What You Need to Know About Employment Verification and Mortgages

by Helen Yang 01/12/2020

Applying for a mortgage is a big step towards homeownership and financial independence. If it’s your first time buying a home, you might be curious (and a little intimidated) about all of the things that go into your mortgage application.

When reviewing your application, mortgage lenders are trying to determine how risky it is to lend you money. If all goes well, and they determine that lending to you would be a worthy investment, you’ll get approved for a mortgage.

There are three main things that lenders will use when weighing your application (however, there are other factors as well).

First, they’ll run a detailed credit report. This will tell them how much other debt you have, what kind of accounts you have open, how long you’ve had this debt, and how responsible you are when it comes to making your monthly payments in time.

Second, they’ll consider how much money you’ll be using toward a down payment. A larger down payment alleviates some of the risk associated with lending to you. Therefore, people with little or no down payment saved can have a difficult time getting approved for a mortgage. And, if they do get approved, they’ll have to pay monthly private mortgage insurance on top of their regular mortgage payments.

Finally, the third main consideration will be your current income. Lenders will look at your previous two years of income (including tax returns) and will seek out current income verification from your employer.

The latter is a key part of getting approved, as lenders will want to ensure that you are in a stable financial situation and will be able to immediately start making mortgage payments.

Today’s post will center around income verification and how mortgage lenders will use your income to determine your borrowing eligibility.

How Do I Verify My Employment?

If you’re employed with a company, most lenders will reach out to your employer directly to verify your employment. You’ll be asked to sign a form that authorizes your employer to share these details with the lender, and then your part of the job is done and you can move on to the next step of your application.

Things get trickier when you’re a freelancer, are self-employed, or work with several clients as a contract worker. In these situations, lenders will typically require you to file a Form 4506-T with the IRS. This form allows your lender to obtain your tax returns directly from the IRS.

Can I submit additional information to verify my income?

There are some situations where providing additional income information can bolster your case in terms of getting approved for a mortgage.

If you own a business, your lender of choice may ask for a profit and loss statement. If you’re an independent contractor or freelancer, your clients who have paid you at least $600 or services or $10 in royalties will be required to send you a Form 1099-MISC.

If you have mixed income, such as a full-time job with freelance work on the side, showing these 1099-MISC forms can help increase your income on paper so that lenders will approve you or a higher mortgage amount or lower interest rate.

About the Author
Author

Helen Yang

Buying or selling a house is an important event in our lives. It is
critical to have a professional help in such a big transition.

I have more than 10 years of local knowledge & experience. I am a
certified residential specialist with vast knowledge in real estate. I
listen to my clients and understand them. I care about their needs
and share their concerns. 

Buyers

You need someone who knows this area inside and out! I can work with you to find the right home at the right price for you, including all the neighborhood amenities that matter - not to mention the essential criteria you have for your ideal home.

Sellers

Allow me to list your home for a quick sale. As a real estate specialist, I know what it takes to sell your home. I bring expert knowledge, valuable experience blended with the latest technology, a well-defined marketing plan, a cohesive network, energy, enthusiasm and the excitement of a job well done.

I am passionate about my job, love my neighborhood and keep up with the latest trends and strategies so that I can pass them on to my clients.

I look forward to having the chance to work with you. A joyful transition and with great result is just a phone call away! 408-500-2027

  • Awarded "Agent of the Year" of MaxReal in year of 2018
  • Awarded "Top Producer" of MaxReal in year of 2017
  • Awarded "Agent of the Year" of MaxReal in year of 2016
  • Awarded "Agent of the Year" of MaxReal in year of 2014
  • Awarded "Agent of the Year" of MaxReal in year of 2013
  • Awarded "Top Producer" of MaxReal in year of 2012
  • Awarded "Agent of the Year" of MaxReal in year of 2011