When is verification of rent required for USDA eligibility?
Do USDA loans require verification of rent? Do you have to prove previous rental history in order to be USDA eligible?
Today’s topic is important because USDA guidelines do not always require verification of rent. In this short video, I’ll explain when verification of rent is required for USDA eligibility. This will keep you in the know and your closing on track!
Before we get started, don’t forget to download our education packet. This free guide is designed to help walk you through the USDA mortgage qualifying process step-by-step and is ideal for homebuyers and realtors alike.
Verification of Rent
Everyone’s qualifying situation is different because a person may pay their rent by cash, check, money order, or a combination.
They may also make their payments to a private individual, apartment complex, or an independent management company. Plus, 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 the following under rental payment history:
“An indicator of future mortgage payment probability is the applicant’s payment of their current rent or housing.”
What determines if a Verification of Rent is required?
The USDA Guaranteed Underwriting System (“GUS”) is responsible for indicating if a Verification of Rent (VOR) is required.
GUS will generate either an Accept, Refer, or Refer with Caution underwriting recommendation.
An Accept recommendation allows for streamlined processing and does not require a VOR.
However, a GUS recommendation of a Refer or Refer with Caution may require Verification of Rent. When required, a full 12-month history is called for. If a full 12-month history is not available, USDA guidelines allow lenders to “verify the amount of rental history that has been paid.”
Also, USDA cautions that having one rental payment over 30 days late within the previous 12 months is “significant derogatory credit and will require a credit exception.”
What does this mean to your transaction?
In summary, verification of rental history is not required when a GUS recommendation is Accept. However, some lenders may still require this information and in turn, slow down processing time.
With a GUS recommendation of Refer or Refer with Caution, verification of rental history is required. In this case, an acceptable rental payment history will be necessary and the required documentation depends on how your rent is paid and the type of landlord you make the payments to.
Lastly, if you have been denied 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. It gives you access to an expert opinion and possibly keeps financing on track!
Just call or email to discuss your scenario and let us show you the Metroplex difference!
(800) 806-9836 Ext. 280