Do Mortgage Companies Call Your Employer?

Mortgage companies contact employers as a standard part of the loan approval process. This verification ensures the loan applicant’s information is accurate and confirms a stable income source. It helps lenders assess repayment capacity.

Understanding Employment and Income Verification

Mortgage lenders verify employment to confirm a borrower’s employment status and income stability. Lenders confirm details such as current employment status, job title, and start date to assess longevity.

Lenders also verify income details, including base salary, hourly wage, and average hours worked. For income sources like bonuses, commissions, or overtime, lenders confirm consistency and history. This ensures the reported income matches employer records and supports continued employment. Verification helps lenders calculate the borrower’s debt-to-income ratio, a key factor in loan approval.

The Verification Process

Lenders use various methods for employment and income verification. These include direct phone calls to the employer’s human resources or payroll department, or sending a formal Verification of Employment (VOE) form. Some lenders use third-party verification services that access employment and income data directly from payroll providers.

The timing of employer contact occurs later in the loan process, often during underwriting, after initial documentation like pay stubs and W-2s has been reviewed. A final verification may take place just before closing, sometimes within 10 days of funding, to ensure no changes in employment status have occurred. Delays in employer responses can prolong the loan process, and lenders may request alternative documentation if direct verification proves difficult.

Applicant Considerations

Applicants can take proactive steps to facilitate employment verification. Inform your employer’s human resources or payroll department that a mortgage lender may contact them. This notification helps ensure a timely response. Providing accurate contact information for the relevant department is also important.

Lenders require your explicit consent before contacting your employer for verification. This authorizes them to access employment and income details. Lenders are primarily interested in verifying your employment status and income, and do not typically disclose personal loan details, such as the loan amount or property being purchased, to your employer.

Variations in Employment Verification

Employment verification adapts based on the borrower’s employment situation. Self-employed individuals do not have a traditional employer. Lenders verify their income and employment through documents like personal and business tax returns, profit and loss statements, and bank statements. Lenders often request IRS Form 4506-T to obtain tax return transcripts directly from the IRS.

For those who have recently started a new job, lenders may require an offer letter and recent pay stubs. A two-year employment history is common, but lenders may consider shorter periods. Variable income, such as commissions, bonuses, or overtime, requires a two-year history of W-2s. Lenders average this income over a 24-month period for a consistent qualifying amount.

Employment gaps are also addressed during verification. Gaps shorter than six months may not require extensive explanation, especially with a new job offer and recent pay stubs. For longer gaps, lenders may request a letter of explanation detailing circumstances like schooling or family leave. Lenders prioritize a stable income and verifiable work history, seeking two years of overall employment, even with breaks.