Do Mortgage Companies Verify Income After Closing?

Getting approved for a mortgage and closing on your new home can be an exciting yet stressful process You go through extensive documentation of your finances during the mortgage application process This leads many homebuyers to wonder – will the lender continue to verify my income even after I close on the home?

The short answer is, in most cases, no. However, here is a more in-depth look at whether mortgage companies verify income after closing and why.

When Do Lenders Typically Verify Income?

Lenders want to ensure borrowers have the means to repay their mortgage To confirm this, they verify employment and income at two key points

• During the mortgage application process – Lenders require pay stubs, W-2s, tax returns, and direct verification with your employer to validate your income This occurs during underwriting when the lender is approving you for the mortgage

• Shortly before closing – Because it takes 30-60 days on average to close a mortgage, lenders conduct a second quick check to ensure nothing has changed just before closing. They want to verify you’re still employed with the same income.

So in most cases, lenders complete income verification prior to closing. But could they still check after closing?

Can Lenders Verify Income After Closing?

While not typical, lenders can legally verify your income even after you close on the mortgage. Here are some reasons they may do so:

• Spot check audits – Mortgage lenders may conduct random audits of closed loans to ensure the original income documentation was accurate.

• Federal housing audits – Loans backed by government programs like FHA, VA, and USDA could get audited to confirm income was verified properly.

• Resolving red flags – If a lender spots red flags about your income after closing, they may follow up with extra verification to address the concerns.

• Verifying continuance – For high risk loans, lenders may verify ongoing employment and income for a period after closing to ensure you remain qualified.

So while uncommon, post-closing income checks are legal and can happen. Many lenders confirm they reserve this right in your initial mortgage documents.

Tips to Avoid Post-Closing Income Verification

While legally allowed, having your income scrutinized after finally closing on your home can feel invasive and concerning. Here are some tips to avoid it:

• Provide accurate income documentation when applying for your mortgage. Attempting to misrepresent income is mortgage fraud.

• Notify your lender promptly of any job changes or loss of income that occurs before closing. They can then re-verify your eligibility.

• Maintain employment and income levels consistent with what you claimed during the mortgage application process.

• Ask your lender ahead of time what their specific policies are regarding post-closing income verification. Understand when it may occur.

• Refrain from applying for additional new credit until after closing. New inquiries or accounts can raise questions.

• Respond quickly to any requests from your lender for additional information to resolve concerns. Non-response can prolong audits.

Following these tips helps avoid giving your lender any reason to re-verify your finances after the closing.

When Post-Closing Income Checks Make Sense

While annoying, post-closing income verification does make sense in certain situations, including:

• High risk loans – If your application showed multiple red flags like a high debt-to-income ratio, low credit score, or minimal down payment, extra checks give lenders more assurance.

• Disputed information – If you dispute any of the income documentation findings during underwriting, a post-closing re-check can provide confirmation.

• Self-employed borrowers – Since self-employment income can vary and is harder to document, a verification after closing may occur.

• Spot checking and audits – Random sampling of closed loans helps lenders improve underwriting accuracy. External audits assess compliance.

So in specific scenarios, a post-closing verification may be warranted and is a reasonable practice for lenders to follow.

The Bottom Line

While not typical, mortgage lenders reserve the right to re-verify your income even after closing on your home loan. This most often happens on an audit or spot-check basis rather than regularly. The best way to avoid post-closing income checks is to provide complete and accurate data upfront. Maintain your job and income at consistent levels throughout the process.

Following these best practices gives lenders confidence in your ability to repay at the time of closing – reducing the need for additional income verification down the road.