Verification Of Rent On Manual Underwriting Required By Lenders


Verification Of Rent On Manual Underwriting Required By Lenders

This BLOG On Verification Of Rent On Manual Underwriting Required By Lenders Was UPDATED On September 24th, 2018

what are the Verification Of Rent On Manual Underwriting Required By Lenders

Verification of rent is one of the most important items borrowers can provide a residential mortgage lender to qualify for home loans.

  • Even though rental payment history does not report on the three giant credit bureaus;
  • Verification of rent provides probably the most weight
  • VOR with low payment shock  is a compensating factor
  • VOR proves that borrowers can handle new mortgage payment going from a renter to a home buyer
  • Verification Of Rent On Manual Underwriting is required on all manual underwriting on FHA and VA Home Loans

Payment Shock

what is Payment shock

Payment shock is the difference on the amount a renter is paying to the proposed new mortgage payment:

  • For example, here is a case scenario:
    • if renter is currently paying $1,000 in monthly rent
    • have been timely for the past 12 months with no late payments on rent
    • new mortgage payment is $1,000 or slightly more
    • this proves to underwriter that they will be able to manage new mortgage payment with no problems
  • If renter is currently paying $1,000 per month in monthly rent and new mortgage payment will be $1,500 per month, the new payment will have a 50% payment shock
  • Payment shock is the percentage of the increase from current rent to new monthly mortgage payment
  • Rental shock factors are considered by mortgage underwriters

Mechanics Of Verification Of Rent On Manual Underwriting

what is Mechanics Of Verification Of Rent On Manual Underwriting

Verification of Rent is not required many times but providing VOR shows a lot of weight and Verification Of Rent On Manual Underwriting is mandatory.

  • All borrowers mortgage files need to go through the Automated Underwriting System
  • Many times when a borrower has credit scores under 620 or a lot of collection accounts, the AUS will require VOR
  • In the event if AUS renders a referred/eligible then it needs to be downgraded to a manual underwrite
  • Verification Of Rent On Manual Underwriting is mandatory
  • Borrowers who cannot provide it cannot qualify for a mortgage loan
  • Many renters pay their rent payment on time to their landlords every month with cash
  • They get a rental paid receipt from their landlords with cash payments
  • Unfortunately, although the renter is making timely payments to their landlords, cash payment to landlords cannot be used as proof of verification of rent
  • Even though a renter can get rental receipts that the rent has been paid with cash, cash is non-existent in the mortgage industry
  • Renters renting apartment or home from a private landlord and not a property management company, the only way verification of rent can be used is by providing the underwriter 12 months of cancelled checks and/or bank statements paid to the landlord
  • One or two cash payment during the 12 month period will disqualify the verification of rent
  • Make sure that if making monthly rental payment to make it with a check payable to landlord
  • Renters renting home or apartment from a registered licensed property management company, VOR Form provided by lender can be completed and signed property manager in lieu of canceled checks and/or bank statements
  • Renters can pay monthly rent with cash to property management company as long as the property management company is a registered, licensed property management company
  • VOR Form stating that renter has been making monthly payments on time for the past twelve months is sufficient

Irregular Monthly Rent Payments

what are Irregular Monthly Rent Payments

Mortgage underwriters want to see the renters lease agreement and will review the lease agreement.

  • Most lease agreements are standard
  • It requires the renter a security deposit and the monthly rent amount as well as the terms
  • Mortgage underwriters will want to see a consistent set monthly rent amount for every month for the past 12 months
  • What happens if borrower have paid lower than rent amount for one or more months due to extenuating circumstances? 
  • If renter have not paid a steady fixed rate every month for rent, then the underwriter will want to see why and a letter of explanation is required
  • This type of case scenario is often common where the landlord may allow the tenant to do minor repairs on the home they are renting and deducting it from their rent payment
  • Unfortunately, underwriters will see this as a red flag and will require the borrower proof showing that the reason for the reduced rent for a particular month was due to repairs
  • Receipts will be required and possibly, a letter from the landlord will be required as well

Qualifying For Mortgage With Lender With No Overlays

How Qualifying For Mortgage With Lender With No Overlays

Home Buyers who need to qualify for mortgage with direct lender with no mortgage overlays on government and conventional loans can contact us at Gustan Cho Associates Mortgage Group at Loan Cabin Inc. at 262-716-8151 or text us for faster response. Or email us at We are experts in manual underwriting and have zero overlays on FHA, VA, USDA, and Conventional Loans.

Gustan Cho

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