Job stability is a main factor lenders consider before approving you for a mortgage loan. While a lender can choose from various methods to verify your employment, many lenders call employers a day or two before closing to make sure you are still employed. If you want to avoid last minute problems, inform the lender of any changes in your employment before you go to the closing table.
Mortgage lenders will often contact your employer by phone or use an employment verification letter to verify information such as your income, employment dates and job title. If you're self-employed, you may have to present proof of income and tax returns as well as possibly have your CPA verify your business status.
Verification of Employment Forms
Most lenders use a verification of employment form to verify a borrower’s employment. You must sign the form authorizing an employer to release your information.
Although banks generally require verification from your current employer, a lender may also want to verify your past employment. Normally, this is the case if you haven’t been with your current employer for at least two years. Depending on your overall financial picture, a lender may want more than two years employment history.
Verifying Employment Verbally
Sometimes lenders verify a borrower's employment verbally. In that case, you will need to give the lender the name, address and telephone number of your employer. When documenting employment verifications they receive over the phone, lenders should ask for the official job title of the person confirming your employment to ensure the reference is actually valid. The date of the call should be noted along with the name of the bank employee who verifies your employment.
Information Lenders Require
Employment information helps a lender determine if you will be able to repay the loan. No matter in what manner it verifies your employment, the lender will require certain information.
Normally, a lender wants to know when you were hired, your rate of pay and the termination date of employment. If you are still working for that employer, the lender will want to know whether your employment is expected to continue. A lender uses the information to verify that you are currently employed or have been employed by the employers you listed on the loan application.
Lenders often require that self-employed individuals who apply for a mortgage loan complete Internal Revenue Service Form 4506-T -- Request for Transcript of Tax Return. The form makes it possible for the lender to receive a copy of your tax returns directly from the IRS, explains Bankrate.
If a certified public accountant handles your business finances, a lender may require that person to verify that you are self-employed in addition to verifying your income, notes Quicken Loans. The lender may also ask your CPA to indicate how likely it is that your business will continue. A CPA can provide information about your business profits, any rental properties or other investment income.
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