Mortgage lenders usually verify your employment by contacting your employer directly and by reviewing recent income documentation. A form allowing an employer to provide employment and income information to a potential lender must be signed by the borrower. At that point, the lender typically calls the employer to obtain the necessary information.
Employers are typically happy to assist, but if they refuse to verify employment, borrowers have recourse.
The short answer is yes, mortgage companies can verify income after closing This is typically done in two ways:
- Third-party verification: The mortgage company may use a third-party service to verify your income. This service will contact your employer and verify your employment status and income.
- Internal audit: The mortgage company may conduct an internal audit of your loan file. This audit may include verifying your income.
There are a few reasons why mortgage companies may verify income after closing:
- To comply with regulations: The Consumer Financial Protection Bureau (CFPB) requires mortgage companies to verify the income of borrowers who are applying for certain types of loans, such as high-cost mortgages.
- To protect themselves from fraud: Mortgage companies want to make sure that borrowers are who they say they are and that they have the income to repay their loans.
- To identify potential problems: If a mortgage company discovers that a borrower’s income is lower than they originally reported, this could be a sign that the borrower is at risk of defaulting on their loan.
If you are concerned about your mortgage company verifying your income after closing, you should talk to your loan officer They can explain the company’s policies and procedures and answer any questions you may have
Here are some additional things to keep in mind:
- The mortgage company is likely to verify your income if you have a high debt-to-income ratio. This is the ratio of your monthly debt payments to your monthly income. If your debt-to-income ratio is high, the mortgage company may be concerned that you will not be able to afford your mortgage payments.
- The mortgage company is also likely to verify your income if you have a history of credit problems. This could include things like late payments, defaults, or bankruptcies. If you have a history of credit problems, the mortgage company may be concerned that you will not be able to repay your loan.
- You can help to avoid problems by providing accurate and complete information to the mortgage company. This includes your income, employment history, and credit history. If you are honest and upfront with the mortgage company, they are less likely to have to verify your information after closing.
How Mortgage Lenders Verify Employment
Generally, mortgage lenders get employment verification by getting in touch with your employer and asking for relevant documentation and information about your income. A form allowing an employer to provide employment and income information to a potential lender must be signed by the borrower. The lender then usually gives the employer a call to get the information they need.
Most lenders only require verbal confirmation, but some will seek email or fax verification. Lenders can verify self-employment income by obtaining tax return transcripts from the IRS.
There are several steps that borrowers can take if employers refuse to verify employment, These steps include:
- Contacting the employer’s human resources department.
- Providing the employer with a copy of the form that authorizes the release of employment information.
- Asking the employer to explain why they are refusing to verify employment.
The borrower might have to look for a new mortgage lender if the employer continues to refuse to confirm employment. Some lenders will work with borrowers whose employers won’t confirm employment more readily.
FAQs
Here are some frequently asked questions about mortgage companies verifying income after closing:
- How long after closing can a mortgage company verify income? There is no set time limit for how long after closing a mortgage company can verify income. However, most mortgage companies will verify income within a few months of closing.
- What happens if my income is lower than I reported on my loan application? If your income is lower than you reported on your loan application, the mortgage company may require you to provide additional documentation to support your income. They may also require you to make a larger down payment or to pay a higher interest rate.
- Can I dispute the results of an income verification? Yes, you can dispute the results of an income verification. If you believe that the information is inaccurate, you should contact the mortgage company and provide them with documentation to support your claim.
The Bottom Line
Mortgage companies can verify income after closing. Usually, they do this to stay in compliance with laws, guard against fraud, and spot possible issues. Speak with your loan officer if you have any concerns about your mortgage company confirming your income after closing.
In addition to the information above, here are some additional tips for borrowers who are concerned about their mortgage company verifying their income after closing:
- Be honest and upfront with the mortgage company about your income.
- Provide the mortgage company with all of the documentation they request.
- Keep your contact information up to date with the mortgage company.
- Respond to any requests for information from the mortgage company promptly.
By following these tips, you can help to avoid any problems with your mortgage company verifying your income after closing.
At What Point in the Mortgage Process Does a Lender Ask for Employment Verification?
Normally, when you apply for a mortgage, you will provide the lender with certain financial details, such as your income and employer. The lender will verify this information during the underwriting process in order to approve you for a mortgage. That process happens days to weeks before closing. But because mortgages can take a month or two to close, the lender might run a second employment verification in the run-up to the closing date, just to make sure nothing has changed in your situation.
Verification for Self-Employed Individuals
Many people who take out mortgages are self-employed. In this situation, lenders often require an Internal Revenue Service (IRS) Form 4506-T. Using this form, which requests a “Transcript of Tax Return,” the lender can obtain a copy of the debtors’ tax returns straight from the Internal Revenue Service. If you work for yourself, the lender might also request attestation from a certified public accountant (CPA) to verify your income.