27 Apr Mortgage Lenders Are Asking More Questions About Employment
Despite the mortgage relief provided by The CARES Act, lenders are tightening requirements when it comes to employment verification. In pre-pandemic times, lenders made fewer verification checks, but with more than 22 million Americans filing for unemployment, they are being more hawkish. If you are applying for a mortgage, here’s what you can expect.
Some Lenders Require Multiple Employment Verifications
“For people who are unemployed, it’s going to be more difficult to qualify for a mortgage at this time,” Bill Banfield, executive vice president of capital markets for Quicken Loans said in a recent interview with USA Today.
That’s because some lenders are instituting extra employment verification checks. Historically, borrowers only had to provide a one-time proof of employment, but in order to mitigate risk, lenders like United Wholesale, one of the largest mortgage lenders in the U.S., are requiring multiple checks along the way, including a recent pay stub or direct deposit statement. This new practice can have major consequences for your mortgage application.
Day-Of Employment Verification
Can your loan fall through at the last minute? Unfortunately, yes. Some lenders are now verifying borrowers’ employment statuses on the scheduled closing date in the form of a verbal or email confirmation from employers. Going a step further, borrowers are being asked to sign an affidavit stating they have not been notified of a pending layoff, furlough, or reduction of income.
Requirements Vary by Lender
While the trend of adding overlays is gaining momentum, employment verification policies vary by lender. Still, many lenders are following similar practices, such as reviewing the age of documents, obtaining verbal verification of employment (VOE), and requiring higher credit scores and down payments. Here is a list of what major lenders are implementing.
What if You’re Self-Employed
Again, each lender has its own policy. Housing Wire points out that Caliber Home Loans, for example, requires that self-employed individuals, “…provide a written statement that the business is open and operational and that the COVID-19 effects will not have a material impact on the financial statement provided at time of approval. If bank statements are unable to be obtained, then the qualifying income must be reduced by 25% and be deemed acceptable to move forward.”
None of this is to say that you shouldn’t move forward with your mortgage application. Definitely do but understand that you can expect more inquiries from your potential lender. It’s also possible that if and when there is another round of financial relief legislation, the borrowing rules may change.