Verification of Employment
The key steps and requirements to verify your employment during the mortgage process.
In the intricate process of securing a mortgage, verification of employment quietly plays a vital role. While much of this verification occurs behind the scenes, there are essential checkpoints linked to employment verification happen at the start and close of the approval process. During employment verification, lenders meticulously validate crucial aspects related to your work situation, including:
- Income Verification: verify how much you are paid
- Continued Employment: Verify that you still are employed and are expected to continue
- Accurate Work History:Verify your work history is accurate (start and end dates)
- Relocation Considerations: If you are moving far away, verify that you are still able to work from your new location
In addition to verifying your current monthly income numbers, lenders are required to validate the legitimacy and stability of the business/employer that you receive your income from. The initial phase of this process occurs when you provide your income documentation at the outset of the underwriting process. The employment information provided on your official mortgage application (1003) is compared to your most recent pay stub and W-2s collected during underwriting to validate your employer and employment both past and present. Lenders often also run additional checks in the background to confirm the legitimacy of and continuing operations of your employer. This can include, but is not limited to, checking the corporation/formation history, validating company websites, etc.
Depending upon your income type as well as the information collected during the initial stages of employment verification, there may be additional requirements that must be satisfied prior to your final approval and closing of your mortgage. The most common is the Written Verification of Employment (WVOE), which is required in most cases if you have variable income or have recently seen a change to your income as compared to the annual income documented on your most recent W-2s.
The last stage of the verification process doesn’t occur until the final days leading up to closing. Lenders are required for any Agency-backed mortgage program (Conventional and Government) to complete what is known as the Verbal Verification of Employment (VVOE). This is exactly what it sounds like, and a lender is required to get in touch with your employer (billing HR or manager) over the phone no more than 10 days before closing to confirm continuing employment. There have been some recent strides here to allow for a lender to digitally verify this, however, this is still in the early stages of adoption and still has a long way to go.
Three main types of verification:
- Verbal Verification of Employment (VVOE)
- Written Verification of Employment (WVOE)
- Ad Hoc Letter from Employer
See below for more info on each type of verification.
1. Verbal Verification of Employment (VVOE)
Every loan application through Fannie Mae or Freddie Mac will require a verbal verification of employment from your employer. The purpose of this is to prove that you will continue working there and to confirm your work history.
What do we need?
- Phone contact information for the department at your employer that is authorized to verify employment. This is commonly the HR or Finance department, but can also be your manager if the other options do not work.
- The lender will often need to be able to verify and tie the contact information provided back to your company, such as your company website or company letterhead.
- Your employer will be contacted towards the end of the mortgage approval process, and sometimes also at the beginning.
- Make sure to give a heads up to the individual or team at your employer who is responsible for completing this on your behalf. Delays in this employment verification could delay your mortgage approval.
Where can I find it?
You should have access to this contact information through your internal payroll system or company directory.
Why do we need this?
- Lenders are required by Fannie Mae and Freddie Mac to contact your employer prior to closing and confirm that nothing related to your employment or income has changed since the previous verifications of income were completed.
- This is one of the many industry standards to fully vet your ability to repay the mortgage. This is covered at the federal level by the Consumer Financial Protection Bureau and Federal Housing Finance Agency.
- Contact information that cannot be tied back to your employer.
- Incorrect contact information.
- The people responsible for completing this at your company do not realize the urgency of this for you as a homebuyer and do not answer or complete the verification in a timely manner. We recommend that you give the proper team a heads up and let them know this needs to be done as soon as possible once we are at this stage of the process.
2. Written Verification of Employment (WVOE) – Form 1005
In certain cases, the lender will require us to get a Written Verification of Employment. The purpose of the written version is typically to confirm your salary and the breakdown of your income (commission, bonus, overtime, etc.), as well as your start and end dates of employment.
What do we need?
- Signed authorization from you in order for us to collect the WVOE on your behalf.
- Contact information for the individual or team that will be completing the verification for us to send the form.
- Notify the individual or team that you are working with your lender and that someone will be sending the WVOE for completion. This typically streamlines this process.
Where can I find it?
- The Morty team will work with you and your employer to get this form completed.
Why do we need this?
- The WVOE is most often needed if your most recent W-2s do not line up with your current Year-to-date earnings as indicated on your most recent pay stub.
- Variable income is more difficult for lenders to verify the stability and continuity of these types of income (think commission and bonus) and this is an additional step that Fannie Mae and Freddie Mac look for to confirm the expectations for these types of variable incomes to continue into the future. See Variable Employment Income for more info.
3. Ad Hoc Letter from your employer
A letter from your employer may be required to confirm additional information that isn’t on the WVOE or VVOE. This includes confirming that you can continue working after you move, or confirming how many months of the year you are paid (this is common for teachers or positions in schools). A letter is generally required if you work remote, or if you are going to be working at a new location.
What do we need?
Whichever applies to your situation:
- Signed letter from your employer confirming that your terms of employment will not be affected by your move
- Signed letter confirming that you work remotely and will continue indefinitely
- Signed letter confirming the location you will be working out of
- Signed letter confirming how many months of the year you are paid
- Signed letter regarding any time “on leave” (See Gaps in Employment and Switching Jobs)
- Incorrect contact information for the individual or team authorized to complete the WVOE form correctly or completely.
- The individual or team authorized to complete the WVOE form does not complete it within the necessary time frame.
- Information provided in the WVOE is inconsistent with the income information used in your official application. This may lead to a chance in the income amount used for DTI purposes, require additional documentation, or change eligibility.