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What is a proof of employment letter?
An employment letter for mortgage purposes is a document provided by your employer that confirms your current employment status and income. Most lenders verify income as a part of their due diligence processes before extending a mortgage, line of credit, lease or loan.
Download the employment letter for mortgage sample as a:
Why do I need an employment letter for my mortgage?
Lenders must do their due diligence before extending a mortgage to a borrower. One of the details they verify is the borrower’s employment status and income because lack of steady, reliable income means the odds of the borrower defaulting on the mortgage is greater.
Verification of employment and income is normally completed using a confirmation of employment letter from the borrower’s employer. You can usually obtain an employment letter for mortgage purposes by requesting one from your human resources department or supervisor.
By gathering all of the documents you need before you apply for a mortgage, you will speed up the application process. A confirmation of employment letter for a bank or another lender can take time. The sooner you start the process, the quicker you can secure your mortgage.
What should be included in an employment letter?
It’s a good idea to check with your lender to find out if they have any specific requirements. The letter will generally need to include:
Employer information. Most lenders require your employment letter to be issued on an official company letterhead that contains the company’s name, address, logo and contact details.
Employment status. The letter should contain information about your employment status, including how many hours you work, your job title and how long you’ve been employed.
Financial information. The letter should state whether you’re paid hourly or you’re on a salary, how much you make, your payment cycle and if you get bonuses.
Date and signature. Make sure the letter is dated and signed by a representative of the employer.
Will all lenders require a letter to verify employment?
No, but most lenders will require some sort of verification, whether that’s from a letter of employment, notice of assessment from the CRA, pay stubs or bank statements. If a letter isn’t requested by the lender, they may call or email your employer instead. Alternatively, the lender might give you a form for your employer to complete on your behalf.
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Bottom line
Most lenders want to verify your employment as a part of their due diligence. This can involve getting a letter from your employer, having your employer fill out a form or having your lender call or email your employer. Some lenders might skip this process and instead ask for proof of employment via notice of assessments, pay stubs and bank statements. Whichever option they choose, the process is generally pretty simple, but it helps to be prepared.
Most lenders require the employment letter to be no older than 60 days from the date of receipt, but it can vary from lender to lender. If you have a letter that’s more than a couple of months old, ask your lender if you’ll need a new copy that’s been signed and dated more recently.
This will vary depending on the lender’s individual policies and eligibility requirements, but most lenders will accept a faxed copy of the employment letter.
At the top of this guide, there is a template that you can download and use. Some employers have their own templates since employment verification is a common request from employees. Alternatively, you can attempt to make your own letter, just be sure that it includes all of the necessary information.
If your lender lets you know that they’ll be calling your employer to verify your employment, give your supervisor (or other employer representative) notice to be courteous. It’s also a good idea to ask your employer if they need any information from you before the call.
Veronica Ott was a writer at Finder. She's written for numerous finance and business websites including Loans Canada, Borrowell and Fresh Start Finance. She previously worked as a professional chartered accountant in the private equity and advertising industries.
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