Can my bonus income count toward mortgage qualification?

Shorter Answer:

Yes, bonus income can count towards mortgage qualification if it's consistent over two years, documented on paystubs and W2s, and verified by your employer. Typically, lenders may average the income over 24 months and require assurance of its continuation.

Longer Answer:

When qualifying for a mortgage, lenders typically look at your income to determine your ability to repay the loan. While your regular salary is the primary focus, many borrowers wonder if their bonus income can also be considered. The answer is yes, but specific conditions and guidelines must be met.

1. Consistency is Key: Lenders want to see a stable and consistent history of bonus income. Typically, they will require at least a two-year history of receiving bonuses. This demonstrates that the bonus is a regular part of your compensation and not a one-time occurrence. In rare instances, lenders might be able to use a one-year history of receiving bonus income. An example of this could be that your employment agreement indicates a guaranteed minimum bonus every year.

2. Documentation: To include your bonus income in your mortgage application, you'll need to provide documentation. This usually consists of W-2 forms, pay stubs, and possibly a letter from your employer confirming the nature and consistency of the bonus payments.

3. Averaging the Income: Lenders often average your gross bonus income over the past two years to determine an amount they can count towards your mortgage qualification. If your bonus income has decreased from one year to the next, the lender might use the lower of the two years.

4. Employer Verification of Continuation: Some lenders may require verification from your employer that the bonus income is likely to continue. This adds an extra assurance that the income is stable and reliable.

5. Income Limits: Including your bonus income could disqualify you from some homebuying and down payment assistance programs. Speak with your lender about this.

6. Different Lender Policies: Different lenders may have varying policies regarding bonus income. Some may be more flexible, while others may have stricter requirements. It's always a good idea to shop around and discuss your situation with multiple lenders.

Conclusion

Yes, your bonus income can count towards your mortgage qualification, but it requires a consistent history, proper documentation, and sometimes employer verification.

If you have other mortgage underwriting questions, please reach out at teamjd@mainstreethl.com

These blogs are for informational purposes only. Make sure you understand the features associated with the loan program you choose, and that it meets your unique financial needs. Subject to Debt-to-Income and Underwriting requirements. This is not a credit decision or a commitment to lend. Eligibility is subject to completion of an application and verification of home ownership, occupancy, title, income, employment, credit, home value, collateral, and underwriting requirements. Not all programs are available in all areas. Offers may vary and are subject to change at any time without notice. Should you have any questions about the information provided, please contact me.

Find more answers to mortgage & real estate questions at www.jdanswersquestions.com