If you’re like most people, you probably think of proof of income as something that’s only important if you’re applying for a loan. But in reality, proof of income is one of the most important things you can have in your financial arsenal.
Imagine that you’re working in your dream job or company and earning a lot of money.
You have carefully planned out all of your personal goals and would like to begin living independently. But before you start searching for your dream apartment or house, it is worth remembering that you should be prepared beforehand in order to find what you are looking for.
One of the most important things you should have ready before signing any lease documents with your prospective landlord is proof of income.
In this article, you will discover the importance of a proof of income letter and how to prepare one to get your dream apartment.
What is a Proof of Income Letter?
A proof of income letter, also known as a proof of income or income verification letter, proves that someone is working at the place where they claim to work and earning the amount they claim to earn.
If you need a loan or rent, you can use this document to prove that you can afford it. This document can also benefit you—a future renter, so you can be sure you are in good financial standing and staying within your rent budget.
Why is a Proof of Income Letter Important?
You’re wondering why do landlords require a proof of income letter from their tenants? The answer is simple: it’s for them to make sure that you’re financially capable of paying rent and other costs on time.
In most cases, property landlords are strict when it comes to showing this document. This is because some people might lie about their employment status and income just to get their preferred property. One of the easiest and simplest ways a landlord can prove this is to require proof of income from the tenants.
Additionally, some landlords may ask for additional documents aside from your proof of income letter.
What Can Be Used as A Proof of Income?
All people are different from each other, so there are different ways future renters can prove they have a stable job and income. On the other hand, most landlords would usually ask renters for a combination of documents aside from your proof of income letter, such as:
- Pay Stubs – the most common form of proof of income. You should always provide your most recent pay stub to show an accurate representation of your income.
- Tax Documents – For your latest tax return, you can find all of your sources of income in this document. You can also ask your employer to provide a W2 for a more accurate representation of your income.
- Bank Statements- a record of someone’s bank transactions. This is a good option for the unemployed or people who don’t receive regular pay stubs.
- Pension Distribution Statements- retired applicants can submit this document if they are receiving monthly pension statements.
- Unemployment Benefits- unemployed workers collecting unemployment benefits may include these payments as part of their income.
These are usually the common documents that landlords may require, but they might require other documents from you as a renter.
What Can Self-Employed Individuals Use?
As most people today are self-employed or work as a freelancer, they don’t receive documents such as pay stubs. Proving your income as a self-employed person can take additional effort and time. Self-employed individuals can use documents such as:
- 1099 Forms- this is the most reliable proof that self-employed individuals can use, as this document shows your wage and taxes. You can easily create a 1099 form yourself without hassle.
- Bank Statements- if you have regular and stable bank transactions, you can also use these as a proof of income.
- Ledger Documentation- This document summarizes your revenue, expense, and costs.
How Do I Make A Proof of Income Letter?
For formal letters like these, you can just ask your employer to create one for you. However, if it’s required that you do it yourself and find it more comfortable, creating your own proof of income letter is not that hard.
The best way to make your own proof of income is to stay simple and honest all the time. Include all the basic information and provide all the necessary details regarding your employment and income. Always show that you are financially responsible so that the landlord can see that you’re capable of paying the monthly rent.
You should include all these basic details:
- Phone Number and/or Email Address
- Employer’s Details
- Employment status/Title
- Income (Hourly or Monthly Wage)
- Job Details
Having a proof of stable income and job title is important for rent or loans, no matter if you work for your dream company or are a freelancer. It is very challenging to maintain a stable income, especially if there is a pandemic, as many businesses are in the process of closing down and having difficulty remaining open. It’s therefore crucial that you are aware of all your sources of income and ensure that they are organized to ensure hassle-free renting and loans in the future.