Do Commissions Count When Qualifying For A Loan?

One of the most common questions I hear from prospective home buyers goes something like this: “I made $40,000 last year and $20,000 of that was commission/bonus income. Can I use that the commission income to qualify for a home loan?”

For many people who work in sales positions, commission-based income is a fact of life. If you’re successful at your job, you can make a good living from commissions, but lending rules sometimes make this income difficult to use in the event that you want to qualify for a mortgage.

People who do not receive commission but do receive regular bonuses fall into the same category. Regular bonuses are treated the same way as commission for income verification purposes.

So, the question is, “Can I use my commission income to qualify for a home loan?”

Answer: It depends on the loan program. 

Let’s take a look at a couple of the most common types of loan programs and their requirements.

FHA Loans requirements to use Commission Income

  • Borrower must have received at least one commission check from their current employer
  • Borrower must have at least 12 months of consistent commission income, that means no job gaps greater than 30 days. If the borrower changed jobs within the last 12 months, the new job must be in a similar line of work as the borrower’s past employment.
  • Copies of tax returns for the previous two years
  • A copy of borrower’s most recent pay stub

VA Loan requirements to use Commission Income

  • Borrower must have received at least one commission check from their current employer
  • Borrower must have at least 2 years of consistent commission income, that means no job gaps greater than 30 days. If the borrower changed jobs within the last 24 months, the new job must be in a similar line of work as the borrower currently is in.
  • Copies of tax returns for the previous two years
  • A copy of borrower’s most recent pay stub

Conventional Loan requirements to use Commission Income

  • Borrower must have received at least one commission check from their current employer
  • Borrower must have at least 12 months of consistent commission income, that means no job gaps greater than 30 days. If the borrower changed jobs within the last 12 months, the new job must be in a similar line of work as the borrower’s past employment.
  • Copies of tax returns for the previous two years if your commission income represents 25% or more of your total income
  • A copy of borrower’s most recent pay stub

Keep in Mind:

  • Any documented decrease in commission income from one year to the next would require a good explanation letter from an employer explaining the temporary nature of the changes impacting income.
  • Unreimbursed business expenses must be subtracted from gross income

In Conclusion, the Good News is  ‘YES’, you can use commission income to qualify for a home loan.

The requirements are somewhat more stringent than they would be for non-commission income, but these are in everyone’s interest. They establish the consistency of income and ensure that there’s enough coming in on a regular basis to pay the bills and keep the lights on.

Talk to your lender if you’d like to see if you can use your commission income to get a home mortgage. If you don’t have a lender yet, contact us today, and we’ll walk you through it. You may just qualify for more than you think.

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