How To Use Your Bonus Income To Qualify For a Mortgage

Not everyone gets paid with just salary or just hourly pay - especially in 2025. Whether you're a tech engineer, attorney, accountant, or manager, chances are your paycheck includes more than just base pay. These days, almost everyone gets some form of bonus, whether annually, semi-annually, quarterly, or even monthly. Maybe it’s a mix of base salary, performance bonuses, commissions, or RSUs. Some months are fat. Others, not so much.

That kind of income is real, and often substantial, but it might make things complicated or even confusing when you’re applying for a mortgage. Lenders want to see steady, predictable earnings, and the minute your pay looks even slightly irregular, they start asking more questions. Bonus checks? Great for your lifestyle. Less great for your loan application.

So if you're asking whether mortgage lenders will count your bonus income toward your approval, the answer is: it depends. Let’s break down how lenders evaluate income when it doesn’t come in neat little rows on a W-2.

If you’re wondering whether mortgage lenders will count your bonus income toward your home loan, the answer is: it depends. Here’s how income requirements for a mortgage work when bonuses or variable earnings are involved.

What Counts as Variable Income?

Variable income refers to any compensation that fluctuates from month to month or year to year. This includes:

• Discretionary and guaranteed bonuses – A discretionary bonus is given at the employer’s choice and can vary each time. A guaranteed bonus is written into your contract and expected as part of your compensation.

• Overtime – Extra hours worked beyond your standard schedule, often paid at a higher rate. If overtime is regular and documented, lenders may count it.

• Commissions – Earnings based on performance, like sales volume or signed contracts. They’re typically variable and must be averaged over time.

• Restricted Stock Units (RSUs) – Company shares given as part of your compensation. To be counted, RSUs usually need a two-year history and proof of ongoing vesting.

Lenders assess variable income differently than base pay because they need to ensure the income is stable, consistent, and likely to continue for at least three years.

Do Mortgage Lenders Take Bonuses Into Account?

Yes—if it’s consistent in the case of discretionary (or guaranteed) and your mortgage lender or broker can document it than it should be taken into account.

Lenders look at two main types of bonuses:

• Guaranteed bonuses are written into your employment contract (e.g., “20% of base salary paid annually”) and typically require at least 12 months of history.

• Discretionary bonuses are not contractually guaranteed and are paid at your employer’s option, even if you’ve received them like clockwork. These generally require a solid 24-month history to be considered.

Regardless of what type of bonus you receive, bonus income is real income to you, and if you’ve been receiving it regularly, your lender should do everything it can to make it count.

This is where a lot of lenders get it wrong. Most lenders start to get skittish when they hear you have discretionary bonuses and start to haircut the bonuses or completely eliminate them. The word 'discretionary' in an employment agreement doesn’t automatically mean the bonus isn’t reliable. It just means it’s not contractually guaranteed. Plenty of bonuses are labeled discretionary but have been paid on a consistent schedule for years. That’s what we care about—real patterns, not just legal language.

To use bonus income, lenders generally want:

• 12 months of history for guaranteed bonuses (written into your contract)

• 24 months of history for discretionary bonuses

• Consistent amounts that don’t vary a material amount year to year

And yes, documentation matters. That means:

• W-2s showing prior year bonus income

• Year-to-date paystubs

• A written Verification of Employment (VOE) that spells out how bonuses work - and a lot can hinge on how your employer words this letter, which is why you should get your lender's input before making the request, so you aren't asking for revisions after underwriting reviews the letter.

Here’s where the wording matters: if your offer letter says you’re entitled to a bonus equal to 20% of your annual salary and it’s been paid on schedule, you’re in good shape. But if your contract says “bonus may be paid at the employer’s discretion,” underwriters start getting nervous. That doesn’t mean we can’t use it—but it does mean we’ll need a stronger paper trail.

If your bonus income has declined or increased slightly, underwriters may average a lower amount—but too much change year-over-year may cause the lender to want to exclude it entirely. 

However, if it’s consistent and structured properly, your lender should push to have it included, I know we do at LendFriend. 

How Bonus Income Is Calculated for a Mortgage

When qualifying bonus income is counted, it is typically averaged over the past 24 months. For example:

• If you received $30,000 in bonuses in Year 1 and $33,000 in Year 2, your average monthly bonus income would be:

  ($30,000 + $33,000) ÷ 24 = $2,625/month)

However, if the bonus is clearly guaranteed and stable, Fannie Mae allows lenders to use a 12-month average.

What About Irregular or Declining Bonus Income?

Lenders are cautious with income that’s dropping or inconsistent. If your bonus income declined more than 10% year over year, you may need to provide a written explanation or accept a lower qualifying amount. Even a promotion—something most people assume improves their financial picture—can complicate things. If your comp structure changes from quarterly to semi-annual bonuses, or if your base salary increases while bonuses decrease, the shift might raise red flags with underwriters. The overall package may be better, but lenders care about predictability and patterns.

Another common issue we see is year-end bonuses paid in different months. For example, if your 2023 bonus was paid in January 2024, but your 2024 bonus hits in December, it can skew your year-over-year income totals. To underwriters, it might look like 2023 was a low bonus year and 2024 was a spike—even if both bonuses were based on the same performance structure. That can create unnecessary friction in the approval process unless it's properly explained.

Underwriters will want to know:

• Why did it decline?

• Was it due to a temporary slowdown, job change, or structural compensation shift?

• Is it expected to rebound?

If there’s no reasonable expectation of continuance, that income may be excluded.

How RSUs and Commissions Are Treated

Some borrowers may also receive RSU (Restricted Stock Unit) compensation, especially in tech-heavy industries.

• RSUs must be vested and documented for at least two years.

• Lenders will use a 52-week average stock price to determine value.

• You must show that vesting will continue at a similar level for the next three years.

Similarly, commission income usually requires a two-year history unless it’s less than 25% of your total compensation, but if you work with our team, we can make it happen with just a one-year history of commissions.