Do you need to show proof of income for a new apartment or loan? Learn why income verification is so critical, and how to prove your income quickly.
Without proof of income, you’re pretty limited in achieving some of life’s significant milestones as an adult. This includes renting your first apartment, owning a car, applying for a loan, or even qualifying for health insurance.
This is why obtaining a proof of income from your employer is so important. Basically, it’s proof that you’re able to meet your financial obligations, just like any other adult.
Learn more about how to prove your proof of income and how it can be applied in the big, bad world of adulting!
Proof of Income and Why It’s Important
So, what exactly is a proof of income used for? It’s used by landlords, lenders, banks, and others to verify your income. It’s a way of proving you’re a ”sure thing” when it comes time to pay your bills.
There are several different forms of proof of income. But the most critical information on your income statement should be your earnings and proof of employment.
To get a clear idea of whether you’re able to repay your debt, proof of income shows that you have a steady job and dependable stream of income.
When it comes to renting or taking out a loan, a lender or landlord may ask for supporting documents along with a proof of income. What qualifies as a proof of income may vary from one lender or landlord to the next.
What Constitutes a Proof of Income?
Depending on the lender, landlord, or any other entity, different income documents carry more weight than others. It also depends on the size of the loan, your rental repayments, and other factors.
For instance, some lenders may require a simple pay stub to prove your income (check out PayStubCreator if you’re self-employed!). W=thers will require a combination of documents.
Whatever documents you use to show your proof of income, they must include this vital information:
- Your full name
- Your social security number
- A marked income amount
- It must be recently dated
- The name of your employer
Here are some standard documents that can be used to show your proof of income.
- Pay Stubs
Depending on the frequency of your pay, you should be issued with a pay stub or payslip every week, bi-weekly, or monthly. A pay stub includes your income amount before and after-tax and other deductions.
It should also include personal information and employer information.
- Payroll Schedule
This is ideal if you get paid irregularly.
If you work as a contractor or freelancer, a payroll schedule is an acceptable way to prove you receive sufficient funds to meet your repayments.
- Signed Letter of Employment
This is a letter of proof that you work with your company, written and signed by your employer. Many lenders and landlords ask for a pay stub and proof of employment letter to show proof of income.
- Tax documents
Tax documentation is also another way to show proof of income, though it’s not as accurate as a paystub or letter of employment.
A W2 form outlines how much you earned in any given year, which informs lenders and landlords that you’re able to meet repayments.
If you’re self-employed, your annual tax return documents can also be used as proof of income as your earnings are listed on the application.
- Bank statements
Bank statements are a distinct way of indicating how much you earn and what your weekly or monthly spending habits. If you have a direct deposit established with your employer, your income will naturally show up on your bank statements.
Find Handy Business Advice Here
Now that you know a little more on proof of income and it’s importance, learn how to handle your business and finances like a boss.
Check out our business archives page for more on how to manage your payroll, business marketing, and more!