According to statistics, up to 39% of Canadian households in Canada have mortgages, showing that mortgage facilities are at the heart of a larger population. If you’re seeking a mortgage, your lender will want to be sure you can repay the loan from your income sources.
If you’re employed, chances are you’ll be funding your mortgage payments using your employment income. In this case, employment verification becomes a vital step in the mortgage process. There are several things involved, and that’s what this discussion is all about.
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The Mortgage Process: Overview
Most first-time homeowners may find the mortgage application complex and daunting. But, it can be broken down into simple steps for easy understanding. The mortgage application follows several stages: pre-approval, house shopping, application, appraisal, processing, underwriting, and closing. When applying for a mortgage loan, the first step is the pre-approval stage, whereby you familiarize yourself with the types of mortgages available and the costs involved, such as down payment, principal, and interest payments, then choose the right one depending on your income status. At this point, an online mortgage calculator is a handy tool to help you with the estimates. You also need to know your credit score, which can impact your loan request.
After pre-approval, the next step is to find a property and make an offer. Your real estate agent may help you find the best offer, as many sellers could have different offers with varying conditions. At this point, you can now approach a mortgage lender and make a formal application. You can go to the same provider that gave you a pre-approval or shop around for a favorable deal.
Next comes the employment verification stage. Your mortgage lender should be direct on the conditions to meet during employment verification.Insurdinary.ca does a great job of further breaking down this process for first-time buyers.
What Is Employment Verification in Mortgage Process?
Employment verification is the process of determining whether you’re in stable employment and have a steady source of income. The lender may require you to fill out an application with the following details.
- Name of your current employer, street address, and phone contact
- Length of time at your current job
- Your position or job title
- Benefits such as basic salary, overtime payments, bonuses and commissions
- Recent income changes
- Leave compensation or allowances.
- Employment probation
- The lender may want to know the number of hours you work everyday to ascertain whether you’re a full-time, part-time, or contract employee.
Documents Needed During Employment Verification Process
Your lender may require additional information and documentation to determine your ability to repay the mortgage facility. They could ask for certified copies of the following documents to support your application and verify your income status, employment, and assets.
- Government-issued identification documents include social insurance numbers, driver’s license, ID issued by federal or government agencies, military card, Permanent Resident Card, and passport.
- Recent pay stubs for proof of income.
- Tax returns and W-2 forms to provide income and tax data for one year.
- Employment verification letter from your employer confirming your employment status, position, and income. For authenticity, it should bear the company’s letterhead, logo, and contact information.
- Bank statements to appraise your income.
- Investment account statements for proof of assets.
Filling out this information should be sufficient to convince the lender to proceed with the mortgage process. A resource such as this can help you organize the application efficiently.
How Is The Employment Verification in the Mortgage Process Done?
Besides providing the documentation, the lender may contact your employer to verify your employment status, income, and capacity to pay the loan. This is typically done via phone, email, or fax. The lender may request your employer to fill out a specific form or a mortgage letter to confirm your employment and salary. Other lenders may ask for verbal verification through a phone call.
How Long Does Employment Verification Take?
During the underwriting process, employment verification can take several days, weeks, or even months before the loan is approved and ready to close. However, the timeline can change depending on several factors.
Manual processes by the lender, such as calling the employer to verify certain details, can delay the verification. If the phone number is inaccurate or the phone rings without being answered, the in-house team can delay the application until a later date. Additionally, the unavailability of authorized HR personnel at your current workplace can delay the verification process. For instance, they are on holiday, retreat, or out of town attending a work-related conference.
You are responsible for providing accurate information on your mortgage application, as misrepresenting facts or falsifying documents can also prolong the verification or lead to denial.
Can A Mortgage Lender Decline A Mortgage Application?
A mortgage lender can only accept a letter for a mortgage application if the information contained therein is satisfactory. If this happens, you can ask your employer to provide additional details, such as your job description and duties.
Other factors, such as a low credit score, can also affect your mortgage application. Another reason your loan application may be declined is unstable employment history, especially if you’ve been changing jobs too often.
Multiple loan facilities such as auto, credit card debts, advance payday loans, and personal loans can affect your income-to-debt ratio. A high income-to-debt ratio means your income is too committed to loan payments, which can affect your borrowing ability. Nonetheless, the mortgage lender should let you know the reasons for the decline so that you can act on them.
Employment verification in a mortgage process is important for lenders because it enables them to evaluate a borrower’s ability to repay the loan. Before commencing the pre-approval process, it’s essential to gather all the documentation from your employer to avoid delays or surprises along the way.
Here at Group Enroll, we not only aim to provide Canada’s best group benefits, but also to arm employers and individuals alike with the information required to make the most out of their money and wellbeing decisions.