Mortgage lenders usually verify your employment by contacting your employer directly and 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.
Employers are usually happy to help, but there are steps borrowers can take if they refuse to verify employment.
When applying for a mortgage loan, one key step in the process is employment verification. As an underwriter digs into your financial background, they will likely want to confirm your employment status and income level directly with your employer.
This can leave many homebuyers wondering do underwriters actually call your employer when you apply for a mortgage?
The short answer is yes. Calling employers to verify employment details is standard practice in the mortgage industry. But don’t panic – this is not as scary as it sounds.
Understanding why underwriters call employers, what they ask, and how you can prepare can help you navigate this process smoothly. Keep reading for the inside scoop on mortgage employment verification.
Why Do Underwriters Call Employers?
There are a few key reasons underwriters take this extra verification step
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To confirm your income: Underwriters need to verify your stated income level to ensure you can afford the monthly mortgage payments. Speaking directly with your employer allows them to confirm your salary and bonus amounts.
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To calculate your debt-to-income ratio: Also known as DTI, this measures how much of your gross monthly income goes toward paying debts. Underwriters use your verified income to accurately calculate your DTI.
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To check employment history: They will want to confirm your employment status, start date, and job title to evaluate stability. Length of employment can impact your eligibility.
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To prevent fraud: Calling employers directly helps prevent mortgage fraud by verifying that you do legitimately work where you claim.
So in short, underwriters call to mitigate their lending risk and ensure you qualify for the mortgage legitimately based on your true income and employment.
What Questions Do Underwriters Ask Employers?
During employment verification calls, underwriters typically ask:
- Is the borrower currently employed there?
- What is their job title and department?
- When did they start working there?
- What is their current salary and bonus amounts?
- Are they full-time or part-time?
They may also ask about your general payment schedule, prospects for continued employment, and previous income history.
How Do Underwriters Contact Employers?
There are a few methods underwriters can use to verify employment:
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Phone call – This is the most common approach. Underwriters will call your employer using a number they verify independently.
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Written verification – Some lenders request the employer complete a written verification of employment form detailing your status.
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Email – Underwriters may email your employer’s HR department to verify details quickly in writing.
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Fax – Lenders can provide a verification form for employers to fill out and fax back.
No matter the method, underwriters just want to ensure your employment lines up with what you stated on your mortgage application.
What If My Employer Doesn’t Respond?
If underwriters have difficulty getting in touch with your employer, it can potentially delay approval of your mortgage loan. Be sure to let your employer know you are applying for a mortgage, providing the name of the lender, so they can respond promptly to any verification requests.
You can also ask underwriters if there are any alternate documents you can provide to substitute, like recent pay stubs, an employment contract, or your most recent W2.
Tips for a Smooth Verification Process
While employer verification checks can feel invasive, being prepared can help everything go more smoothly:
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Inform your employer: Let your manager or HR department know ahead of time that underwriters may call about your mortgage application.
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Gather documentation: Have income statements, contracts, tax documents, and pay stubs ready in case underwriters need them.
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Provide accurate contact info: Give underwriters the right department and phone number to reach the person who can verify your status.
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Explain bonuses or irregular income: If you receive sporadic commissions or bonuses, explain how the income schedule works.
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Stay in touch: Keep your loan officer informed if any employment details change while underwriting is underway.
The Bottom Line
While it may feel uncomfortable having underwriters call your workplace, this verification is critical to preventing mortgage fraud and ensuring you qualify for your loan legitimately.
Looking at the big picture, underwriters are just doing their due diligence to help you secure financing for your dream home. Understanding the process ahead of time and over-preparing documentation can help employer verification go smoothly.
With the right information and a proactive approach, you can work with underwriters to make the home buying process as efficient as possible. Before you know it, you’ll have the keys to your new home in hand.
Additional Information
When verifying employment, a lender will frequently ask other questions as well. The lender may inquire about the likelihood of continued employment.
Lenders are also interested in verifying position, salary, and work history. While lenders usually only verify the borrowers current employment situation, they may want to confirm previous employment details. This practice is common for borrowers who have been with their current company for less than two years.
What Happens if a Lender Cannot Verify Your Employment?
It is possible for a loan to be denied during the underwriting process, so youll want to do everything you can to make sure that doesnt happen. If the lender cant verify your employment through the human resources department, be sure to call the department and explain your situation. You can also ask the lender whether supporting documentation, such as recent paystubs, tax returns, and W-2s, will be sufficient.
Will a Lender Call My Employer? | Lending Expert
FAQ
Do underwriters always call your employer?
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.
Will a mortgage company contact my employer?
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.
Do lenders call your employer before closing?
Lenders typically verify your employment twice: when you apply for a home loan and several days before closing. They don’t usually check your employment after closing, but they may in some cases.
Do loan companies actually call your employer?
Essentially, a debt collector or loan company isn’t allowed to communicate with your employer unless you’ve explicitly permitted them to do so.Jan 23, 2024
Will a lender call my employer?
A lender will only ever contact an applicant’s employer in certain circumstances. For example, if you are applying for a mortgage or certain loan products, then some lenders may phone or email your employer to verify your employment, as well as other additional financial details.
What does a mortgage underwriter do?
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.
When will a lender contact my employer?
A lender will only ever contact your employer in certain circumstances. For example, if you’re applying for a mortgage or certain products like credit cards or larger loans. Equally, if you’ve fallen behind on your short-term loan repayments and the lender is struggling to get in contact with you via your personal contact information.
How does a mortgage underwriting process work?
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.
Why is underwriting a mortgage so complicated?
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?
Do lenders need to know my employer’s details?
For those concerned about lenders contacting their employers, you can rest assured that this will only be done when necessary, and only ever in certain situations (e.g. when applying for a mortgage, or when struggling to get in contact with borrowers who haven’t paid their loan repayments on time). Why Do Lenders Need to Know My Employer’s Details?