Financing in Dallas>Question Details

Ivan Chedah, Home Buyer in Dallas, TX

Will a lender consider a yearly bonus when applying for a home loan?

Asked by Ivan Chedah, Dallas, TX Thu Nov 8, 2012

Right now I have a "base salary" which is x. But my yearly bonus is y. Can I combine both x and y or just x when applying for a loan?

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You have already gotten a good amount of information here, most of it is accurate. Of course there are variations with lenders, but I deal with the bonus issue quite regularly, because of the number of people in finance in the NY area, so will give you an idea of what I do.
If someone has a base salary, even if it has gone up, I use the base salary of the current year. If we need bonus income, we take the bonus from the past 2 years as confirmed on the verification of employment form (VOE), and add that to the base. Generally, if the bonus has declined in the past 2 years, the lower bonus is used. If it is increasing, then it is averaged. Unreimbursed business expenses are deducted from that, and it works the same way, more or less. If the amount deducted is increasing, then use the higher amount, otherwise average. Also, it is the amount on line 21 of the itemized deductions, not line 27. If I can get someone approved on base salary alone, I note that on the application.
Although the rule with 25% of income being from bonus requiring tax returns is true, the majority of lenders now exercise a 4506T during the underwriting process, which gets them a transcript of the tax returns from the IRS, which confirms any un-reimbursed business expenses. Because of this, I always take everyone's returns up-front anyway. We seem to get into the most trouble with unreimbursed expenses for union workers. People who work in finance have minimal, if any, unreimbursed expenses, and are generally very well qualified for the loans they take out.
0 votes Thank Flag Link Tue Nov 13, 2012
if it is on-going for 2 years or more then yes
0 votes Thank Flag Link Tue Nov 13, 2012
Ivan, they will go by your stated income on your tax returns, so make sure that's it's claimed. Your best option is to speak directly with a lender, and I recommend going with a solid local lender for a great pre-qual over a big bank that'll tell you you're approved without putting any actual thought into it until you're half way through the deal.
0 votes Thank Flag Link Mon Nov 12, 2012
Hi Ivan,

It will be depends if that is a bonus or a commission. If you get the same amount of bonus for 2-3 years in a roll. Then lender might able to count that into that.

You will still need to check with a lender. Please let me know if you need any recommendation on lenders.


JP and Associate
0 votes Thank Flag Link Fri Nov 9, 2012
You can use it if you have had it on your W2s for the last two years and there is a likelihood of continuance for bonuses of that amount. However, some lenders put extra restrictions on lower credit scores and will only let you use bonuses if the credit scores are higher than 680. Call me and I can get you pre-qualified for free 972-854-3270 in 15 minutes.
0 votes Thank Flag Link Thu Nov 8, 2012
Sure will. As long as you have a two year history (which they average) and can have the company say it will continue.

Good luck!

Web Reference:
0 votes Thank Flag Link Thu Nov 8, 2012
Ivan, Are you a first time home buyer? Do you have 2 years work history to be able to demonstrate past bonus income? I'll defer to the mortgage experts, but it may be possible that your employer can verify the bonus is a part of your compensation structure (and likely to continue going forward) in the event that this will be your first or second bonus check.

As part of the standard underwriting process, your employer will complete a Verification of Employment which includes verification of your income and any other income including bonuses.

Brent Rice, Top Recommended Broker
The Rice Group, Inc.
0 votes Thank Flag Link Thu Nov 8, 2012
Hi! You can consider a yearly bonus when applying for a mortgage. However, there are caveats. First, you cannot use an employment signing bonus to qualify. Otherwise, bonus income earned can be used if: you have received the bonuses for the past two years AND it is likely it will continue for the next three years. IF the bonus is 25% or more of your total income signed personal income tax returns are required. I'm licensed in Ohio only so I would recommend you contact a locally licensed mortgage banker or broker to assist you with your mortgage financing needs. Good luck!! Kimberly Lawson NMLS: 5601 OH.LO.004495.000 First Priority Financial T/F: 888-659-3848
0 votes Thank Flag Link Thu Nov 8, 2012
Yes if it occurs every yr.
0 votes Thank Flag Link Thu Nov 8, 2012
We look at 2yrs tax returns and average the bonus.
We use bonus income all the time.

Tom Burris
Mortgage Banker
(214) 763-4629 cell/text/nights/weekends(Really!!)
Lending all across the entire Great State of Texas!!
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0 votes Thank Flag Link Thu Nov 8, 2012
Bonus and over time income may be used as long as you can establish a two year history of receiving the income. If you are new to a position and have not yet or only have one year of bonus you may only use base salary.
0 votes Thank Flag Link Thu Nov 8, 2012
Generally we can count bonuses if they are averaged over a 2 year period and the employer indicates that they are likely to continue. Also, remember we will be looking at your tax returns for any unreimbursed employee business expenses. They'll have to reduce your income.

Barbara Coker
Licensed Mortgage Loan Officer Since 1983
100% Home Loans ALL Over Texas
Web Reference:
0 votes Thank Flag Link Thu Nov 8, 2012
It is really up to the bank. Call any lender of your choice and get hard answers from them.

Good luck.

Turtle Creek Realty
0 votes Thank Flag Link Thu Nov 8, 2012
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