Verification Of Rent Requirements To Qualify For Mortgage
This BLOG On Verification Of Rent Requirements To Qualify For Mortgage Was UPDATED On November 15th, 2017
Verification Of Rent is extremely important and viewed very favorably by mortgage underwriters. Rental Verification is proof that a renter has paid their rent payments on time for the past 12 months. Verification Of Rent is not always required by mortgage lenders.
However, there are instances where Rental Verification is required. Here are instances where Rental Verification is required by mortgage underwriters:
- Manual Underwriting
- VOR is required if the Automated Underwriting System (AUS) Findings conditions that VOR is required
- Cases where the borrower has lower credit scores
- Instances where borrowers are marginal borrowers
- High debt to income ratio borrowers
Many mortgage lenders will have lender overlays where they require verification of rent even though AUS Findings do not require it.
What Is Verification Of Rent?
Verification Of Rent Requirements Explained:
Verification of rent, also known as VOR, is one of the most important credit factors in the mortgage underwriting process.
- Verification of rent probably has more weight than any other credit tradelines in the mortgage underwriting process
- Most renters can easily provide proof that they have been paying timely on their monthly rent payment
- The only way the verification of rent can be used is via cancelled checks or bank statements and/or a letter signed and dated from a registered property management company’s property manager
- A rental receipt is not an acceptable form of verification of rent nor is a letter from the landlord
- In order for VOR to be valid, the rental payments needs to be on time for the past 12 months
Verification Of Rent Requirements From Private Landlord
Renters who are renting a home or apartment from a private landlord who does not own nor operate a registered licensed property management company needs to be paying that landlord with a check or direct deposit
Renters need to provide cancelled checks and/or bank statements if paid online from the previous 12 months in order for verification of rent requirements to be valid:
- Cash payment to private landlord does not count and cannot be used for verification of rent
- Although landlord may give renter a receipt or a letter attesting the fact that renter is paying rent timely, it will not count towards verification of rent
- Verification of rent requirements is extremely important for those potential home buyers who have credit scores lower than 620 FICO and for those who needs a manual underwrite in order to get a mortgage approval
We will cover this important topic in a later paragraph.
Rental Verification Requirements From Property Management Company
Renters who are renting your home or apartment from a registered licensed property management company, the property management property manager can complete, sign, and date a VOR Form provided by the mortgage lender:
- Renters can pay cash to the property management company
- As long as the renter have been timely on the past 12 months rental payments and the VOR has been filled out and signed and dated by the property manager, it can be used a VOR
Verification Of Rent Required If Automated Underwriting System Conditions It
There are times when I run a mortgage application through Fannie Mae’s Automated Underwriting System that the resulting DU Findings will require verification of rent by borrowers:
- If that is the case, verification of rents is mandatory
- Another important aspect with verification of rent is that a mortgage underwriter can decrease maximum debt to income ratios if borrowers do not have verification of rents due to rental shock on manual underwrites
- Payment Shock is when mortgage borrowers goes from a certain rental payment to a higher mortgage payment
- Huge Payment Shock if housing payment goes from zero to a new mortgage of $1,500
- This is a very bad thing for borrowers who do not to have verification of rent
- However, if borrowers have verification of rent of $1,300 per month and your new proposed mortgage payment is $1,500, there is no rental shock since new mortgage payment will only be $200 more than your current rental payment which is verified via verification of rent
The Gustan Cho Team at USA Mortgage is a direct mortgage lender with no overlays on government and conventional loans. To qualify for a home loan, please contact Gustan Cho at 262-716-8151 or email us at firstname.lastname@example.org. We are available 7 days a week, evenings, weekends, and holidays.