How Does a Bank Verify Employment?
When you apply for a mortgage or another type of loan, the lender will typically need to verify your employment before they can approve you. Along with contacting your current employer, lenders will also want to verify any documentation you have on your income. Before a lender is able to contact your employer, however, they will need you to sign a form that authorizes them to get specific information from your employers such as your income information and details about your employment.
Lender Obtains Necessary Information
Like stated earlier, the lender you are applying with will contact your employer to get your income information as well as the likelihood that you will continue working there long-term. For borrowers who have been at their place of employment for less than two years, lenders may also want to check out their previous employment as well.
Typically, lenders will verify information in a verbal manner with their borrowers after they have filled out a Uniform Residential Loan Application. However, they may decide to send the information through email, fax or between all three methods. Once a lender has received all pertinent information from a borrower, they will use that information to figure out the likelihood that a borrower will be able to repay a loan both in full and with on-time payments.
If there is a change in a borrower’s employment status from the time they first apply up until the lender makes their decision, it could have an impact on whether or not they get approved for the loan.
Self-Employment Income Verification
In some cases, it may be a little more difficult for those who are self-employed to prove their income when trying to apply for a loan. For this situation, a lender might require a specific form from the IRS to be filled out. The form is necessary for a lender to be able to request a “Transcript of Tax Return” from the Internal Revenue Service for your previous returns. In addition to previous tax returns, lenders may need to contact an accountant to help them confirm the strength of your business and viability of your income in regards to your ability to repay a loan.