Most every industry has its own internal mix of acronyms, and the mortgage biz is no different. Your everyday consumer won’t ever use these terms, but mortgage companies use them throughout the course of a regular business day. What do these industry acronyms stand for?
A VOD stands for ‘verification of deposit.’ It makes sense that lenders want to ensure you have enough available funds for a down payment and closing costs, but there needs to be a little dough left over after the dust settles. During the application process, you’ll be asked to provide recent copies of bank statements for the funds used to close. Your bank statements will show this information. A lender can also send over a VOD to your banking institution for a verification of deposit. This is third-party verification of having sufficient funds to close.
A VOR means ‘verification of rent.’ The lender uses this form to verify a timely payment history directly from your landlord or property manager. This form asks if you’ve paid your rent on time, how much the rent is, and how long you’ve lived there. Lenders like to see at least two years of timely rental history. There is nothing similar to a VOD that you can provide showing timely rent history other than a couple of years’ worth of canceled checks or a payment history from your bank. Lenders also want to see how much your rent is, compared to what your new mortgage payment will be.
If there’s a big difference, say more than 125% or so of what you’re paying now, lenders might view this as what the industry refers to as ‘payment shock.’ If your rent is $100 and your new mortgage payment, including taxes and insurance, is $200, that’s a 100% jump. The lender will balk. If your debt ratios fall in line with the new mortgage, payment shock won’t be an issue. The VOR goes directly to your landlord and bypasses you completely.
Finally, a VOE stands for ‘verification of employment.’ This form is sent to your employer, again directly and bypassing you. The completed VOE will show how much you make each month and how long you’ve worked there. The VOE works as a backup verification of the paycheck stubs you provide to your lender. There are other verifications that take place during the application approval process, but these are actual forms that lenders send independently.
