If you’ve ever tried to rent an apartment or apply for a mortgage when you’re self-employed, you know how difficult the approval process can be. Even if your credit score sets you in the highest percentile, the company with which you’re applying will want to see some sort of proof of income. For example, most apartment complexes in Houston require that tenants make at least three times the monthly rent in order to be approved.
In some instances, it’s actually easier to get around the proof of income problem when applying for a mortgage than it is to get into an apartment. Reason being, there is such thing as a “no-doc” (or no documentation) loan that is provided to individuals who are self-employed, as long as they have sufficient credit. No such courtesy is supplied to tenants, however, which is what makes it harder.
The first way you can establish proof of income is by submitting last year’s tax returns as evidence of your yearly income. In some cases, those documents will no longer be applicable, especially if you’ve changed jobs since then, but many apartment complexes and mortgage companies except them from the self-employed. Just make sure to black out your social security number so that it isn’t evident before you hand it over.
Additionally, some companies will accept bank records as proof of income from the self-employed, but they must be official statements mailed from your bank to your current address. They should show regular deposits that total the amount of income you claimed on your application, and make sure to black out or cut out your bank account numbers and other personal information you don’t want anyone to see.
When you bring your proof of income to whatever company requests it, make sure they understand that you are self-employed. Put all documentation in a manila folder and label it as proof of income, and dress as professionally as possible to make a good impression. What you might not realize is that the individual processing your application does have some control over whether or not you are approved. If he or she finds your proof credible, you’ll have better chances.
Additionally, you can ask at your meeting if there are other types of proof of income that they find acceptable. Some apartments and mortgage companies will accept letters from high-paying clients when you’re self-employed, or will forgo proof of income if you can provide a recommendation from a previous lender or landlord. The more you can provide to substantiate what you wrote on your application, the more likely you are to get approved.
