Can I Qualify with commission income?
In order to qualify you for a mortgage, a lender must be able to verify your employment income is stable and reasonably likely to continue. Commission income by its nature is variable, so it has to satisfy some special conditions before the lender can include it in your qualifying income, and those conditions depend on the loan program you're using.
For all programs, if your commission income is 25% or more of your total employment income, you must provide copies of your tax returns for the last two years to document your income and any unreimbursed employment expenses. We will subtract the expenses from your total income before calculating your qualifying income. In addition, we may ask your employer to provide your year-to-date commission income.
For a conventional loan, we would prefer to see a two-year history of receiving commission income. The history may span different employers as long as they're in the same line of work. We may be able to use a less than two-year history as long as your most recent tax return covers a 12-month period of receiving commission income, your financial situation demonstrates positive factors, such as an excellent credit profile or more assets than you need for closing, and the commission income is likely to continue.
We generally average commission income for the past two years to determine your qualifying income. If your income declined from one year to the next, we generally use the lesser amount. Likewise, if your year-to-date commission income is not consistent with the previous year's monthly average, we generally will use the year-to-date income to determine your qualifying income. If the decline is severe, we may not be able to use your commission income at all as qualifying income.
FHA only requires a one-year history of receiving commission income. We calculate your qualifying income based on your average commission income over the past two years (or the time you've earned commission income). If your income declined from one year to the next, we will use the lesser amount.
VA and USDA generally require a two-history of receiving commission income. We follow the guidelines for conventional loans to calculate your qualifying income.