Verification of Rent Requirements To Qualify For a Mortgage
This blog will cover the verification of rent requirements to qualify for a mortgage. Verification of rent requirements is extremely important and viewed very favorably by mortgage underwriters. Rental verification proves that a renter has paid their rent payments on time for the past 12 months. Verification of rent requirements is not always mandated by mortgage lenders.
Recent Fannie Mae Guidelines give verification of rent as a strong compensating factor for automated underwriting system approve/eligible findings. This means that if a borrower is a marginal mortgage loan applicant with rental verification, it will enhance the chances for an automated underwriting system approval. In the following paragraphs, we will cover the verification of rent requirements for a mortgage.
When Are Verification of Rent Requirements Mandatory?
There are instances where rental verification requirements are mandatory. In general, all manual underwriting files mandate verification of rent requirements. Here are instances where Rental Verification is required by mortgage underwriters:
- Manual Underwriting
- VOR is required if the Automated Underwriting System (AUS) Findings condition 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 often have overlays where they require verification of rent even though AUS Findings do not require it. Gustan Cho Associates is a national mortgage company licensed in multiple states with no overlays on government and conventional loans. In this article, we will discuss and cover the Verification Of Rent Requirements To Qualify For a Mortgage.
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 payments.
In general, all manual underwriting files require verification of rent requirements. However, Gustan Cho Associates can waive verification of rent requirements on VA and FHA manual underwriting files if borrowers are living rent-free with family to save money for the down payment and closing costs on a home purchase.
When Is Verification of Rent Requirements Valid?
The only way the verification of rent can be used is via canceled checks or bank statements and a letter signed and dated by 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. For VOR to be valid, the rental payments must be on time for the past 12 months.
Verification of Rent Requirements From Private Landlord
Renters renting a home or apartment from a private landlord who does not own nor operate a registered, licensed property management company need to pay that landlord with a check or direct deposit. Renters need to provide canceled checks and bank statements if paid online from the previous 12 months for verification of rent requirements to be valid.
Cash payment to the private landlord does not count and cannot be used to verify rent. Although the landlord may give a renter a receipt or a letter attesting that the renter is paying rent timely, it will not count towards verifying rent. Verifying rent requirements is extremely important for potential homebuyers with credit scores lower than 620 FICO and those needing manual underwrite to get mortgage approval. We will cover this important topic in a later paragraph.
Rental Verification Requirements From Property Management Company
For renters renting their home or apartment from a registered, licensed property management company, the 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 has been timely on the past 12 months’ rental payments and the VOR has been filled out, signed, and dated by the property manager, it can be used as a VOR.
VOR If Automated Underwriting System Conditions It
Sometimes, when I run a mortgage application through Fannie Mae’s Automated Underwriting System, the resulting DU Findings will require verification of rent by borrowers. If that is the case, verification of rent is mandatory. Another important aspect of verification of rent is that a mortgage underwriter can decrease maximum debt-to-income ratios if borrowers cannot provide verification of rent due to rental shock on manual underwrites.
Payment Shock is when mortgage borrowers go from a certain rental payment to a higher one. Huge Payment Shock if housing payment goes from zero to a new mortgage of $1,500. This is very bad for borrowers who do not have verification of rent. However, if borrowers have verification of rent of $1,300 per month and their new proposed mortgage payment is $1,500, there is no rental shock since the new mortgage payment will only be $200 more than their current rental payment, which is verified via verification of rent.
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Gustan Cho Associates is a national mortgage company licensed in multiple states with no overlays on government and conventional loans. To qualify for a home loan, please contact Gustan Cho Associates at 800-900-8569 or text for a faster response.
Gustan Cho Associates is a mortgage broker licensed in 48 states with a national reputation of being able to do mortgage loans other lenders cannot do. Over 75% of our borrowers are folks who could not qualify at other lenders due to overlays, stress, last-minute loan denial, or not having the mortgage products. At Gustan Cho Associates, we only market mortgage loans that exist and are possible at competitive rates. Besides government and conventional loans with no lender overlays, we offer hundreds of non-prime mortgage programs including non-QM and non-prime mortgages.
You can email us at Gustan Cho Associates at gcho@gustancho.com. The team at Gustan Cho Associates is available seven days a week, evenings, weekends, and holidays.
