How do mortgage lenders verify employment?
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/or income information to a prospective lender. At that point, the lender typically calls your current employer to obtain the necessary information, such as income, position title and length of employment with the company. 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.
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 need to contact your Certified Public Accountant (CPA) to confirm the viability and strength of your business.