If you ever find yourself looking to take out a loan of any sort, then you may be asked to provide an income verification letter. If you’ve never heard of this document before, then you’ve come to the right place; we’ll fill you in on exactly what an income verification letter is, the information it should include, who can write one, and situations in which you might be asked to provide one.
What Is an Income Verification Letter?
An income verification letter is simply a document that verifies an individual’s current employment status and salary. Also known as employment verification letters or proof of employment, income verification letters are an easy way for your employer to verify that you do indeed hold the job you claim and make as much money as you say you do.
Why would that be anyone else’s business? You’ll find out the first time you need to take out a loan or make a major purchase. Income verification letters are generally meant to ensure that you can actually afford to take on a large financial commitment of some sort. Some situations in which you may be asked to provide one include:
- When applying for a mortgage
- Applying to rent an apartment or other property
- Taking out a loan or line of credit
- Purchasing a vehicle
The average income verification letter will include where you work, your job title, how long you’ve worked with the company, and your average hourly wage or salary. Depending on the situation, the person requesting the letter may ask that additional information be included whenever they make the request.
Why Do We Need Income Verification Letters?
As you can see, income verification letters are usually requested by people or institutions who you’ve asked to place a large amount of trust in you financially. Given that most lenders are unlikely to know you personally, it makes sense for them to ask for proof of your claims. Rest assured that this is nothing to take personally, as it’s a pretty standard business practice whenever a large amount of money is on the line.
Part of the reason income verification letters are such a common request is that they can go a long way towards protecting potential lenders or landlords. Occasionally, people get so caught up in their desire for a loan or to move into a specific apartment that they’re willing to stretch the truth a bit to make sure they’re approved. While such a move may appear to make for a more flattering application, the truth ultimately catches up with them when it’s time actually to pay their rent or minimum payments.
Not only is an income verification letter designed to protect the lender, but also potential borrowers. We’ve all experienced the temptation to believe that we could afford to own a shiny new home or car, even though reality says otherwise. Sometimes, being forced to take a look at our finances can save us from jumping into a situation it would be incredibly difficult, if not impossible, to recover from.
Where to Get an Income Verification Letter
Okay, so you need to prove how much you make. But where do you get an income verification letter? If you work for a company, your HR department is a great place to start. The average human resources manager is well versed in typing up such letters and should be able to provide you with one.
If you work for a smaller company, then you might ask any of the following people to either write or help you obtain one:
- The business owner, founder, or president
- The director of your department
- Your supervisor or manager
What if you work as an independent contractor or are self-employed? If you have a client you work for regularly, you may be able to ask them for a work verification letter to help paint a more thorough picture of your arrangement.
Otherwise, you’ll likely need to provide a self-employment letter that you’ll prepare yourself. Just understand that this is a legal document, so you’ll want to be careful to include the most thorough and truthful information possible. In some instances, you may also be asked to provide additional proof of income in the form of things like invoices, pay stubs, or bank statements.
How to Write an Income Verification Letter
If you’re a business owner or employer, then you may find yourself asked to provide an income verification letter at some point. Rest assured that such a letter need not be complicated, though it should include specific information. If possible, you should use your company’s official letterhead or stationery.
Make sure to include:
- Your contact information, including your name and position, the company name, address, and phone number.
- The employee’s name, job title, and how long they’ve worked for the company.
- If they’re an hourly employee, include how many hours they usually work each week.
- The employee’s compensation rate, including any commissions or bonuses if applicable.
- Your signature
As you can see, it’s best to keep things short, sweet, and to the point. The lender is likely just looking for legal verification of the employee’s claims and who they should contact if they have any questions. If you should get stuck or just want to have an income verification letter on file, it might be worth downloading one of the many templates available online.
Sites like Rocket Lawyer and eForms will allow you to create a draft for free and can be helpful when it comes to things like formatting. If you end up drafting a letter on such a template site, only to find that you have to pay to remove the watermark, go ahead and print it out even if you’re not interested in subscribing. Once the letter’s composed, it should be pretty easy to retype in another program and save it for future use.
There are also plenty of great example letters and free Word templates online that can give you an idea of what to shoot for if you’ve never composed an income verification letter before.
We hope this has helped answer your questions about income verification letters and what they should include!