Getting a Mortgage with Commission Income
Most people know that to qualify for a mortgage to buy a house, a borrower will need to prove their monthly income. This concept isn’t as easy as it sounds if you are paid on commission. Luckily, most mortgage Loan Officers in Michigan are also paid on commission, making them familiar with the process and equipped to help you.
What you need to know about getting a mortgage when you work on commission:
- Only “verifiable” income can be used to qualify for a mortgage
- Different mortgage programs have varying rules when it comes to handling commission income
- Commission income CAN be used to qualify if it meets certain criteria (our Loan Officers have those specific requirements)
- For Government (FHA, VA, RD/USDA) & Conventional Loans borrowers must have 2 years of commission income—income will be averaged for the last 2 years
- Borrowers must provide signed copies of tax returns for 2 years as well as their most recent pay stub
- Borrowers whose incomes reflect a significant decrease from one year to the next must show compensating factors to demonstrate why that decrease took place
- Future & predicted income can NOT be used to qualify for a mortgage
- What about write-offs?
- The income used for loan qualification is your adjusted gross income (AGI), which includes your tax write-offs. This means if you earned $100,000 but only claimed $30,000 after write-offs and exemptions, you can only qualify based on $30,000.
- Verification of Employment: Whether all or a part of your salary is commission based, your mortgage company will always call your company (or a 3rd party service) to verify your employment.
Generally, if you have two years of pay history and the amount of income you filed on your taxes is satisfactory to qualify for the loan amount you are looking for, we may be able to help. We work with many Realtors, insurance agents, and other salespeople—we look forward to working with you as well!
Are you a Realtor looking to buy?
Real Estate Agents may use their commission as a down payment source provided they are licensed and the property is being purchased by them!
Treadstone can use your earned real estate commission as an eligible source of funds for down payment and closing costs provided your are a licensed real estate agent and will receive a sales commission from the purchase of the property.
Have more questions? Contact your Loan Officer about documentation requirements and get started!
For illustrative purposes, not a commitment to lend and not all borrowers may qualify. Please see a tax advisor for any tax implications.
