Do you have to prove previous rental history in order to qualify for a USDA loan?
Do USDA loans require verification of rental history?
Due to the variety of USDA qualifying questions that we receive on our subject today, I feel it is important to give you the facts in order to help keep your all important financing headed to the closing table!
But before we get started, don’t forget to download our newest educational flyer with the link below. This free guide is designed to help walk you through the mortgage qualifying process step-by-step and is ideal for both homebuyers and Realtors alike.
So, do USDA loans require verification of rental history?
Everybody’s situation is different, because a person may pay their rent by cash, check, money, or a combination and it may be paid to a private individual, apartment complex, or an independent management company.
Additionally, an individual may not have a verifiable rental payment history such as when one is living with family or rent free.
As a starting point, USDA guidelines state that in cases where the qualifying credit score is below 680 and there is a rental payment history, the lender should obtain a rent payment reference either as:
- Part of the credit report, or
- Directly from the landlord, or
- Through cancelled checks covering the most recent 12 months prior to the loan application.
While the USDA guidelines state that “written verifications by independent management companies and private landowners may be accepted in lieu of canceled checks or money order receipts.”
It further confirms that “when a private individual is the applicant’s present landlord, 12 months’ worth of cancelled checks indicating a satisfactory rent payment history is preferred.”
Also, in cases when the applicant does not have a full 12 month history we would need to “verify any previous payment made in the last 12 months”.
Remember, USDA loan eligibility provides that it is the “lender’s responsibility to confirm the applicant’s history of payment towards housing expense is acceptable”.
“One rent or mortgage payment paid 30 or more days late within the last 12 months is an indicator of unacceptable credit”, unless further consideration may be allowed due to extenuating circumstances.
With that being said, here are the situations where a USDA loan would NOT require verification of rental history:
- USDA Applicants with credit scores of 680 and above are not subject to verification of rent or housing history
- USDA Loans processed through the GUS underwriting system that receive an “Accept” response are not subject to verification of rent or housing history.
In summary, USDA loans do not always require verification of rental history, but when it is, an acceptable rental payment history will be necessary and the documentation to do so will be dependent on how your rent is paid and the type of landlord you make the payments to.
If you have been denied for a USDA loan due to verification of rental history, please call or email us today in order to take advantage of our free 2nd opinion service which gives you access to an expert opinion and possibly be able to keep that all important financing on track!
(800) 806-9836 x 280
Are you working with a lender that understands the USDA program? Here is the report to download so you can be in the know: