Yes, overtime, bonus, commission, and tip income can count toward your mortgage qualifying income. The usual starting point is a two-year history, though FHA and Fannie Mae can accept as little as 12 months in the right circumstances. The lender averages what you've earned, checks whether the trend is steady, rising, or falling, and uses a lower figure if it's falling. A strong recent month helps, but the history and the trend decide what counts.
Here's how FHA, conventional, VA, and USDA handle variable pay, how the average is built, and what to have ready.
Base salary or a fixed hourly rate is predictable: your employer has agreed to pay it, and your pay stub shows it. Overtime, bonus, and commission depend on your employer's needs, the season, your performance, and the economy. The underwriter isn't punishing you for working extra. The question is narrower: is this income stable enough to rely on for a long loan, and if so, what monthly amount is reasonable?
For FHA loans and conventional loans, the automated findings can also shape what's required on a specific file. These are agency rules; individual lenders and investors may layer their own on top.
For overtime, bonus, tips, and commission, FHA uses the lesser of the average over the previous two years (or the time you've earned it, if less) or the average over the previous year (4000.1, II.A.4.c.v(C), II.A.4.c.ix(D)). That "lesser of" rule means a big older year can't prop up a weaker recent year.
The lender figures out how often you're paid that income, converts the year to date to a monthly amount, and compares it to prior years (B3-3.3-02):
If your hours vary, FHA averages your hourly income over the past two years. If you've had a documented raise, the lender may use the most recent 12-month average of hours at your current rate (4000.1, II.A.4.c.iii(C)(2)). If your hours don't vary, the lender uses your current hourly rate.
These aren't overtime or bonus, but they're variable in the same way, so they get similar treatment.
Whatever monthly figure the underwriter lands on gets added to your base pay. That total is the income side of your debt-to-income ratio. A conservative average lowers the income side, which raises the ratio. That's why the method matters as much as the history. A borrower who earned a lot of overtime two years ago but less this year can see a meaningful gap between what they think they make and what the file uses.
If you're close on the ratio, we have a few honest levers: pay down or pay off a debt, add a qualified co-borrower, adjust the purchase price, or wait until another stretch of steady earnings shows up on your pay stubs and W-2s. I'd rather show you those options before you write an offer than after.
Because the calculation leans on year-to-date figures, the calendar matters. Early in the year, your year-to-date total covers only a few weeks, so prior-year W-2s carry most of the weight. If a big bonus pays out in March, applying in April puts it in the year-to-date numbers. If your overtime dipped and then recovered, a few more months of steady earnings can help show the income has stabilized. None of this means you should wait by default. It means it's worth running your numbers both ways before you pick a date.
Commission earners are documented like bonus earners, plus tax returns in some cases. VA, for example, asks for two years of tax returns and says that when commission is 25 percent or more of annual employment income, unreimbursed business expenses reported on IRS Form 2106 must be deducted from income (Chapter 4, Topic 2). A car allowance or reimbursement is handled separately, so gross commission and qualifying income can differ.
If you're paid entirely on commission and get a 1099 instead of a W-2, you may be treated as self-employed, and those rules apply instead.
History usually has to be in the same or a similar line of work. Moving from a salaried role to a commission role, or into a new field, can restart the clock on the variable part of your pay even if your base pay history carries over. My job changes article covers how a move affects your file.
The written or electronic verification of employment matters. It breaks your earnings out by type and year, and it can confirm whether overtime or bonus is likely to continue. If your employer says overtime is ending, it generally can't be used even with a long history. Lenders also reverify employment shortly before closing, so tell me right away if your overtime dries up, your commission plan changes, or a bonus program ends while your loan is in process.
This example is made up to show the method.
Jasmine is a nurse at a Fort Worth hospital who picks up extra shifts. She's had overtime for two full years, and this year's year-to-date pace is a little lower than last year's. On an FHA loan, the underwriter averages her overtime over two years and over the last year, then uses the lower of the two. On a Fannie Mae loan, because the trend is down, the underwriter first confirms her overtime has leveled off, then calculates it from the point where it stabilized. Either way, last year's higher total doesn't set her qualifying income by itself.
If overtime, bonus, commission, or tips are a big part of your pay, let's lay out your history by year and type first so you know what the underwriter would likely use, and whether waiting for another pay cycle would change it. Book a call, or when you're ready, start an application.
Links checked Oct 21, 2026.
About the author: McKade Lively, NMLS 2704474, American Pacific Mortgage Corporation dba True North Home Loans, NMLS 1850.
Equal Housing Opportunity.
Last reviewed: Oct 2026