Apartment hunting is fun. You get to choose the location of your new home and the type of rental — apartment, condo or house — that you're going to live in. However, once you've found your ideal living space, you'll need to fill out the rental application and come prepared with a variety of documents required by the landlord to make it official, including proof of income.
So, how do potential renters show proof of income and what types of documents qualify? This article will walk you through ways to show proof of income for an apartment and help you secure the rental property you've been eyeing.
Proof of income for an apartment is an important metric for landlords because it shows them that the potential renter has a steady income and will be able to make the monthly rent payments. Property owners will usually ask prospective tenants to provide an income letter in at least two different forms to verify the applicant's income and protect themselves from fraud and scams.
These documents assure the landlord that you'll be able to pay rent, but they also benefit the renter. It gives renters a moment to check in with their budget and make sure they can actually afford the place they're trying to rent. It's also proof that renters have a steady income and they can use it to vouch for themselves and their credibility if a dispute ever arose about the ability to pay for rent.
Now that we've discussed why proof of income is important, let's dive into what income verification documents will be sufficient.
If you work a full-time or part-time job where you earn a regular paycheck, you'll likely receive regular pay stubs. A pay stub shows how much you earned within a certain time period. It also shows how much money you paid for insurance, taxes and other investments.
Most likely, you receive a pay stub every pay period, but you can also ask your employer to provide past pay stubs as a way to verify proof of income. Keep in mind that landlords may contact your employer to check that your pay stubs are accurate.
When you file your federal taxes for the previous tax year, you'll get an official document showing last year's federal tax return. The tax statement is a legal document that highlights everything you earned the previous year.
Prospective renters can use their wage and tax statement as proof of income. Using last year's tax return is a good option for those who are self-employed — like freelancers or contract workers — because they can show their self-employment income on an IRS form, which proves that they can pay the monthly rent.
You can use bank statements as proof of income because they show the landlord every deposit, withdrawal and transaction made by the tenant. However, bank statements don't always portray an accurate income.
For example, if the future renter gets paid on commission, their income may fluctuate month-over-month and a bank statement would highlight these fluctuations in pay. Likewise, self-employed renters may have miscellaneous income that fluctuates over time and may not paint an up-to-date picture of their finances.
Renters may ask their current employer for a letter that verifies their income. This letter confirms that a renter has the means to pay for rent. If your landlord requires a reference, this is a good opportunity to provide both proof of income and a reference at the same time.
If you live on and receive Social Security payments, you can use the social security benefits statement as a way to show your annual income. While this is a federal document that's credible proof of income, there's one caveat — Social Security benefits could change.
For example, Social Security proof may work when you sign the lease but if any related laws change during that time period, you may or may not be able to use social security as proof of income for an apartment rental when you renew your lease.
If you receive disability insurance from the government, you can use the benefit verification letter as documentation and proof of income. These documents show verifiable income and will help during the tenant screening process.
Some career fields provide a pension after retirement. If you contributed to a pension when you worked, you can request a pension distribution statement as income verification. This will be sufficient documentation to prove income for your tentative landlord.
If you receive court-ordered payments like alimony or child support, you can use these to show consistent income. If a potential renter receives alimony or child support, which is a court-ordered payment, that renter can use that as proof of income when applying for a new apartment. You can show your property manager your alimony payments as a source of additional income.
If you're currently unemployed and receiving unemployment benefits, you can use this as proof of income. However, unemployment checks usually have a timestamp on them, meaning they'll likely be stopped after a certain amount of time. So, it's smart to have a backup form of income verification for when your unemployment benefits run out.
If you're receiving worker's compensation due to an on-site injury, you can show your potential property manager the worker's compensation letter outlining what happened, why you're taking time off and how much income you're receiving from the insurance company in the interim. This is a viable way to verify income.
There are some scenarios where you can still rent an apartment with little or no income. However, it's most desirable to have a stable income in order to secure the exact apartment you want.
If you were laid off recently but received a severance package from your employer, you may use the severance statement as an official letter to landlords showing them how much you received as a lump sum upon department from your company. While this is not the same as a stable income, it will work in the short term.
When you're gathering your proof of income documents, it's a good time for you to check your budget, assess your monthly income, review your business expenses, see your student loans and make sure you can actually afford the apartment you're trying to lease.
A general rule of thumb is that renters should budget roughly 30 percent of their salary toward rent. While this method may work for some, the 30 percent ratio is not always realistic, especially if you live in a city like New York or San Francisco, where rent is extremely expensive.
As you gather your proof of income documents to verify income, assess all of your bills and financial responsibilities to ensure you'll be able to make your rental payments on time each month.
You'll also want to review how much money you make each month from non-traditional sources. This is particularly true for self-employed individuals who make money from dividends, investments or annuities. You can show your unearned income with things like an annuity statement, profit and loss statement, dividend income or a tax form.
Make sure to show every source of income to prove you'll be a reliable renter. By verifying income ahead of time, you'll be in a good situation when it comes time to sign the lease agreement.
As you get ready to rent a new apartment, make sure you have all of the proper paperwork in place. Showing an up-to-date picture of your finance makes you seem organized and responsible, which is a good sign for landlords.
Sage Singleton is a writer from Salt Lake City with a passion for literature and words. She enjoys writing articles that will inspire, educate and influence readers. She loves that words have the power to create change and make a positive impact in the world. Some of her work has been featured on LendingTree, Venture Beat, Architectural Digest, Porch.com and Homes.com. In her free time, Sage loves traveling, reading and learning French.