Proof of Income: How to Use a Paystub and More to Buy A Home

Buying a house is a big step. It puts you on the property ladder, grants you rights you didn’t have as a tenant, and gives you a place to call home. In 2019, the median house price in the U.S. was $279,600.

Home loan application

To purchase a house at that price, you needed a salary of at least $61,123 to pay your monthly bill of $1,426.21. However, you need more than a salary. You need proof of income.

What does proof of income mean, and how do you show it? Here’s what you need to know.

What Does Proof of Income Mean?

Proof of income is formal documentation that verifies what you earn each year.

Lenders rely on proof of income because it determines your true ability to pay a mortgage. It’s one thing to say, “I earn $50,000 a year.” You need to be able to prove it.

Proof of income is particularly important in today’s world, where 16 million Americans are self-employed and no longer have employment contracts and regular paychecks to rely on. Mortgage lenders and the government are aware of this. Fannie Mae has a list of 26 types of acceptable forms of income.

What Qualifies as Proof of Income for a Mortgage?

You need to prove how much money you take home every month. But how do you do it?

The answer depends on the lender. Some lenders will take a letter from your employer, but others require a much longer list.

Some of the standard proof of income document requests include:

  • Proof of income letters
  • Pay stubs
  • Wage and tax statement (W-2)
  • Tax returns

The good news is that most of these are easy to get. You can request a proof of income letter from HR or accounting. You can also request a new copy of your W-2 at any time. If you’re missing your tax returns, you can get these from the IRS.

What if you don’t file taxes, and your employer isn’t responding to your requests? In some cases, you can use a printable paycheck stub maker to provide proof of income.

Remember that you also need to provide proof of income from any second job. If you’re self-employed, you’ll need to demonstrate your income through your tax documents.

If you claim income outside of your full-time employment or you’re not employed, then you might provide:

However, you may also need to provide other supporting documents, such as your bank statements.

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Prove Your Income to Buy Your First Home

Buying a home opens up financial opportunities. To get there, you first need to have an income and then be able to prove it.

Your lender will let you know what type of proof of income documents they require before you apply. But if you’re shopping for a mortgage, it’s a good idea to get as many types of proof of income together before you start talking to lenders. They will give you a good idea of what mortgages you might qualify for and save time when you apply.

Did you find this article helpful? Find more money matters for small businesses in our archives.


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