Confirming income and job stability is a crucial step in the mortgage approval process for loans sold to Fannie Mae. This process typically involves lenders obtaining documentation from employers, such as pay stubs, W-2 forms, and tax returns. Sometimes, lenders also use third-party services to contact employers directly for verbal or electronic verification.
This rigorous validation helps mitigate risk for lenders and investors by ensuring borrowers have the financial capacity to repay their loans. It contributes to the overall stability of the housing market by reducing the likelihood of defaults. Historically, stringent income verification standards have played a key role in maintaining investor confidence in mortgage-backed securities.
