Your credit score isn’t the only thing that lenders check on when you apply for a loan. You may not have known, but a steady employment is one of the most important things lenders look for in order to approve mortgage applications with confidence. After all, they will absorb significant financial losses if borrowers stop making payments, especially during the critical, first years of the loan.
In the Beehive State, here’s how mortgage lenders such as the Altius Mortgage Group perform employment verification:
They Have a Checklist
An average Utah mortgage lender would want to see the borrower in the same position or (or higher) for at least 24 months. Two years is the universal minimum because this period can provide enough history of earnings, and show consistency of having a job. It’s enough time to show your capability to pay off your loan, and your ability to maintain your finances.
Also, lenders feel comfortable issuing home loans to people who stay in the same line of work. Switching industries mean starting new careers, which means going back to the bottom of the pecking order. If you’re planning to get a loan, don’t switch lines of work anytime soon.
They Dig Deep
Once your lender approves of your general employment history, he or she will focus on the specifics. Mortgage lenders will try to connect the dots to ensure that your initial disclosures make sense. They verify with your employer what you do for a living, how much money make, and how much time you spend in there. They will look at your records to determine what your base, overtime, and total pay sums up to. Also, they will be curious about your last pay raise, and when you’re likely to get another one.
They don’t have to do everything themselves. They hire a third-party firm that provides employment verification services, which has a connection to most of Fortune 500 companies and Federal government agencies across America. This company produces Employment Data Reports, which are similar to credit reports. You’ll be free to dispute any information you think is utterly wrote or slightly inaccurate.
They Check It Twice
Lenders start employment verification upfront, but they’ll do second assessment around the time of closing. This way, they can spot any negative changes to the borrower’s job history since the first verification procedure. As a rule of thumb, you ought to stay employed and avoid submitting your resignation before getting the loan to prevent jeopardizing your mortgage application. If you really need to resign, at least wait until the loan is approved.
Strict employment verification is a measure mortgage lenders take to calculate risks, but it’s a useful mechanism to protect unqualified borrowers from themselves. If you fail it, it only means that you actually can’t afford the loan you want, which would protect your best interests overall. Before you even apply for any loan, it’s a wise practice to evaluate on your own your capability to pay for the loan, and whether you really need one in the first place.