If you’re trying to find an apartment to live in, filling out applications is an important part of the process. Most of these applications require basic information like your name and contact information, references, and previous residential addresses. But you should also be prepared to provide your monthly income.
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It may be tempting to exaggerate your income so you can qualify for a nicer or more expensive apartment. However, you should avoid doing this because you’ll need to verify your income before your application is approved. Here are a few things to know about the role income verification plays in rental applications and lease agreements.
Understanding Income Verification
Income verification is an important part of the tenant screening process. It helps the landlord know whether you’re capable of paying rent. Even though tenants self-report their income on their applications, most landlords want to verify that number. Without being required to show proof of income, it would be easy for applicants to lie about how much they make.
There are multiple documents you can use to prove how much you earn each month. (More on those below.) Review your application or check with your landlord to see if there are certain types of documentation you need to show.
Why Landlords Verify Income
Many renters are a bit too optimistic when it comes to how much they can afford to pay in rent. For this reason, verifying income is not only beneficial for the landlord, but for the applicant as well. The process helps protect the landlord from losing money due to a tenant’s inability to pay. It also helps protect the tenant from eviction because they simply can’t afford to make rent.
Many landlords follow the “3x Income Rule.” This rule states that potential tenants should earn approximately three times the amount of rent. So, if your monthly rent is $1,000, your landlord will want your gross income to be at least $3,000 a month. There may be some exceptions to this rule. But you should generally try to ensure you’re earning at least three times the rent amount when applying for an apartment.
Ways You Can Show Proof of Income
There are various official documents you can use to prove your income. Some are used more commonly in the income verification process than others. Where things can get tricky is if you are a retiree or you’re receiving income from public assistance. But even in those situations, there are still documents you can provide to verify your monthly income.
Your application may state the specific types of documentation you’re required to show. If you do not have the required documents, work with your landlord to see what other documents are acceptable. Here are some of the different ways you can show proof of income:
Pay stubs are the most common documents used to verify income. If you have a standard full-time or part-time job, you should be able to show your paystubs. Freelance and contract workers may not have pay stubs, but they should have a 1099 form.
W2 or 1099 Form
A W2 form is also known as a Wage and Tax Statement. It’s the form employers must send to each employee every year for tax-filing purposes. A 1099 form is the freelancer’s equivalent of the W2 form. These forms show how much an applicant made over the past year.
If you’re a cash-only employee and don’t have pay stubs, it can be tricky to prove your income. In this situation, your landlord may choose to contact your employer directly to find out how much you make. This process may be quick if done by phone or email. But it could take a few days or weeks if done by mail.
What if you’ve just switched jobs and you don’t have any pay stubs from your new job? In this case, an offer letter from the new employer is an acceptable form of income verification. It indicates how much your yearly salary will be at your new job.
Your tax return shows how much you made last year. If you use your tax return as a form of income verification, your landlord may request additional documentation. They may also want to see current pay stubs to show that you’re still making the same (or more) this year as you did last year.
Non-Wage Income Considerations
If you’re retired or living off of social security, you won’t be able to provide pay stubs or other traditional forms of income verification. However, you can still show retirement or social security distribution statements to prove your monthly income.
What To Do if You Have Insufficient Funds
If you don’t meet the 3x Income Rule or you don’t have sufficient income verification documentation to satisfy your landlord, there may be another option. You may still qualify for an apartment if you have a third-party cosign with you. This is a common course of action for students who are applying for their first apartment, as their parents or guardian often cosign.
When it comes to qualifying for an apartment lease, income verification is extremely important. Now that you know why it’s required and how to provide it, the apartment application process should hopefully go more smoothly for you.