What is Verification of Employment (VOE)? When applying for a mortgage, lenders require proof of your financial stability and employment history. One essential document they need is a Verification of Employment (VOE). This comprehensive guide will cover everything you need to know about VOEs, including what they are, how to request one, and how to handle various scenarios such as loss of income or self-employment.
The ABCs of VOE
A Verification of Employment is a document that confirms a borrower’s employment status, income, and job history. It is a crucial part of the mortgage application process and helps lenders determine your eligibility for a loan. There are different types of VOEs, including a verification of employment letter and a standard verification of employment form.
- According to the U.S. Census Bureau, the average sales price of a new home in the United States was $439,300 in 2021.
- As of September 2021, the Federal Reserve reports that the total outstanding mortgage debt in the United States is approximately $10.7 trillion.
- The Mortgage Bankers Association forecasts
While specific statistics on Verification of Employment (VOE) are not as widely available, its significance in the mortgage application process cannot be overstated. Here are some general figures that showcase the importance of employment verification in the mortgage landscape:
- According to a 2020 report by the Urban Institute, nearly 86% of mortgage loans are fully documented, meaning that the borrower’s income, assets, and employment are verified.
- The Bureau of Labor Statistics projects that employment in the mortgage and non-mortgage loan broker industry is expected to grow by 10.3% from 2016 to 2026, highlighting the increased importance of verification processes, including VOE, in the industry.
Types of Verification
- Written Verification of Employment (WVOE): A verification of employment letter template is often provided by the employer, or you can use a letter of employment verification template found online. A sample verification of employment letter can be found here.
- Verbal Verification of Employment (VVOE): In some cases, a lender may accept a verbal verification of employment, which involves the lender contacting your employer directly to confirm your employment status. This is more common for borrowers with stable jobs and incomes.
- Third-Party Verification of Employment: Some lenders may use third-party services, such as Equifax Verification of Employment, to obtain your employment information.
Requesting a VOE
To request a VOE, you’ll need to contact your employer’s human resources department or your supervisor. Provide them with a request for verification of employment form or letter, and make sure to include all the necessary information. For example, Bank of America employment verification requires you to provide your Social Security number, your employment start date, and your income.
Loss of Income and Verification of Employment
If you’ve experienced a loss of income, you may need to provide a verification of employment/loss of income form. This document is used to confirm your current employment status, and it helps lenders understand the reason behind your income reduction. It’s essential to be transparent about your situation, as lenders need accurate information to assess your ability to repay the mortgage.
Employment Verification for Major Companies
Many large companies have specific procedures for employment verification. For example:
- Amazon verification of employment can be obtained through the Amazon Employee Resource Center. As an employee or a potential lender, you can contact the resource center to confirm the employment status and other relevant details of an Amazon employee.
- Department of Defense employment verification can be requested through the Defense Manpower Data Center. The DMDC provides an online portal for lenders, property managers, and other authorized users to verify the employment status and salary information of Department of Defense personnel.
The Importance of Verifying Employment
When it comes to securing a mortgage, lenders need to ensure that borrowers have a stable source of income to make their mortgage payments. This is where verification of employment (VOE) comes in. VOE is a process lenders use to confirm a borrower’s employment status, income, and job stability. In this article, we’ll dive deep into the various aspects of VOE and its significance in the mortgage process.
What is Verification of Employment (VOE)?
Verification of employment is a critical step in the mortgage application process. Lenders require proof of a borrower’s income and job stability to assess their ability to repay the loan. A verification of employment letter or form is typically requested by the lender to obtain this information.
A verification of employment letter, also known as a letter of employment verification, serves as written confirmation of a borrower’s employment status, income, and length of employment. This letter is usually provided by the borrower’s employer, who completes a verification of employment form.
Different Types of Verification of Employment
There are several methods lenders use to verify a borrower’s employment, including:
- Written Verification of Employment: The most common method, which involves the employer completing a verification of employment form or providing a written verification of employment letter.
- Verbal Verification of Employment: In some cases, lenders may call the borrower’s employer to confirm their employment status and income. This method is often used as a backup or in addition to written verification.
- Electronic Verification of Employment: With the rise of technology, some lenders use online employment verification services like Equifax Verification of Employment to obtain employment information.
How to Obtain a Verification of Employment Letter
To obtain a verification of employment letter, borrowers should follow these steps:
- Contact your employer’s human resources department and request a verification of employment letter.
- Provide your employer with any necessary information, such as your lender’s name and contact information.
- Ensure that the letter includes all required information, such as your employment status, income, and length of employment. You can use a verification of employment letter template as a guide.
- Submit the completed letter to your lender as part of your mortgage application.
What Information is Included in a Verification of Employment Letter?
A verification of employment letter typically includes the following information:
- Borrower’s name and job title
- Employment start date and length of employment
- Employment status (full-time, part-time, etc.)
- Borrower’s gross monthly income
- Any additional income, such as bonuses or commissions
In some cases, the lender may require additional information, such as the borrower’s job history, job responsibilities, or likelihood of continued employment.
The Role of Verification of Employment in the Mortgage Process
Verification of employment plays a vital role in the mortgage process by helping lenders assess a borrower’s ability to repay the loan. By confirming the borrower’s employment status and income, lenders can determine if the borrower meets the minimum income requirements for the loan and can comfortably afford the monthly mortgage payments.
How Lenders Use Verification of Employment to Calculate Debt-to-Income Ratio
One of the key factors lenders consider during the mortgage approval process is the borrower’s debt-to-income (DTI) ratio. This metric is used to determine the borrower’s ability to manage monthly debt payments, including mortgage payments, in relation to their monthly income. The verification of employment plays a crucial role in calculating the DTI ratio as it confirms the borrower’s income.
To calculate the DTI ratio, the lender divides the borrower’s total monthly debt payments by their gross monthly income. As a general rule, lenders prefer borrowers with a DTI ratio below 43% as it indicates a lower risk of default. Verifying the borrower’s employment and income helps ensure that the lender is using accurate information to calculate the DTI ratio. In some cases, lenders may require additional documentation, such as bank statements or tax returns, to further verify the borrower’s income and financial stability.
Types of Verification of Employment Forms
There are various forms of verification of employment, depending on the specific requirements of the lender or the borrower’s circumstances. Some of the most common verification of employment forms include:
- Standard Verification of Employment Form: This is a widely used form that requests the borrower’s employment and income details from their employer. The form usually includes the borrower’s job title, start date, current salary, and employment status. The printable standard verification of employment form can be found on Mortgage Rater’s website.
- Verification of Employment/Loss of Income: This form is specifically designed for borrowers who have experienced a loss of income due to a change in their employment situation. It may be required when the borrower is applying for a mortgage modification or is in the process of a short sale or foreclosure.
- Fannie Mae Verification of Employment: Fannie Mae, a government-sponsored enterprise, has its own specific verification of employment form that lenders may use for borrowers applying for a mortgage backed by Fannie Mae.
- Verbal Verification of Employment: In some cases, lenders may accept a verbal verification of employment as an alternative to a written form. This typically involves the lender contacting the borrower’s employer by phone to confirm the details of their employment and income.
How to Request a Verification of Employment
If you need a verification of employment for your mortgage application, follow these steps:
- Contact your employer’s human resources department and request a verification of employment letter or form. Some large companies, such as Amazon, Bank of America, and Walmart, may have specific procedures for handling verification of employment requests.
- Provide your employer with the necessary information, such as the lender’s contact information and any required forms or templates. Mortgage Rater offers several templates for employment verification letters.
- Ensure your employer completes the verification of employment form or letter accurately and promptly. Delays in obtaining a verification of employment can cause delays in your mortgage application process.
- Submit the completed verification of employment form or letter to your lender as part of your mortgage application.
Government Mortgage Assistance Programs and Resources
In addition to obtaining a verification of employment, you may also be eligible for government mortgage assistance programs or resources. These programs are designed to help homebuyers with the mortgage application process and provide financial assistance or guidance. Some of the most popular government mortgage assistance programs and resources include:
- FHA Loans: The Federal Housing Administration (FHA) offers mortgage loans with more lenient credit requirements and lower down payment options. FHA loans are insured by the government, which reduces the risk for lenders and makes it easier for borrowers to qualify. Learn more about FHA loans on Mortgage Rater’s website.
- VA Loans: The Department of Veterans Affairs (VA) offers mortgage loans to eligible veterans, active-duty service members, and their spouses. VA loans typically have no down payment requirements and offer competitive interest rates. For more information on VA loans, visit Mortgage Rater’s website.
- USDA Loans: The United States Department of Agriculture (USDA) offers mortgage loans to eligible borrowers in rural areas. USDA loans often have no down payment requirements and are designed to help low- and moderate-income families purchase homes in rural areas. You can find more information on USDA loans on Mortgage Rater’s website.
- HomeReady® Mortgage: This mortgage program is offered by Fannie Mae and is designed for low- and moderate-income borrowers. HomeReady® mortgages offer flexible underwriting guidelines, low down payment options, and reduced mortgage insurance requirements. Learn more about the HomeReady® Mortgage on Mortgage Rater’s website.
- Home Possible® Mortgage: This mortgage program is offered by Freddie Mac and aims to assist low- and moderate-income homebuyers with affordable financing options. Home Possible® mortgages offer low down payment options and flexible credit requirements. For more information on the Home Possible® Mortgage, visit Mortgage Rater’s website.
- HUD’s Good Neighbor Next Door Program: The Department of Housing and Urban Development (HUD) offers the Good Neighbor Next Door program, which provides a significant discount on the purchase of eligible homes for law enforcement officers, firefighters, emergency medical technicians, and teachers. More details about the Good Neighbor Next Door program can be found on Mortgage Rater’s website.
- State and Local Programs: Many states and local governments also offer mortgage assistance programs, including down payment assistance, low-interest loans, and grants for first-time homebuyers. Check with your state’s housing agency or your local housing authority for information on programs available in your area.
In conclusion, the verification of employment is a vital part of the mortgage application process as it provides lenders with the information needed to assess your financial stability and ability to repay the loan. Be sure to request a verification of employment from your employer and explore available government mortgage assistance programs to help you achieve your homeownership goals.
As you continue your journey towards homeownership, it’s essential to be aware of additional resources and steps that can help ensure a smooth process. Here are some tips to keep in mind:
- Improve your credit score: A higher credit score can lead to better mortgage terms and lower interest rates. Pay your bills on time, reduce your debt-to-income ratio, and avoid applying for new credit in the months leading up to your mortgage application.
- Save for a down payment: The more you can save for a down payment, the better your mortgage terms will likely be. Aim to save at least 20% of the home’s purchase price, but keep in mind that many mortgage programs offer lower down payment options.
- Get pre-approved: Before you start house hunting, consider getting a mortgage pre-approval. This will give you a better idea of how much you can afford, and it can make your offer more attractive to sellers.
- Shop around for a mortgage: It’s crucial to compare mortgage rates and terms from multiple lenders. Look for the best combination of interest rates, fees, and terms that suit your needs.
- Work with a real estate agent: A knowledgeable real estate agent can help you navigate the home-buying process and advocate for your interests. They can provide invaluable guidance on local market trends, neighborhoods, and potential homes.
- Budget for closing costs and other expenses: In addition to your down payment, you’ll need to cover various closing costs, such as appraisal fees, title insurance, and loan origination fees. Be sure to budget for these expenses and any necessary home repairs or improvements.
- Get a home inspection: Before closing on a home, it’s essential to have a professional home inspection to uncover any potential issues. This can help you negotiate with the seller for repairs or a lower purchase price.
- Consider a home warranty: A home warranty can offer protection against costly repairs and replacements for major systems and appliances in your new home. This can provide peace of mind during the first year of homeownership.
- Prepare for homeownership expenses: Owning a home comes with additional expenses, such as property taxes, homeowner’s insurance, and maintenance costs. Be prepared for these expenses and set aside money in your budget for potential repairs and upgrades.
By following these tips and making use of the resources mentioned earlier, you can successfully navigate the home-buying process and achieve your dream of homeownership.
Taking the Next Steps
In conclusion, obtaining a mortgage and purchasing a home can be a complex process. Understanding the importance of the Verification of Employment and other critical steps will help ensure a smooth experience. As you embark on this exciting journey, remember that knowledge is power, and being well-informed will ultimately lead to better decision-making.
Take Action with Mortgage Rater
As you prepare for your mortgage application, understanding the critical role that Verification of Employment plays is essential. At Mortgage Rater, we’re here to support you throughout this process, ensuring that all requirements are met and your application is as strong as possible.
Ready to take the next step towards homeownership? Apply for a loan with Mortgage Rater today by visiting our application page at https://www.mortgagerater.com/apply/. Also, be sure to explore our comprehensive mortgage terms page to further expand your understanding of the mortgage process.