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.
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
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.
We use bonus income all the time.
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