When looking to Rent an apartment, there are many items, requirements and processes you must endure before you can even be approved to sign a lease. You may have to encounter a credit check and a background check, as well as produce references, a rental history, vehicle registration and proof of renters insurance. You also may need to pay a check fee, an application fee and a security deposit fee. A lot goes into renting an apartment besides filling out an application.

But one thing you are almost assured of having to provide is proof of income. Income verification has become a standard part of the application process. Landlords require proof that renters will be able to pay and continue to pay monthly rent on time and in full month after month.

So what exactly are income requirements? What is the proper monthly rent-to-income ratio? How much are you expected to pay in monthly rent and how much should you pay in monthly rent? And how do landlords determine their requirements and what proof do they demand?

Why do apartments have income requirements?

To protect themselves and renters, many landlords and property managers set minimum income requirements needed before a potential tenant can even think about signing a lease agreement.

And there's a reason why this is often the first step in applying for lease approval. If you cannot pay your rent on time, you are probably not going to be approved for a lease. If you cannot show you will be good tenants and make rent payments on time, there's no point in moving forward with the application. Both the landlord and the potential tenants can move on without spending the time or money on things like further application fees and background checks.

Income verification to protect the landlord

Most often, the reason landlords require proof of income is to avoid bad tenants. Not ones that are too loud or make a mess (although they often go hand-in-hand), but potential tenants that won't be able to pay rent. A minimum income requirement ensures that come the first of the month, the proper full rent will be paid. With this requirement, the landlord knows (or at least can speculate well) that rent will be provided on time.

It is not just bad for landlords when tenants cannot pay rent in full. It can also cause difficulty when rent — even if the full amount — is consistently paid late. This can wreak havoc with budgets, savings, interest and the apartment building owners to pay staff, bills and taxes.

When tenants start paying late or not being able to cover the full amount, it can be harmful to the reputation of the property as a good place to live. Other tenants may also feel like they need not pay on time as well. And in the worst-case scenario, a tenant may fall so far behind, they skip out on the lease entirely.

Income verification to protect the tenant

It may seem counterintuitive, but income verification also protects prospective tenants as well. If a renter moves in without the ability to pay in full on time, they put the landlord in a difficult position. The landlord may have no choice but to evict the tenant for nonpayment. At worst, the eviction could follow the renter for the rest of their lives, keeping them from renting again or ruining their credit report score. At worst, the tenant might become unhoused.

And remember, rent is just one expense for renters. Ensuring that the renter can pay each month will also go a long way in assuring the tenant can afford their utilities, groceries and other expenses as well. A renter who can't pay their heat and electricity bills affects everyone.

How much income is required to rent an apartment?

There is a long-held unwritten rule that says you should be paying around 30 percent of your income towards housing, whether that be rent or mortgage payments. This has been the rule of thumb for a long time as a guide when perusing listings and deciding what is affordable.

The Three Times Rent Rule

But as income verification becomes more common, many landlords have turned to this figure as well. Often, the income requirement is simply proof that a renter's gross income is high enough that 30 percent of it would cover the monthly lease price. This is called the Three Times Monthly Rent rule. Total gross income should be about three times the rent.

Although the 30 percent and Three-Times-Rent rules are popular, they have inherent issues. One of the primary ones is that it does not account well for debt or expenses. Debts, student loans, child support, back taxes and paying for elder care are large expenses that aren't taken into account with just income. Paying 30 percent of your income is great, but if you're also paying just as much for student loans or a mortgage on a business, suddenly 30 percent seems low.

Beyond the 30 percent rule

More recently, the 43 Percent Rule has become more popular. The figure takes the Three-Times-Rent ratio multiplier (33 percent in other words) and adds 10 percent. The new 43 percent figure accounts for more variables than the old system. It is also the rule financial institutions use to calculate mortgage payment requirements.

Of course, individual landlords and property managers can set income requirements at whatever level they wish (depending on local regulations). It is not unusual to see income requirements upwards of 50 percent. This can be attributed to factors like high demand, low inventory, inflated lease prices and "consumer culture." This is particularly true in major cities, especially during and post-pandemic.

Sometimes, the income requirements are noted on a brochure or a website, but you won't find out until you are meeting with the landlord for the first time.

Roommates and combined monthly income

The good news is that the minimum income requirement is a per-unit measurement, not per person. If you're married, cohabitating or moving in with a roommate, the minimum income is culled from the combination of both (or more) occupants.

With a second person, each tenant's income level need only be half of the requirement. If the property requires income based on the 43% rule, each occupant only needs to exceed the 21.5% threshold. Having a roommate or partner reduces risk by half. However, if your roommate is not on the lease, it is possible that only the income of the primary leaseholder will count towards the cap. This is a property-by-property decision.

What documents are used by landlords to verify income?

So you have a good job and you know you can afford to spend a third or more of your income on rent. But your landlord doesn't know that, yet. So how do you prove your income to your landlord? What sort of documentation do landlords require as verification?

These are some of the most common ways landlords verify income. They may ask for one of these, several of these, or even all.

• Your pay stubs: The most obvious and common verification document is your pay stub. From this, the landlord can see where you work (and how stable the job may be), your rate or salary, hours worked and other telling details about your financial stability.
• Proof of income letter: More personalized and more private than your pay stub, a proof of income letter is a communication directly from your employer to your potential landlord. Where your pay stubs contain a lot of private information, the letter simply states that you are employed and how much you earn. This should be enough proof for most leases.
• IRS Tax Form 1040: More robust than a pay stub, your Form 1040 from the IRS gives the property manager a better overall snapshot of your earnings. The form will contain all forms of income, not just from a primary employer. However, the form only covers the prior year. If you're applying for an apartment in December, the information on your tax returns will be nearly a year out of date.
• IRS Tax Form W-2: A W-2, or your Wage and Tax Statement, shows all of your individual earnings and tax liabilities from an individual job. You would be required to provide a W-2 from your tax returns for each job you may have. But again, this information can be dated depending on the time of year.
• Bank statements: Some landlords will also ask for your most recent bank statements. These show all of your transactions, both deposit and deduction. It's a comprehensive account of your financial situation. However, many renters can find providing this to be past the bounds of privacy, and it technically does not verify your employment.

Renting an apartment without proof of income requirements

While it all seems so simple, it isn't for everyone. Just showing a paycheck from a 40- hour-a-week job isn't feasible for everyone. Gig workers, digital nomads and freelance creatives are among millions with regular income from irregular jobs.

Plus, there are scores of people who are not currently employed or are underemployed but have plenty of income to cover monthly rent. What is the solution for potential renters like these? How to prove a positive rent-to-income ratio when you don't have traditional income?

• Show items besides pay stubs: Among the proofs of income listed above, several like your bank statements and Form 1040 do show both your ability to pay without proving income and a pattern of income positivity. This will also help show any non-primary job income.
• Have a good credit score: It's also advisable to do everything you can to maintain a good credit score or increase it. Get a credit card, keep your balances low and pay them off on time. Don't close out old credit cards. These will increase your line of credit and help your score.
• Consider a co-signer or guarantor: Like any other kind of loan or contract, your position can be bolstered by having someone – in writing – confirm that you are good for your word. But of course, if you default, if you can't pay rent on time, the co-signer will be on the line to take up the financial slack.
• Look for a rental by owner: Try finding a rental offered directly by a single-property owner, someone who is just renting out their house or a building they own. When you don't rent through some rental property megacompany, you are more likely to have more slack and more ability to improvise verification with that personal one-on-one relationship. If potential mom-and-pop landlords get to know you and like you, that can go a long way.

What happens if my income changes?

Of course, income can change over time. Usually for the good, but most often when a job loss occurs. But that's not what income requirements are about. It is a snapshot of your ability to pay at the time of lease application. Any changes would be addressed in your lease, depending on state laws.

To learn more common renter terms, visit our Renter Dictionary.

The information contained in this article is for educational purposes only and does not, and is not intended to, constitute legal or financial advice. Readers are encouraged to seek professional legal or financial advice as they may deem it necessary.

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