The Step Most Lenders Skip That Creates Problems Later

Most lenders calculate qualifying income from pay stubs and move forward without ordering a verification of employment. Angel Hernandez recommends going one step further from the beginning because that one additional step catches income discrepancies before they become problems in escrow rather than after.

What a Verification of Employment Actually Shows

A verification of employment goes significantly deeper than what a pay stub reveals. It provides a full breakdown of the borrower’s income history going back approximately two years plus year-to-date figures. It includes base pay, bonuses, and overtime.

That level of detail matters because bonuses and overtime are not always consistently shown on pay stubs and lenders use specific guidelines for how those income types can be counted toward qualification. If a borrower has significant overtime income or annual bonuses that they are counting on for qualification the verification of employment is what confirms whether that income is usable and how it will be calculated.

The lender is going to request this information at some point regardless. Getting it early means the income picture is confirmed before the file goes into escrow rather than surfacing as a problem once the transaction is already underway.

The Second Request Worth Making at the Same Time

Angel also recommends asking for the income calculation directly from an underwriter rather than relying on a loan officer’s estimate. The underwriter is the person who will ultimately sign off on how the income is counted and what qualifies. Getting that calculation confirmed upfront rather than assuming the estimate is accurate prevents the situation where a borrower believes they qualify at a certain level and discovers late in the process that the underwriter’s calculation produces a different number.

Both steps together create a much cleaner income picture going into escrow and significantly reduce the likelihood of a surprise that disrupts the transaction when it is already in motion.

Reach out to Angel Hernandez to have this conversation before your file goes into the process.

Sources

ConsumerFinancialProtectionBureau.gov
FannieMae.com
MortgageNewsDaily.com
HUD.gov
Investopedia.com