Can I use bonus income to qualify for a mortgage?

How lenders count bonus income

Bonus income is qualifying when:

1. You have 2 years of bonus history at the same employer (or same industry/role) 2. The bonuses have been consistent (each year within reasonable range) 3. Your employer confirms continuance (via VOE — Verification of Employment)

The formula: - If year 2 bonus ≥ year 1 → use 2-year average - If year 2 bonus < year 1 → use year 2 (lower year) — or a further conservative average

Example: Year 1 bonus $20K, Year 2 bonus $24K. Qualifying bonus = ($20K + $24K) / 2 = $22K/yr → $1,833/mo added to base salary.

The #1 documentation mistake

Buyers often show only their W-2s, which combine base + bonus into box 1. Lenders need the breakdown. Provide:

• 2 years of W-2s (shows total wages)
• 2 years of December year-end paystubs (shows YTD bonus separately from base)
• Written Verification of Employment (VOE) from your employer — most crucial. The VOE asks HR to confirm bonus history + likelihood of continuance

Without the VOE confirming continuance, many lenders won't count the bonus at all — no matter how consistent your history.

Special cases: signing bonuses, retention bonuses, discretionary bonuses

• Signing bonuses: One-time — do NOT count as ongoing income
• Retention bonuses: Count if paid annually with 2-year history; do NOT count if one-time
• Discretionary annual bonuses: Count with VOE confirming likelihood of continuance
• Performance bonuses tied to metrics you control: Count with 2-year history
• Company-wide profit-sharing: Count if consistently paid; discount if wildly variable

When in doubt, ask your lender to run scenarios both ways (with and without bonus) so you know your true buying power.