When applying for a home loan, it’s assumed that things like your current debt, credit score and debt-to-income ratio will be taken into consideration. Alas, that’s not always the whole story, especially if you’re on a commission-based income.
You can get approved – but it’s tricky.
Lenders love clients that are on a salaried income because it’s much easier to verify for Fannie Mae, Freddie Mac or FHA. When you’re on a commission income, it gets a little trickier — you’ll have to pay close attention to the underwriting process, and have documentation ready to back it up.
Contact Accunet today to buy a home with commissioned income.
What you’ll need:
For most of the major financial services, you’ll need a history of your commission income that goes back two years. To do this, you’ll need to acquire a few different forms of proof, which usually includes:
- Two years worth of W-2s from your employer
- Recent pay stubs
These documents will prove that this method of payment has been consistent and will continue in the future. This is done to document the likelihood that this income will continue, and you’ll be able to afford your monthly payments.
Click here for help getting a loan with commission-based income.
Do I always need 2 years of commission income on-record?
While the 2-year rule is pretty standard, there are programs (like FHA loans) that will give some wiggle room if you’re under the 2-year mark.
Really, it all has to do with your story. Why don’t you have 2 years worth of income? What field are you currently working in? Is your commission trending upwards, or downwards? While some mortgage underwriting is computerized, getting a mortgage with commission-based income usually requires a human underwriter (luckily for you, humans are much better at understanding stories than computers). If you can convince the underwriter you’re good for the money, then you’ll probably get your loan approved without a hitch.
Client Story: We recently had a client who switched from a salaried position to a commission-based position. Since they were only in the commission-based position for 1 year, a Freddie Mac or Fannie Mae loan was out of the question (their requirements are much stricter). If it had been 18 months, there could have been some opportunity, but one year wasn’t enough for them to approve. Our client was willing to put down a large down payment on the home. By putting down 25% instead of the typical FHA down payment of 3.5%, our client had enough of a compensating factor for them to allow it to go through. That’s not to say that you’d have to put down such a large down payment to be considered a compensating factor, but the more you can prove your strength as a borrower to underwriting, the better your chances of approval are.
Contact us today for answers to your questions on getting a mortgage with commission-based income.
So, what’s next?
Yes, it is easier to get loan approval for a mortgage on a salary, but it’s good to know that there are guidelines and options for different incomes. Additionally, since it’s not as cut-and-dry as a salary, you’re going to need some help from experts, like the team at Accunet Mortgage. Unlike a lot of larger banks that only sell to Fannie Mae or that won’t do FHA, Accunet has the range to accommodate your situation with a complete line-up of loan products.
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