Mortgage lenders usually verify your employment by contacting your employer directly and by reviewing recent income documentation. The borrower must sign a form authorizing an employer to release employment and income information to a prospective lender.
Employment Verification Process
An underwriter or a loan processor calls your employer to confirm the information you provide on the Uniform Residential Loan Application. Alternatively, the lender might confirm this information with your employer via fax or mail.
To offset the possibility of fraud, a lender may ask you to provide an SSN, mailing address or other reported personal data. A current or previous employer is another bit of information a lender can use to verify that the person applying for a loan or credit product is really who they say they are.
Mortgage lenders verify employment by contacting employers directly and requesting income information and related documentation. 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.
Lenders usually re-run a credit check just before completion to check the status of employment. A worry people have is that a second credit check would further impact their score but you can rest assured that multiple checks with the same lender will not affect your credit score.
If you lose your job before you close on a mortgage, you should tell the lender immediately and explain what happened. Failure to do so will be considered mortgage fraud. Remember that your mortgage provider verifies your employment status and income before approving the loan.
In addition, penalties for mortgage fraud – which is what lying on a mortgage application is – range as high as 30 years in prison and a $1 million fine. You likely won't face a penalty like that for a small exaggeration or omission, but you could still end up with a fine and a conviction.
Lenders won't approve your home loan if you don't have enough income to make the loan's monthly payments. You may be able to quit a part-time job if you aren't using the income to qualify for your loan. But it's best to avoid any big changes until after the loan closes.
Most mortgage companies will go through a second VOE about ten days before closing. Remember, you are borrowing hundreds of thousands of dollars, and your lender wants to make sure you are still earning enough to make your house payment.
Can a mortgage be denied after the closing disclosure is issued? Yes. Many lenders use third-party “loan audit” companies to validate your income, debt and assets again before you sign closing papers. If they discover major changes to your credit, income or cash to close, your loan could be denied.
If you change jobs while buying a house, you'll have to notify the lender and provide details about the switch. In some cases, the new job could be a boon to your loan application. But if you take a pay cut, switch fields, or start your own business, the switch could jeopardize your closing.
If you lie on your loan, you could also lose your loan. Prosper says that 11 percent of the applications it verifies contain false or insufficient employment or income information. In those cases, the company cancels the loan before it is funded.
To qualify for a mortgage, you must provide your lender or mortgage broker with proof of employment, your assets and your debts. If you knowingly misrepresent your income in your mortgage application paperwork, that is considered mortgage fraud and the consequences could be severe.
Typically, mortgage lenders conduct a “verbal verification of employment” (VVOE) within 10 days of your loan closing — meaning they call your current employer to verify you're still working for them.
Banks and lenders have always had a policy of checking employment status at any stage during a loan application. However, historically, after confirming employment status and income to satisfy the finance clause, they would not have typically checked a second time after the finance clause had passed.
You can get a mortgage even if you're just starting your career: You don't always need years and years of work experience in order to get a home loan approved. Sometimes, a lender will approve you on the strength of a job offer alone; especially for high-earning positions like physicians and lawyers.
Traditional Employment
Banks may ask to see as many as your last three pay stubs to verify your income, whether you work full-time or part-time. If you have several part-time jobs, be sure to bring in pay stubs from each job.
Lenders often factor your income into their lending decisions and, under the Credit CARD Act of 2009, they are legally obligated to do so in many cases. They typically ask about your income on credit applications and may require proof, in the form of a pay stub or tax return, before finalizing lending decisions.
To verify your income, your mortgage lender will likely require a couple of recent paycheck stubs (or their electronic equivalent) and your most recent W-2 form. In some cases the lender may request a proof of income letter from your employer, particularly if you recently changed jobs.
Yes, a mortgage lender will look at any depository accounts on your bank statements — including checking accounts, savings accounts, and any open lines of credit.
Generally speaking, it usually takes two to six weeks to get a mortgage approved. The application process can be accelerated by going through a mortgage broker who can find you the best deals that suit your circumstances. A mortgage offer is usually valid for 6 months.
Most job changes shouldn't interfere with your ability to buy a house. Keep in mind that lenders like to see a job history that demonstrates increased pay and responsibility over time, stable work within the same industry, and jobs that match your qualifications and training.
Most lenders will ask you to provide a number of recent payslips (typically a minimum of three), along with your mortgage application as evidence of your earnings. In some cases, however, you may not have any payslips to offer, or they may not fully evidence all of your sources of income.