In underwriting, lender has an issue with rent receipt

[tim1017]

Loan officer called me today and asked that I present canceled checks for the past four months where I have been renting from my Father.  I explained to her that all rent was paid in checks EXCEPT the first month where we paid with cash.  Loan officer stated that since we were renting from family that his is going to be an issue with the underwriter.   

I have a hard time understanding why the ONE month of cash rent paid even though I have a receipt would be an issue.  Could this potentially kill my mortgage deal?  Anyone experience something like this in the past?  This is completely unexpected obviously we are a little discouraged here.

[Anonymous]

Is the issue 4 cancelled checks?   Month 1 was for cash, and next 3 check?  So why can't ya just write a check for Feb coming up, and turn in 4 cancelled checks then?

[tim1017]

I have no idea what the issue is here, they asked for 12 more months of canceled checks.  Thankfully I was able to pull them and submit quickly.  Have some other conditions they came back with as well.

[Anonymous]

Like what?

[StartingOver10]

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@tim1017 wrote:

I have no idea what the issue is here, they asked for 12 more months of canceled checks.  Thankfully I was able to pull them and submit quickly.  Have some other conditions they came back with as well.

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The issue is paying cash for your rent, especially since it is to a relative. Cash is impossible to verify.  Thankfully you can show checks for the rest.

[Revelate]

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@StartingOver10 wrote:

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@tim1017 wrote:

I have no idea what the issue is here, they asked for 12 more months of canceled checks.  Thankfully I was able to pull them and submit quickly.  Have some other conditions they came back with as well.

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The issue is paying cash for your rent, especially since it is to a relative. Cash is impossible to verify.  Thankfully you can show checks for the rest.

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Wouldn't bank statements assuming cash was withdrawn to pay rent cover that for the purposes of underwriting?

Granted if it were being yanked out of a mattress I agree heh.

[StartingOver10]

This is specifically one of the red flags that lenders look for - cash payment for rent to a relative.

The risk to the lender is this: you show you made $X cash payment to relative for rent, but who is to know that the "rent" wasn't given back to the borrower at some later time and date and not redeposited into the same account? That is the fear, that there is actually no rent being paid, just an amount that is tagged rent for mortgage purposes.

[Revelate]

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@StartingOver10 wrote:

This is specifically one of the red flags that lenders look for - cash payment for rent to a relative.

The risk to the lender is this: you show you made $X cash payment to relative for rent, but who is to know that the "rent" wasn't given back to the borrower at some later time and date and not redeposited into the same account? That is the fear, that there is actually no rent being paid, just an amount that is tagged rent for mortgage purposes.

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Dumb question: but other than payment shock determination is rent really used for anything?

[Anonymous]

I have been mortgage free 7 years, and prior to paying off the house, the payment was 378 per month.

I'm pre approved for a 250k new build.  Pretty good credit, steady 6 figure income,  DTI in the 20s, but I was counseled on the "sticker shock" phenom noted by Revel.  I was advised I'd be going from paying 0 a month to 4 figures.  I'm sure the UW advised the LO to have the conversation.  I agreed we were a little intimidated at first, but every calculator said we could do this, but for sure it would mean a few changes in our lifestyle, meaning a firmer grip on our budget.

So yeah, they're gonna look at payment shock.