We often get borrowers with substantial income in the previous tax year who do not qualify for the financing they desire. This is because a large portion of their income was comprised of either Overtime Pay, Bonus Income, Commissions, or Stock Options (exercised), and there is no “history” of earning such income in prior years.
Lenders require a two-year history of overtime, bonus and commission income before they will allow it to be used for qualifying. This history must be reflected on their tax returns & verified by their employer. Stock option income is rarely allowed at all.
This is another reason why a careful pre-approval analysis is always required. A borrower’s W2 might reflect $200,000 in income, but if $125,000 of that amount is unseasoned bonus income, that borrower will qualify for much less than one might think at first glance.
Founder/Broker | JVM Lending
(855) 855-4491 | DRE# 01524255, NMLS# 335646