A verification of employment, usually shortened to VOE, is how a lender confirms the job on your application with someone other than you. Pay stubs and W-2s show what you were paid in the past. The VOE confirms you still work there, when you started, and how your pay breaks down this year.
Written, verbal and electronic VOEs
- Written VOE. Fannie Mae's Form 1005, filled out by your employer. It lists your start date, position, base pay, year-to-date earnings, and overtime, bonuses and commission by year. Lenders use it when pay stubs don't break out overtime clearly or when a W-2 is missing.
- Verbal VOE. A last check, close to closing, that you're still on the payroll. Fannie Mae requires it no more than 10 business days before the note date for wage earners, and within 120 calendar days for self-employed borrowers. FHA, VA and USDA lenders run a similar final check.
- Electronic VOE. Many large employers report pay to a payroll database, and the lender pulls the record with your permission in place of a form.
Reading overtime off a written VOE
Darnell earns $21.00 an hour on a 40-hour week. His base income is $21 × 40 × 52 ÷ 12, or $3,640 a month. The written VOE shows $6,300 in overtime last year and $5,400 so far this year through nine months, and the employer marks overtime as likely to continue. Lenders generally average overtime over the last two years.
| Line | Monthly |
|---|---|
| Base pay | $3,640.00 |
| Overtime: ($6,300 + $5,400) ÷ 21 months | $557.14 |
| Qualifying income | $4,197.14 |
| Highest housing payment at FHA's 46.9%, with overtime | $1,968.46 |
| Highest housing payment at 46.9%, base pay only | $1,707.16 |
The overtime adds $261.30 a month of payment room. If all of it went to principal and interest at a 5.75% rate on a 30-year fixed, it would carry about $44,776 more in loan, a little less once taxes and insurance on the higher price come out of it. This year's overtime is running at $600 a month against $525 last year, a rising trend, which is what an underwriter wants to see before counting it.
Before the VOE goes out
Give your loan officer the name and email of the person in HR or payroll who handles verifications, and let that office know a request is coming. Keep your hours, pay type and employer the same until after closing, and tell your loan officer before any change, even a raise or a switch from hourly to salary. If you earn overtime, commission or bonuses, mention them at the start, because they only count once the VOE or your pay records show them.
Enter your base pay and averaged overtime in the affordability calculator to see the price each one supports. Then call AAA Capital Funding at 888-601-8344 before you make an offer, and we'll figure your overtime the way the VOE will report it.