Mortgages and Commission Income

I've been faced with an unusually high amount of applications involving commissioned income clients lately; having been able to provide financing for some but not all I thought I would take a moment to discuss some features of being all or semi-commissioned as a means of deriving your income.

First, Fannie Mae and Freddie Mac state that if a portion of your income (typically 20% or more) is derived from commission then the most recent 2 year's taxes must be provided. Why? Because they will want to average your "commissioned" income over the last 24 months, this will give them a better indication for a "basis" in deriving an average monthly salary.

Second, if you have been in a field that has commission income for less than 2 years they (Fannie & Freddie) will not allow you to use your commission money. Fannie Mae and Freddie Mac will want to see a two year history. Now if you have worked for your current employer for 8 months but your previous employer (who also paid you commission) for 2 years then Fannie and Freddie will allow to average your 2 years commissioned income. Simply put they want to see a 2 year history of being paid commission.

Just like everything else in the lending world there are always "exceptions to the rule" or guideline changes depending on loan-to-value, credit score, assets etc. but this should give you the general idea behind underwriting commissioned income clients.

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