Let me preface this post by saying that it applies to people getting bad credit auto loans and first time buyer loans only. If you have good credit, lenders do not typically verify info with landlords or mortgage companies before they fund your auto loan.

There, now that that is out of the way…

I had an applicant yesterday that would have probably qualified for an auto loan with no money down, but they were adamant that their landlord would never talk to the bank or call the bank back. That poised a bit of the problem for the potential client because the client did not have good enough credit to get an auto loan through a lender that would do an auto loan with no money down that would not require a landlord verification.

I could have listed the client as “Living with Relatives” on their application, but the lender that would have given them the loan still would have counted $1000 into their monthly budget for rent, not leaving room for a car loan. Unfortunately, the customer did not make enough money to budget for a new car payment with $1000 rent factored in. Their real rent was only $600, and at that rent amount, the customer budgets for a car payment just fine.

Unfortunately for this customer, their living situation prevented them from being able to get a loan with no money down.

There are lenders out there that are still willing to give this customer an auto loan, even without verifying residence through a landlord. However, all of those types of lenders that this person could qualify for would have required $1000-$2000 down.

The auto lenders balance the risk of every auto loan very carefully. They consider the applicant’s time on job, time at residence, previous credit history, credit score, age of vehicle (collateral), mileage on vehicle, make and model of vehicle, term of loan, interest rate, and (of course) down payment. Only when the entire loan package looks profitable to the lender will the analyst approve the auto loan.

When we increase the down payment, we lower the risk of the loan, and lenders are willing to overlook certain other deficiencies of the contract.

Why does the auto lender want to talk to your landlord?

• Make sure you are not behind on rent.
• See if you are on the lease with other people.
• See if you have been living at the address as long has you claim.
• Make sure the lender knows the correct rent amount.
• Make sure you live where you say you do.

It is all about stability. As long as the landlord does not tell the lender you are sketchy, always behind on your rent, and probably going to be evicted, you should be okay. Make since? Let me know if I forgot to mention anything.