Mortgage lenders can consider many types of income, including salary, hourly pay, commission, bonuses, overtime, part-time work, second jobs, self-employment, retirement benefits and other documented sources.
The key question is not simply where the money comes from. The lender has to determine how much of the income can reasonably be expected to continue and what monthly amount should be used when calculating your ability to repay the mortgage.
Qualifying Income by Type Basics
| Income Type |
Can It Count? |
What Lenders Generally Look At |
| Fixed salary |
Yes |
Current salary and employment documentation |
| Fixed hourly income |
Yes |
Hourly rate and qualifying hours |
| Variable hourly income |
Potentially |
History, hours worked and earnings trend |
| Commission |
Potentially |
History, current earnings and whether income is stable or declining |
| Bonus |
Potentially |
History and earnings trend |
| Overtime |
Potentially |
History and earnings trend |
| Part-time income |
Potentially |
Employment history, hours and stability |
| Second-job income |
Potentially |
History of maintaining the additional employment |
| Self-employment |
Potentially |
Tax returns, business income and history |
| Retirement or pension income |
Potentially |
Payment amount, type and applicable continuation requirements |
| Social Security |
Potentially |
Benefit type, amount and applicable continuation requirements |
These are general categories. The exact rules depend on the mortgage program and the details of your income.
What Is Qualifying Income?
Qualifying income is the monthly income a lender can use when deciding whether you can afford a mortgage.
It can be different from your gross annual pay.
For example, you might earn $90,000 during the year, including $20,000 of overtime. If the lender determines that only part of that overtime is sufficiently established or stable, your qualifying income could be lower than $90,000.
The opposite can also happen. A borrower with several established income sources may be able to combine them when qualifying.
The CFPB explains that mortgage lenders generally must make a reasonable, good-faith determination that borrowers have the ability to repay the loan. That includes considering and documenting income or assets used for qualification.
Fixed Salary Income
Fixed salary is generally one of the simplest types of employment income to document.
For conventional loans sold to Fannie Mae, fixed base income means a set salary or a fixed hourly rate with guaranteed minimum hours.
Unlike many variable income sources, fixed base income does not automatically require a two-year history.
The lender still has to verify your current employment and income and determine that the income can reasonably be expected to continue.
Hourly Income
Hourly income can be treated as either fixed or variable depending on your work schedule.
If you have a fixed hourly rate and guaranteed minimum hours, the lender may be able to calculate income directly from those terms.
If your hours regularly change, the calculation becomes more like other variable income.
The lender may review your year-to-date earnings and prior income to determine a monthly amount that reflects what you regularly earn rather than simply multiplying your current hourly rate by 40 hours per week.
Commission Income
Commission income can be used to qualify for a mortgage when it meets the applicable history and stability requirements.
Under current Fannie Mae conventional guidance, a two-year history is recommended for commission, bonus and overtime income. A shorter history may be acceptable when the borrower has received the income for at least 12 months and there are positive factors supporting its use.
Commission income usually requires more analysis than fixed salary because the amount can change from month to month or year to year.
If your income is stable or increasing, the lender may average current and prior earnings. If it has declined, the lender has to determine whether the lower income has stabilized before using it.
Bonus Income
You may be able to use bonus income for mortgage qualification.
The lender looks at the history and pattern of the bonuses rather than assuming your most recent bonus will repeat indefinitely.
For example, receiving a $15,000 bonus this year does not necessarily mean the lender will add $1,250 per month to your qualifying income.
If you received $8,000 one year, $10,000 the next year and $15,000 this year, the lender may use an average based on the applicable underwriting rules and year-to-date trend.
A declining bonus history can result in less income being counted or the income being excluded if the lender cannot establish that the lower level has stabilized.
Overtime Income
Overtime income may count when you have an established history of receiving it.
Like bonus and commission income, overtime is generally evaluated as variable income.
A lender may compare your current year-to-date overtime with previous years to determine whether your earnings are stable, increasing or declining.
If you earned substantial overtime in prior years but your current hours have dropped sharply, the lender generally cannot simply qualify you using the higher historical average without considering the decline.
Part-Time Income
Income does not have to come from full-time employment to count toward a mortgage.
The CFPB notes that lenders generally cannot refuse to consider income simply because it comes from part-time employment. The amount and likelihood that the income will continue can still be evaluated.
Qualifying with part-time income depends on whether the lender can establish a reliable earnings pattern.
Variable hours can require the lender to average your actual earnings rather than use the maximum number of hours you might work in a given week.
Income From a Second Job
You can potentially use income from a second job in addition to income from your primary employment.
The lender generally wants evidence that maintaining both jobs is an established and sustainable part of your employment history.
A second job you have held for years is very different from one you started shortly before applying for a mortgage.
The lender also looks at the actual earnings history from the additional employment rather than automatically adding the current paycheck to your primary income.
Self-Employment Income
Self-employed income can count, but the lender generally has to analyze the business and your taxable income rather than relying on gross business revenue.
Fannie Mae generally expects a two-year history of self-employment.
A shorter history may be acceptable when you have at least 12 months of income from the current business and prior experience earning the same or greater income in the same or a similar field.
If you are getting a mortgage while self-employed, expect income documentation to differ from a standard W-2 file.
1099 Income
Receiving a 1099 does not automatically tell the lender how your income should be underwritten.
A 1099 worker may be treated as self-employed depending on the working arrangement and ownership structure.
The lender may need tax returns or other documentation to determine the income available for mortgage qualification.
Some non-QM 1099 mortgage programs use alternative methods for documenting income, with requirements that vary by program.
Retirement and Pension Income
Retirement income can potentially be used to qualify for a mortgage.
Examples include pensions, annuities and distributions from retirement accounts.
The documentation and history requirements depend on how the income is paid.
For example, current Fannie Mae guidance does not require a minimum history for a fixed pension or annuity payment. A variable distribution generally requires at least a 12-month history.
The lender may also need to determine whether the income is expected to remain available for the required period.
Social Security Income
Social Security retirement, disability, survivor and Supplemental Security Income can potentially count toward mortgage qualification.
The documentation and continuation rules depend on the specific benefit.
Fannie Mae does not require a minimum receipt history for Social Security income.
Some Social Security benefits do not require separate proof of three-year continuance, while others do.
This is one reason broad statements such as “all non-employment income must continue for three years” are inaccurate.
What Makes Income Usable for a Mortgage?
Different income types have different rules, but lenders generally evaluate a few recurring questions.
Is the Income Documented?
The lender needs reliable evidence of the income it uses to approve the mortgage.
Depending on the income type, that can include:
- Pay stubs
- W-2s
- Tax returns
- Verification of employment
- Benefit or award letters
- Bank statements showing receipt
- Business records
Some lenders can also verify employment and income electronically.
Is the Income Stable?
Stability does not mean the amount must be identical every month.
Variable income can qualify. The lender simply has to determine an appropriate amount based on its history and trend.
Current Fannie Mae guidance, for example, requires bonus, commission and overtime income to be evaluated as stable or increasing, or to have stabilized after a decline.
Is There Enough History?
There is no universal two-year employment rule for every type of mortgage income.
Some income sources require or strongly favor a longer history. Others have shorter requirements or no minimum history at all.
For example, Fannie Mae recommends a two-year history for bonus, commission and overtime income but may accept as little as 12 months with supporting positive factors. Fixed base income does not use that same two-year standard.
Is the Income Expected to Continue?
Lenders have to evaluate whether qualifying income is reasonably expected to continue.
But that does not mean every source needs a letter guaranteeing three more years of payments.
Some income types have explicit three-year continuation rules. Others do not require separate verification of continuance unless the lender has reason to believe the income may stop.
How Lenders Average Variable Income
Variable income is generally analyzed over time rather than based on your best month or most recent paycheck.
Consider this simplified example:
| Period |
Overtime Earnings |
| 2025 |
$12,000 |
| 2026 year to date through September |
$9,900 |
The lender would first convert the year-to-date figure into a monthly amount and compare the current pace with the prior year's income.
If the income is stable or increasing, an average based on the applicable historical period may be used.
If current earnings have fallen significantly, a higher historical average may overstate what you are likely to continue earning. The lender may instead use a lower amount or determine that the income cannot currently be used.
The specific calculation depends on the income type and mortgage program.
What if Your Income Recently Increased?
A raise in fixed salary can be different from an increase in variable income.
If your fixed annual salary increases from $70,000 to $80,000 and the new amount is documented, the lender may be able to use the new fixed salary.
If your commission jumps from $20,000 to $35,000 in one year, the lender generally does not assume $35,000 will automatically repeat. The historical pattern still matters.
This distinction is one reason borrowers with the same total earnings can end up with different qualifying income.
What if Your Income Has Decreased?
A decline can be more important than an increase.
For current Fannie Mae bonus, commission, overtime and tip income, the lender must determine that the income has stabilized after a decline before using it.
If it has stabilized, the lender generally uses the income earned since stabilization rather than a higher multi-year average.
If it has not stabilized, the income may not be eligible for qualification.
How Qualifying Income Affects Your DTI
Your qualifying income is used in your debt-to-income ratio.
DTI compares your monthly debt obligations with the gross monthly income the lender can use.
For example, assume you earn:
| Income |
Monthly Amount |
| Base salary |
$6,000 |
| Qualifying commission income |
$1,000 |
| Total qualifying income |
$7,000 |
If the commission qualifies, the lender evaluates your debts against $7,000 of monthly income rather than $6,000.
If the commission cannot be used, your DTI will be calculated using the lower figure.
A debt-to-income calculator can show how different qualifying-income amounts affect the ratio.
What Documents Should You Prepare?
The exact documents depend on how you earn your income.
| Income Type |
Common Documentation |
| Salary or hourly employment |
Pay stubs, W-2s and employment verification as required |
| Bonus, commission or overtime |
Current pay stub, prior W-2s and employment verification |
| Second job |
Documentation from both jobs showing earnings and employment history |
| Self-employment |
Tax returns and applicable business documentation |
| Pension or retirement |
Award or benefit statements, account statements, tax documents or other evidence of payment |
| Social Security |
SSA documentation or other permitted evidence of benefits and receipt |
Requirements can change depending on the mortgage program and whether automated verification is available.
Changing Jobs Before Getting a Mortgage
A recent job change does not automatically prevent you from getting a mortgage.
What matters is how the change affects the income you need to qualify.
Moving from one fixed-salary position to another can be much simpler to document than starting a new job where most compensation comes from commission, bonuses or variable hours.
If you are getting a mortgage with a new job, the lender needs enough documentation to determine which portion of the new compensation can be used.
What if Traditional Income Documentation Does Not Fit?
Traditional conventional, FHA, VA and USDA underwriting generally relies on documented qualifying income under the applicable program rules.
Some borrowers have income that does not fit neatly into traditional W-2 or tax-return underwriting.
Non-QM programs can use alternative documentation in some circumstances. Examples include bank-statement, 1099 and written-verification-of-employment programs.
A WVOE mortgage, for example, uses written employment verification under program-specific requirements.
Alternative documentation does not mean the lender ignores income. The method used to establish the borrower's ability to repay is different.
Qualifying Income Guides by Type
Bottom Line
Mortgage income does not have to come from a traditional fixed salary.
Commission, bonuses, overtime, part-time work, second jobs, self-employment, retirement income and other documented sources can potentially be used to qualify.
What changes is how the lender calculates the income. Fixed income may be relatively straightforward, while variable income usually requires more history and analysis of whether earnings are stable, increasing or declining.
The most useful number when planning a home purchase is therefore not simply your annual income. It is the monthly qualifying income that the lender can actually use in underwriting.
FAQ
What Income Counts When Applying for a Mortgage?
Many income sources can potentially count, including salary, hourly wages, bonuses, commission, overtime, part-time work, second-job income, self-employment income, pensions and Social Security. The income must meet the documentation, history and stability requirements of the mortgage program.
Do You Need Two Years of Income to Get a Mortgage?
Not in every case. Different income types have different history requirements. Fannie Mae does not apply a universal two-year rule to fixed base income, while two years is recommended for bonus, commission and overtime income. Those variable sources may sometimes qualify with at least 12 months of history.
Can a Lender Count Bonus and Overtime Income?
Yes. Bonus and overtime income can potentially be used when the lender can document an acceptable history and determine an appropriate qualifying amount. Stable or increasing income may be averaged, while declining income generally requires additional analysis before it can be used.
Can Part-Time or Second-Job Income Count?
Yes. A lender can potentially use income from part-time employment or a second job. The lender evaluates the history, amount and stability of the income. A newly started second job may be treated differently from additional employment you have maintained consistently over a longer period.
Does All of My Gross Income Count Toward a Mortgage?
Not necessarily. The lender uses qualifying income rather than automatically counting every dollar you earn. Variable, declining or insufficiently documented income may be averaged, reduced or excluded. The resulting qualifying-income figure is then used to calculate your debt-to-income ratio.
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