Commission-Based Income: Mortgage Qualification Strategies

Buying a home is one of the most significant financial decisions you’ll ever make. But if you’re a sales professional, freelancer, or entrepreneur who earns a large portion of your income through commissions, getting approved for a mortgage can seem challenging. While lenders view commission income as less predictable than a traditional salary, there are proven strategies to help you qualify with confidence.

In this article, we’ll break down how commission-based earners can navigate the mortgage process and increase their chances of approval.

Understanding Commission Income in the Eyes of Lenders

Commission income can include:

• Sales commissions
  
• Bonuses
  
• Finder’s fees
  
• Incentive pay
  

Because commission earnings often fluctuate, mortgage lenders typically require more thorough documentation and a longer income history to verify stability.

Key lender concerns:

• Income stability: Lenders want to see a consistent track record.
  
• Risk of variability: Commission can change month to month, increasing lending risk.
  
• Duration of income: Most lenders require at least a 2-year history of commission-based income.
  

Mortgage Qualification Requirements for Commission Earners

1. Prove a 2-Year Commission History

To establish a reliable income stream, most lenders require:

• Two years of tax returns (with all pages and schedules)
  
• W-2s and/or 1099s
  
• Recent pay stubs
  
• Letter of employment confirming income structure and future earnings potential
  

Tip: If you’ve recently transitioned to a commission-based role from a salaried position, you may still qualify—but expect tighter scrutiny.

2. Watch Your Tax Deductions

Commission earners often take deductions to reduce taxable income. While great for taxes, it can hurt mortgage qualification. Lenders assess net income after deductions, not gross.

Strategy:

• Limit aggressive deductions at least two years prior to applying for a mortgage.
  
• Consult a mortgage-savvy tax professional to balance tax savings and borrowing power.
  

Need help maximizing your mortgage potential? Talk to our mortgage advisors today →

Strategies to Strengthen Your Application

1. Boost Your Credit Score

A strong credit score can offset the risks lenders associate with commission income. Aim for a FICO score of 700 or higher.

Read: How to Improve Your Credit Score Before Applying for a Mortgage →

2. Increase Your Down Payment

A larger down payment (20% or more) shows commitment and lowers the lender’s risk, increasing your chances of approval.

3. Lower Your Debt-to-Income (DTI) Ratio

Keep your DTI below 43% to qualify for most conventional loans. Pay off credit cards, car loans, or other debts where possible.

4. Show Savings & Reserves

Having several months of reserves in a liquid account demonstrates financial resilience. Lenders may require:

• 2–6 months of reserves for conventional loans
  
• More for jumbo or investment property loans
  

Lender Programs That Help

Some lenders offer loan products tailored for self-employed and commission-based borrowers. These include:

• Bank statement loans: Use 12–24 months of bank statements instead of tax returns.
  
• Stated income loans: Used less frequently today but still available from some non-QM lenders.
  
• Freddie Mac and Fannie Mae conventional loans: Accept commission income with adequate documentation.
  

Explore loan programs designed for non-traditional income earners →

Frequently Asked Questions (FAQs)

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