Verification Of Rent Required By Mortgage Lenders
This article covers Verification Of Rent Required By Mortgage Lenders
VOR is one of the most important factors and probably the most important compensating factors that homebuyers can provide lenders. Verification Of Rent Required on FHA and VA Manual Underwrites. Many renters who rent an apartment or home pay their monthly rental payments with cash. They often get a receipt from their landlord. Renters pay cash to their landlord and they feel that the receipt of the monthly rental payment is sufficient as verification of rent required by lenders. However, any cash rental payment to the landlord cannot be used as rental verification.
Rental Verification By Registered Property Management Company
If renting an apartment or home from a registered property management company, then a VOR Form provided by the lender can be completed by the property manager:
- Executed VOR Form can be used a rental verification in lieu of 12 months canceled checks and/or bank statements of rental payments
- If not renting an apartment or home from a registered property management company, then need to provide 12 months consecutive canceled checks
- Cannot have missed payment
- Need 12 months of on-time payment to be provided to mortgage processor and/or mortgage underwriter
- If late on rent payment in pas 12 months, the verification of rent will be void and cannot be used
Why Do Lenders Make Such Big Deal With Making Verification Of Rent Required?
Rental payment history is not reported on the credit bureaus. However, rental payment history is considered one of the most important, if not the most important, factors in whether the borrower qualifies on manual underwriting.
- Many homebuyers do not understand that the reason lenders make such a big deal about rental verification
- This is because of PAYMENT SHOCK
- VOR shows how much rent the borrower has been paying and compares it to his or her new housing payment
For example, here is a case study:
- if a mortgage loan borrower has a VOR of $1,000 per month
- can prove it by providing 12 months canceled checks
- the borrower’s new housing payment on his or her new home purchase, which includes principal, interest, taxes, and insurance ( PITI ) is $1,100
- payment shock is only a 10% increase
- This is not a bad compensating factor
- 5% or less payment shock is considered a great compensating factor
If the borrower cannot provide VOR the payment shock will go from zero to $1,100 which is a major negative.
Is Verification Of Rent Required On All Mortgage Applicants?
No, proof of rental payment is not required on all mortgage loan applicants but if the borrower can provide it, it is a huge compensating factor and goes a very long way. There are many times where rental proof is mandatory. Especially if it states on the automated approval of the Automated Underwriting System ( AUS ). VOR is normally requested on all manual underwriting mortgage applications. Many times, borrowers with under 600 credit scores may be required to provide rental proof as well.
Home Loan With Bad Credit: Verification Of Rent Required If Requested By AUS
For borrowers with lower credit scores or bad credit history, the Automated Underwriting System Findings may state that Verification Of Rent Required. If the AUS requires VOR, the borrower needs to provide it, or else the borrower cannot qualify for the mortgage. If currently renting and have been paying rental payments with cash, stop paying with cash and start paying with checks. Renters can also pay it online as well. Will need to provide 12 months bank statements showing the money being transferred from the bank account to the landlord’s bank account. If planning in being a home buyer in the near future or currently have bad credit or low credit scores, please contact us at Gustan Cho Associates Mortgage Group at 262-716-8151 or text us for a faster response. Or email us at [email protected] Or click this link, GET PRE-APPROVED NOW to get started in getting pre-approved. We are available 7 days a week, evenings, weekends, and holidays.