When Is Verification Of Rent Required On FHA Loans?

Verification Of Rent Required On All Manual Underwriting FHA Loan Programs

VOR is one of the most important factors and probably the most important compensating factors that a home buyer can provide to a mortgage lender. Verification Of Rent Required on all manual underwriting FHA Loans.

  • Many renters who rent an apartment or home pay their monthly rental payment with cash and get a receipt from the lender and feel that the receipt of the monthly rental payment is sufficient. 
  • However, any cash rental payment to the landlord cannot be used as rental proof unless the renter is renting their apartment or home from a registered property management company. 
  • If you are renting your apartment or home from a property management company, a letter on the property management company letterhead and signed by the property manager can be used in lieu of providing 12 months canceled checks to the landlord. 
  • If you are not renting your apartment or home from a registered property management company, then you need to provide 12 months consecutive canceled checks, without a missed payment and on time payment, to your mortgage processor and/or mortgage underwriter. 
  • If you have been late on your rent in the prior 12 months, the verification of rent will be void and cannot be used. 
  • Verfication of rent cannot be used if you made most of your rent payments with checks but on a few months you have made it with cash.

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, factor in whether or not a mortgage loan borrower qualifies for a residential mortgage loan.  Many home buyers do not understand that but the reason mortgage lenders make such a big deal about VOR is because of PAYMENT SHOCK where it shows how much rent the borrower has been paying to his or her new housing payment.  For example, if a mortgage loan borrower has VOR of $1,000 per month and can prove it by providing 12 months canceled checks and the borrower’s new housing payment on his or her new home purchase, which includes principal, interest, taxes, and insurance ( PITI ) is $1,100, then the payment shock is only 10% increase which is a great compensating factor whereas 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 of manual underwriting mortgage applications as well as all of FHA Back to Work Extenuating Circumstances due to an economic event mortgage loan applicants.  Many times, mortgage loan borrowers with under 600 FICO credit scores may be required to provide rental proof as well.

Home Loan With Bad Credit: Verification Of Rent Required If Requested By AUS

If you have 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 you are currently renting and have been paying your rental payment with cash, stop paying with cash and start paying with checks.  You can also pay it online as well and will need to provide 12 months bank statements showing the money being transferred from your bank account to your landlord’s bank account.  If you are planning in being a home buyer in the near future or currently have bad credit or low credit scores, please contact me now so I can help you get prepped up at www.gustancho.com or click this link, GET PRE-APPROVED NOW to get a full pre-approval.  You may also call me at 262-716-8151.  I am available 7 days a week to issue pre-approval letters or answer any of your questions.

Related> Verification of Rent: VOR

 

The information contained on Gustan Cho Associates website is for informational purposes only and is not an advertisement for products offered by The Gustan Cho Team @ Gustan Cho Associates or its affiliates. The views and opinions expressed herein are those of the author and/or guest writers of Gustan Cho Associates Mortgage & Real Estate Information Resource Center website and do not reflect the policy of Gustan Cho Associates Lenders Network, its officers, subsidiaries, parent, or affiliates.

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