Ask The Experts: Question of the Week
Our loan scenario desk experts receive thousands of questions from our subscribers.
Our experts work in the field and have over 25 years of experience, which is why they are known for saving a lot of deals.
We hope you learn something new!
FHA – Borrower Pays Cash for Rent – Manual Underwriting
Question:
We are doing a manual underwrite for an FHA loan where the borrower has paid cash for the rent. I have a VOR from two previous landlords documenting his payment history. Will this work?
Answer:
FHA does allow this under these circumstances. See the underlined area below.
Reference:
FHA Handbook 4000.1.II.A.5.a.(B)(2). See item “C”.
(2) Independent Verification of Non-traditional Credit Providers
The Mortgagee may independently verify the Borrower’s credit references by documenting the existence of the credit provider and that the provider extended credit to the Borrower.
c. To verify the Borrower’s rental payment history, the Mortgagee must obtain a rental reference from the appropriate rental management company, provided the Borrower is not renting from a Family Member, demonstrating the timing of payment of the most recent 12 months in lieu of 12 months of canceled checks or equivalent proof of payment.
Subscribers have access to the FHA Manual Underwriting Chart, which is on the ‘Charts & Checklist’ page under ‘FHA,’ and our FHA Manual Underwriting Class, which is located under the ‘Education Tab’ in ‘Online Video Classes.’