Your salary isn’t always the whole story when qualifying for a mortgage.

Many Michigan homebuyers earn a significant portion of their income through overtime, bonuses, commissions, or a combination of all three. That extra income might make a big difference in what you can qualify for—but lenders can’t necessarily use every dollar simply because it appears on your paycheck.

This can create confusion during the mortgage pre-approval process.

Maybe you earn $65,000 in base salary but regularly make another $15,000 to $20,000 in overtime each year.

Maybe your employer pays a large annual bonus.

Or perhaps you’re in sales and your commission income changes significantly from month to month.

In situations like these, the question isn’t simply:

“How much money do you make?”

The better question is:

“How much of your income can actually be used to qualify for the mortgage?”

Understanding that difference before you start shopping for a home can prevent some unpleasant surprises later.

Can Overtime, Bonus, and Commission Income Be Used for a Mortgage?

Yes.

Overtime, bonus, and commission income can potentially be used as qualifying income for a mortgage.

However, lenders generally need to establish that the income has an acceptable history and can reasonably be considered stable.

That makes these income sources different from a straightforward fixed salary.

If you earn a salary of $75,000 per year, determining your base monthly income may be relatively simple.

But suppose your compensation looks like this:

Base salary: $60,000
Overtime: $12,000
Annual bonus: $8,000

Your actual gross earnings could be $80,000.

Whether the lender can qualify you using the entire $80,000 depends on the history and documentation of the additional income.

That’s why someone looking only at their most recent paycheck can sometimes overestimate—or even underestimate—the income that will ultimately be used during mortgage underwriting.

Do You Need Two Years of Overtime or Bonus Income?

This is where mortgage rules are often oversimplified.

You’ve probably heard that you need two full years of overtime, bonus, or commission income before a lender can use it.

That’s not always the case.

For example, current Fannie Mae guidelines recommend a two-year history of bonus, commission, overtime, and tip income. However, income received for a shorter period may potentially be considered when there is at least a 12-month history and positive factors support using the shorter history.

That distinction can be important.

Someone who has received overtime for 18 months shouldn’t automatically assume the income can’t be used simply because they haven’t reached the two-year mark.

The complete employment and income history needs to be evaluated.

The requirements can also vary based on the loan program, underwriting findings, and the borrower’s individual circumstances.

That’s one reason it’s helpful to have variable income reviewed during mortgage pre-approval, rather than waiting until you’ve already found a home.

How Is Overtime Income Calculated for a Mortgage?

One of the biggest misconceptions is that lenders simply take your current overtime earnings and multiply them by 12.

Variable income generally requires more analysis than that.

The lender may look at:

• Current year-to-date overtime
• Previous year’s overtime
• Earlier income history when applicable
• How frequently overtime is received
• Whether the amount is stable, increasing, or decreasing
• Whether there are reasons to believe the income may not continue

The trend can be especially important.

Imagine these two borrowers:

Borrower A

2024 overtime: $8,000
2025 overtime: $11,000
2026 year-to-date earnings indicate a similar or higher pace.

That pattern may support the argument that overtime has been stable or increasing.

Borrower B

2024 overtime: $18,000
2025 overtime: $11,000
2026 year-to-date overtime has fallen substantially again.

Borrower B may have a very different qualifying-income calculation even though both borrowers currently receive overtime.

When income is declining, the lender may need to determine whether it has stabilized before relying on it for qualification.

This is why simply averaging two W-2s isn’t always the correct answer.

What If You Recently Started Working Overtime?

A shorter history doesn’t automatically mean the overtime is unusable.

But the details matter.

Suppose you’ve worked for the same employer for five years but only started receiving regular overtime 14 months ago.

That situation could be evaluated differently from someone who received their first overtime paycheck two months ago.

The lender may consider factors such as:

• How long you’ve received the overtime
• Your overall employment history
• Whether overtime is regularly available
• Your year-to-date earnings
• Previous earnings
• Whether the income appears stable
• The requirements of the specific mortgage program

The key takeaway is:

Don’t disqualify yourself based on a rule you heard somewhere about needing exactly two years.

Have the actual income reviewed.

How Is Bonus Income Treated?

Bonus income follows many of the same principles as overtime income, but the timing can make the calculation look unusual.

Some employees receive monthly or quarterly bonuses.

Others receive one large bonus each year.

Suppose your employer pays you a $12,000 bonus every March.

That doesn’t necessarily mean the lender considers you to have earned an extra $12,000 per month in March.

The bonus needs to be converted into an appropriate monthly qualifying amount and evaluated against your historical bonus earnings.

The lender may compare your current bonus with previous years to determine whether the income is stable, increasing, or declining.

This is another area where looking only at the most recent pay stub can give a misleading picture of your qualifying income.

Why Income Trends Matter So Much

Mortgage underwriting isn’t only concerned with what you earned in the past.

The lender is trying to determine what income can reasonably be relied upon when evaluating your ability to repay the mortgage.

That’s why stable and predictable income matters.

Increasing income is generally easier to understand.

Declining variable income deserves more attention.

If overtime, bonuses, or commissions have been dropping, the lender may need to understand why.

Maybe your employer reduced available overtime.

Maybe your territory changed.

Maybe an unusually strong prior year made your historical average look higher than what you’re currently earning.

Or perhaps there was a temporary event that explains the decline and your earnings have since returned to normal.

Those details can affect how much income is ultimately used to qualify.

And because qualifying income affects your debt-to-income ratio, even a relatively small change in the income calculation can sometimes make a meaningful difference in your mortgage approval.

Why You Should Have Variable Income Reviewed Before Shopping for a Home

If a meaningful portion of your earnings comes from overtime, bonuses, or commissions, don’t estimate your buying power based solely on your annual earnings.

Have the income calculated as part of a thorough mortgage pre-approval.

That allows potential issues to be identified before you’re emotionally invested in a particular house.

At BrightSide Lending, we can review the actual income history and documentation, evaluate the available mortgage options, and determine what income may be usable for qualification.

Sometimes the result is exactly what the borrower expected.

Sometimes it’s lower.

And occasionally, properly reviewing the income shows that a borrower can qualify using more income than they assumed.

Either way, it’s much better to know before you start making offers.

How Is Commission Income Calculated for a Mortgage?

Commission income can be one of the more complicated types of employment income to evaluate because earnings can fluctuate significantly throughout the year.

Some borrowers earn a base salary plus commission.

Others earn most—or nearly all—of their income through commissions.

For example, two salespeople might each say they earn approximately $100,000 per year, but their compensation could look very different.

Borrower A

Base salary: $70,000
Commission income: $30,000

Borrower B

Base salary: $25,000
Commission income: $75,000

Both may earn $100,000 in a good year, but Borrower B relies much more heavily on variable income.

That means understanding the history and trend of the commission income becomes especially important when determining how much income can be used for mortgage qualification.

Do You Need Two Years of Commission Income?

Just like overtime and bonus income, the often-repeated “two-year rule” isn’t quite as simple as it sounds.

For a Conventional loan following Fannie Mae guidelines, a two-year history of commission income is recommended, but a shorter history may potentially be acceptable when the borrower has received the income for at least 12 months and there are positive factors supporting its use.

That doesn’t mean every borrower with 12 months of commission income automatically qualifies using it.

It means the lender can evaluate the circumstances rather than automatically excluding the income solely because the borrower hasn’t received it for exactly two years.

The stability of the income, employment history, earnings trend and other factors can all matter.

If you recently moved from a salaried position into a commission-based role, for example, the lender may need to look more closely at the situation.

On the other hand, someone who has worked in the same industry for years and simply moved into a compensation structure that includes commissions may present a different overall picture.

This is another reason variable income should be evaluated individually rather than relying on a blanket rule.

What Documents Are Used to Verify Commission Income?

The documentation required can depend on the mortgage program and the circumstances of the borrower.

For conventional financing following Fannie Mae requirements, documentation may include a completed verification of employment or recent pay documentation along with W-2 history.

The lender will typically want enough information to establish both the amount of commission income being received and its historical pattern.

Depending on the situation, documentation could include:

• Recent pay stubs
• W-2 forms
• Verification of employment
• Year-to-date earnings
• Previous income history
• Additional documentation when needed to explain the income

The objective isn’t simply to prove that you’ve received a commission check.

The lender needs enough information to determine an appropriate amount of qualifying income.

What If Your Commission Income Is Increasing?

Increasing commission income can be a positive sign, but lenders still need to determine an appropriate amount to use.

Consider a borrower whose commission earnings look like this:

2024: $28,000
2025: $36,000
2026: Tracking toward approximately $42,000

The borrower might look at the current pace and assume the lender will qualify them using $42,000 of annual commission income.

That isn’t necessarily how the calculation will work.

The lender may need to evaluate the historical earnings and current year-to-date income rather than simply projecting the strongest year forward.

This is an important distinction between what you’re currently earning and what can be used to qualify for a mortgage.

A strong current year can certainly help establish the trend, but lenders generally aren’t trying to predict the most optimistic possible future income.

They’re trying to determine a reasonable, supportable amount.

What If Your Commission Income Is Declining?

Declining commission income deserves even more attention.

Suppose your earnings look like this:

2024: $55,000
2025: $45,000
2026: Currently tracking toward $35,000

Simply averaging the previous two years could produce an income figure that doesn’t accurately reflect what you’re earning today.

The lender may need to determine why the income is declining and whether it has stabilized.

There could be many explanations.

Maybe your employer changed the commission structure.

Maybe your sales territory became smaller.

Maybe you changed positions.

Maybe one unusually strong year made your historical income look higher than normal.

Or perhaps your industry experienced a temporary slowdown.

The reason matters because declining income can affect how much of that income is considered stable enough to use for mortgage qualification.

This is one reason an experienced mortgage professional shouldn’t simply plug numbers into a calculator and call it a pre-approval.

The trend behind the numbers matters.

Can You Qualify Using Base Salary but Not Commission?

Potentially, yes.

If you receive a combination of base salary and commission, the lender may be able to use your qualifying base income even if the commission portion can’t be used.

For example:

Base salary: $72,000
Commission: $20,000

If the $72,000 base salary meets the applicable requirements but the commission income doesn’t yet have sufficient acceptable history, the mortgage may still be evaluated using the base income alone.

That could reduce your maximum qualifying amount, but it doesn’t necessarily mean you can’t get approved.

This distinction is important because borrowers sometimes hear that their commission “can’t be used” and assume their entire income is being rejected.

That’s not necessarily what it means.

The lender may simply need to qualify the borrower using the portion of the income that meets the applicable guidelines.

Does Changing Jobs Affect Overtime, Bonus, or Commission Income?

A job change can affect the income analysis, but the answer depends heavily on what actually changed.

Moving from one employer to another isn’t automatically the same thing as starting an entirely new career.

For example, imagine someone who has worked in automotive sales for six years and moves from one dealership to another while continuing to earn a similar combination of salary and commission.

Compare that with someone who worked a fixed salary for six years and just switched into a primarily commission-based sales position.

Those aren’t necessarily the same underwriting scenario.

The lender may evaluate factors such as:

• Employment history
• Type of work
• Compensation structure
• Length of time receiving variable income
• Current earnings
• Previous earnings
• Whether the new income is reasonably consistent with the borrower’s history

If you’re considering changing jobs while preparing to buy a home, it’s a good idea to discuss the change before assuming it won’t affect your mortgage pre-approval.

Does FHA Treat Overtime and Bonus Income Differently?

Different mortgage programs can have different requirements, which is another reason the loan program matters when variable income is involved.

For FHA loans, overtime and bonus income may be considered effective income when the borrower has an acceptable history and the income is reasonably likely to continue.

FHA guidance generally looks for a two-year history, but income earned for less than two years may potentially be considered when it has been consistently earned for at least one year and is reasonably likely to continue.

So once again, “you need exactly two years” can be an oversimplification.

A borrower with 15 or 18 months of overtime shouldn’t automatically assume an FHA loan won’t allow that income.

The actual circumstances need to be reviewed.

Can Variable Income Change How Much House You Qualify For?

Absolutely.

The amount of qualifying income used by the lender directly affects your debt-to-income ratio, which can affect the mortgage amount you may qualify for.

Consider someone with:

Base income: $5,000 per month
Potential qualifying overtime: $1,000 per month

If the overtime can be used, the qualifying income could potentially be $6,000 per month instead of $5,000.

That’s a meaningful difference.

But the opposite can also happen.

A borrower may earn $100,000 annually when looking at their most recent earnings, but underwriting may determine that only $85,000 is appropriate to use for qualification because part of the variable income can’t be counted or must be calculated differently.

That’s why online estimates based solely on your gross annual earnings can sometimes give you the wrong impression about your actual buying power.

A mortgage calculator can be useful for estimating payments, but it doesn’t analyze whether your overtime, bonus, or commission income meets mortgage underwriting requirements.

That calculation needs to happen before determining what purchase price actually makes sense.

What Happens When Your Variable Income Is Lower This Year?

One of the most important things lenders look at with overtime, bonus, and commission income is the direction your income is moving.

A two-year average isn’t automatically the answer.

That’s especially important when your current earnings are lower than they were previously.

For example, suppose your overtime income looks like this:

2024: $16,000
2025: $18,000
2026: Currently tracking toward $10,000

A simple historical average could make your qualifying income appear stronger than your current earnings support.

The lender may need to determine whether the decline is temporary, whether the income has stabilized, and what amount can reasonably be used going forward.

For Conventional financing following current Fannie Mae guidelines, declining bonus, commission, overtime, or tip income generally must have stabilized after the decline before it can be considered for qualifying. If it hasn’t stabilized, the income may not be eligible to use.

That’s why variable-income calculations aren’t always as simple as adding two years together and dividing by 24.

What If One Year Was Unusually Low?

The opposite situation can happen too.

Maybe your income history looks like this:

2024: $15,000 overtime
2025: $7,000 overtime
2026: Back on pace for approximately $16,000

Why was 2025 lower?

Perhaps your employer temporarily reduced overtime.

Maybe you were out of work for a documented period.

Maybe your company had a temporary shutdown.

Or perhaps something else happened that isn’t representative of your normal earnings.

The explanation doesn’t automatically allow the lender to ignore the lower year. However, understanding what caused an unusual income period can be important when the lender evaluates the overall history.

Current Fannie Mae guidance even provides for certain documented, non-recurring events outside a borrower’s control to potentially be excluded from the income calculation when the event temporarily prevented the borrower from earning income.

This is another example of why looking at the complete financial picture matters.

What If You Received a Raise?

A raise to your regular base salary and an increase in variable earnings aren’t necessarily treated the same way.

Suppose you receive a promotion that increases your guaranteed salary from $60,000 to $70,000.

That new fixed base income may be relatively straightforward to document.

Now suppose your employer tells you that your new position should also provide substantially more commission opportunities.

The lender generally can’t simply assume you’ll earn the projected commission amount because your employer believes you probably will.

Variable income still needs to be evaluated based on the applicable history and documentation.

That distinction is important:

Guaranteed base income and projected variable income are not necessarily interchangeable for mortgage qualification.

Current Fannie Mae guidance separately categorizes fixed base income and variable sources such as bonus, commission and overtime income.

What If Your Overtime Is Guaranteed?

Borrowers sometimes say:

“My employer guarantees my overtime, so shouldn’t the lender just count all of it?”

Possibly, but don’t assume that the word “guaranteed” automatically eliminates the need to review the income.

The lender still needs to properly document and calculate the income according to the requirements of the mortgage program.

The same principle applies when an employer says bonuses are expected to continue or when a sales manager provides an estimate of future commissions.

Those facts can be relevant, but lenders still have to establish qualifying income using acceptable documentation and underwriting guidelines.

The safest approach is to have the actual compensation structure reviewed rather than trying to determine eligibility from one sentence in an employment agreement.

Can a New Bonus Be Used If You’ve Never Received One Before?

This can be more difficult.

Imagine you’ve worked for the same company for five years and just received a promotion.

Your new compensation package includes:

Salary: $80,000
Target annual bonus: $15,000

But you’ve never actually received the bonus before.

You shouldn’t automatically assume that your qualifying income is now $95,000.

For Fannie Mae’s bonus, commission, overtime and tip income category, the current guidance recommends a two-year history and permits consideration of a shorter history only when the borrower has received the income for at least 12 months and positive factors support using it.

That means a newly introduced potential bonus generally isn’t the same thing as an established history of actually receiving bonus income.

Your base salary may still be usable even if the new bonus isn’t.

Can You Use Overtime From a Second Job?

This is where terminology matters.

If you’re working additional hours for your primary employer, that may be overtime income.

If you’re earning money from an entirely separate employer, the income may instead need to be evaluated under the guidelines applicable to secondary employment.

Those aren’t necessarily the same thing.

For example:

You work 40 hours per week at your primary job and regularly work another 10 hours for that same employer at an overtime rate.

Compare that with:

You work 40 hours at your primary job and then work 15 hours each weekend for a completely different company.

Both situations produce additional income, but the lender may need to evaluate them differently.

This is another reason it’s important to accurately explain where your income comes from during mortgage pre-approval instead of simply providing your total annual earnings.

What About Seasonal Income?

Seasonal income is another category that can sometimes be confused with overtime.

A borrower might work substantial additional hours during certain parts of the year but have predictable periods when those earnings aren’t available.

Construction, landscaping, education, agriculture, tourism, and other industries can sometimes have seasonal income patterns.

For conventional financing, Fannie Mae has separate guidance specifically addressing seasonal income, distinct from its bonus, commission and overtime guidance.

That doesn’t mean seasonal income can’t be used.

It means the lender needs to correctly identify the type of income before determining how it should be documented and calculated.

What If Your Employer Can’t Verify That Overtime or Bonuses Will Continue?

This is another area where loan-program guidelines matter.

Under current Fannie Mae guidance, a lender isn’t automatically required to verify continuance of bonus, commission, overtime, or tip income unless there is reason to believe the income may not continue.

That is different from assuming every employer must promise that overtime will exist indefinitely.

Mortgage guidelines recognize that variable income is, by definition, variable.

What matters is whether the lender can establish an acceptable history and calculate qualifying income in accordance with the applicable requirements.

Other mortgage programs can apply their own standards. FHA, for example, evaluates whether qualifying overtime and bonus income is reasonably likely to continue. HUD’s guidance also permits periods shorter than two years in certain circumstances when the income has been consistently earned for at least one year and is reasonably likely to continue.

Why Your W-2 Doesn’t Tell the Entire Story

A W-2 is extremely useful, but the number in Box 1 doesn’t necessarily tell a lender everything needed to calculate your current qualifying income.

Your W-2 might combine:

• Base salary
• Regular hourly earnings
• Overtime
• Bonuses
• Commissions
• Other taxable compensation

If those different sources need to be evaluated differently, the lender may need additional documentation to separate them.

Your current pay stub can also provide important year-to-date information.

Current Fannie Mae guidance requires lenders to determine the frequency of bonus, commission, overtime and tip income and compare year-to-date earnings with previous years when determining qualifying income.

This is why a proper mortgage pre-approval for someone with variable income can require more work than simply looking at last year’s W-2.

What Should You Provide for a Variable-Income Pre-Approval?

If overtime, bonus, or commission income is necessary for you to qualify, providing good documentation upfront can make the process much easier.

Depending on your situation and loan program, your mortgage professional may want to review items such as:

• Recent pay stubs
• W-2s
• Current year-to-date earnings
• Employment history
• Details about your compensation structure
• Documentation explaining significant changes in income when necessary

For Fannie Mae loans, the current Selling Guide specifies a completed Verification of Employment or the most recent pay stub and two years of W-2s for bonus, commission, overtime and tip income, along with the applicable verbal employment verification.

Providing those documents early can help answer one of the most important questions before you start shopping:

What income can we actually use?

Don’t Assume Your Income Is Too Complicated to Qualify

Variable income is extremely common.

Salespeople earn commissions.

Manufacturing employees work overtime.

Managers receive performance bonuses.

Employees receive quarterly incentives.

People change employers while remaining in the same industry.

None of those things automatically prevents someone from getting a mortgage.

What changes is the amount of analysis required to determine the qualifying income.

And sometimes the difference between an accurate mortgage pre-approval and an unreliable one is whether someone actually takes the time to perform that analysis before issuing the letter.

If overtime, bonuses, or commissions represent a meaningful portion of your income, the goal shouldn’t be to find the lender willing to use the biggest number.

The goal should be to determine the correct qualifying income under the mortgage program you’re actually using.

That gives you a much better foundation for deciding how much to spend, making an offer, and ultimately getting through mortgage underwriting without discovering an income problem at the last minute.

Does the Loan Program Change How Variable Income Is Calculated?

Yes.

One of the reasons overtime, bonus, and commission income can be confusing is that there isn’t necessarily one calculation that applies to every mortgage.

A Conventional loan may have different requirements from an FHA loan, and other mortgage programs can have their own rules as well.

Even within conventional financing, the specific loan and underwriting findings can affect the documentation required.

That’s why asking:

“Can overtime be used for a mortgage?”

isn’t quite enough.

The better question is:

“Can my overtime be used with the mortgage program I’m applying for, and how much of it can be used?”

That distinction can affect your qualifying income, debt-to-income ratio, and ultimately how much home you may qualify to purchase.

Conventional Loans and Variable Income

For conventional mortgages following Fannie Mae guidelines, bonus, commission, overtime, and tip income are evaluated as variable income.

Current Fannie Mae guidance recommends a two-year history but permits consideration of a shorter history of at least 12 months when positive factors reasonably offset the shorter history.

The lender also needs to determine how frequently the income is received and compare current year-to-date earnings with previous earnings.

When the income is stable or increasing, an average using current year-to-date and previous earnings is generally calculated, with at least 12 months of income included.

When the income is declining, additional analysis is necessary because the lender must determine that the income has stabilized before it can be considered eligible qualifying income.

That means two borrowers who have earned the same total overtime over the previous two years could potentially end up with different qualifying-income calculations because their current trends are different.

FHA Loans and Variable Income

An FHA loan also allows qualifying borrowers to potentially use overtime and bonus income, but FHA has its own requirements for determining whether that income is effective income.

The history, consistency, likelihood of continuance, and earnings trend can all matter.

The important point for homebuyers isn’t memorizing the differences between every mortgage program.

It’s understanding that an income calculation performed for one loan program shouldn’t automatically be assumed to produce the same result under another.

This becomes particularly important when variable income is necessary for the borrower to qualify.

Sometimes choosing the right mortgage isn’t simply about comparing interest rates or down payments.

The way a particular program treats your income can matter too.

Does Variable Income Affect Your Interest Rate?

Generally, earning overtime, bonuses, or commissions doesn’t by itself mean you receive a higher mortgage rate.

A commission-based employee isn’t automatically considered a worse borrower simply because part of their income fluctuates.

However, the lender still needs to determine how much income can be used for qualification.

Your mortgage pricing can be affected by factors such as the loan program, credit profile, down payment, property type, occupancy and other characteristics of the transaction.

The variable nature of your income is primarily an income-qualification issue, not simply an automatic interest-rate penalty.

Does Your Credit Score Change How Much Variable Income Can Be Used?

Your credit score and your qualifying income are separate pieces of the mortgage analysis.

Having excellent credit doesn’t automatically allow a lender to use overtime or commission income that doesn’t satisfy the applicable income requirements.

Likewise, having variable income doesn’t automatically mean you have a credit problem.

Both factors can affect the overall mortgage approval, but they answer different questions.

Income helps establish your ability to repay the mortgage.

Credit helps lenders evaluate your history of managing financial obligations.

This is why mortgage qualification involves more than simply reaching a particular credit score or income number.

The entire financial profile needs to work together.

What Are Some Common Variable-Income Mistakes Homebuyers Make?

Many problems can be avoided simply by having the income reviewed early.

Some of the most common mistakes include:

• Assuming all overtime will automatically count
• Multiplying the latest commission check by 12
• Assuming a newly announced bonus can immediately be used
• Using the highest earning year as expected qualifying income
• Ignoring a recent decline in overtime or commissions
• Assuming two years of W-2 income will always be averaged together
• Confusing second-job income with overtime
• Assuming every mortgage program calculates income exactly the same way
• Waiting until after making an offer to have variable income reviewed

The last one can be particularly important.

If you need overtime, bonuses, or commissions to qualify for the purchase price you’re considering, you want to know how that income will be treated before you make the offer.

Example: Using Overtime to Qualify for a Mortgage

Consider a Michigan homebuyer earning:

Base salary: $62,000
2025 overtime: $14,000
2026 overtime: Currently tracking at a similar pace

If the overtime has an acceptable history and meets the applicable guidelines, some or all of the calculated overtime income may potentially be added to the borrower’s qualifying base income.

That could make a meaningful difference in buying power.

Now change the scenario:

Base salary: $62,000
2025 overtime: $14,000
2026 overtime: Tracking toward only $4,000

The borrower still earns overtime.

But the lender now has a declining income trend to evaluate.

Using $14,000 simply because that’s what the borrower earned last year could significantly overstate the income available for mortgage qualification.

For Fannie Mae loans, current guidance specifically requires lenders to confirm that declining variable income has stabilized before using it for qualification.

Example: Using Commission Income to Qualify

Now consider someone earning:

Base salary: $45,000
Commission income: approximately $40,000 annually

That borrower might reasonably describe their income as approximately $85,000 per year.

But suppose they only started earning commissions six months ago.

The lender may not be able to qualify them using the full $85,000 simply because that’s what their current earnings suggest they could make.

Under current Fannie Mae guidelines, commission income received for less than 12 months would not satisfy the minimum history for this variable-income category.

If that same borrower had an acceptable 18-month commission history with stable earnings, the analysis could be very different.

Again, the income itself isn’t necessarily the problem.

The history and documentation matter.

What Should You Do Before Applying for a Mortgage?

If overtime, bonuses, or commissions represent a significant portion of your earnings, gather your income documentation before you start setting a home-buying budget.

Your mortgage professional may need to review your current pay information and previous earnings to determine what can actually be used.

You should also mention anything unusual about your income.

For example:

• Did you recently receive a promotion?
• Did your employer change its bonus structure?
• Has overtime recently increased or decreased?
• Did you change employers?
• Did you move from salary to commission?
• Was there a temporary period when you couldn’t work?
• Do you have a second job?
• Is your work seasonal?

Those details can be much more useful than simply saying:

“I made $95,000 last year.”

The objective of a strong mortgage pre-approval is to understand the income before you’re relying on it to purchase a home.

Don’t Let a Complicated Paycheck Stop You From Exploring Your Options

If your income isn’t a simple fixed salary, that doesn’t mean getting a mortgage has to be difficult.

It means the income needs to be analyzed correctly.

Overtime, bonuses, and commissions can potentially represent thousands of dollars of additional qualifying income each year. For some borrowers, properly documenting that income can make a meaningful difference in the mortgage amount for which they qualify.

For others, the analysis may show that using a more conservative income figure is appropriate.

Either outcome is useful information when you learn it early.

At BrightSide Lending, we help Michigan homebuyers understand how their actual income may be evaluated before they start making offers.

That includes borrowers with traditional salaries as well as those earning overtime, bonuses, commissions, variable hourly income, and other forms of compensation.

Rather than guessing based on your W-2 or an online calculator, we can review your situation, compare available mortgage options, and determine what income may be usable for qualification.

The Bottom Line

Overtime, bonus, and commission income can potentially help you qualify for a mortgage.

But receiving the income doesn’t automatically mean every dollar can be used.

The lender may need to evaluate:

• How long you’ve received the income
• Whether it is stable, increasing, or declining
• Current year-to-date earnings
• Previous earnings
• Your employment history
• The type of variable income
• The mortgage program you’re using
• Whether the documentation supports the qualifying amount

Current Fannie Mae guidelines recommend a two-year history for bonus, commission, overtime, and tip income but may allow a history as short as 12 months when positive factors support it. They also require lenders to evaluate the current trend rather than blindly relying on a historical average.

So if a significant portion of your paycheck comes from overtime, bonuses, or commissions, don’t assume you qualify—or don’t qualify—based on a rule you heard online.

Have the income reviewed before you start shopping for a home.

A properly calculated mortgage pre-approval can give you a much clearer picture of your actual buying power and help prevent income surprises later during mortgage underwriting.

Ready to Find Out What Income You Can Use?

If you’re planning to buy a home in Michigan and your income includes overtime, bonuses, or commissions, BrightSide Lending can review your income and help you understand your mortgage options before you start making offers.

Get pre-approved today or contact BrightSide Lending to discuss your home-buying plans.