Why Do Apartment Need Bank Statements?

Landlords ask for bank statements to verify whether the tenant can cover the rent. You may have to provide this along with your rental application as proof of income.

No law prevents them from asking for this information. But that doesn’t mean landlords have free rein over your bank account or financial information.

Find out what they look for in your bank statements, and what documentation you can show instead. They cannot force you if you are uncomfortable revealing your financial information.

The good news is that you can show other paperwork proving you have an income besides bank statements. 

What do Apartment Landlords Look for In Bank Statements?

It is normal to be suspicious if anyone besides lending institutions asks for your bank statements. But this is a standard practice that most landlords follow when choosing tenants. 

Here are some of the main reasons why they do ask for bank statements:

To Determine Monthly Income 

The main thing they need to see is your average monthly income across several years. It helps them understand whether you can make rent each month.

They can also ask you for an income breakdown besides the statement, and clarification on where you are earning it. 

So if you are self-employed, you need to give them a breakdown of your income post taxes.

To Determine Total Funds

The statement will also show the landlord the total funds you have in your account. It helps them determine whether you are a viable candidate for the apartment.

Chances are that more people have their eyes on your apartment. Most landlords decide after evaluating each potential tenant’s bank statement. 

They may also ask other questions about your income if they need help deciding. Tenants with the highest total funds and monthly income are chosen. 

To Determine Financial Responsibility 

Landlords may also determine how financially responsible you are before renting out an apartment. So, for example, say you earn $2,000 per month but spend more than half of it on designer clothes. 

That doesn’t set you up as a prime candidate who can make rent successfully every month. In this case, the landlord will tell you that you must fulfill their requirements. 

So if you want to ensure you get the apartment you need, manage your finances strategically before applying for the rental agreement. 

Here is a simple plan you can follow:

  • Use 50% of your monthly income towards basic needs such as utility bill payments, rent, insurance, etc.
  • Use 30% of your monthly income towards things you want, such as clothes, vacations, games, cosmetics, etc.
  • Save 20% of your income or use it to pay debts.

You can use several online calculators to make the process simple and quick. 

To Determine Unusual Activity 

Fraudulent bank statements have duped many landlords. To prevent this, they may peruse your statement for unusual financial activity. 

This includes large withdrawals or deposits, which may need explaining. If they think these are suspicious, your application may be rejected. 

Why do Landlords Ask for Bank Statements?

The bottom line is that landlords will always go for financially viable tenants, which is understandable. 

Apartments are expensive to maintain. Besides maintenance, many landlords use rent as a source of income or pension rather than stocks and shares. 

Naturally, this makes them keen to ensure they retain tenants who can afford rent and care for their investments. 

Experienced landlords would prefer that their apartments remain vacant rather than take on risky or irresponsible tenants. 

This is why most reference agencies ask for bank statements as proof of income before recommending apartments. 

But they also know that bank statements, pay slips, and other paperwork about income sources can be fraudulent. Anyone with a PC can make these. 

Both landlords and reference companies have experience dealing with dishonest tenants. So it is understandable why they won’t take the risk. 

What You Can Show In Place Of Bank Statements

You can safely give them your bank statements without worry. 

Besides evaluating your transactions, your account number is the only thing landlords will get from your bank statement. They can get this from your checks, which is nothing new for them.

However, if you are uncomfortable showing them these statements, you can still show them you are financially stable enough to pay rent. 

Some of the items you can show in place of a bank statement include the following:

A W-2 Form 

Your employer fills this out. Among other data, it details your wages, tips, and other compensation that can prove you have a stable income.

1099-MISC Form 

This is a tax form that details income payments and royalties. It will come in handy if you are self-employed with a variable source of income. 

Pay Stubs 

You can use these to prove your income without providing a bank statement. However, most landlords are reluctant to accept these.

These don’t paint a complete picture for those who are paid hourly or have inconsistent schedules. But you can increase your chances of acceptance by providing recent paystubs. 

This way, you can confirm you have a job and monthly earnings. Provide multiple pay stubs to cover an entire month (two at least that cover all four weeks).

Unfortunately, it will be challenging to get an apartment if you don’t have savings while you are in between jobs or don’t have a steady source of income. 

Each pay stub looks different. But all of them have this critical information:

  • Gross income for the pay period.
  • Your name and address.
  • Your pay schedule.
  • Your employer’s name and address.

Landlords check this information against the information you provide verbally. They can also use it to contact your employer to ensure you are employed. 

Tax Returns 

Tax returns can show landlords your income history as well as unearned income. In other words, they can show that you can earn to support yourself. 

But a tax return will only provide info on the last calendar year rather than your income. Some landlords may not accept it.

Landlords usually ask for tax returns covering two years to verify income. Get a copy of the return from the IRS or download it online. 

The information they look at on your tax return includes:

  • Your gross income.
  • Your name and address.
  • Date of the tax return.
  • Adjusted gross income. 
Also read: How to Check Your Apartment Rental History

Employer Letter 

You can ask your employer to draft a letter verifying your income and employment duration. This includes a copy of your offer letter that shows your position and salary.

The letters can serve as a reference for your financial viability. Mention your employer’s contact details so the landlord can check and show you have nothing to hide. 

The information landlords look for in employment letters includes:

  • Your name.
  • The date of the letter.
  • The date on which you started to work for your employer.
  • Your position at the company.
  • Your gross yearly salary.
  • Your employer’s name, address, contact information, and signature. 

Unemployment Documents 

If you don’t have a job but are on unemployment benefits, show those documents to the landlord. These should show how much money you are getting from the government.

It will show the landlord that you can pay rent on a schedule, provided the amount is sufficient to cover it.

Disability Insurance 

If you are currently on workers’ compensation, get an award letter from the insurance company or your employer. 

This will act as proof of income and will also have an end date listed. Ask for more documents verifying your income source after it ends. 

Pension Statements 

If you are retired and are on a pension, provide proof of pension payments, such as your pension statement. This is also known as the 1099-R form, which you can find on your tax return. 

Court-Ordered Payments

If you are paying child or spousal support, provide proof with documents such as a court award letter. This can serve as your proof of income. 

What You Can Do If Landlords Only Accept Bank Statements 

Landlords don’t have the authority that banks do. But if you refuse to provide bank statements, they may think you are hiding something. 

If you want to protect your privacy and are set on getting an apartment, you can take a permanent marker and black out all information except your income and rent payment info.

Your landlord will be able to make a decision based on that information.

Wrapping Up 

Coming back to the initial query, apartment landlords ask for bank statements to protect themselves. Tenants who don’t have sufficient income to cover rent can become costly liabilities.

A stable financial record and proof of income can get you an apartment. But if you cannot provide a bank statement, you can still prove your income with other paperwork. 

Contact your bank immediately if you cannot provide a statement because your bank account has been compromised. Your account will be locked.

Inform the landlord and provide employment proof to increase your chances of getting an apartment. 

Apartment rental applications that ask for bank statements can be tricky. But once you understand what is expected of you and have the information required, you can get an apartment quickly. 

Other articles you may also like: