Verification of employment before closing

How the check is done

Fannie Mae allows the verification to be done verbally, in writing, through an employment verification vendor, or by other means acceptable to the lender, provided it is reasonable, verifiable and appropriate for the type of employment or income. In practice that often means a phone call to your employer's HR or payroll office, or a lookup through an electronic verification service your employer uses.

Lenders can sometimes complete the check after closing, up to the time the loan is delivered to Fannie Mae. But if it cannot be done before delivery, the loan is ineligible for sale to Fannie Mae, which is why lenders take it seriously.

Timing for salaried and hourly workers

Fannie Mae loans. For borrowers using employment income, the lender must verify employment no more than 10 business days before the note date, which is usually the closing date. Fannie Mae allows up to 15 business days in some cases, such as when the lender relies on documentation dated within 15 business days that reflects the most recent pay period.

FHA loans. HUD's single family handbook requires the lender to reverify employment within 10 days before the note date. HUD's rules also allow electronic verification data under its own timing standards.

Automated validation. When Fannie Mae's Desktop Underwriter validates employment through a data vendor, the DU message includes a date by which the loan must close, and following that message satisfies the verification requirement. If closing slips past that close-by date, the lender may need updated data.

Self-employed, K-1 and military borrowers

Self-employed borrowers, and some borrowers with Schedule K-1 income, have a longer window. Fannie Mae requires the verification no more than 120 calendar days before the note date. The lender may use the method most suited to your business structure, the documentation must confirm the business exists, and it must show you still do the same income-earning work. Lenders commonly look at items such as a current business license or a letter from your accountant.

Military servicemembers may provide a Leave and Earnings Statement dated within 120 days of the note date under Fannie Mae's rules.

Temporary leave. If your employer confirms you are on temporary leave, such as parental or medical leave, Fannie Mae says the lender must consider you employed, but it will apply separate rules to the income it counts. Tell your lender about any planned leave early.

If something changes

Fannie Mae makes lenders responsible for identifying, evaluating and resolving employment changes or discrepancies. Any of these can trigger new review:

• A new job, even at higher pay, because the history and type of income may change.
• Reduced hours or a move from salary to commission or hourly pay.
• A layoff, furlough or resignation.
• Leave that will affect your pay around closing.

The CFPB's closing checklist advises against major financial changes before closing. If a change is unavoidable, tell your loan officer before it happens. They may be able to reunderwrite with an offer letter and first pay stub, but timing matters, and some changes will end the approval.

Help the check go smoothly

• Let HR or payroll know a lender may contact them, and make sure the lender has the right phone number or email.
• If your employer uses a verification service, the lender can often complete the check without anyone picking up a phone.
• Keep your latest pay stub handy in case the lender asks for an update.
• If you are self-employed, make sure your license is current and your accountant can respond quickly.

The bottom line

Lenders confirm your job again near closing, generally within 10 business days for Fannie Mae loans and 10 days for FHA, and within 120 days for self-employed borrowers. Avoid job changes until after closing, tell your lender about anything that changes your pay or status, and make it easy for your employer to confirm you still work there.