How to Write an Income Verification Letter

by Kelly Bowlin; Updated September 26, 2017
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An income verification letter is often needed when employees are trying to qualify for certain types of loans, such as home loans or automobile financing. Lenders often require an income verification letter signed by the employer that supports the documentation the borrower has provided during the loan process. This is an important statement that should be carefully prepared to avoid any liability that might result from a loss a lender might sustain as a result of loan fraud in a transaction.

Prepare the Letter

Step 1

Show the employee's gross pay for the current month, as well as his current year-to-date gross pay, and indicate whether the pay is based on an hourly rate or salary; show what these amounts are. Also indicate the employee's prior year-to-date gross earnings, as well as gross earnings for the year before that, if applicable.

Step 2

Note the employee's hire date in the letter.

Step 3

Indicate the likelihood that the employee’s employment will continue for the foreseeable future. This is a subjective question, but lenders like to know that a loan applicant has a reasonable expectation for future employment with the company.

Step 4

Indicate the last time the employee had a change in compensation and if there will be a known change in compensation in the future, such as a built-in cost of living increase or a mandatory rollback in wages.

Step 5

Sign and date the form and indicate your business relationship to the employee, — e.g., human resources director. Also include your contact information in case the lender has any questions.

Tips

  • Ask a lender to send a request for employment verification in writing to maintain a backup record for your release of confidential information. Be sure to use the gross income figures and not the net income figures after all taxes have been withheld.

Warnings

  • An employment verification is an important legal document that lenders rely on in making loan decisions for borrowers. Be sure it's accurate and complete to keep you and your company safe.

About the Author

I graduated with a degree in Finance from Cal Poly Pomona and have held an active Brokers License for over 30 years. I also owned an accounting and tax practice for ten years. I'm an expert in all matter relating to mortgages, accounting, small businesses and taxation, and investing.

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