Commission Income Mortgage Guidelines Versus Salary Income

This article covers Commission Income Mortgage Guidelines Versus Salary Income 
Commission Income Mortgage Guidelines require a two-year work history plus two years of income tax returns to qualify for a home mortgage.
  • Lenders often look at the borrower’s credit history when assessing risk and their payment habits
  • This is why lenders will require timely payments in the past 12 months to approve borrowers
  • It is next to impossible to get an approve/eligible per automated underwriting system (AUS) if you have any late payments in the past 12 months
  • Borrowers can have prior bad credit
  • Borrowers can have prior outstanding collections and charged-off accounts
  • You do not have to pay outstanding collections and/or charged-off accounts to qualify for a home mortgage
  • You can have a prior bankruptcy and foreclosure and qualify for a mortgage
  • However, you need timely payments in the past 12 months and reestablished credit to get an approved/eligible per AUS
  • There is a mandatory waiting period after bankruptcy and foreclosure

Lenders frown on late payments after bankruptcy, foreclosure, deed in lieu of foreclosure, short sale.

Late Payments After Bankruptcy And Foreclosure

Lenders refer to borrowers with late payments after bankruptcy and/or a housing event as second offenders:

  • Most lenders will have lender overlays on those with late payments after bankruptcy and/or foreclosure
  • Most lenders will not qualify and approve any borrowers with late payments after bankruptcy and foreclosure
  • However, Gustan Cho Associates will approve borrowers with late payments after bankruptcy and foreclosure if they get an approve/eligible per automated underwriting system
  • Commission income wage earners are considered riskier borrowers versus salaried wage earners
  • Commission income can vary and fluctuate
  • This is why lenders require a solid two years seasoning at the same job and two years of income tax returns for commission income wage earners
  • Another key factor is lenders want to know the adjusted gross income on commission income wage earners
  • Commission income wage earners often take many write off which affect the adjusted gross income

Commission Income Mortgage Guidelines On Qualified Income

Only qualified documented income can be used when qualifying for a home mortgage. Cash income does not count and cannot be used. Commission wage earners can qualify for a home mortgage as long as they can provide proper documentation. All information provided to the mortgage underwriter is verified.

Here is the documentation required to process and qualify mortgage borrowers:

  • Two-years of income tax returns
  • 30 days of commission paychecks from the employer
  • Most recent paycheck stub

Past income earnings history is a good indication of the borrower’s future earnings. This is why two years of income tax returns are required on commission income wage earners. Commissions can vary from month to month. This is why mortgage underwriters will take the average monthly income over the past 24 months.

Are Commission Income Mortgage Guidelines Different Depending On The Mortgage Program?

Are Commission Income Mortgage Guidelines Different Depending On The Mortgage Program?

Commission Mortgage Guidelines are the same across the board on all home mortgage programs. Whether it is FHA, VA, USDA, Conventional loans, the Commission Mortgage Guidelines are the same.

Here are the general Commission Income Guidelines on home mortgages:

  • Two-years income tax returns are required
  • Mortgage underwriters will average the past two years of the borrower’s adjusted gross income and use that figure as the monthly qualified income
  • The income cannot be declining from one year to the next year without a good explanation
  • If the income is substantially declining, additional years of income tax returns will be required
  • Mortgage underwriters want to see if the borrower will have the same type of income for the next three years

Declining income may automatically disqualify borrowers unless there is a good excuse for the reason.

How Mortgage Underwriters Process Commission-Income Borrowers

Here are other bullet points when it comes to commission income borrowers:

  • Only adjusted gross income is used after unreimbursed business expenses has been deducted
  • Commission income borrowers are defined as a borrower who receives mortgage than 25% of their annual income from commission wages
  • A completed Request for Verification of Employment (Form 1005 or Form 1005(S)), or the borrower’s recent paystub and IRS W-2 forms covering the most recent two-year period is required for VOE
  • Verbal verification of employment is done prior to the issuance of a clear to close:

See The Following Resource Links:

Gustan Cho Associates are experts in helping commission income homebuyers qualify for a mortgage. If you are looking for a five-star lender licensed in multiple states with no lender overlays, please contact us at GCA Mortgage Group at 262-716-8151 or text us for a faster response. Or email us at [email protected] The team at Gustan Cho Associates is available 7 days a week, evenings, weekends, and holidays.

Leave a comment