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. At that point, the lender typically calls the employer to obtain the necessary information.

The lender may contact employers to verify information beyond compensation, such as position, length of employment, and likelihood of continued employment.

The lender may also inquire about the likelihood of your employment to continue. Also, while lenders usually only verify the borrower's current employment situation, they may want to confirm previous employment details. This practice is normal for borrowers who have not been at their current company for at least two years.

In general, lenders verbally verify the information borrowers provide on the Uniform Residential Loan Application, but they may opt to confirm the data via fax, email, or a combination of all three methods. Lenders use this information to calculate several metrics to determine the likelihood of a borrower repaying a loan on time and in full. A change in employment status from the time the loan application was filled out to when it is reviewed could have a significant impact on whether the borrower's application gets approved.

Key Takeaways

  • Mortgage lenders verify employment by contacting employers directly and requesting income and related documentation.
  • Most lenders only require verbal confirmation, but some will seek email or fax verification. 
  • Lenders verify self-employment income via the IRS, generally requesting tax return transcripts.

Employment Verification if Self-Employed

Many people who take out mortgages are self-employed. In this situation, lenders often require an Internal Revenue Service (IRS) Form 4506-T. This form is a request for "Transcript of Tax Return" and allows the lender to receive a copy of the borrower's tax returns directly from the IRS. In a self-employed situation, the lender may also ask to contact to speak to confirm the viability and strength of the business by speaking to the individual or company’s certified public accountant (CPA).