There’s no way around it. Proof of employment is a big part of getting a mortgage. Besides verifying your credit score and credit history, your lender is going to ask you to prove that you’re bringing in enough money to pay off the loan you want.
If you’re wondering why your lender won’t simply take your word for it when it comes to your income, just know that it’s business – not personal. It’s in your lender’s best interest (and yours) to verify that you make enough money to make all your monthly debt payments, including your mortgage payment.
Prove that you have enough money coming in to cover your estimated mortgage payment, and you’ll be well on your way to picking up the keys to your dream home.
Proof of employment is also required when you’re getting an apartment lease or taking out a personal loan. It’s an important part of borrowing money so knowing exactly what it is and how to get it is a good idea.
Even if buying a home is still a few miles down the road, learning the ins and outs of proving your income doesn’t have to wait.
What Is Considered Proof of Employment and Why Is It Important?
Proof of employment is what it sounds like: It’s proof that you work for a certain company, have a certain title and earn a certain income.
No matter what kind of job you have, no one is exempt from the proof of employment requirement. Whether you have a traditional salaried job, you’re paid by the hour or you work for yourself, you’ll need to prove what you earn.
Proof of employment can range from pay stubs or tax returns to a signed letter from an employer or a job offer letter.
Why Is Proof of Employment Necessary?
Proof of employment is a way to demonstrate that you can make good on your financial obligations. In other words, it means you make enough to pay what you owe.
Regardless of what form it might take, promptly providing proof of employment can help you look good in a lender’s eyes.
Buying a house isn’t the only reason you might need proof of employment. There are lots of situations where having a tax return or employer letter can come in handy, including when you’re working with:
Lenders: When you have to pay a loan back, a lender needs to know you’re good for it.
Third parties: All kinds of third parties, including background check companies, may require proof of employment.
Credit card issuers: For many credit card companies, your income dictates your credit limits. A high income can mean a higher credit limit.
Landlords: Like mortgage lenders, landlords want to be sure that your rent will fit comfortably into your budget.
Present and potential employers: In some states, asking about salary history is illegal, but in other states, anything goes. Prospective employers may want to know what kind of money you earned at a past job.
How Do You Prove Employment?
There are lots of ways to prove that you’re gainfully employed.
How you prove it will depend on the job, the available forms and your company’s protocols. This will also vary if you’re self-employed or work multiple jobs.
These are the most common forms an employee can use to prove employment:
I-9 form: An I-9 form won’t state your income, but it can prove that you’re legally eligible to work in the United States.
Employment verification letter: An employment verification letter is one of the most common proofs of employment. This letter should state who your employer is, your title, the length of your employment and your annual salary and bonus opportunities. Ideally, it’s signed by your boss or an HR representative. In large companies, these letters can sometimes be generated on demand through an employee portal.
State-specific income verification form: Some states have specific income verification forms, like Form H1028 in Texas. These forms don’t apply in all states.
W-2: These tax documents are sent at the end of every tax year to help you file your annual return. A W-2 reports how much you earned for the year.
Pay stub: Whether you get a paper pay stub or you get it online or through your company’s portal, you should get a pay stub every time you get paid. Recent pay stubs can prove that you’re currently employed and report how much money you’re making every pay period.
Reference: A reference letter from a trusted peer or co-worker may be accepted. With a strong reference, you can show that you’re reliable and a good candidate for a loan.
Contract or signed agreement: Many employees get a signed contract, employment agreement or offer letter before they start a new job. You can use either document to prove employment and income.
Employment verification company: Some companies go through a third party for employee verifications. If your company does this, give the requesting party (read: your lender) all the relevant information, like your name, title and company code, so they can do an independent check. It’s important to note that accepted documents may vary by lender and what you’re applying for, so be sure to check specific requirements before diving in.
1099 forms: Similar to a W-2, a 1099 is a tax form sent out in January that reports annual income. It indicates all wages and any other payments made as part of a working arrangement.
Tax returns: Income tax returns provide a complete view of your income, which can be very helpful if you’ve got a few jobs. It can be a good idea to provide tax returns as well as other verification documents if you’re self-employed.
Bank statements: Your bank statements don’t necessarily say who employs you, but they can show cash inflow and outflow. Plus, if you have a healthy savings account balance, lenders may be willing to overlook an unpredictable pay schedule, although they aren’t obligated to let it slide.
Invoices: For those of us who find work through freelance platforms, online delivery companies or ride-share apps, we can usually access income reports and work logs. You can use that info to demonstrate your average income.
When you’re asked to provide income verification, it’s important to be as detailed and transparent as possible. You want to give whoever’s asking the most complete picture possible.
Make sure your income verification paperwork includes:
Your legal name
Your employer’s name and, if possible, an employer identification number (EIN) from your pay stub or a recent tax return
Your job title
Your employment dates
Your annual or hourly salary
Any other lender-requested information
Make proving yourself a priority. The more proof you provide, the more reassured a lender may feel that you can afford a loan – and pay it back. When in doubt, send what you have. At the very least, you may dodge follow-up questions.