Applying for a mortgage involves a great deal of documentation and verification. A mortgage underwriter has to ensure that they are giving a loan to somebody who has a steady job and is a good candidate to be able to repay the loan. Verifying an applicants present and past employment is one way to ensure they are stable.
Applying for a Mortgage
Applying for a home loan has become a different process since the mortgage and housing crisis. An applicant used to be able to state their income and assets and sign a document saying that this was an accurate statement. However, now lenders are using tighter controls so that the odds of loan default are reduced.
Many documents are needed to apply for a mortgage. These include the applicant's past tax returns and W2s, at least two previous paystubs, bank and investment statements and more specific documentation, depending on the type and amount of loan. A lender will also use form 1005 to verify employment for a conventional first or second mortgage. If an applicant has many different jobs in the past two years, they may also be required to write a letter of explanation documenting why they have switched jobs many times.
Verification of Employment
A loan processor and mortgage underwriter will carefully go through all of the documentation provided to ensure they are getting the entire story. In addition, they will usually call the place of employment to get a verbal verification. By speaking to somebody in the human resources department, an underwriter is ensured that the applicant is indeed employed at the place they stated and have not forged any documentation. This extra step is critical in the verification of employment process.
Re-Verification of Employment
Before a loan closes, the underwriter or loan processor will often reverify employment to ensure that nothing has changed in the days or weeks over which the mortgage application has been processed. The goal of the lender is to get the most steady and stable borrowers possible, so verifying that an applicant hasn't quit or been laid off is important. This final step before closing a loan is a safeguard against major changes that could affect the probability of a borrower re-paying the home loan.