Mortgage Facts - Did You Know

Bonus Income

– A minimum history of two years of bonus employment income is recommended. However, bonus income that has been received for a shorter period of time may be considered as acceptable income, as long as the borrower’s employment profile demonstrates that there are positive factors to reasonably offset the shorter income history.

  • Best case: The borrower has a 2 year history of receiving bonus income to use for qualifying.
  • Acceptable: Bonus income received for more than 1 year but less than 2 years may be considered for qualification as long as there are positive compensating factors to reasonably offset the shorter income history.
  • Unacceptable: Bonus income earned for less than 1 year cannot be used in qualification.

 

Bonus Income Documentation:

Written VOE covering the most recent 2 year period (form 1005)
A recent paystub and last 2 years of W-2’s.

If the borrower changed jobs within the last 2 years, confirm they have they been on the current job at least 1 year. Confirm the current WVOE states the income is likely to continue.

If the borrower is paid a bonus annually ensure the correct calculation is used. i.e. If a borrower is paid an annual bonus on March 31st of each year the amount of the March bonus should be divided by 12 to obtain an accurate calculation of the current monthly bonus amount.

Acceptable compensating factors include but are not limited to low DTI, excessive assets/reserves, large down payment and/or no mortgage/rental lates within past 24 months.