Can Bonuses Be Included in Income for a Mortgage?

You can do a lot with a big bonus from work -- but it may not help you qualify for a larger mortgage. Your lender doesn't care whether you get your income from salary, wages, commissions or bonuses. What she does worry about is whether you can bring home the same level of income year after year.

TL;DR (Too Long; Didn't Read)

If your bonuses are given reliably each year, the lender may allow them when considering your income for a mortgage.

Steady Income

A big one-time bonus is not going to affect your lender's mortgage calculations. Lenders figuring how much mortgage you can handle are interested in steady income, not rare events. If you point out to the underwriter the big bonus you scored this year, the underwriter will check to see if your boss gave you the same bonus last year. If the bonus is a regular part of your income, your lender will be open to including it in his mortgage-affordability figures.

Calculating Your Income

A lender will typically look at your income for the past couple of years. If you've earned a $12,000 bonus both years and the lender accepts that the bonuses will keep coming, that translates into $1,000 added to your average monthly income. The lender uses that to calculate how much mortgage, property tax and insurance you can pay a month.

Fluctuations in Income

Most bonuses aren't that consistent, even if you stay with the same employer. If your bonus has varied over the past couple of years, your lender may average it out: $12,000 this year and $8,000 last year gives you $20,000 for 48 months, or $416 extra income a month. If you got a bonus last year but none this year, or the size of the bonus dropped, your lender may not consider your bonus income at all, for fear it'll shrink further or disappear after you take out the loan.

Additional Considerations

If your job offers the potential for big bonuses, that won't impress your lender until you actually receive some of the money. You should be cautious about the future too: If you're not sure your bonus income will keep up, using it to qualify for a mortgage may get you in over your head. If nothing else, you can put your bonuses toward your down payment. The more you pay up front, the smaller the monthly payments. Once you have your mortgage in place, you can use that annual bonus to pay on the principal, increasing your equity in the house and putting you closer to paying off the loan.

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