A VOE-Only (Verification of Employment Only) loan program is a non-traditional income documentation product designed to streamline the qualification process for borrowers with verifiable employment but limited access to standard income documentation. Unlike a standard FHA loan, a VOE-Only program is not an FHA-originated product; it is a proprietary underwriting variation offered by participating lenders that can sometimes be paired with FHA-insured loans under specific overlays.
Instead of requiring full income documentation—such as pay stubs, W-2s, or tax returns—the VOE-Only structure relies solely on a completed Verification of Employment (VOE) form provided by the borrower’s employer to substantiate both employment status and income stability.
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· Program Ownership: The Federal Housing Administration (FHA) does not insure or define VOE-Only programs. These are lender-driven overlays or pilot initiatives, sometimes aligned with FHA guidelines but not formally recognized as a distinct FHA documentation type.
· FHA Compatibility: When utilized in conjunction with an FHA-insured loan, the lender must still satisfy all FHA underwriting criteria regarding capacity, creditworthiness, and collateral. The VOE-Only verification merely substitutes for traditional income documentation within the lender’s internal approval model.
· Pricing and Risk Adjustment: Due to increased documentation risk, lenders typically apply loan-level price adjustments (LLPAs) or higher interest rates compared to standard full-doc FHA loans.
· Eligibility Thresholds: While documentation is reduced, credit, asset, and down-payment requirements are often more restrictive to offset income-verification risk.
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Feature Standard FHA Loan VOE-Only Program
Income
Verification Two years of W-2s, pay stubs, and tax returns required Employer-completed VOE form only
Verification Borrower-supplied and IRS-verified documentation Direct employer confirmation of employment and income
Risk Profile Lower; full income verification Higher; limited documentation
Authority FHA-regulated Lender-proprietary
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While criteria vary by lender, the following standards are commonly observed:
· Employment History: Minimum of two consecutive years of verifiable employment
· Employer Verification: Direct verification via standardized VOE form signed by authorized HR or payroll representative
· Down Payment: May exceed FHA’s minimum 3.5% requirement—often 10% or more depending on credit and DTI
· DTI Limits: Generally capped at 43%–45% unless supported by compensating factors
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Borrowers and originators should confirm in advance that the participating lender:
1. Offers a VOE-Only structure compatible with FHA loans; and
2. Maintains investor acceptance for such documentation standards.
These programs can provide a valuable alternative for qualified borrowers with legitimate but non-traditional income streams, provided all other FHA and lender-specific requirements are satisfied.