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.
Loan companies verify employment multiple times because they need confidence you have a stable enough income to buy a home. A mortgage is a significant investment for a bank, and job verification is one way the bank minimizes risk.
You may not qualify for the loan if you change jobs during the loan process or have an unsteady employment history. However, a change like a promotion can show that you have more financial stability.
When do mortgage lenders verify employment?
First verification: During the loan application process
The first verification happens when you apply for the mortgage. The lender wants to know that you were honest about your income on your application and that you earn enough to meet the loan requirements.
Lenders spend the most time on the first employment verification. It typically involves contacting your employer directly, analyzing your tax statements, and evaluating your loan application to ensure that everything lines up.
This mortgage employment verification is part of the underwriting process, where an underwriter researches your current income, debt level, credit history, and other factors to determine whether you can repay the loan. Based on their research, the underwriter recommends whether the lender should approve or deny your loan application.
Second verification: Before or at closing
The second verification typically takes less time and can be a verbal confirmation that you still work in the same position.
Suzane Downs, founder and mortgage broker at Palm Beach Mortgage Group, explains, “Most lenders will do what's called a verbal verification of employment before closing, usually within 10 days of the wire, to ensure the borrower still works there and that the position on the application is correct.”
Third verification: After closing
Lenders rarely verify your employment after closing, but they may if they:
- Suspect fraud
- Find discrepancies when reviewing the application
- Buy the loan from a different lender
In the case of a loan buyout, “doing the verification provides the new servicer useful background on the borrower's loan terms and makes them familiar with the original qualification details,” explains Crystal Olenbush, real estate expert at AustinRealEstate.com.
How do loan companies verify employment?
Your potential lender will use one or more of the following methods to investigate your employment:
- Verification of Employment (VOE) Forms: The lender requests information from your current employer via VOE forms that include your job title, time at the company, salary history, current salary, bonuses, and other details.
- Verbal Verification of Employment (VVOE): The lender calls your employer to confirm the details in the VOE forms.
- IRS Transcript Reviews: The lender looks up your tax transcripts to confirm your employment information aligns with your W2s.
Tax documents are the primary way loan companies research self-employed applicants. Fannie Mae guidelines require self-employed borrowers to have proof of at least two years of earnings to qualify for a mortgage.[1]
What happens if I lose my job or change jobs during the underwriting process?
Losing or changing your job will have a significant impact on your mortgage eligibility. Many lenders see a job change as a lack of stability that disqualifies you from a loan.
“The trickiest scenario that can come up is if a borrower loses their job or changes positions during underwriting,” says Olenbush. “This may delay closing or even cause the deal to fall apart, depending on the specific case.”
Communication is key if you lose or change your job during the application process. Let your lender know the circumstances surrounding the job change, details about your severance package, or your current reserves for paying the loan back. These details may save your eligibility.
One job change that may improve your eligibility is a promotion within the same company. You're increase in income would make you more qualified to pay back the loan.
What happens if I lose my job or change jobs after closing on a house?
Job changes after closing don’t affect your mortgage eligibility, and most lenders don’t care about employment changes after closing. But losing your employment could hurt your ability to repay your loan.
Do I have to tell my mortgage lender if I lose my job after closing?
You don’t need to reach out to your lender if you lose your job after closing on your home. However, being proactive and contacting your lien holder could help you avoid missing payments or foreclosure.
“Should the borrower be concerned about making payments, we would always recommend they contact their mortgage servicer to see if anything can be done to assist,” says Downs.
How soon can I change jobs after closing on a house?
You can change jobs as soon as you close on your house. But you should avoid an immediate job change if it results in delayed mortgage payments or financial uncertainty.
Ned Priestly, former loans specialist and CEO of My-Quick Loan, says that “keeping a steady job for a few months post-closing can help maintain financial stability and avoid any potential complications with early repayment penalties or refinancing needs.”
FAQ
How many times do mortgage lenders verify employment?
Mortgage lenders typically verify employment twice. But special circumstances could prompt a third verification after closing.
How long does employment verification take for a mortgage?
Mortgage employment verification typically takes 2–5 business days after the initial request. Some instances, like delayed responses from employers, may cause the process to take longer.
Do lenders verify employment the day of closing?
Lenders often verify employment close to or on the day of closing to ensure potential borrowers are still employed. This is typically a verbal confirmation of employment.
Do lenders verify employment after closing?
Lenders only verify employment after closing under special circumstances like suspected fraud, application inconsistencies, or buyouts from another lender.
Can I quit my job after closing on a house?
Yes, you can quit your job after closing on a house. But it’s best to maintain steady employment after closing to ensure you can pay your mortgage.
