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Do student loans count as income for rental application?

The short answer is yes, student loans count as income for rental application.

If you are trying to rent an apartment and have student loans, don’t panic! You can still qualify for a rental if you have student loans.

Student loans can be reported on your credit report as long as they are in good standing—meaning that they’re not in default. Some landlords may require that you pay off your student loans before they will consider renting to you, but many do not.

However, it’s important that you know that having a lot of student loans will make it harder for you to qualify for a rental apartment and get approved by the landlord or property manager.

How Do I Show Proof of Income to Rent an Apartment?

• Most landlords will want to verify how much money you make to ensure you can pay the monthly rent
• There are several ways to show proof of income before signing a lease
• Make sure to do your homework ahead of time so you’re fully prepared to snag the apartment you want to live in

Apartment hunting is fun. You get to choose the location of your new home and the type of rental — apartment, condo or house — that you’re going to live in. However, once you’ve found your ideal living space, you’ll need to fill out the rental application and come prepared with a variety of documents required by the landlord to make it official, including proof of income.

So, how do potential renters show proof of income and what types of documents qualify? This article will walk you through ways to show proof of income for an apartment and help you secure the rental property you’ve been eyeing.

Why proof of income is important

Proof of income for an apartment is an important metric for landlords because it shows them that the potential renter has a steady income and will be able to make the monthly rent payments. Property owners will usually ask prospective tenants to provide an income letter in at least two different forms to verify the applicant’s income and protect themselves from fraud and scams.

These documents assure the landlord that you’ll be able to pay rent, but they also benefit the renter. It gives renters a moment to check in with their budget and make sure they can actually afford the place they’re trying to rent. It’s also proof that renters have a steady income and they can use it to vouch for themselves and their credibility if a dispute ever arose about the ability to pay for rent.

Ways to show proof of income for an apartment

Now that we’ve discussed why proof of income is important, let’s dive into what income verification documents will be sufficient.

1. Pay stubs

If you work a full-time or part-time job where you earn a regular paycheck, you’ll likely receive regular pay stubs. A pay stub shows how much you earned within a certain time period. It also shows how much money you paid for insurance, taxes and other investments.

Most likely, you receive a pay stub every pay period, but you can also ask your employer to provide past pay stubs as a way to verify proof of income. Keep in mind that landlords may contact your employer to check that your pay stubs are accurate.

2. Tax returns

When you file your federal taxes for the previous tax year, you’ll get an official document showing last year’s federal tax return. The tax statement is a legal document that highlights everything you earned the previous year.

Prospective renters can use their wage and tax statement as proof of income. Using last year’s tax return is a good option for those who are self-employed — like freelancers or contract workers — because they can show their self-employment income on an IRS form, which proves that they can pay the monthly rent.

3. Bank statements

You can use bank statements as proof of income because they show the landlord every deposit, withdrawal and transaction made by the tenant. However, bank statements don’t always portray an accurate income.

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For example, if the future renter gets paid on commission, their income may fluctuate month-over-month and a bank statement would highlight these fluctuations in pay. Likewise, self-employed renters may have miscellaneous income that fluctuates over time and may not paint an up-to-date picture of their finances.

4. Income letter from employer

Renters may ask their current employer for a letter that verifies their income. This letter confirms that a renter has the means to pay for rent. If your landlord requires a reference, this is a good opportunity to provide both proof of income and a reference at the same time.

5. Social Security documents

If you live on and receive Social Security payments, you can use the social security benefits statement as a way to show your annual income. While this is a federal document that’s credible proof of income, there’s one caveat — Social Security benefits could change.

For example, Social Security proof may work when you sign the lease but if any related laws change during that time period, you may or may not be able to use social security as proof of income for an apartment rental when you renew your lease.

6. Disability insurance

If you receive disability insurance from the government, you can use the benefit verification letter as documentation and proof of income. These documents show verifiable income and will help during the tenant screening process.

7. Pension

Some career fields provide a pension after retirement. If you contributed to a pension when you worked, you can request a pension distribution statement as income verification. This will be sufficient documentation to prove income for your tentative landlord.

8. Court-ordered payments

If you receive court-ordered payments like alimony or child support, you can use these to show consistent income. If a potential renter receives alimony or child support, which is a court-ordered payment, that renter can use that as proof of income when applying for a new apartment. You can show your property manager your alimony payments as a source of additional income.

9. Unemployment documentation

If you’re currently unemployed and receiving unemployment benefits, you can use this as proof of income. However, unemployment checks usually have a timestamp on them, meaning they’ll likely be stopped after a certain amount of time. So, it’s smart to have a backup form of income verification for when your unemployment benefits run out.

10. Worker’s compensation

If you’re receiving worker’s compensation due to an on-site injury, you can show your potential property manager the worker’s compensation letter outlining what happened, why you’re taking time off and how much income you’re receiving from the insurance company in the interim. This is a viable way to verify income.

There are some scenarios where you can still rent an apartment with little or no income. However, it’s most desirable to have a stable income in order to secure the exact apartment you want.

11. Severance statement

If you were laid off recently but received a severance package from your employer, you may use the severance statement as an official letter to landlords showing them how much you received as a lump sum upon department from your company. While this is not the same as a stable income, it will work in the short term.

Understanding rent-to-income ratio

When you’re gathering your proof of income documents, it’s a good time for you to check your budget, assess your monthly income, review your business expenses, see your student loans and make sure you can actually afford the apartment you’re trying to lease.

A general rule of thumb is that renters should budget roughly 30 percent of their salary toward rent. While this method may work for some, the 30 percent ratio is not always realistic, especially if you live in a city like New York or San Francisco, where rent is extremely expensive.

As you gather your proof of income documents to verify income, assess all of your bills and financial responsibilities to ensure you’ll be able to make your rental payments on time each month.

Calculate all forms of income

You’ll also want to review how much money you make each month from non-traditional sources. This is particularly true for self-employed individuals who make money from dividends, investments or annuities. You can show your unearned income with things like an annuity statement, profit and loss statement, dividend income or a tax form.

Make sure to show every source of income to prove you’ll be a reliable renter. By verifying income ahead of time, you’ll be in a good situation when it comes time to sign the lease agreement.

Preparing to pay rent

As you get ready to rent a new apartment, make sure you have all of the proper paperwork in place. Showing an up-to-date picture of your finance makes you seem organized and responsible, which is a good sign for landlords.

Renting an Apartment With Student Loan Debt Problems

You want to rent an apartment, but you’ve got oodles of student loan debt.

Maybe you’ve been late on some payments. Maybe you’re even in default.

Can you still rent an apartment with student loan debt headaches?

Probably. But it might not be easy. Here’s the scoop:

What landlords want

Landlords have two basic priorities:

1. Find tenants who aren’t going to cause damage to the property or expose the landlord to liability. We assume you’ve got that covered.
2. Find tenants who will reliably pay the rent, every month, as agreed, on time, throughout the lease term.

Landlords hate to evict. It’s a long, expensive process that can cost thousands of dollars, and it can take months to get a tenant out of a property. All landlords would rather have a property go vacant a little longer to rent to a good tenant who can and will pay the agreed rent than take a chance on a renter they may have to evict.

So that’s what you’re dealing with: Smart landlords tend to be risk-averse when it comes to tenant selection.

Small, independent real estate investment property owners have a lot of flexibility. They can rent to whoever they want. If you can show to their satisfaction that you meet these two criteria, you’re in like Flynn.

If you’re dealing with a professional property manager or management company, however, you’re probably going to have to clear a higher hurdle:

Property managers will have specific criteria that you have to meet in order to be approved to rent an apartment. Unless the management company also owns the apartment building, they won’t have much flexibility. Their rental criteria are probably in their contract with the landlord. If they violate it and rent to you, and you don’t meet the landlord’s criteria that they specified to the management company, the management company could be in hot water with the landlord.

Common apartment rental criteria

Every landlord is different. But here are are some common rental criteria you may encounter in today’s market:

1. No previous evictions.
2. No previous eviction filings (or none within the last X number of years).
3. Verifiable income of two to four times the monthly rent. The more exclusive and in demand properties will require higher multiples.
4. No felony convictions (or none within the last X number of years).
5. No drug convictions within X years
6. Minimum credit score – which could be a FICO Score, or it could be an industry-specific score from a report they buy from another vendor that’s optimized specifically for the real estate industry
7. No serious delinquencies on your credit report.
8. Not more than 1 or 2 late rent payments in last X years
9. No utility shutoffs in last X years
10. No more than 2 people per bedroom
11. Income verification – typically via pay stubs, W-2s, tax returns or the last X consecutive bank statements.
12. Employment verification. If you’re an employee, landlords commonly call your employer to verify your employment status and income.
13. Identification.
14. Security deposit. Some states limit how much a landlord can hold as a security deposit. The lower your credit score or income multiple, the more you may need to come up with as a security deposit. However, you should get this deposit back at the end of your residency, minus any damages.

Note: When an applicant is borderline, some landlords and property managers focus on your track record with prior landlords and utility companies. If you’re routinely late on your gas and electric bill, you’re probably not a great risk for the landlord.

Student Loans and Renting an Apartment

Your monthly student loan payments, as well as your balance, are going to show up on your credit report. So will your minimum payments and balances on your other debts, if the creditor reports to the credit bureaus.

If you have been paying on time, you won’t have to worry about your student loan hurting your credit score, as long as you didn’t refinance it to a credit card. In fact, it’s probably helping your score, if you’re making on-time payments. Data from CoreLogic indicates that, on average, people with student loan debt have higher credit scores than people who don’t have student debt. 

But if you are commonly late on your student loan payment, or any other debt payment, it’s going to hurt your score. Your track record of making on-time payments as agreed is the most important factor in your credit record, accounting for a 35 percent weighting in your credit score.

Renting an apartment when you’re in default on a student loan

Renting when you’re currently in default status on a student loan could be tough. Having problems in the past and bringing your account current is one thing. But if you have a student loan currently in default on your credit report, that’s a much tougher thing for an apartment manager or landlord to overlook. It means your financial problems are not yet behind you, and you’ve been seriously delinquent on at least one very important account.

Are you currently in default on a student loan? There’s a way out, as long as it’s your first time in default on that loan. Read this piece on how to rehabilitate your student loan and get it out of default. 

Evictions are big trouble.

Do everything you can within the law to avoid having an eviction filed against you. The filing will show up on your background check Fall behind on any other bill you like, and you can probably recover and still be able to rent an apartment in a great area. But many landlords simply will not consider renting to anyone who has an eviction on their credit record, period. 

That’s going to make it tougher to find a place to live for up to seven years, until the eviction scrolls off your credit report.

So if you have to choose between paying a student loan debt and paying the rent, pay the rent. Call your servicer and request a deferment or forbearance. Or if you don’t qualify, take the ding to your credit, reduce your expenses to the bare bones, and catch up when you can.

Photo credit: Bruce Mars, Pexels.com

What to do if you already have an eviction on your record

If you do have a prior eviction on your credit report, all is not lost. Some landlords will be willing to remove the eviction from your credit report, in return for the prompt payment of all amounts owed. That’s going to include past-due rent, late fees, court costs and filing fees, as well as up to two month’s rent in “liquidated damages,” depending on the jurisdiction and the lease terms.

Securing a good recommendation, even if you’ve been evicted

If that’s not possible, be out within a few days so the landlord can re-rent the property to someone who can afford it. Be sure to leave the place in pristine condition. Landlords talk to each other. The owner or manager of the place you’re applying to may well call your old landlord as a reference. If your new place is much less expensive than your old one, you left the old apartment in great shape, and you’re faithfully making payments to knock out anything you owe to the old landlord who evicted you, you may still get a decent reference. “He’s a nice kid, and he left the apartment in pristine condition, but he just couldn’t afford the rent anymore” is much better than “Yes, the tenant was evicted for non-payment. No further comment.”