How to verify an applicant's proof of income, from home!

How to verify an applicant's proof of income, from home (or anywhere else)!

For any lender or property manager, verifying the income of your applicants requires substantial due diligence..

In the environment of a global pandemic, especially, independently verifying income will not only increase decision-making confidence, it will save a ton of time. Anyone looking to buy a vehicle or rent a place to live will undergo some scrutiny regarding capacity to meet future financial obligations and so, those who receive applications will spend time considering whether and how you can make ends meet. Failure to verify income in advance can lead to expensive consequences for all parties, not to mention a series of awkward and uncomfortable conversations.

Calculating borrower or tenancy risk calls for detailed screening. Traditionally, the process is laden with multiple steps, for both the decision maker and the applicant. Each step along the way introduces opportunities for fraud, manual data entry breakdowns, and lost time, resulting in lost deals or lost apartments. These several steps may involve in-person interactions which should be avoided if at all possible these days. So, where to turn for instant, non-touch access to accurate info supporting decisions around lending and leasing? Like many industries today, the digitization of otherwise mundane and unpredictable workflows can bring significant advantages to both sides of the buying relationship, and companies like The Closing Docs are empowering lenders and property managers with at-home-ready tools for safely validating the income of every applicant.

How is applicant income verified?

At a fundamental level, income is verified by looking at the consistent trends of monetary flow in someone's bank accounts. If you’ve ever applied for a car loan, or the lease on an apartment or home, you will recall having to share screenshots of pay stubs and bank statements, or sharing certain permissions to allow the review of your financial information. Lenders and property managers typically look to see if there is a consistent deposit stream into your accounts. Specifically:

  • What is the source of the income (who does the applicant work for)?
  • How stable is the income stream (how consistently and over what period have the deposits occurred)?
  • Are there inconsistencies in the data shared by the applicant (fake pay stubs, discrepancies between reported and actual income)?

It’s important to remember that application reviewers are not looking to take advantage of an applicant's situation, but rather seek to validate the applicant is in a financial position to take on a new financial obligation, whether a loan or rent. Failure to receive payments from approved applicants in future will result in costs to recover, and not just for the lender or property manager. Repossessions and evictions produce long-term and significant impacts on anybody’s ability to obtain credit in the future, or to rent a new place. It’s a delicate relationship, which is why The Closing Docs has made their online income verification tools friendly to both parties, offering complete transparency, ease of use, along with a variety of integration options for the users reviewing applications.

Note: reviewers have varying criteria for what qualifies an applicant (most lenders consider income to debt ratios, while property managers commonly consider income to rent ratios), so it’s advised that the reviewer and applicant communicate upfront to avoid any misunderstanding.

Verifying applicants’ income at scale

As any operation increases in scale, offering more loans or more apartments for lease, for instance, the ability to validate applicant income needs to keep up with the number of applications they receive. Leaving it to multiple points of potential failure will only exacerbate poor outcomes as volume increases. So, it’s critical to expedite and streamline the review and approval processes as much as possible. The faster loans close, the earlier the reward of interest payments accrues. Similarly, a rapid tenant approval means units are vacant for fewer days, which yields additional rental income.

With tools like The Closing Docs, lenders, property managers and their applicants collaborate on verifying income right then and there. In fact, one of their use cases speaks directly to instantly verifying income at the point of sale when purchasing a vehicle. Check out this use case here.

For reviewers, there’s great value in having an integrated income validation process. It saves a ton of time, eliminates fraud, and increases confidence in decision making. I distinctly remember applying for my first apartment many years ago. I was required to take screenshots of my bank statements and email them to the property manager, who then had to run them through their reviewers and, by the time I heard back from them, ended up requesting another round of screenshots because it had been two weeks since the first set of screenshots! If I faced that runaround today, I might very well consider looking elsewhere for an apartment.

The Closing Docs offers an integrated option to combat this, where decision makers can embed an automated income verification module into their website, or within an application workflow. Incorporating automated income verifications directly into the reviewer workflow saves massive amounts of time and eliminates process breakdown opportunities. More info about the integration options available from Closing Docs can be found here.

Costs of screening applicants

A real concern for those considering whether to approve applicants, is the cost of screening. Some will rely on third party agencies to verify income, and suffer hefty fees, either one time or on a retainer basis. With The Closing Docs, all verifications fall to the reviewer. And because their reports are so easy and consistent to read, it ends up saving users so much time, they can reallocate effort to higher value activities (like winning new customers) than reviewing pay stubs or bank statements. Users enjoy transparency and timeliness, and each report costs only $10 USD per screening. While it’s up to the originator of the request, in some cases, applicants pay the report fee and in other cases, the originator pays the report fee. In either case, everyone spends far less time in the process and leaves knowing the most accurate information was shared instantly.

The Closing Docs does also have enterprise level options, for when lenders or property managers are scaling up and need more specific solutions. Other features of enterprise level support from The Closing Docs includes customized workflow (manual form modification), embedded widgets on websites, third party software integrations, plus everything that’s included with the per-screening fee. You can check out their pricing page and features here.

Timeliness and transparency are vital to establishing a good relationship between applicants and reviewers. The Closing Docs automatically verifies income in an easy to manage (and affordable) way, empowering applicants to deliver proof-of-income statements quickly and intuitively. Check it out today!

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Tagged in : MoneyTools

Millennial Moderator Author

Aleksey Weyman

Aleksey Weyman is a web designer, music artist and creator of Millennial Moderator.