payments, closing costs, and reserves.
Investment Accounts: Statements from investment accounts (stocks, bonds, retirement accounts) may be required to verify additional assets.

Debt Verification

Debt Documentation: Lenders examine the credit report to detect current debts and monthly commitments, including but not limited to car loans, student loans, and credit card payments.
Debt-to-Income Ratio: They calculate the debt-to-income ratio to ensure the borrower can manage additional debt from the mortgage.

Identity Verification

Government-issued ID: Borrowers must provide a government-issued photo ID (e.g., driver’s license, passport) to verify their identity.
Social Security Number (SSN): This number is used for credit checks and to verify employment and income with the IRS.

Property Appraisal

Appraisal Report: Lenders mandate a comprehensive property appraisal to verify that the property’s value justifies the purchase price or loan amount. They require a professional appraisal to ensure the property is worth the purchase price or loan amount.

Title Search

Title Search: Conducting a title search helps to ensure that there are no outstanding liens or legal issues associated with the property’s title.

Verification of Residency and Housing History

Rental History: Lenders might ask for rental payment history from first-time homebuyers or individuals with limited credit history. This information helps lenders assess the borrower’s creditworthiness and ability to make timely payments.
Previous Addresses: Lenders may verify previous addresses to cross-check against credit and employment history.

Each verification step assists lenders in evaluating the borrower’s capacity to repay the loan and ensure the integrity of the loan application process.

Mortgage Guidelines On Timely Mortgage Payments In The Past Month

Per Verification Of Mortgage Guidelines, the reason verification of mortgage, VOM, is required is because the lender that is processing and underwriting a mortgage loan applicant’s application can verify the following:

the existing mortgage loan balance
monthly payment
payment history for the past 12 months
and to see if the borrower had any late payments in the past 12 months

Importance Of Verification Of Mortgage

A Verification of Mortgage is an extremely important document for homeowners undergoing a refinance mortgage. One of the main reasons why Verification of Mortgage Guidelines necessitates this document is because it demonstrates the borrower’s payment habits over the past 12 months. Borrowers who have consistently made their housing payments on time in the past 12 to 24 months exhibit financial responsibility.

This document indicates that the borrower can make their monthly mortgage payments on time. Borrowers who have consistently paid their mortgage on time over the past 12 months will likely continue this trend. As such, past performance is a reliable indicator of future performance. Speak to our loan officer Verification of Mortgage

Why Do Lenders Want Verification Of Mortgage

Most individuals applying for a refinance mortgage need to provide a Verification of Mortgage (VOM) to the lender to process and underwrite their new mortgage loan. Typically, the existing mortgage company provides this form. The lender holding the borrower’s current mortgage loan needs to confirm that the borrower has been making timely mortgage payments.

The current mortgage company will verify that the borrower has made on-time payments for the past 12 months. The new lender requires a VOM showing timely payments in the past 12 months when applying for a new mortgage.

A critical question for the current mortgage lender is whether the applicant has made timely payments over the past year. You must not have any late payments in the past 12 months to qualify for a new mortgage loan. While some lenders may allow one 30-day late payment, the majority will not permit any 30-day late payments within this period, according to Verification of Mortgage Guidelines.

Verification On Non-Traditional Home Purchase

Suppose you purchased your home through seller financing or other non-traditional financing methods and seek to refinance your mortgage. In that case, a mortgage verification will still be necessary. You must provide 12 months of canceled checks paid to the mortgage note holder or hard money lender, with no late payments in the past 12 months. According to the Verification Of Mortgage Guidelines, this is the only acceptable method to provide mortgage verification.

Cash payments do not qualify, even if the mortgage loan note holder issues a paid receipt. Suppose you have been alternating between cash and check payments for your housing. In that case, this will not meet the verification of mortgage requirements, and you will need to accumulate 12 consecutive months of canceled checks. Click here to apply for Mortgage Loans for purchase home

FAQs: Verification Of Mortgage Guidelines And Requirements By Lenders

What is a Verification of Mortgage (VOM)? A Verification of Mortgage (VOM) is a document that outlines a borrower’s complete mortgage payment history. Lenders use this document to assess a borrower’s past mortgage payment performance when evaluating a new mortgage loan application by the Verification of Mortgage Guidelines.
Why do lenders require a VOM? Lenders require a Verification of Mortgage (VOM) to assess the borrower’s reliability in making timely mortgage payments. This verification is essential for refinancing and new mortgage applications, including those for second homes or investment properties. According to Verification of Mortgage Guidelines, lenders focus on the borrower’s payment history, especially over the past 12 months, to evaluate their financial responsibility.
How does a VOM affect the loan approval process? A VOM reveals the borrower’s mortgage payment history, including any late payments in the past 12 to 24 months. For an automated underwriting system (AUS) to approve a new mortgage, the borrower generally needs a history of timely payments for the past 12 months. One 30-day late payment might be acceptable, but multiple late payments are a significant negative factor.
What specific information does a VOM provide? A VOM details the existing mortgage loan balance, monthly payments, and payment history over the past 12 months. It highlights late payments, considered one of the worst derogatory credit tradelines.
How do lenders verify a borrower’s income? Lenders verify income by reviewing recent pay stubs from the last two or three months, W-2 forms for the past two years, and tax returns for self-employed borrowers or those with additional income sources. They may also conduct direct employer verification to confirm employment status, income, and job stability.
How do lenders verify a borrower’s credit? Lenders check the borrower’s credit by obtaining a credit report from major bureaus (Experian, Equifax, or TransUnion) to review the credit history, score, and outstanding debts. They also examine recent credit inquiries to see if the borrower has applied for new credit accounts.
How do lenders verify a borrower’s assets? Lenders typically ask for bank statements dating back two to three months and statements from investment accounts like stocks, bonds, and retirement accounts.
What is the debt-to-income ratio (DTI), and why is it important? The DTI ratio compares the borrower’s monthly debt payments to their gross monthly income. A lower DTI indicates a manageable debt relative to income, suggesting the borrower can handle additional debt from a new mortgage. Lenders use this ratio to ensure borrowers can manage their monthly obligations.
How do lenders verify a borrower’s identity? Lenders require a government-issued photo ID (e.g., driver’s license, passport) and the borrower’s Social Security Number (SSN) for credit checks and employment/income verification with the IRS.
What role does a property appraisal play in the mortgage process? A professional appraisal ensures the property’s value justifies the purchase price or loan amount. This step is critical for lenders to confirm the investment’s worth.
Why is a title search necessary? A title search confirms that there are no existing liens or legal complications associated with the property’s title, providing protection for both the lender and the borrower.
How do lenders verify residency and housing history? Lenders might ask for a record of rental payments from individuals buying a home for the first time or those with little credit history. They also verify previous addresses to cross-check against credit and employment records.
What are the guidelines for non-traditional home purchases? A VOM still applies for homes purchased through seller financing or other non-traditional methods. Borrowers must provide 12 months of canceled checks as proof of timely payments. Cash payments do not count, even with a receipt from the mortgage note holder.
What happens if there are late payments in the borrower’s history? Late payments, particularly 30-day late payments, negatively impact the borrower’s creditworthiness. While one late payment might be tolerated by some lenders, multiple late payments typically hinder loan approval.