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Moving into a new apartment or accepting a bank loan is a major commitment — and not just for you. Banks and landlords have a vested interest in verifying the financial status of those who use their services. Otherwise, there’s a substantial risk of nonpayment.
For these reasons and more, you’ll need to provide proof of income to show these institutions that you’re a viable, low-risk candidate. That’s sometimes easier said than done. Few types of documentation quality as proof, and you’ll have a limited number of options depending on your lifestyle.
Thankfully, everyone has access to acceptable proof of income documents. You just need to know what gets the job done. Here’s how to show proof of income and pass the screening process.
Proof of Income Documents
Landlords and lending institutions will ask for a wide array of paperwork during a consultation. In addition to signing an income verification letter, you’ll also be asked to bring supporting documentation. It’s this paperwork that serves as proof of income.
Keep in mind that most entities will require at least two proof of income documents, and they can accept or deny this paperwork as they see fit. Speak with the representative in question if you’re ever in doubt.
With that said and done, you’re ready to get started. Below, we’ve provided a comprehensive list of the most widely-accepted formats for proof of income.
1. Pay Stubs
Since pay stubs come directly from an employer, they are the most reliable way to show proof of income. Nowadays, pay stubs are usually available through online payroll services such as ADP. But if you work for a smaller company, you may receive pay stubs through the mail or have to request them.
However, there’s one problem: self-employed workers and some freelancers may not have access to pay stubs. That’s at least 16 million Americans. Are you one of them?
The good news is you can still get your hands on a pay stub. Depending on the organization of your business, it’s completely acceptable to give yourself a monthly stub. To do so, search online for a pay stub creator.
2. Bank Statements
Two months of bank transactions are often an acceptable verification method. It’s one of the most convenient options since just about everyone has a bank account of some form.
Of course, bank statements aren’t perfect. If you share the same bank account for business and personal transactions, you could reveal private information you’d rather keep to yourself. It’s also more difficult for banks and landlords to navigate large volumes of transactions, so not everyone will accept bank statements.
3. Tax Returns
For the highest rate of acceptance, turn to tax returns from the previous year. These come in the form of W-2s for salaried employees or 1040s for freelancers and the self-employed. Neither tax document is better than the other.
Landlords and banks love tax returns as proof of income since they’re unlikely to be forged. That said, tax returns aren’t a great source of documentation if you’ve experienced a change in income or employment since last year.
For example, a recent raise won’t be reflected in the tax returns. That could make or break the consultation process if the arrangement hinges on that income.
4. Employer Letters
As a salaried employee, you have the option of asking your employer to vet your stated income within the application. They’ll send a letter to the managing party as requested, divulging your salary.
It’s an excellent choice for those working in large companies. That’s because these entities have a standardized format for employer letters. Best of all, they can keep private, unnecessary information out of the equation.
Since employer letters are often forged, be aware that the managing party will call the reference in question to confirm their authenticity. These letters will also state only your salary on paper, which could vary if you often work overtime.
5. Supplemental Income
Also known as “unearned income,” this includes payments such as pensions, alimony, and unemployment benefits. These are often temporary forms of income, so it’s best not to rely on these alone. That said, major supplemental income streams are worth consideration.
So how do you go about proving them? That depends largely on the unearned income in question. In most cases, you’ll need to directly contact the issuing entity to get your hands on the proper paperwork.
6. Profit and Loss Statements
How do you provide proof of income if you own your own business? Outside of issuing yourself a pay stub, you can also present profit and loss statements. These are sometimes used as a secondary form of verification, but a P&L statement alone won’t be enough in most circumstances.
A P&L statement is an unverifiable document that demonstrates a business’s profit across a certain span of time. Although it requires other documentation, it can show banks or landlords positive financial indicators such as business growth and consistency.
Demonstrating Worth With Proof of Income
Whether you work for yourself, an employer, or anyone else, you have plenty of options for demonstrating proof of income. So get the loan or apartment you need by starting off on the right foot and with the right paperwork. In addition to simplifying the consultation process, you’ll benefit by displaying professionalism and organization skills.
It’s hard to think of a better way to show landlords and banks you’re ready to follow through with a financial contract.
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