Shelter is a main requirement for survival, so keeping a roof over their head is the first priority for most Americans. If a potential borrower has a prior history of not meeting their housing obligations, lenders feel comfortable assuming they may have difficulty meeting future obligations as well. For applicants who have not owned a home before, or for some time, rental history is the only indicator of how they handle housing obligations. The Federal Housing Administration, or FHA, has guidelines for lenders on how to get and verify rental histories.
VOR is a verification of rent form the lender sends out to a landlord or property manager, requesting information on an applicant’s rental history. VORs typically ask for the dates of occupancy, the monthly rental amount and if the applicant paid in a satisfactory manner. If the applicant left the property and has an unsatisfactory payment history, the VOR asks if the account is current, the amount of any balance owed and the dates of any late payments. A VOR is a standard form for all loan programs, not just for FHA loans.
The FHA requires lenders to report a 12-month housing payment history for all applicants, including those who have lived in rent-free housing for the prior 12 months. The FHA also requires a clean credit history for the prior 12 months, except for medical accounts. This includes credit lines related to housing, like a mortgage or rental, even if they do not appear on an applicant’s credit report. Even if a rental record appears on a credit report, lenders will send a VOR to verify the information on that credit report.
If the information on a completed VOR matches the credit report, the FHA does not require any additional verification, since the two sources verify each other. The only exception to this would be if the landlord or property manager has a relationship with the applicant such as a familial relationship. If the information does not match, or if there is no rental payment history shown on the applicant’s credit report, the lender will independently verify the information on the VOR.
There are several ways to verify this information. Lenders may choose to call the landlord or property manager who signed the form and get a verbal confirmation of the information on the form. The FHA stipulates that lenders cannot use a phone number provided by the applicant, but must use one they obtain from an independent source, such as a phone directory. Lenders may also accept 12 month’s worth of cancelled check stubs from the applicant as verification or in lieu of a completed VOR. Lenders use this method if the prior landlord or property manager does not complete and return the VOR or if there is a relationship between the prior landlord and the applicant.
One last method used to either verify any cancelled checks turned in by an applicant or to prove timely rent payment for an applicant who paid their rent in cash is the review of the applicant’s bank statements for the last year. The applicant’s bank account should show deductions for checks, withdrawals for cash payments or a reduced payroll deposit reflective of the amount of the monthly rent payment. If there is no completed VOR and the lender cannot independently verify the rental payments, the lender will deny the FHA loan.