You’ll be required to show proof of your income when you rent or buy a house so that lenders and landlords are able to verify your financial stability. You need to provide proof of income in order to prove that you can afford your mortgage or rent.
To prove your income, you can use copies of your paycheck stubs or IRS Form W-2. However, the documentation required may vary depending on the person requesting proof.
There are other ways to prove that you can afford rent or mortgage payments, besides paycheck stubs. We’ve collected 14 types of valid documentation that most lenders accept as proof.
What do you need to prove your income?
Income verification documents can be as simple and straightforward as a letter of proof from your employer summarizing how much you make and how often you are paid.
For more formal or authoritative evidence, you may need to provide supporting documents. Documentation should generally include:
- Your full name
- Name of your employer
- Other identifying information
- Earnings
- When you get paid
- Date information is entered on the form
The documents are mainly from an hourly or salaried job. However, passive income, such as interest on investments or capital gains, Social Security, or unemployment benefits is also acceptable.
Here are 14 examples of proof of income documents.
1. Pay Stubs
You can use recent pay stubs to prove your income if you are employed by an employer.
If your income is based on commission or hourly, but you are not being asked, you might want to provide additional information.
The higher your income is, the better chance you have of qualifying for a rental or home. You can show your income by using a letter of employment, or the federal income tax returns from last year.
2. Employer Letter
You can ask your employer to provide you with an employer letter as proof of income. You could use this letter to recommend your employer or as a reference depending on the relationship you have with them.
3. Last Year’s Tax Refund
It’s possible that you wonder “Can I use my tax return 1040 as proof of income?”. Yes! Verifying your income is often done by using the federal income tax returns from last year. The federal income tax return from last year shows your total income (including income earned from a job, and unearned income derived from investments or annuities).
It only displays information from the previous year. It may not reflect your income accurately. You’ll want to choose the current income option if you have had a recent pay raise. This will increase your chances of qualifying.
4. IRS Form W-2
The W-2 form, which is also called a Wage Tax Statement or Wage and Income Statement, that you receive from your employer can be used to prove your earnings for the previous tax period. It will not reflect any raises that you received in the current tax year, just like your federal income taxes.
5. Social Security Income Proof Letter
You can print your Social Security Statement online if you are one of the 69.1 millions people who receive benefits from the Social Security Administration. Just log in to My Social Security Accountlogin.
6. Annuity Statement
An annuity contract is between you and the insurance company. It provides a lifelong fixed income. Ask your insurance agent to provide a proof of income if it is derived from an annuity.
7. Pension Distribution Statement
The IRS Form 1099R or the pension statement from your tax return will show you your monthly pension for income verification.
8. Court Ordered Agreements
As proof of income, court-ordered payments like alimony or child support are acceptable. The court will provide you with an award letter if you do not have one.
9. Unemployment Benefits
You can use forms and letters to show how much and how frequently you receive unemployment benefits. For documentation, contact the insurance company or court that dealt with your case.
10. Workers’ Compensation Letter
A workers’ compensation letter is a way to verify your income if you have been injured and are eligible for workers’ comp for medical care and wage replacement. Contact the insurance company that handled your case for documentation.
11. Disability Insurance Award Letter
Disability payments usually have a deadline, so a letter of award from an insurance company can be used as proof of income.
12. IRS Form 1099 -NEC
Your 1099-NEC for Non-Employee Compensation can serve as proof of income if you are self-employed or a contractor. You’ll need to collect a 1099-NEC form for each employer if you work at multiple companies.
13. Profit & Loss Statement
Profit and loss statements are a financial statement that businesses often use to summarize their costs, expenses and revenues. This document can be used to prove your self-employment income.
14. Bank Statements
Bank statements provide a record of your bank balance and withdrawals. This is a great option for those who are unemployed or working on their own without regular pay stubs.
Renters: Proof of income
Landlords screen prospective tenants carefully during the rental process. This typically includes requesting proofs of income that you meet the required income for the apartment rental.
You should make three times your monthly rent or you may need to have someone else co-sign the agreement.
They may even call your employer to verify the documents. The landlord may even contact your employer to confirm the documents. As proof of rental income, you can use other documents such as tax returns, bank statement, Social Security statement, etc.
Proof of income for home buyers
As part of your home-buying process, your lender may ask for documentation to prove your income. Home loans are a longer-term financial commitment than rental or lease agreements, so lenders will require additional documentation to confirm that your income is sufficient to support the mortgage payments you’re applying.
Paycheck stubs are not enough. You will need to provide your lender with a recent W-2, a proof of income letter from the current year, bank statements and two years’ worth of federal tax returns.
Proof of Income Documents For Self-Employed
How do you prove your income without pay stubs or other documents? The self-employed documents that prove income for home or rental purchases are not the same as those of a traditional employee. You can instead use your tax returns or company profit and losses statements.
You might be able rent a home if your company is still in its early stages, but it might not be time to buy because the lender will require that you have a minimum of two years’ worth of income from your business. Your personal tax returns as well as your company’s income and loss statements will be requested.
Many home buyers today have multiple sources of income, which makes proving income more difficult. It’s best to get an expert involved as soon as possible.
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