September 4, 2014
When you apply for an FHA mortgage, your lender will need a variety of documentation from you about your income, assets, debts and employment. In fact, employment verification is one of the major steps in the FHA loan approval process. But how does your lender verify you are working with a current employer?
According to the rules printed in HUD 4155.1, the lender will require a current pay statement and a written Verification of Employment (VOE). Not all FHA loan applicants may be able to furnish a written VOE, so the FHA loan rule book lists some acceptable alternatives.
Chapter One, Section B states:
“As an alternative to obtaining a written VOE, the lender may obtain the borrower’s
• original pay stub(s) covering the most recent 30-day period, and
• original IRS W-2 forms from the previous two years. (Note: Any copy of the IRS W-2 not submitted with the borrower’s tax return is considered an ‘original’. The original may be photocopied and returned to the borrower.)”
Additionally, the lender is required to take some steps along with the alternative documentation in order for the VOE process to be considered complete:
“The lender must also
• verify, by telephone, all current employers
• include in the loan file a certification stating that original documents were examined and the name, title, and telephone number of the person with whom employment was verified
• sign and date the verification, and
• for all loans processed in this manner, obtain a signed copy of IRS 4506, Request for Copy of Tax Form, form IRS 8821, Tax Information Authorization, or a document that is appropriate for obtaining tax returns directly from the IRS.”
Chapter One, Section B adds, “The lender may also use an electronic retrieval service to obtain W-2 and tax return information. The lender must use standard employment documentation if the
− employer will not provide telephone confirmation of employment, or
− W-2(s) and/or pay stub(s) indicates inconsistencies (for example, Federal Insurance Contributions Act (FICA) payments not reflecting earnings).”
If you need additional information about specific lender or financial institution policy with regard to VOE issues, discuss your questions with the loan officer. Some financial institution standards or requirements may vary depending on circumstances or the nature of your loan application.
Do you have questions about FHA loans? Ask us in the comments section.
Joe Wallace has been specializing in military and personal finance topics since 1995. His work has appeared on Air Force Television News, The Pentagon Channel, ABC and a variety of print and online publications. He is a 13-year Air Force veteran and a member of the Air Force Public Affairs Alumni Association. He was Managing editor for www.valoans.com for (8) years and is currently the Associate Editor for FHANewsblog.com.
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