Can I Qualify for a mortgage with bonus 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. Bonus income generally isn't guaranteed, 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 a conventional loan, we can add bonus income to your qualifying income if you've received it for the past two years and your employer indicates bonus income is likely to continue. The regularity of receipt is more important than the consistency of the amount. The bonus amount may fluctuate, but you must receive it on a periodic basis for us to include it. If the bonus amount fluctuates, we average the amount over the past two years.
Note that we only can use income you've received. Projected bonus income is not acceptable.
The government loan programs, FHA, VA, and USDA, each provide an exception for using bonus income if you haven't received it for two years, but it is an exception to the loan guidelines. Granting it is at the discretion of the lender, and you'll have to provide a strong case for it.
FHA and USDA loan guidelines indicate the lender may consider bonus income as qualifying income if you've received it consistently for at least one year and your employer indicates it's likely to continue. If you bonus income fluctuates, and this year's amount is at least 20% less than last year's amount, we have to use this year's amount, not the average.
VA will not allow us to include bonus income unless you've received it for at least two years. However, if you've received it for at least one year, we may be able to use it to omit debts that you will pay off within the next two years from our total debt calculation. If you have short term debts, this could give your ability to qualify a big boost.