Of prime consideration to any lending institution is whether the borrower’s income is expected to last the most critical phase of the mortgage. The first five years of a mortgage is defined as the "most critical phase" because most defaults occur on a mortgage during this time frame.

To ascertain the potential stability of the borrower’s income, we will send a "Verification of Employment" (VOE) to the borrower’s employer to determine the start date of employment, position title, the current year-to-date and previous years salary, any bonus or overtime paid on a regular basis, and the probability of continued employment. This form cannot be hand carried to the employer by the borrower.

The VOE must be signed and dated by the borrower authorizing the employer to release this information to a third party, the lender. The VOE is them mailed to the employer to complete, sign, date, and return to the lender.

Once the completed VOE is returned to the lender, it is examined for completeness and the information analyzed. The income amount reflected by the borrower on the loan application is compared with the income amount shown on the VOE. The borrower must provide an explanation for any discrepancies. The lender will also analyze the length of time that the borrower has worked in the same line of work experience, review the employer’s comments, and the probability of continued employment. Although, a short time on the job is not a basis to reject a borrower, if a pattern of hob hopping without potential or skills development is evident, the lender may question the probability of the borrower remaining employed; a key factor when evaluating the stability of the borrower’s income. If the borrower has been employed with the current employer for less than two years, VOE’s will be sent to all employers covering a two year period.

On the other hand, if the borrower is self-employed, we will request at a minimum, the last two years of income tax returns, and financial statements for the business (other programs are available). Business financial statements include a Year-to-Date Balance Sheet, and a Profit and Loss Statement. We may in some instances request an income projection statement for the business for the next two to five years. Once the financial documents are received, we will perform a financial analysis to ascertain the probability of the business’ continued operation which will have a direct impact on the stability of the borrower’s income.

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