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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.).
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 they’re taking into consideration all of your income sources. This confirms that the borrower can cover their down payment and any closing costs.
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Do Lenders Verify Employment On Closing Day?
This process varies from lender to lender. Some lenders will verify your employment with your employer either over the phone or through a written request. Then, about 10 days before your scheduled closing, re-verify your employment. This is done to make sure nothing has changed with your employment status.
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 we’re checking your employment early on to make sure you qualify for a loan before you’ve invested a lot of time in the process. We then recertify your employment right before closing to make sure nothing’s changed.
We’re 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 Does A Lender Verify Employment?
Another reason we’ve found clients get frustrated with the VOE process is because it’s not always as simple as calling the employer and checking a box. To meet government and investor regulations, mortgage lenders have to call your employer on a phone number that can be verified by a third party, such as Google.
This third-party verification requirement can present difficulties when we’re working with clients employed by small companies that may not have a website, or nonprofits.
Involving the client in the verification process is a conflict of interest. We always have to be able to independently verify the number and then talk to an employer. We also have to verify the employment without any involvement from the client. We can’t call your work number, for example, and have you hand the phone to your boss.
How Long Does Employment Verification Take?
Employment verification is done during the underwriting process, which typically takes anywhere from a few days to a few weeks before your loan is cleared to close. This timeline can depend on multiple factors, including whether you’re borrowing for a conventional loan versus an FHA or VA loan.
The Bottom Line
Verification of employment is an important part of the mortgage process. Your lender confirming your employment status will move you down the path to have your home loan approved and get the house of your dreams. Ready to move forward with the home buying process? Read more about how to prepare for closing and what to expect.
FAQs
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.
What is the 2 2 2 rule for mortgage? ›
One Spouse's Income Doesn't Meet Requirements
Many lenders use the 2/2/2 rule to evaluate loan eligibility, which typically requires: 2 years of W-2s. 2 years of tax returns. 2 months of bank statements.
What is evidence of sufficient assets? ›
How can I show proof of assets? In most instances, you'll need to provide documents to show proof of assets. The specific documents you need will depend on the type of asset, but brokerage statements and bank statements are commonly used to show proof of assets.
Do all lenders verify employment the day of closing? ›
Do Lenders Verify Employment On Closing Day? This process varies from lender to lender. Some lenders will verify your employment with your employer either over the phone or through a written request. Then, about 10 days before your scheduled closing, re-verify your employment.
What questions do lenders ask when verifying employment? ›
Lenders will often ask about the future of your employment and how likely you are to lose your job. This is especially pertinent if you recently moved to a new job or industry. If you've been in your job for less than two years, you may have to give details about previous roles.
Do loan companies call your employer? ›
Personal lenders can call your employer if they want to. But most personal lenders will simply verify your income through a tax document or bank statement. If something is unclear, such as your current employment status, personal lenders can contact your employer to verify that you actually work there.
How much house can I afford if I make $70,000 a year? ›
One rule of thumb is that the cost of your home should not exceed three times your income. On a salary of $70k, that would be $210,000. This is only one way to estimate your budget, however, and it assumes that you don't have a lot of other debts.
How much house can I afford with a 100K salary? ›
A $100K salary allows for a $350K to $500K house, following the 28% rule. Monthly home expenses would be around $2,300 with a down payment of 5% to 20%. The affordability of the house will vary based on financial factors and credit scores.
What is the 36 mortgage rule? ›
According to the 28/36 rule, you should spend no more than 28% of your gross monthly income on housing and no more than 36% on all debts. Housing costs can include: Your monthly mortgage payment. Homeowners Insurance.
How do mortgages verify income? ›
How Do Lenders Verify Income?
- Paycheck stubs for the past 30 days.
- Two years of W-2 forms.
- Two months of checking and savings account statements.
- Copy of your driver's license.
Next, we'll take a look at 10 ways to show proof of income if paid in cash.
- #1: Create a Paystub. ...
- #2: Keep an Updated Spreadsheet. ...
- #3: Bookkeeping Software. ...
- #4: Always Deposit the Payment and Print Bank Records. ...
- #5: Put it in Writing. ...
- #6: Create Your Own Receipts. ...
- #7: Utilize Your Tax Documents. ...
- #8: Use an App.
Mortgage lenders usually verify income and employment by contacting a borrower's employer directly and reviewing recent employment and income documentation. These documents can include an employment verification letter, recent pay stubs, W-2s, or anything else to prove an employment history and confirm income.
Can you be denied on closing day? ›
If there are any changes to your credit score or employment status, your loan can be denied during the final countdown.
Can a loan be denied after closing day? ›
Your loan can be denied anytime from the point of application to the point of closing. However; at closing' and 'after closing' differ in that at closing, the final documents are yet to be signed. Therefore, cancellation is still possible if the lender finds that you no longer meet some requirements for the loan.
Can a mortgage company verify employment after closing? ›
Sometimes lenders do a third VOE after closing. There may be a variety of reasons for this. First, it could be that the mortgage institution is undergoing an audit. Perhaps a third party is checking that the mortgage company employees took all the proper steps to verify the information on your loan application.
How close to closing do they verify employment? ›
Second Verification of Employment
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.
Do mortgage lenders verify remote employment? ›
In most cases, yes, you will need a remote work letter when applying for a mortgage loan. The purpose of this letter is to provide verification of your employment and income during the underwriting process. Underwriters are responsible for verifying the information you provide, including your employment details.
What is a mortgage verbal verification of employment? ›
Verbal Verification of Employment: The lender must independently obtain a phone number and, if possible, an address for the borrower's employer. This can be accomplished by using a telephone book, the Internet, directory assistance, or by contacting the applicable licensing bureau.
How do lenders verify pay stubs? ›
Specifically, they examine and cross-reference pay stubs together with income tax returns, bank statements, and Form W-2s. Depending on the type of loan, banks and lenders may also ask debtors to provide profit and loss statements and proof of deposit.
