Disclosure: This post contains affiliate links, which means we receive a commission if you click a link and purchase something that we have recommended. Please check out our disclosure policy for more details.
Getting a mortgage can be frustrating, especially with all the work that goes on behind the scenes. Most of that work is done by an underwriter who reviews and verifies the mounds of information you have to supply your lender to get a loan.
This process of underwriting is complicated because the underwriter has to follow the guidelines of the specific mortgage company, the state, the federal government and the specific investor who is guaranteeing the loan (Fannie Mae, Freddie Mac, the Department of Veterans Affairs, etc.).
When applying for a mortgage, lenders will require extensive documentation to verify your employment history and income Employment verification is a key part of the home loan process This ensures you have steady income to afford the new mortgage payment.
Employment verification seems simple on the surface – the lender just contacts your employer to confirm you work there. But it involves detailed behind-the-scenes processes. Read on for a step-by-step guide to employment verification for home loans.
Why Employment Verification Matters for Home Loans
Verifying employment serves two main purposes
-
Confirms you currently have a job as stated on the application. This ensures stable income to make mortgage payments.
-
Verifies your income amount to ensure it’s enough to cover the new housing expense. Lenders want your total debts to be less than 28% of pre-tax income.
Lenders require direct confirmation from employers. Your word alone isn’t sufficient, since that’s a conflict of interest. Independent verification is vital for mortgage approval.
What Documentation Do You Need to Provide?
When you apply for a home loan, you’ll need to supply documentation to prove your employment status and income. This typically includes:
- W-2 tax forms for the last 2 years
- Recent pay stubs covering 1-2 months
- Federal tax returns for the last 2 years
- Bank statements showing payroll deposits
- Written offer letter if you start a new job amidst the application
Make sure the employer name, address, phone number and your income are clearly stated on these documents. Lenders will use this info to verify your employment.
Step 1: Employment Verification During Preapproval
Getting preapproved for a home loan amount early in the homebuying process is wise. This shows sellers you’re qualified to purchase.
During preapproval, you’ll provide your last 2 years of employment history with company names, positions held, incomes earned, and employer contact info. Lenders confirm you’ve held jobs steadily, a good sign you can handle a mortgage.
Step 2: Completing the Mortgage Application
Once you’ve found a home and made an offer, you’ll fill out the full mortgage application with your current employer’s details. This includes their name, address, phone number, your position, income and time employed there.
You’ll also submit income documentation like W-2s, pay stubs and tax returns. The lender needs all this to verify your employment.
Step 3: Loan Processing – Lender Contacts the Employer
Next comes loan processing where the lender verifies all your application details. This is where employment verification happens.
The loan officer will phone your employer to confirm you currently work there and review your stated income. They may also ask the employer to complete a verification form.
Step 4: Underwriting Reviews the Verified Information
After processing, an underwriter reviews your full application, including the employment verification info. They ensure all details meet mortgage requirements and may request more documentation if needed.
Once satisfied, the underwriter approves your loan, and you’re clear to close!
Direct vs. Third-Party Employment Verification
There are two main methods lenders use to verify employment:
Direct verification: The lender contacts your employer’s HR department directly by phone. This is the most common method.
Third-party verification: The lender uses an outside agency like The Work Number to pull your employment history. This costs a fee but can be faster.
Lenders may also ask employers to complete a verification of employment form. This documents the confirmation for their records.
Why Re-verification Happens Close to Closing
Many lenders double check your employment shortly before the closing date. This ensures nothing changed since the initial verification.
Losing a job or switching employers can impact your loan eligibility. Re-verification protects lenders from lending to someone who no longer has stable income.
As long as your job status remains the same, re-verification is a quick process. But it’s mandatory.
How Long Employment Verification Takes
Employment verification happens during the loan processing stage. This generally takes anywhere from 2 days up to 2 weeks.
Factors impacting the timeline include:
- Responsiveness of the employer – small businesses tend to take longer
- Type of mortgage – FHA and VA loans require more verifications
- Ease of reaching the employer’s HR department
Borrowers can’t assist with employment verification. Any contact has to happen directly between the lender and employer only. This avoids conflicts of interest.
Self-Employed Borrowers
Self-employed borrowers have to provide extensive documentation proving stable income. This often includes:
- 2 years personal and business tax returns
- Business license
- CPA letter vouching for your income
- Months of bank statements showing earnings
- High credit scores and savings balances
Underwriters scrutinize self-employed applications more closely. Expect to pay a higher interest rate since you’re considered higher risk.
What to Do If Employment Can’t Be Verified
If your employer won’t verify your employment, first talk to them to understand why and see if it can be resolved. While rare, it does happen occasionally.
You’ll need to keep your loan officer informed about any verification issues. Be ready to provide other documentation like past W-2s, tax returns, and pay stubs establishing your income history.
The lender will try to prove your income another way, but it makes getting approved more difficult. In some cases, you may need to change jobs.
The Takeaway
While employment verification creates extra steps, it’s required for mortgage approval. Be cooperative, patient and responsive with your loan officer. Ask your HR department to assist with the process.
Thoroughly verify income and employment is critical. It protects lenders from taking undue risk on borrowers who can’t truly afford monthly payments. Once approved, you can rest easy knowing you can manage your new mortgage.
What Is Verification of Employment?
One step in the underwriting process is the verification of employment (VOE). The mortgage lender needs to check that you are and have been employed to ensure theyâre taking into consideration all of your income sources. This confirms that the borrower can cover their down payment and any closing costs.
Why Do I Need A Verification Of Employment?
This double verification often confuses clients because it seems like redundant work that is slowing down their loan process. But weâre checking your employment early on to make sure you qualify for a loan before youâve invested a lot of time in the process. We then recertify your employment right before closing to make sure nothingâs changed.
Weâre required to recheck your employment because a change in jobs can affect your ability to make your monthly mortgage payment. This is why we always encourage clients to avoid changing jobs or doing things like getting a new credit card or auto loan while applying for a mortgage.
How to Complete a Verification of Employment (VOE) for a home mortgage loan
How does a mortgage lender verify my employment?
Finally, the lender will contact your employer for confirmation and to obtain any other relevant information they may need relating to your employment and work history. In most cases, the lender will only need verbal verification from your employer, but in some circumstances they may request verification via email or other channels.
Why is employment verification important in the mortgage approval process?
Therefore, employment verification is a critical aspect of the mortgage approval process. Lenders view stable employment as a significant factor when approving a mortgage. This is because a steady job is seen as a reliable source of income, ensuring that the borrower can meet their monthly mortgage payments.
Do you need employment verification for a mortgage?
Employment verification for a mortgage is one of the most crucial items on the loan application checklist, so it’s important you understand what you need to provide the lender, especially if you’re self-employed, as that tends to complicate things just a bit more than if you work for a company. About to apply for a home loan?
How does a mortgage processor verify employment?
Once you have signed your initial disclosures, the loan processor will likely verify employment upfront. There is a company called The Work Number, owned by credit bureau Experian, which offers employment verification for mortgage lenders.
How does a lender verify a loan?
The lender may call or email your employer to confirm your employment status, job title, and income. This direct contact helps lenders verify the information you’ve provided and assess your ability to repay the loan. Lenders also review employment documents such as pay stubs, W-2 forms, or tax returns.
What is a verification of employment letter?
A verification of employment letter is a document provided by your employer that confirms your current employment status and income. Some lenders will need to verify your employment when you apply for a mortgage, line of credit, lease or loan. Why does my lender need a verification of employment letter?