Commission Income and Mortgages

How does a commission-based income affect a mortgage? It’s more common than ever to have employees who do not fit the standard mortgage qualifying box.  Employees are working remotely or spending half time in the office and half time working from home or working on strict commission.  If you are good at your job, employers who do not have traditional 9-5 hours, don’t much care how you get your work done, just so long as it gets done.

If you are ambitious, oftentimes your income potential can be much higher working a commission only job than a salaried job.  Good for your wallet and savings account, but not so great when you are considering applying for a mortgage.

Typically when you start the home search, your real estate agent will want you to get pre-qualified for a loan.
To be pre-qualified for a standard loan, you need documentable income, a decent credit score, and you must meet specific debt to income ratios. But, what do you do if you don’t fit the “norm?”

Employees who work on salary are much easier to work with because it’s easier to verify income, but when your work is 100% commission things start to get a little tricky.  Underwriting requires answers on the majority of your financial stream, wanting verification on where, when and how your finances come into play.

It’s by no means impossible to get approved for a loan, even a Fannie Mae, Freddie Mac or FHA loan.  Just plan to submit more documentation than the average “Joe.”

Most mortgage programs require a standard requirement of a two-year history of your commissions.  Be prepared for your lender to ask for verification with your employer along with recent pay stubs and signed tax returns.  Your lender and underwriter (when you get to that point) are looking for consistency in your income and more importantly that the income will continue so you will be able to afford your monthly mortgage payments.

Suggested Reading: Home Plus Program

But, what if you don’t have 2 years of history? While you can consider the two-year “rule” standard, there are some lending institutions, like an FHA loan or a conventional loan that will potentially allow a borrower’s income to be verified for a minimum of 12 months.

Although FHA generally wants two years proof of income there are other factors that can ease the lenders’ concerns.  Perhaps you have the financial ability to make a large down payment, that’s not a guarantee of approval, but it can help prove your financial strength and better your chances of approval.

It may be easier to get approved for a home mortgage loan while working a salaried position, it’s good to know that there are options for different types of income jobs.

Since your loan might not be as cut and dry as some others, we suggest obtaining help from the experts.  Call us today to discuss the range of loans we offer and how we can help.


The Certo Team
55 N. Arizona Place Suite #103
Chandler, AZ 85225

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