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How is bonus or commission counted as income?
Some clients got bonus every year. How is bonus averaged and counted as income? Also, for commission based clients, how does the lender calculate the fluctuated commission as their income?
If the bonus is higher the most recent year than the previous year, it is averaged and it is divided by 12 and that is what is used. If the bonus is lower the most recent year than the older year, then the lower year bonus is used and that is divided by 12 and that is used as the monthly income in the debt to income qualification. The same with commission income. If the commission income is increasing every year, then it is averaged. If the commission income is declining, then the lower year commission income will be used. Same with part time income.


Attached is a recent blog post I published on how underwriters view commission income. Hope it help.


Here is an article on how mortgage loan underwriters view commission income.


Also, you cannot go from a W-2 wage earner to a 1099. If you do, you need to wait two years as a 1099 wage earner. However, you can go from a 1099 wage earner to a W-2 employee and no seasoning is required. Just 30 days pay check stubs.

If the bonus income and/or commission income has declined substantially the most current year than the previous year the bonus income and/or commission income may not be used even if the mortgage loan borrower has had two year bonus income and/or commission income history. It is up to the mortgage loan underwriter. Here is an article on declining income:



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