The Ultimate Guide for Writing an Employment Verification Letter for a Home Loan Application

Getting a home loan often requires providing proof of stable employment and income to lenders. An employment verification letter also known as a proof of employment letter is an essential part of the home loan application process. This letter confirms your employment status and income level.

I know first-hand how daunting and confusing getting a home loan can be. When I was applying for my first mortgage, I underestimated how detailed the lenders are with employment verification. I had to scramble last minute to get an updated and accurate employment verification letter, causing delays and headaches.

Don’t make the same mistakes I did! This comprehensive guide provides everything you need to know to successfully obtain an employment verification letter for your home loan application.

What is an Employment Verification Letter?

An employment verification letter is a formal letter written by your employer on company letterhead that confirms your current employment status and income It provides proof to lenders that you have stable employment and can financially commit to making monthly mortgage payments,

Specifically. the letter contains details like

• Your job title and role
• Your employment status (full-time, part-time, contractor)
• Length of employment
• Salary and frequency of pay
• Regular bonuses or overtime pay

Lenders require this verification because they want to mitigate risk. Before lending hundreds of thousands of dollars for a mortgage, they want to confirm the borrower’s source of income is reliable.

Why Do Lenders Need This Letter?

There are a few key reasons why lenders require an employment verification letter:

• Validate your income: The letter verifies your income level and that you earn enough to afford mortgage payments. Lenders want to see consistent and predictable income.

• Confirm employment stability: The letter shows how long you’ve been employed with the company. Lenders feel more secure lending to borrowers who have steady, long-term employment rather than switching jobs frequently.

• Check employment status: Lenders want to verify you are a full-time permanent employee, not part-time, hourly or contract. Full-time employees are seen as lower risk.

• Fraud prevention: The letter helps prevent mortgage fraud by validating the employment information you stated on your application.

Bottom line, the lender needs to check you have the financial means to repay a mortgage. Providing direct employment verification gives them confidence in your ability to handle the long-term loan commitment.

When Do Lenders Require This Letter?

For most lenders, an employment verification letter is mandatory to include with your mortgage application, alongside pay stubs and tax returns.

Here are common situations when the letter is required:

• Applying for a mortgage pre-approval or approval
• Self-employed borrowers
• Changing jobs recently
• Requesting loan for investment property
• Insufficient income documentation

Lenders may also ask for an updated letter right before closing if your original letter has expired. Verification letters are usually valid for 30-60 days.

What Information Needs to Be Included?

Lenders expect certain details to be provided in the employment verification letter for it to be valid. Here are the key pieces of information to include:

Letterhead and Signature

The letter must be written on official company letterhead with your employer’s logo and address. It also must have a signature from an authorized representative like a supervisor, manager, or HR person.

Lenders need to verify the legitimacy of the employer. A signature and letterhead provides that authentication.

Contact Information

Your employer’s contact information should be clearly listed including company name, address, phone number, and website.

This allows the lender to directly contact your employer if any clarification is needed on your employment status.

Date

The letter should clearly state the date it was written. Most lenders require the letter to be dated within the last 30-60 days.

An outdated letter risks the possibility that you have changed employers or income since it was written. Having a recent date gives the lender confidence the details are current.

Job Title

The letter should accurately state your official job title and role at the company. This further validates you are actively employed in your stated position.

Employment Status

To understand your level of job security, lenders want confirmation on whether you are employed full-time, part-time, or as a contract worker. Full-time employees are seen as lowest risk.

Start Date

Your employer should list the exact date you commenced employment with the company, especially if you’ve been with them for several years. This demonstrates stable longevity at one employer.

Salary and Pay Frequency

Lenders require clear verification of your annual salary or hourly/weekly pay rate. The letter should note if you are salaried or hourly. It should also confirm how frequently you are paid – weekly, bi-weekly, monthly, etc.

Bonus and Overtime Pay

If you receive regular bonus or commission payments, your base salary alone may not present your full income picture. Lenders want to factor in all sources of income from your job. Any additional bonus or overtime pay you receive should be detailed in the letter.

Any Other Relevant Details

Some lenders may want additional clarification on your employment depending on your unique circumstances. For example, they may request details on your probation status, contract renewal terms, and previous income history.

Your employer should be willing to customize the verification letter to include any extra employment details the lender specifically requests.

Employment Letter Template

To make things easy, here is a simple employment verification letter template you can use. Just download the Word doc and fill in your personal details:

DOWNLOAD TEMPLATE

Make sure to double check that all the required information outlined above is included clearly in the letter before submitting it to your lender.

Can a Digital Signature Be Used?

Traditionally, the authorized representative signs the physical letter before scanning and sending it to you. However, many companies now use digital signature platforms that allow virtual signing of documents.

Lenders allow and accept digitally signed employment verification letters as long as the digital signature platform is valid and verifiable. Some popular platforms used are DocuSign, Adobe Sign, and eSignLive.

Who Should Sign the Letter?

The letter should be signed by an appropriate representative at your company who can verify details about your employment status.

Common signees are:

• Your direct supervisor or manager
• A senior executive like the CEO if you are a smaller company
• Someone from HR or payroll who has access to your employment records

You just need to choose someone at your company who can confirm your job title, income, start date, etc. and is authorized to sign on the company’s behalf.

What If I’m Self-Employed?

As a self-employed borrower, providing direct employment verification is more challenging but still required. Rather than your employer, you will need to write the letter yourself.

The lender will also require seeing additional documentation like tax returns, 1099s, and bank statements.

Here’s what to include in a self-employment verification letter:

• Your company name, address, and contact details
• Nature of your business and services provided
• How long you’ve been self-employed
• Your estimated annual income
• List of recurring clients
• Copies of any licenses, certifications, or degrees that authorize your self-employment

What If I Just Started a New Job?

Switching to a new employer shortly before applying for a mortgage can complicate the verification letter process. Rather than a single letter from your current employer, you may need to provide:

• A letter from your new employer with your job title, start date, salary, etc.
• A letter from your previous employer showing your prior income and length of employment
• Recent pay stubs from your new employer

Providing documentation across both past and present employers gives the lender income history continuity.

Does a Verification Letter Get Mailed or Emailed?

The signed employment letter can either be mailed or emailed to you from your employer. The lender will accept the letter in either physical or digital format.

Just be sure if emailed to you, it is sent as an official PDF copy from the employer’s registered domain.

Once you receive the completed employment verification letter, you need to submit it to the lender along with the rest of your home loan documentation. They will not contact your employer directly for it.

How Far In Advance Should I Request The Letter?

Ideally, you want to request the employment verification letter from your employer 2-3 weeks before you anticipate needing it for your home loan application.

Here’s a timeline that provides ample time:

• Week 1: Contact HR or your manager to request the verification letter. Explain it is needed for a home loan application.

• Week 2: Follow up if you haven’t received the signed letter after 1 week. Give them a friendly reminder.

• Week 3: Expect to receive the final signed letter no later than the end of week 2. Submit to lender as soon as possible.

Building in a cushion guards against any delays from your employer