If you are a first-time home buyer and you are applying for a mortgage, one of the documents you may be asked to sign is a verification of rent. This is especially true if you have little or no credit history, or if it is required by your lender. For example, if you are applying for a VA loan or an FHA loan, the underwriter will typically require the loan officer to verify your rent.
Why a Verification of Rent?
A verification of rent allows a lender to feel confident that you have made rental payments on time for a specific period of time, typically two years. The reason behind this is that many lenders feel if you have been able to pay your rent on time, you are less likely to fall behind on mortgage payments. Lenders can also feel confident that you have the income needed to sustain a monthly payment if your mortgage payment and rental payments are not significantly different.
While a borrower who currently owns their home may have their mortgage payments verified via their credit report, renter's payment history is generally not reported to any credit reporting agency. Lenders expect a first-time buyer may be making a higher mortgage payment, but if your rental payment history is strong, they are generally more willing to accept the risk associated with a mortgage.
What is Included in a Verification of Rent Form?
The information contained in a Verification of Rent form is standard. The name, address and telephone number of your landlord must be provided to the lender. Additionally, you will be asked to sign the form to verify that you have authorized the lender to act on your behalf to obtain this information. Finally, the lender will fill in their name, address, and contact information in the event the landlord has questions.
Additionally, the landlord will be asked to verify when you began your occupancy, whether you had any late payments during the prior 12 months, and whether your tenancy has been satisfactory to the landlord. There is also a section which allows the lender to make comments should they desire to do so.
What Happens if I Live with Friends or Family?
We often have situations when a first-time buyer lives with a friend or family member and contributes to the household by making regular rental payments. In these cases, the lender may ask you to provide 24 months of canceled checks verifying the amount you are/have been paying. In lieu of canceled checks, the lender may accept bank statements showing regular withdrawals of cash, at the same time of the month, in the same amount. If this is the type of situation you find yourself in, it is a good idea to discuss with your lender what additional proof might be needed.
If a Verification of Rent is Received Will Additional Documents be Required?
For renters who are making regular payments to a property management company, in most cases, a verification of rent is all that is necessary. However, in some instances, for example, if your landlord only owns a single-family home you are renting, the lender may ask you to provide additional proof of timely rent payments such as canceled checks or bank statements. First-time home buyers should ask their lenders in advance whether they may require additional documents in order to ensure they can secure them in a timely manner.
As a top mortgage lender in the Washington D.C. area, First Savings Mortgage is committed to helping you purchase your first home. One of the most important parts of getting a mortgage loan is understanding the documents you will be asked to sign and which may be required as part of the home buying process.