Most loan borrowers rely on their employment-based salary in order to pay down their loan. Due to this, lenders typically verify the stability and amount of income that is used in order to qualify for a loan. The requirements for verification of employment generally will vary from lender to lender, as well as the loan program you choose and the type of employment that you hold. Lenders tend to also verify your employment through recent income documents.
The Employment Verification Process
Lenders verify your employment as part of the whole underwriting process. This usually takes places before the closing date of the loan. Usually a loan processor or underwriter will call you employer in order to confirm that the information you give in your loan application is 100% correct. However, some lenders are content to simply confirm the information via mail or fax to your employer or will only need a recent income tax return or pay stub to confirm your employment. If you are self-employed then lenders will usually ask for your business license.
Verification of Employment Possibilities
Getting together a sufficient amount of information in order to verify your employment status can be quite tricky. For instance, employers may not be able to promptly and accurately complete a verification of employment due to a slow human resource department. However, in order to avoid any delay some lenders will use software so that they can streamline the process of obtaining your employment information. This type of program will automatically request employment information from your employer based upon the information gathered in your loan application. If your employer gives employment or income information that is different from what you gave them then the lender will use the information that is verified by your employment. Keep in mind that a disparity can increase your debt ration, which will decrease your borrowing power.
Deal Breakers
Checking your employment information can allow lenders to detect any fraud and avoid funding your loan in the case that you just lost your job or are close to losing it. For instance, lenders will make sure that your employment is continued in the future. Usually lenders will consider employment stable if it is likely to continue for at least 3 to 5 years. If your employer reports that you are unemployed or that unemployment is foreseeable then the lender will likely deny your loan.
Verifying Self Employment
If you are self-employed then lenders usually require that you complete an IRS Form 4506-T, which is a Request for Transcript Tax Return. This form will make it possible for a lender to get a hold of a copy of your most recent tax returns from the IRS. If you have an accountant who deals with your business finances then a lender may want that individual to verify your income personally. The lender may also want your CPA to say how likely it is that your business will remain successful. CPA’s can provide lenders with such information as any rental properties, business profits or other investment income that you have.
Information that Lenders Require
Having your employment information will aid lenders in determining whether or not you’ll be able to repay your loan. Typically lenders want to know your rate of pay, when you were hired and if you have a termination date. The lender uses your employment information in order to make sure that you are in fact truly employed by the employers that you listed on your application.
Doing Your Part
In order to ensure that your lenders get the information they need on your employment provide them with your employer’s name, phone number and address. Keep in mind that your employer may contact you in order to verify information such as the length of your employment. You must send the copies of critical financial documents by email, fax or regular mail. Once your lender receives these they can then study them to determine the loan that you can qualify for.
Warning
Whatever you do, don’t lie about any of your employment information including your employment status or your income on your loan application. Lenders will always find out if your anything less than truthful, and this can lower your chances of receiving the loan. Even if you do get away with tricking your lender, keep in mind that you want a loan that you can afford to pay back, and lying will only get you in over your head.