Overtime bonuses and commissions

Unstable income such as overtime, bonuses and commissions are averaged over the past 24 months or two years. The monthly average is added to the base income. For example, if Jane received commissions of $15,000 last year and $12,000 the previous year, then her monthly average over the past two years is $1,125 per month—that's $27,000 divided by 24 months. This $1,125 calculation is then added to Jane's other income to determine her qualifying income.

Loan processors and underwriters will normally scan the applicant's pay stubs to determine average overtime earnings. Most pay stubs will provide a year-to-date summary of overtime pay. Another method is to subtract the base salary from the W-2 income—with adjustments for raises.

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