Verification Of Rent
Verification of Rent is one of the most important factors a mortgage lender will look at and is considered an extremely important compensating factor. Verifcation of Rent, also referred to as VOR, is proof that a renter has been making timely payments to his or her landlord for the past 12 months. Many renters do not realize the importance of verfication of rent until its time to purchase a home and qualify for a mortgage loan. You cannot pay your landlord with cash even though you get a paid receipt from your landlord. Cash payments cannot be used as proof even with a signed receipt from your landlord. In order for a verification of rent to be valid, the renter needs to provide 12 months canceled checks that has been paid to the landlord if the landlord is a private landlord. If the renter is renting from a registered property management company, a letter from the registered property management company is sufficient. There are proper forms that need to be completed by both the landlord and/or the property management company that will be provided by the mortgage lender.
Going From Renter To Homeowner
Going from being a renter to a homeowner is a huge responsibility. Mortgage lenders are also very concerned for first time home buyers who go from renting to owning a home and will seriously look at payment shock. Mortgage lenders view first time home buyers as high risk and take that there is a considerable amount of risk of the first time homeowner defaulting on their mortgage loan. This is why verification of rent is so extremely important due to payment shock. For example, if you do not have verification of rent, you will go from a zero per month payment history to your new housing payment amount, let’s say $1,200 per month. However, if you have proof of verification of rent that you have been making $1,000 per month and can provide 12 months canceled checks that you have been making your housing payment for the past 12 months, your new mortgage lender will not be concerned with your new $1,200 per month housing payment. Many renters do not realize how huge it is for them to be paying their monthly rent payments with a bank check.
What Is Manual Underwriting?
If you need to qualify for a residential mortgage loan, you would consult with a mortgage company and/or mortgage loan originator. The mortgage loan originator will take your mortgage loan application and then run your credit and submit your mortgage loan application as well as your credit report to the Automated Underwriting System. An approve/eligible automated approval is what we need. The automated approval will dictate whether or not the mortgage loan applicant needs to provide a verification of rent. If the automated approval states a verification of rent is required, the mortgage loan process cannot proceed unless the mortgage borrower can provide verification of rent, VOR.
If the Automated Underwriting System renders a referred/eligible per automated finding, this means that the Automated Underwriting System cannot issue an automated approval, however, that the mortgage loan application can proceed via manual underwriting. Manual underwriting is when a mortgage underwriter is assigned to the mortgage loan application and needs to manually underwrite the mortgage loan package. Compensating factors will be required.
Verification Of Rent Is Required On Manual Underwriting
All manual underwriting requires verification of rent. No exceptions. There are cases where a mortgage loan applicant gets an approve/eligible per DU FINDINGS but the mortgage underwriting downgrades it to a manual underwrite due to the risk factors. Mortgage lenders consider a late rental payment as serious and can be a cause for a mortgage loan denial. If you are planning on qualifying for a residential mortgage in the near future, make sure that you make your monthly rental payments with a bank check and make sure you are not late on your monthly rental payments. Besides having timely rental payments, mortgage lenders expect to see that you have been making timely payments on all of your credit obligations for the past 12 months.
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