One of the frequently asked mortgage questions we get from home buyers is when is rental verification required by mortgage underwriters. Rental verification is an extremely strong credit tradeline that will add strength to the mortgage loan borrower’s credit profile. There are times when the Automated Underwriting System (AUS) will require borrowers to provide verification of rent. This normally happens with lower-credit-score borrowers or those with many outstanding collections, charged-off accounts, or prior bad credit. In the following paragraphs, we will cover when is rental verification required by mortgage underwriters.
Table of contents "Click Here" Toggle
FHA and VA loans are the only two mortgage loan program that allow manual underwriting. There are instances where a mortgage underwriter can downgrade an automated underwriting system approved file to a manual underwrite due to high debt-to-income ratio, low credit scores, or large outstanding collections or charge-off accounts. All manual underwriting files require verification of rent. However, for homebuyers who do not have rental verification due to living with a family rent-free to save money, the verification of rent is waived at Gustan Cho Associates. Gustan Cho Associates will waive rental verification for homebuyers living rent-free if they can complete and sign the living rental-free form provided by the landlord. Renters renting an apartment or home will be asked by lenders how they are paying their monthly rental payments. The rental verification cannot be used for renters paying monthly rent with cash. Even though they are armed with paid cash receipts by landlords, the VOR is invalid. Cash in the mortgage world is non-existent. Renters who rent from a private landlord pay cash and get a paid receipt every month that still cannot be used as proof of rental verification. Only canceled checks or bank statements are valid in providing VOR.
Many first-time homebuyers normally live with family or rent an apartment or home. For those first-time homebuyers, proof of renting and showing the mortgage lender that they are paying their monthly rent on time is extremely important. The mortgage loan underwriter will require at least 12 months of timely rental payments to the landlord. Lenders do not accept cash-paid receipts by landlords as a valid verification of rent. Only 12 months of canceled checks paid to the landlord or 12 months of bank statements are valid as rental verification.
Renters renting from a registered property management company are exempt from providing 12 months of canceled checks or bank statements to validate the verification of rent. Those living in an apartment complex and paying cash for their rent do not have to provide 12 months of canceled checks or 12 months of bank statements. A VOR form provided by the mortgage lender needs to be completed and signed by the manager of the property management company. The signed VOR Form can be used as a valid verification of rent for borrowers. Contact Us For First Time Home Buyer Loan
Renters renting an apartment or home from a private landlord can only show proof of rental verification by providing the mortgage lender with 12 months of canceled checks. Paying part with a check and part with cash is invalid and cannot be used as a VOR. This does not constitute a VOR in the mortgage lender’s eyes. First-time homebuyers are planning on purchasing a home soon and have been paying the landlord with cash. They need to start paying monthly rent payments with checks, effective immediately.
As mentioned earlier, renters rent an apartment or home from a registered property management company and pay them with cash every month, then a completed VOR form from the property management manager towards rental verification. Registered property management companies are exempt from the check-only rental verification rule. It needs to be a professional property management company, and a letter stating that you have been timely on monthly rental payments for the past 12 months will be sufficient proof to be used as rental verification.
Rental verification is only valid if the renter has been paying rent in a timely manner for the past 12 months. If the renter has been late multiple times, do not turn in the VOR. Mortgage lenders do not always require Verification of rent. Only borrowers with lower credit scores, not enough credit tradelines, gift funds, prior bad credit, late payments in the past 12 months, or substantial collections or charged-off accounts will most likely require rental verification.
Rental verification is extremely important because it shows the mortgage lender that borrowers have made timely rental payments for at least 12 months. It proves that borrowers are used to paying housing payments. Verification of rent with a low payment shock is considered a top compensating factor. It proves that a potential home buyer can easily transition from renting to paying a mortgage. This is especially the case if there is very little payment shock. Also, if renters live rent-free with family or friends and pay no monthly rent, the new proposed mortgage payment will be a big financial surprise to first-time home buyers.
Homebuyers who need to qualify for a mortgage with a mortgage company licensed in multiple states with no lender overlays on government or conventional loans can contact us at Gustan Cho Associates at 800-900-8569 or text us for a faster response. Or email us at alex@gustancho.com. We are available 7 days a week, evenings, weekends, and holidays. Qualify For A Mortgage, Click Here
Our team of licensed and support personnel is very creative and will guide every borrower to make the dream of homeownership a reality. Many mortgage lenders will require rental verification as part of their lender overlays. Gustan Cho Associates has zero OVERLAYS on FHA, VA, USDA, and conventional loans. If AUS does not have a condition for verification of rent, we will not require it. In the following paragraphs, we will cover the verification of rent requirements on manual underwriting.
Manual Underwriting require verification of rent. Sometimes, borrowers may undergo manual underwriting rather than automated. Manual underwriting involves a more thorough evaluation of the borrower’s financial profile. VOR may be required to verify rental payments in such cases. Gustan Cho Associates will exempt verification of rent for borrowers who have been living with family rent-free to save money to purchase a home.
VA Home Loans and FHA Loans allow manual underwriting on files that cannot get approve/eligible per Automated Underwriting Findings. Mortgage borrowers who need manual underwriting loans must realize that rent verification is required on manual underwrites. VA and FHA have guidelines on manual underwriting: Verification of rent, also referred to as VOR, is one of the most important compensating factors when qualifying for a mortgage. Verification of rent, also known as VOR, is proof of rental payments for the past 12 months.
The only way to prove it is by providing a mortgage lender with 12 months of canceled checks or bank statements to a private landlord. One missed rental payment without a check will void the verification of rent. Renters renting a rental unit from a registered property management company can get a VOR letter provided by the lender completed and signed by the property manager.
The VOR Form needs to state that the renter has been on time with rental payments for the past 12 months. Renters renting from registered property management companies must not provide 12 months of canceled checks or bank statements. This article will discuss and cover the verification of rent required on manual underwriting guidelines. Mortgage applicants with certain lenders may require verification of rent as part of their overlays even if the Automated Underwriting System (AUS) does not require it. Most lenders will require VOR for certain applicants.
Verification of rent required on manual underwrites is mandatory. Those who cannot provide VOR will not qualify for manual underwriting. If a mortgage lender requires verification of rent, VOR, from a mortgage loan applicant living with family or rent-free, it can create major issues in getting a mortgage loan approval. There are exemptions. Gustan Cho Associates WILL ACCEPT borrowers living rent-free with family members if the family member can complete, date, and sign a living rent-free form provided by the lender. The number one r eason verification of rent is so important for lenders is because it determines payment shock.
Mortgage lenders view this as a payment shock where first-time homebuyers are going from paying zero monthly rent to, for example, a new $1,500 mortgage payment. However, first-time home buyers currently pay $1,400 per month, and the new proposed mortgage payment will be $1,500, so there is hardly any payment shock. Payment shock is the difference between how much the renter was paying for rent versus the new proposed housing payment (PITI).
If a renter pays $1,000 monthly and the new proposed mortgage payment with property taxes and insurance is $1,200, the rental shock is 20%. A payment shock of less than 10% is considered compensating factor.
Lenders will feel comfortable seeing a renter who has had a history of paying $1,000 rent in the past 12 months being able to pay a $50 increase or no increase on a new housing payment. The lower the payment shock, the better-compensating factor it is. Lenders want to see if the borrower has a history of paying a housing payment, so the adjustment to their new mortgage payment is not a shock. If a renter goes from paying zero a month because of living rent-free and the new mortgage payment is $1,200 monthly, that would be considered a high payment shock.
Some so many renters deserve to have verification of rent credit. Unfortunately, they cannot use rent verification because they have been paying their monthly rent with cash instead of a bank check. Renters renting from a private landlord need 12 months of canceled checks or bank statements to prove rent verification with no late payments in the past 12 months.
Cash payment or one missed payment without a check will disqualify the verification of rent. Many renters who pay their landlords with cash and get a cash-paid receipt will not be able to use this as a verification of rent.
For renters renting a home or apartment from a property management company registered and licensed by the state, a VOR Form provided by the mortgage company is completed and signed by the property management homeowner association manager. The VOR Form completed, dated, and signed by the property management company can be used in lieu of the 12 months canceled checks.
Mortgage lenders will often require verification of rent (VOR) when a borrower is applying for a mortgage and currently rents their primary residence. The purpose of VOR is to verify the borrower’s rental payment history and assess their ability to make consistent and timely housing payments, which is an important factor in determining their creditworthiness and eligibility for a mortgage loan. Mortgage lenders typically request VOR when the borrower has limited credit history. Borrowers with a limited credit history or a thin credit file may be asked to provide VOR as part of the mortgage application process. Verifying a history of on-time rental payments can help demonstrate the borrower’s ability to manage housing expenses responsibly.
Borrowers who lack traditional credit references, such as credit cards or auto loans, may be asked to provide alternative forms of credit history, including VOR, to demonstrate their creditworthiness. Borrowers should be prepared to provide their rental payment history documentation, such as canceled rent checks, bank statements showing rent payments, or a letter from their landlord confirming the rent amount and payment history. Accurate and timely verification of rent can streamline the mortgage application process and increase the likelihood of loan approval.
For borrowers with solid credit, good income, great credit history, solid employment history, and reserves, the chances are that verification of rent will not be required. However, if credit scores are lower than 620, have outstanding collections, limited credit tradelines, short credit history, high debt-to-income ratios, and derogatory credit, then mortgage underwriters may require verification of rent. Just because one lender requires verification of rent does not mean another mortgage lender will require it. If borrowers are being requested VOR by an underwriter when AUS is not conditioning it, please contact us at Gustan Cho Associates. Gustan Cho Associates has zero overlays on government and conventional loans. If AUS does not require it, neither do we.
In cases where borrowers cannot get approve/eligible per DU FINDINGS or LP FINDINGS and get a referred/eligible per FINDINGS, the file can still get approved via manual underwriting. Manual underwriting is when borrowers can qualify for VA or FHA loans but not through the Automated Underwriting System. Almost all manual underwrites require verification of rent, VOR. There may be a lender or two that will not require a verification of rent.
Strong compensating factors will be required, such as high credit scores, larger down payments, and strong reserves. There cannot be any late payments on manual underwrites in the past 12 months. No late payments after bankruptcy or foreclosure unless the borrower has strong compensating factors.
Verification of rent may be needed to accurately calculate the borrower’s debt-to-income ratio (DTI), which is a key factor in determining mortgage eligibility.
Rental payments in the DTI calculation provides a more comprehensive picture of the borrower’s financial obligations. Lenders may require VOR as part of the income qualification process, especially if the borrower’s income alone is insufficient to qualify for the desired mortgage amount. Demonstrating a history of consistent rental payments can help strengthen the borrower’s case for loan approval.
Homebuyers can qualify for FHA and VA loans during Chapter 13 Bankruptcy repayment plan with trustee approval. Most bankruptcy trustees will approve a mortgage on a home purchase during the Chapter 13 bankruptcy repayment plan. There is no waiting period after the Chapter 13 Bankruptcy discharge date to qualify for VA and FHA loans.
Any Chapter 13 bankruptcy with less than two years seasoning from the discharge date on VA and FHA loans is manual underwriting, and manual underwriting guidelines apply.
Borrowers who need to qualify for FHA Loans or VA Loans during or after the Chapter 13 bankruptcy discharge date, please get in touch with us at Gustan Cho Associates at 800-900-8569. Or text us for a faster response—or email gcho@gustancho.com. The team at Gustan Cho Associates comprises experts in manual underwriting. We have zero FHA, VA, USDA, and Conventional loan overlays.
Gustan Cho NMLS 873293 is the National Managing Director of NEXA Mortgage, LLC dba as Gustan Cho Associates NMLS 1657322. Gustan Cho and his team of loan officers are licensed in multiple states. Over 75% of the borrowers of Gustan Cho Associates (Gustan Cho Associates) are folks who could not qualify at other lenders due their lender overlays on government and conventional loans. Many mortgage borrowers and real estate professionals do not realize a mortgage company like Gustan Cho Associates exists. We have a national reputation of being a one-stop mortgage company due to not just being a mortgage company with no lender overlays but also offering dozens of non-QM and alternative financing loan programs. Any non-QM mortgage loan program available in the market will be offered by the team at Gustan Cho Associates. Our team of support and licensed personnel is available 7 days a week, evenings, weekends, and holidays.
Share on X (Twitter) Share on Facebook Share on Pinterest Share on LinkedIn Share on Email Share on RedditHomebuyers can…
Share on X (Twitter) Share on Facebook Share on Pinterest Share on LinkedIn Share on Email Share on RedditThis guide…
Share on X (Twitter) Share on Facebook Share on Pinterest Share on LinkedIn Share on Email Share on RedditIn this…
Share on X (Twitter) Share on Facebook Share on Pinterest Share on LinkedIn Share on Email Share on Reddit In…
Share on X (Twitter) Share on Facebook Share on Pinterest Share on LinkedIn Share on Email Share on RedditThis Article…
Share on X (Twitter) Share on Facebook Share on Pinterest Share on LinkedIn Share on Email Share on RedditThis ARTICLE…
Hi Michelle, We talked back in February about a mortgage. I’ve been thinking about mortgage options. Please remember: I want to purchase either a single family home or a duplex sometime this year. And I will move into it as my primary residence.
I want to put down AS LITTLE AS POSSIBLE
I’ve got about $103K in reserves in 3 different IRA accounts and another $55k in checking accounts – total about $158K
In Sept of 2020, I purchased a 3-unit using FHA financing – I live in one of the 3 units.
Next week will be 3 years seasoning since Chapter 7 discharged on June 28, 2018
All 3 credit bureaus are 705-720+ Questions: I heard that I might be able to get an 80% loan and negotiate a seller 2nd mortgage (of 15%). (I’ve done this 10 times years ago). Would I qualify for a loan like this? After only 3 years since my Chapter 7 discharge? Or do you think I need to wait 4 years since the discharge? Thanks, Liam Liam Crotty
You can not purchase another primary home until you have held your FHA property for a full year. You can purchase a primary home with 5% down in September. What is your intention for the next purchase?
Manual Torrez says:It’s hard to come by educated people on this particular topic, but you seem like you know what you’re talking about!
Thanks. I am looking to refinance my investment property in Oregon. It is 40 acres, is this something you can lend on?
It’s actually a cool and helpful piece of information.
I am happy that you just shared this useful
info with us. Please keep us informed like this. Thank you for sharing.
It’s not my first time to visit this website, i am browsing this web site dailly and take nice
facts from here everyday. Hello, are you licensed in Michigan? We are over 12 months in, have made every house pmnt within the month due. We owe about 165,000 and our house is currently worth around 275,000. We owe apx 40,000 to the chapter 13. I have no idea what our credit score is. Let me know what you think.
You seem like you meet all the minimum guidelines on Chapter 13 bankruptcy HUD guidelines on FHA loans. Please reach out to us at gcho@gustancho.com.
Gustan Cho says:Yes, we are licensed in Michigan. What is your number and I will have my Associate Alex Carlucci call you shortly.
LueAnn Robinson says:Hello, I lived with a lady for 6 months did not pay rent because she said until she ask then I pay.
So can i provide cell phone bills, or is there anything else I could do to show pay back worthiness.
Car insurance coverageis actually a necessary in the state of Illinois. Brent Norkus of Goosehead Insurance has the best terms and rates has the best terms and rates at Goosehead Insurance. There are more positive reviews about Brent Norkus of Goosehead Insurance than any other insurance agent in Chicago.
Make sure you possess the right coverage.
Brent Norkus of Goosehead Insurance is a five star rated insurance agent in Chicago and suburbs. Recent data suggests that Brent Norkus of Goosehead Insurance has 40% lower premiums over the competition.
GoodBased on 65 reviewsTrustindex verifies that the original source of the review is Google.Sapna Sharma2024-07-04I am working with Gustan Cho Associates and all the staff and Gus are so cooperatives. Gus is a motivational person and he always motivate or praise about my work. Really so happy working with Gustan Cho Associates Family.Trustindex verifies that the original source of the review is Google.James Strebel2024-04-06Very professionalTrustindex verifies that the original source of the review is Google.Bill Burg2024-04-06Man it’s been great working with Gus and his amazing team. Their professionalism and attention to detail is second to none. I’ve never met anyone with more knowledge and skill at finding ways to help people into a home than him.Trustindex verifies that the original source of the review is Google.Rhonda Smith2024-02-23Amazing placeTrustindex verifies that the original source of the review is Google.brent norkus2024-02-23Working with Gustan and his team has been an absolute pleasure. From start to finish, they have every client's best interest in mind to ensure they get the correct loan that fits their needs. Efficiency and accuracy are two words that describe my experience with Gus. Gus and his team over at Nexa are dominating the GAME! 5 stars is an understatement, and I would give ten stars if possible!Trustindex verifies that the original source of the review is Google.TCrumpCollinsParsonMcGinnis Frazier2024-02-22John and Angie are absolutely amazing! We had another lender and our loan fell through at the last minute. I called John and told him our issues and in 5 minutes he told me he could get it done. After 30 years of praying, moving and bankruptcy issues, these two got it done. It’s was fast and they answered all our questions. There are not enough words that could express how overwhelmed we are and how awesome they are. Do yourself a favor and call John, I promise you will thank me later. Please check out Gustan Cho’s videos. They are telling the truth and will walk thru fire with you. Thank you John and Angie! The Frazier’s.Trustindex verifies that the original source of the review is Google.Charlie G2024-02-16Gus is a great person, and a great loan officer with lots of experience and knowledge of many types of loans. Gus even takes calls after business hours unlike a lot of other companies. Gus has given me the best options available for a mortgage; he is honest and has integrity. I got to give Gus 5 stars due to he goes the extra mile to help you. Thanks Gus.Trustindex verifies that the original source of the review is Google.David Heckman2024-02-15John Strange and Angie Torres made this whole process seamless from start to finish. John would answer a text or call anytime and made sure to keep me updated the whole time. I would tell you that you are in good hands with these two!
Gustan Cho Associates are mortgage Loan Officer licensed in 48 states including Washington DC, Puerto Rico, and the U.S Virgin Islands (Not licensed in NY and MA). The team at Gustan Cho Associates has a national reputation of being able to do mortgage loans other mortgage companies cannot do. Gustan Cho Associates dba of NEXA Mortgage has a lending partnerships with over 190 wholesale mortgage lenders with dozens of no overlay lending partners on government and conventional loans and countless non-QM and alternative lending partners. Over 80% of our clients are borrowers who could not qualify at other mortgage companies either due to a last-minute mortgage loan denial due to lender overlays or because the lender did not have the mortgage loan program suited for the borrower. At Gustan Cho Associates, we only market mortgage loan products that exists and are possible.
