Income verification is accomplished by a user providing proof of income to a service provider.
It is a part of the underwriting process which helps the service provider determine whether or not the user has the ability to pay.
Providing proof of income is required when a consumer applies for a home loan, auto loan, rental property, or line of credit, among other situations.
How can consumers show proof of income?
Today, there are long established and acceptable ways for a consumer to show proof of income.
Paystubs provide recent income but usually need to be aggregated to at least the last three months in order to be accepted as proof of income.
Federal and state tax returns will give a more holistic view of all a consumer’s sources of income in one place.
W2’s can also be accepted as proof of income as long as the consumer has one from each employer (for those with multiple jobs).
Bank statements are acceptable as proof of income but usually cannot stand on their own and must be provided in conjunction with paystubs.
What are examples of ‘unearned income’?
Social Security, unemployment, and pension benefits are examples of “unearned income”.
These statements are acceptable as proof of income. However, because most of these benefits are limited, they may not offer as much in the way of stable income.
Service providers may charge higher interest rates, offer shorter loan periods or only approve a lower loan amount if a consumer uses sources of unearned income.
The type and amount of loan plays determines how many and what kind of documents are required for underwriting.
Some service providers may require just one of these examples of proof of income while others will require a combination of proof.
The issue with gaining proof of income
With so many different types of proof of income, gaining a holistic view of a user’s income can be challenging.
Atomic allows users to connect their payroll account directly to the service provider’s application, giving access to verified, real-time data directly from the user’s employer.