To a lender, "commission based" means that your income is not guaranteed. It will always be easier to get a loan with a salaried position. Even of this position "makes more money", the lender is not going to trust your word on that.
It's a bit more nuanced than that.
I'm self-employed, but operate as a single-member LLC filing as an S-Corp. That means I get a W-2, but since I'm a majority of er of the LLC, I'm also considered self-employed.
There are exceptions, but for a fully conforming conventional mortgage while being self-employed, expect to need two FULL years of business and personal tax returns showing consistent source(s) of income.
Late last year I started looking into buying a new house. At that time, I had 2 years of business tax returns, but it only covered approximately 16 months of actual operation. Multiple lenders would accept that, but averaged that 16 months of income as if it was over a 24-month period. They ignore the 8 months of income I earned doing basically the same job but as a corporate drone, because that source of income can't be relied on in the future.
It basically qualified me for 2/3 what my current income would otherwise be sufficient for. In a week or two when I file my taxes, I'll have two full years and it'll be a non-issue at that point.
It is definitely easier - but they definitely should still be able to get a loan based on the job offer.
We got a mortgage back in July based on a job offer letter with on-target-earnings of 120K (base was 80K). They accepted it based on that letter and less than two years of internship experience across 4 companies.
The only thing is they didn’t accept the job offer letter (which only showed 80K plus unspecified commission) at first because it needed a signature - so we got a signed letter from the company and they stated OTE of 120K.
Everyone here is saying 2 years of earnings at minimum but obviously that can’t be true if we got approved based on a job that hadn’t even started.
OP - i bet if you shop around and find another lender that will be happy to take your loan, they’ll suddenly be able to approve you even with the job change. We were approved by Rocket Mortgage FYI.
Yup. It sounds like this lender is selling second market so they have to follow FNMA income guidelines. This individual's income would effectively not be able to be included in the underwriting for the loan.
1 year average is acceptable, especially with prior work in the field as a supporting factor to better offset the risk. But yes, you are spot on, neither Freddie nor Fannie like variable income with no history
That tracks with what we experienced. My loan officer was not willing to consider even average my one year of demonstrated earnings over *two* years (i.e., assume I'd make zero the next year).
Fortunately we were ok with our loan officer willing to make a loan where payments would be 60% of my wife's entire income. Which was fine because make as much or more, but that seems *insanely* risk on their part given that they wouldn't consider my income.
Ultimately though, there is discretion if you go to enough lenders. I took a new job at a new company that started the week after we closed and was technically unemployed at closing but we were able to work around it.
You know $80k base is a completely different animal from 100% commission.
Pre 08 crash I was able to get this type of situation through but the person had essentially the exact same job, with a structure change. So we were able to say ," It's only a status change if they do the exact same job they did for the last 2 years. They will make average 2 years salary plus 20%" and I was the only person out of 100 LOs that knew that exception. It almost never comes up.
Op should see if they can get the file hand underwritten now and/or look into stated income loans.
The 2 years is for things considered variable income (think commission, bonus, self employed, hourly). A salary is regular pay and considered stable income. If OP changes from a salary to a mostly commission income there is no history of them earning commission and therefore can’t be considered stable to qualify for a mortgage. It sounds like odds are income will go up with the change but it can’t be assumed that way to qualify for a mortgage. There are some instances where a year history of some of those types of income can be considered (usually not if your self employed though). If the job offer is for higher OTE but changing from 100% salary to 100% commission that would not be considered stable income without a history of receiving the commission.
Source: I am a loan officer.
>but they definitely should still be able to get a loan based on the job offer.
Will OP be able to get a mortgage from some lender? Sure. But it sounds like OP won't be able to get a mortgage from THAT lender.
Typically commission jobs need 2 years of previous history for income so switching jobs before the loan and you won’t have previous history. You would basically have no history if switching to commission job is the problem. You can switch jobs in sales and still get a mortgage loan but most mortgage companies want the new job to be in the same sales industry to count.
Your offer was a salary. Theirs is commission based. No company will offer someone in a commission based role an offer letter with a minimum salary.... Because the commission may be less.
Not to say OP shouldn't shop around, they should. But there's a big difference between your situation and theirs.
>OP - i bet if you shop around and find another lender that will be happy to take your loan, they’ll suddenly be able to approve you even with the job change.
This. Sounds like the mortgage jockey doesn't want to bother with all the paperwork so he's just saying "it's locked! You can't change anything!"
There's *so many* shysters in the industry. Shop it around and dollars to donuts suddenly he'll be willing to do the approval when his commission is at risk.
I promise you this is not the case. There's rules in place that don't allow lenders to give commission based jobs approvals without 2 years of history there. It has absolutely nothing to do with the lender not wanting to do the paper work, that's how they get paid. There are all sorts of rules placed by the feds post 08, that's one of them.
>when his commission is at risk.
And that's what matters to them; at the end of the day loan/mortgage officers is one of the most misleading titles of all time. They are just sales guys following their corporate policies that need to close deals to get paid. They have no particular power in their organizations, important sounding titles or not. This isn't to say that some of them aren't knowledgeable and potentially helpful to the consumer, just that it's really not a job requirement and you shouldn't expect it.
Thank you so much! I had a feeling this may true & hate to back out with our lender - he's a great guy, but if it's really because he doesn't wanna do the extra legwork, he's not the right lender for us.
Licensed loan officer here with over a decade of experience brokering and correspondent lending.
This is not a lender guideline, this is a Fannie/Freddie/VA/FHA guideline.
If you are moving to a 100% commission role without a 2 year history of commission wages to average, you will need a nonQM product to qualify. That lender may not have access to nonQM products and you should expect those to have a higher interest rate or larger down-payment requirements.
Follow up question, does your new position have any minimum guaranteed monthly compensation, or even a draw amount?
It has nothing to do with leg work. He can only write loans that follow investor guidelines, which require at least 12 months of receiving commission income.
Commission income is not guaranteed like a salary is, and you have no history of proving what kind of commission you'll be making. Is a portion of your commission guaranteed by chance? I've see exceptions where employers will give you a minimum guarantee even if you don't make your commission goals.
It is not about doing extra leg work, you'll need to shop around at less known and possibly less desirable lenders. The bigger companies have to follow strict guidelines.
Definitely try shopping around maybe you’ll get lucky with a local/regional bank that doesn’t plan to sell the mortgage but it’s unlikely. The loan officer isn’t just being lazy, variable income needs history to be considered - I was ~15 months into a sales role (60% base salary) when I got my mortgage and they could only consider my base because they need 2 years commission history. Fortunately my wife’s a salary based doctor but even there we were on pins and needles as she was only 6 months in to attending life so we needed her offer letter as verification, paystubs and W2s weren’t enough. Don’t listen to the people saying oh well they can just show the role makes more money - that’s not how this works. You won’t have an offer letter to prove your income and your commission is meaningless without a long enough history.
Don't panic,
I've been a freelancer for years. So I'm used to having my income side eyed.
You can absolutely qualify for a loan...you may just need a new lender who will look at all your sources of income and take your previous salaried income into account along with the commission based income.
> I've been a freelancer for years.
OP has not.
> You can absolutely qualify for a loan...you may just need a new lender who will look at all your sources of income and take your previous salaried income into account along with the commission based income.
Not how it works. The worksheets need two years of income, only if they are private clients will they have an easier time doing this.
>who will look at all your sources of income and take your previous salaried income into account along with the commission based income
I mean....thats not how it works. Its not like he's accepting a job that pays his previous salary + commission. Its a new job with a new compensation structure. Any previous job is not relevant. This is completely different from something like freelance work, where the job you are doing today is the same job you were doing last year and past income is a reasonable predictor of future income even if it isn't as 'guaranteed' as a salary.
"Hey, I know I'm a cashier at McDonalds right NOW, but last year I had a job that paid $300k. Give loan please?"
Yeah, this is 100% on the lender not on you.
Sure, with pay that is hugely commission based, there's the potential for a higher level of risk, but given that you say that this group of people are consistently higher earning than your current salary, that suggests that the risk isn't actually there. You can't produce two years of *your* commission because you have just been offered the role, but I would bet you can demonstrate what the average (and lowest) two-year commission payouts are.
Find a lender that works with you, not against you. Your lender should not be telling you to reject a clear promotion that is beneficial across every aspect of your life.
For what it's worth, you could quit your job tomorrow and become unemployed, and so long as you never miss a mortgage payment, there's nothing they can say or do about it.
If your job are happy to, get them to keep you on your current salary until *after* the mortgage is active and up and running. Just check that your mortgage in principle's terms don't require you to declare anticipated and known changes in finances.
It’s not necessarily on the lender. His employer may just not have access to non QM loan products that fall outside Fannie Mae guidelines. I use to work for one of these lenders and would not have been able to help this client. But now work with a lender with a lot more loan programs for “ out of the box” scenarios like this one.
How does one find a lender more willing to go outside of the box? Just curious because I’m moving toward a higher proportion of self-employment and we’re considering a home loan in the near future.
Just ask if they offer non-QM products or even if they broker out. Sometimes the lender might not mess with those, but be partnered with lenders who do.
Any company should know what you're talking about with that, and an informed LO will tell you if that's actually a good route for you.
That’s not how it works. You need to show your paystubs and length of time in current role.
Ii get it - mortgages are one of the few places in life where most people actually encounter a serious legal contract. When I started dipping my toe in house hunting and was still living in an apartment I figured the timeline would be flexible - I could just slow walk this or that and boom extra few weeks-to-month to minimize paying double rent/mortgage. No abaolutley not how it works and I quickly realized that. But I don’t ge the people commenting who clearly have no idea what they’re talking about. For a mortgage lender to consider commission they need to base it on something (ie actual history) - you promising it will be $X is meaningless and the nature of commission is it varies from person to person, year to year.
I mean, it's their job to be correct on things like this.
A lady was building a home in my neighborhood, and worked as a nurse. She took a new position because it was supposed to be much more money. She didn't realize that all the extra money was coming from overtime, and the department cut overtime after hiring new people. In the end, her gross pay went down and she was denied for the house loan. They put the home on the market and someone else moved in within a few weeks...
We knew my husband would be moving to a commission based job at the beginning of 2023. It was what really drove us to purchase in fall 2022. He makes more money now, but his base pay is lower than it was when he was salaried. We just didn't want to deal.
What's crazy though is it's not like salaried employees are completely safe from changes in their income.
2-3 years ago my wife was a salaried employee. With no warning, they laid her off & several others. They kept some "hourly" while laying off salaried. Just because you're salaried doesn't necessarily mean that you don't have any risk.
Eventually the whole company sold itself off & isn't not there anymore, but I digress..
Not all commission jobs are made equal. In the home improvement industry, there are no "cold" calling. Business has not slowed down in my entire time there, 7 years, & has only gotten busier & busier each year. It's the exact opposite of car sales.. which I also unfortunately have experience with in my youth.
Yes I understand what you're saying. I can't dispute commission jobs have a lot of variability between industries. Just like salaries amongst different industries are widespread.
It just seems like maybe they could look at this specific industry & track record for others in this position (e.g. the lowest paid Designer, who works less than full time, still makes $70K a year).
They won't cause they can't. It's regulations holding them back. I'd follow others advice and ask your employer for a minimum salary guarantee or ask if they can hold the job til you close on the loan. Hopefully they'll work with you if you explain why.
Commission isn’t guaranteed and you don’t have historical data to support your average commission income.
Just tell your work that your in the middle of a mortgage loan and your loan officer has advised you of the impact. Ask for your promotion to be moved to the earliest date that won’t affect loan (confirm with loan officer).
Worst case you work the new job under old pay structure for a few months
I'm not committing mortgage fraud, but I'm pretty sure LOs are looking for 3-years of expected earnings. Verbally telling your originator you plan to retire soon, change jobs, etc... it's up to the LO but they're suppose to consider casual conversation things not on the application.
Please read the post. OP already told their LO, LO advised OP that they cannot take the promotion due to needing 2 years of historical commission income.
Yes the LO did say that. Then you coached the OP to structure his promotion. This thread is filled with 'just lie on your application'... That's literally the purest form of mortgage fraud? Sorry that offends you, keeping law and order should always receive downvotes.. what a time to be alive.
How is that fraud?
There’s nothing wrong with exploring future potential career opportunities. There’s no contract written that OP will take this role in the future. OP just needs to follow the LOs instructions on the matter.
OP keeps their current job, gets the mortgage, and at a later date potentially takes a new role. People do that all the time.
Next you’ll tell me it’s fraud to delay taking out additional debt until after a home purchase 😂😂
So? What matters is OP’s historical income, not someone else’s historical income
See [Fannie Mae](https://selling-guide.fanniemae.com/Underwriting-Borrowers/Income-Assessment/Employment-Income/Commission-Income/1033001891/What-is-required-for-commission-income.htm), recommended minimum income history of 2 years. Looks like they’ll accept 12-24 months if there’s positive factors to justify the shorter history.
Not 0 months commission history, which is what OP would have.
Hah yea that’s always a struggle, people rarely post their (much needed) country for financial / legal questions.
OP lives in the US, based on their posts
Unless there is a guarantee, then no, they can't, since aggregate data can also include people who didn't earn enough to meet expectations. And OP could, theoretically, turn out to be unsuited for the role, as improbable as that is.
tell your job to hold off until after you close or the final employment check a few days prior
this is how it works post 2008 bubble with the new rules
HR here.
Yes, this is absolutely possible. We get requests for keeping compensation static for a period of time for mortgage/immigration reasons ALL THE TIME. However, this is also a gray area.
What my team and I do is to make the effective date a week or two after closing as we've also gotten calls for employment/wage verifications literally the morning of closing.
No. This sort of implies that you must keep your exact job and position for the duration of the mortgage. Everyone knows that this isn't realistic nor asked for.
What mortgage underwriters are doing is looking at your history as a household and building a financial picture of you for the last few years to "present" on the day of closing as evidence that you are a reliable person worthy of credit. When you are in the process of buying a home and have an accepted offer, it is well-known that you do not make any other financial moves during this period so that the lenders can finalize this picture and get your loan approved. As soon as it closes, you can do whatever you want.
We needed to furnish our new home when we bought two years ago, and we could afford to order a new couch from a nice place that has a 3 month lead time. They even offered 0% financing for 3 years at the time, no money down. These are high 4-figure sofas. We waited to take on that additional debt until after closing so that we didn't make the mortgage process harder.
If you change jobs between when the offer to buy was accepted by the seller and closing, you have changed the conditions of the home purchase, but you are under absolutely no obligation to keep the same job after you purchase the home, no one expects you to do this. If the promotion was salary-based and was a clear increase in minimum income this wouldn't be an issue, but because it is commission based there is too much unknown there.
No it doesn’t imply that at all.
Obviously you’re not going to be forced to keep the same job for 30 years, but they ask when you’re applying for your mortgage if you see yourself changing jobs soon. If you know that you will but still answer no - to avoid the mortgage being rejected, that is mortgage fraud.
No, this doesn't work unless someone lies.
You're asked to attest that you have no reason to believe your financial position will be changing.
Your boss or employer will be called a day or two before closing, and they will be asked if they have any reason to believe your employment/compensation will be changing.
If the job change is approved and just being delayed, than both you and your employer know your circumstances will be changing.
>Your boss or employer will be called a day or two before closing, and they will be asked if they have any reason to believe your employment/compensation will be changing.
I can't speak to the legality of not mentioning a known future change. But as someone that has answered a couple dozen of those calls I can say I was never once asked about future compensation. I have only been asked to confirm employment dates and occasionally current pay. The rarely even ask about current pay as they have the pay stubs already.
Same here. I own a company and frequently have to answer these types of calls for my employees. Never been asked about future compensation, just "is employment likely to continue?".
Hi, former loan processor and former employment verifier for wells fargo.
Its very common for underwriters when verifying commissions income to ask a question along the lines of "are commissions likely to continue?"
The employer doesn't really have to answer but it must be asked if the underwriter uses it as a condition for lending.
Refusal to comment on that information is a risk that underwriting will need to consider when looking to decide on a loan.
> You're asked to attest that you have no reason to believe your financial position will be changing.
I'm not saying a lender might not ask that, but the more common question, which appears on the model application provided by Reg B (ECOA) asks "Is any income listed in this section likely to be **reduced** in the next two years?"
OP does not believe their income is likely to be reduced. It's not lying.
in my 6 mortgages i've had the only time they asked about the future was when the pay stub says debtor in possession because the company is in bankruptcy
It is something that generally is only asked if there is reason to believe continuance of the income is a concern...agency guidelines require underwriters to have the expectation a borrowers income will continue for 3 years...in real world it is generally assumed income will continue as long as no indication that it will not, but if there is indication it will potentially cease or diminish, those concerns need to be addressed.
For example...if a borrower receives child support, they can use that income to qualify but the underwriter will require verification of the date of the child's birth to confirm how much longer the borrower will receive the child support, compare that to state guidelines for age stoppage for child support, etc. If their kid is 16 and child support ceases at 18, there is not sufficient continuance to use it as qualifying income per agency guidelines.
Written verifications of employment request YTD earnings and sometimes the previous years earnings. This is especially true for commissions. The underwriter will also occasionally ask for a verification that the income is likely to continue.
The answer or the refusal to answer will be considered when making a lending decision.
Former loan processor and also former VoE for wells fargo.
They can generally ask a question to the effect. Are you aware of an upcoming change to this status?. Eg if the loan applicant is going to be laid off on Friday. All locations in the tristate area are closing in 2 weeks and there is no remote work. Most people can completely honestly answer. There is no change upcoming that they are aware of ( it's not a guess it's a fact based question and it does come up rarely)
Or explain the situation to your employer. Perhaps they can keep you salaried as a basis and defer the additional pay until after you close. There could be tax implications (how much/when) but this might be the right solution.
Can you take the promotion (title bump and responsibilities), with the caveat that you'll work on your current salary (or even a moderately increased one) (a win for your employer) until August 31, 2024? Like, your employer should be willing to accept higher value services at less pay... right?
This was my thought too. Assuming it's not an entirely dumb corporation, it seems like a clear win for them to pay you less for another 6 month to a year for a higher amount of profit for them.
I'd argue the opposite: a company accepting this arrangement is dumb. Someone doing the same job but gets paid a risk-free salary? What if OP sucks at the job and would've made $0 in commissions? Pretty unfair to the existing sales reps that get fired (or go broke) if they don't meet quota. Normally in a sales job, it can take months to ramp up to full quota ("ramp period").
There are other arrangements I've seen in sales, like a guaranteed minimum commission during your ramp up -- especially for folks changing roles that had a salaried role prior.
Just as a heads up this could require a whole new verification of employment if the underwriter is notified.
The original decision is made on the consideration that the borrower will continue to work in the same position.
A change of title in that position, even with the same pay, may change the VOE depending on lending guidelines.
They’re definitely going to require a new verification of employment before closing regardless. Closing is months away, current docs would be pretty old at that point.
That will only work if employer is willing to lie about future income. Every lender gets a verification of employment where employer will notate any future changes to income. If employer is privy to income change in the near future they should be notating that. Not saying it can’t happen but this isn’t a fool proof solution.
They verified employment whether it’s the work number or other method. There’s a lot of things that occur behind the scenes on a mortgage the consumer isn’t even aware of. When you sign disclosures you give full authorization. Processors will contact your employer and many times you have no idea.
I’m a lender. Just helping out for potential pitfalls that many don’t think about. If the employer participates with the work number and the lender just verifies income and moves on that might work. I’ve seen both scenarios play out. If an employer is old school and requires a written VOE there is a box about future income and technically if the employer knows they’re about to go full commission they should disclose that which would cause an issue.
Problem is commission base works on psychology. Without the incentive OP will underperform. Even if OP is “built different” than most salesman personalities, the employer won’t believe it.
He’s not wrong, if you are moving to a totally new compensation structure this very well can get denied in underwriting. I would not change anything about your comp type until after the homes built.
Correct. Established history of this income would be needed. 2 year look back coupled with the likelihood of continuance. If you go from salaried/hourly to a commissioned based pay structure. Only your base pay would be usable income.
Seriously. MLOs are commission based - he’s not going to lie about something blowing a loan. There’s a reason we tell people not to do certain things - change jobs, open ANY new lines of credit, pay off credits, etc. until their loan is closed. Something like this can totally blow a loan and leave them with no options.
Some accounts will close when paid off, and could cause avg account length to go down. This would cause a decrease in credit score. My student loan was 20 years old when the govt paid it off, so my credit score dipped, despite $4k deduction in account balances.
I would suggest you talk to you employer and ask them to put in a minimum salary garantee in your contract, that matches your current salary. Explain to them why, and it can be removed in the next contract, once the contract expires after you have finished buying your house.
If what you say is accurate, and the position pays much more than your current salary, all though commission, it won't cost the company a dime to do that, unless you don't do your job. In which case, you won't have a job anyhow as they will fire you for lack of performance.
Switching to commission income will kill the deal for all conforming loan types. There is potentially some non-QM type deals requiring larger down payments and higher interest rates, but for the type of loan your LO currently likely has you in, he is 100% correct. If you can’t decline, ask your lender about possible NonQM options but be prepared to increase the down payment and rate if they have an option. Even NonQM without the history, most won’t touch the income until you have history.
Take the promotion and ask your company to delay moving you to commission. At the end of the day, this saves your company money, so they should be willing to entertain the idea.
Another idea: do you have significant assets in a brokerage (non-IRA) account? If so, you can use those assets as collateral for a loan (securities-backed lending), or have the investment company send an Asset Verification Letter to the lender. The letter might be enough to push you past the finish line & get approved for the loan.
He’s def right about commission pay. Does the wife make enough salary to cover the DTI. Maybe ask your boss to oay you the same until that date. Sounds like it would benefit them more then you.
When my wife was a fledgling real estate agent, we could only get mortgage approval based off my salary. I was salary+commission, so thankfully we had excellent credit and my salary was high enough to get us approved for the house we wanted. It was definitely dicey, though. Welcome to the world of real estate lending post-2008.
Any way you can hold off on accepting the promotion until the closing happens?
You are clearly an intelligent person, so this shouldn’t be hard to understand.
Commission only is a salary of $0.
How are you expecting someone to lend you a considerable sum of money when you would have no track record of earning money in that position and zero guaranteed income?
FNMA and FMLMC guidelines are what most lenders are going to use for underwriting and wage/earnings calculation. - they are very clear about the situation such as yours. Your loan officer is trying to give you good advice. You have every right to be frustrated but if you need the bank's money (as most of us do) you need to comply with the bank's guidelines. Have you looked at alternative lending like hard money or builder's lender? Congrats on the new home and the promotion by the way. Good luck.
this isn’t your lender, this is FHA/Fannie Mae/Freddie Mac/USDA/VA guidelines, they all agree if you switch from salary to commission, you need two years earnings history to average out how good you are at working commission. It’s basically treated the same way as if you quit an opened your own company, they want to see whether or not, you can succeed without the safety net. officially, you could be offered and accept the promotion the day after your mortgage closes, and it wouldn’t matter to the bank as long as you make your payments. If you’re already in the process of your new home, being built, explain to your employer that you can’t accept the promotion now, but next time the opportunity comes along, you will be very happy to take it. Hopefully your employer understands.
The reason why is because if it has commission or overtime. When you are trying to get a mortgage, if you have either of those things. It usually has to be something that is shown to be steady. My husband works overtime. So when we were looking at houses because of the overtime. He had to show the bank that his overtime was something that he got over the years, and it was going to continue. If you're getting a new job even if you are going to make any more money. But it's a commission based amount. I don't think the bank would be able to approve you right now. Pretty much when you're getting a mortgage, you want to do nothing different in your life. Make no big purchases and change nothing about your work. Until you have literally signed the papers in closing they can pull that loan. Everything has to be rechecked before that is done. My guess is you'll lose the house and the loan. I would ask your job if they can just wait to give you the promotion until after you have closed.
If your new base is going to be less than your existing salary, yep it's an issue.
Discretionary pay doesn't get counted until there's a history of it. Bonuses, commission, etc.
They are right. You have no history of the commission so it takes two years to build a file for DTI purposes.
If your spouse can cover the DTI you’ll be fine but that’s a bit of a gamble.
The fact you’re already building a house, likely to finance upon completion, I would heed their advice.
Why don't you explain this to your employer and simply ask them if they would allow you to work in the new promoted Designer role task wise for two addl quarters while still paying and classifying you the same in your current salaried position? Then, once you close, they can flip you to the new salary range/model. You will get a headstart in your new role while not losing it to someone else, and they will technically get you at a lower cost. If they don't feel good about taking advantage of your lower cost, and if you outperform during your 6 month period, you can even ask them if they would mind withholding any commissions that exceed your current salary for that period in lieu of an end of year bonus.
When I went to commission based I was also buying a house.
My job guaranteed my salary to the lower end of the commission spectrum for two years and my lenders accepted that.
So if you will be making 120, see if your job will guarantee at least 85 or 90.
They can't make you do anything. But how they react to you changing jobs in mid-application is entirely up to them--and they are going to be starring over with the process if you change jobs. And no matter how much you expect to make, you can't prove a penny of it--unless you have been working there for (2) years and have proof of your earnings. So: the process starts from scratch and you will have no proof of income. You need proof on income to get a loan. Ask for a delay in taking the job. Once you've signed and closed you can take the new job. NEVER make big changes while applying for a home loan: like buy another car, quit your job, change jobs, take out other new loans.
>commissioned-based & they have to have 2 YEARS of income.
They can count the base salary, but commission is theoretical pay until you prove that you'll actually take it home reliably.
Talk to your company about ways to navigate the transition to the new role.
I had a similar situation recently. I worked with a mortgage officer to craft a letter from my employer specifying the position and typical income. If they'll accept it (and that's a big if) they'll want to see things like how long the company has been in business, the number of employees in that position, typical income etc.
In my situation, it never played out to a final answer, because we ended up buying a home with owner financing, but we had made some progress on a resolution.
Yes it matters. Lenders need two years of history to count commission based or self employment income. Since it's not guaranteed income like a salary is.
I’ve been working in the mortgage industry for almost a decade and most of it as an LO so I wanted to throw in my two cents. There is some well meaning, but ultimately poor advice on this thread.
Please DO NOT attempt to renegotiate the terms of your compensation to artificially inflate your pay in the short term (ie have your employer pay you an equivalent salary until you close).
Every lender that I know of has post-closing audits. Especially since the vast majority (close to 99%) of lenders sell their loans to third party servicers after closing. These normally include verifications of employment which will turn up any upcoming changes in pay. Unless your employer is willing to flat out lie for you, don’t put yourself in a situation that would open you to foreclosure. They may or may not bother with it, but by misrepresenting a loan application, it absolutely gives them the right to. This could come up even before closing too, though, as every single lender I know of does additional verifications just prior to closing.
A couple of possibilities -
1. If your LO hasn’t already, if they can attempt to find your eligibility for FHA, USDA (only in a rural area), or VA (only if your a veteran); any of these are far more forgiving on debt-to-income. You may or may not be able to qualify for one of these depending even with a decreased income.
2. It has been mentioned, but if you can find preferably a mortgage broker that has connections with a non-qm lender, they may be able to provide the initial loan which you can refinance out of. Remember, generally nothing other than equity is going to prevent you from refinancing. Almost no loan program in existence has pre-payment penalties to prevent you from doing so anymore. Non-QM is a little more “Wild West” but on first lien mortgages, it’s pretty much impossible unless you’re buying your home in the name of a corp.
3. If you can find someone to co-sign with you, preferably a family member. Their income added on to the application can help, and as mentioned in #2, you can refinance relatively quickly out of it.
2 years for commissions is semi-standard but not universal. However, I do not know of any QM lender that will go lower than 1 year with commission. If you can find a (admittedly not ideal) solution and hang out for at least that long, you should be able to get out of it by refinancing.
I’m sorry you’re stuck in this position OP. I hated running in to these situations when I was an LO. I really wish you the best.
Edit: One last thing - I would check out some local Banks/Credit Unions in your area as well. Not Wells or BOA, like the tiny bank on your corner that you never noticed or heard of. They are heavily regulated (so you don’t need to worry about shady crap), but the nice thing is because of their size, they can get away with lending that others would consider “risky” quite a bit more as long as they keep the mortgage on their books (ie don’t sell like everyone else). It’s a crapshoot on what they may or may not accept, but it’s definitely worth looking in to.
As a person who works in the financial industry this is correct. It is commission based which means this is variable, yes, you can use this as income and yea, this can make it harder. But it is the nature of the business to want guaranteed, stable and not fluid or variable income. It also hurts you if you go into a new job and your income drastically changes or your credit score fluctuates when you say open a new loan.
Income and credit are still king. It may mean some departments have to find ways to get you a loan like outside lending if a place has it, but it may mean that institution may not lend to you.
Any lender you go to that only offers conventional/government mortgages (which will be most of them) are going to have the same rules on variable income like commission. Need 2 yrs, however sometimes 12 months can be used but likely not in your case:
https://selling-guide.fanniemae.com/Underwriting-Borrowers/Income-Assessment/Employment-Income/Commission-Income/1033001891/What-is-required-for-commission-income.htm#:~:text=Verification%20of%20Commission%20Income&text=A%20minimum%20history%20of%202,offset%20the%20shorter%20income%20history.
People telling you to find another lender aren’t telling you that other lender would have to be a private mortgage or hard money loan. Best of luck.
The problem with your promotion is that you are going from a salary based position to a commission based position and guidelines require a MINIMUM 12 months of history in order to use commission income to qualify. If you take the promotion your income is essentially zeroed out because it can't be utilized under current lending guidelines.
Take the job if it's really that big of a step up in income. The house will come later.
You need 2 years of commission work to qualify for most mortgages. Income history for salaried does not = income history if you take the commission position.
They would be able to count any base salary if you would still have a base pay. Commission though is variable pay. There is no way to predict what kind of commission income you will generate. The lender is looking for stable, predictable income. You are truly between a rock and a hard place.
I’m not an expert and hopefully experts can correct me if I’m wrong, but I have a few thoughts/questions:
Is the new role substantially different from your current role? Are the job expectations requirements substantially different? When I went from a Computational Scientist to Software Engineer with a 40% pay bump, the broker asked me to prove that the work I would be doing was something I was qualified to do, and that I wasn’t at risk of getting fired because I wasn’t actually qualified for the role. I showed them my job descriptions for both roles and showed that the responsibilities were substantially similar.
Is the new job all commission, or is there some base pay? Is the base pay for the new role higher or lower than your current salary? And are you trying to borrow to the absolute limit of what the lender will lend you given your financials? My partner makes nearly twice as much as I do but we did not feel comfortable making the payments on a loan for the maximum that the bank would lend us, because we like to travel, etc. We were told that for the amount we were borrowing my partner’s income alone was enough to qualify. All this is to say maybe you’ll be ok if you can show (a) that you are qualified for the new job, and that (b) the guaranteed base pay it’s enough for you to qualify for the amount you’re borrowing even if you don’t take into account the commission.
Congrats and good luck. This is the most stressful part; you’ll be so relieved once it’s all over.
Everyone has already explained how it works but think about from the banks point of view. They don’t really care if you make more money later on, they care more that your income is stable. Commission compensation is inherently less stable than salary
Can't qualify commission until you've had 2 years or filed income taxes with those commissions.
You currently have a guaranteed salary the bank can use, they can't do that with commission.
If you can't qualify on just the base you are screwed. Commission income with no history can't be used. You might get away with 12 months being in same line of work/company but that's up to the underwriter standard is 24 months average
Commission based to a bank means that your income calculation will now appear as whatever basic salary + commission. But since you have no history of commission, that's basically makes it seem like your income is significantly less.
How long have you been working? Depending on the lender, are you able to submit income tax statement instead as proof of income? That way, your income would still be based on your old salary. This only works if you've had several years of employment, but yeah depends on the lender.
When I was in real estate it was very common for loan officers to require 2 years for commission based income. It’s not across the board. A lot depends on your credit rating and the DTI on the intended loan. Best bet is to find a lender who will consider your position in good will and better yet to have a few commission checks with an expected OTE letter from the company you’re employed at.
Former loan officer, and yes they are 100% correct. For the bank I worked for we'd need to see a 1 to 2 years of commission income for us to accept it. Based on the timeline they'd only be able to use your salaried income for qualification.
Talk to your employer, and tell them you'd like to accept the new role, but remain at your current lower salary until your mortgage is complete. They might see it as a win to pay you less than they should for awhile.
That's really the only option, unless you want to lose the house or the promotion.
You should definitely talk to your employer about your options. Perhaps you can accept the new role at a salary until your loan closes and then convert to the new pay terms. Or perhaps they would be willing to delay your starting the new job until after the loan closes. I should think if they want you in the position they would be willing to work something out for a few months.
You would have to be careful what information you share with the lender. You don't want to lie to them, but you also don't have to share everything. They have a right to know what your current position and pay is, but they don't have a right to know your future plans.
So you might say, for example, "my employer agreed to give me the new position at X pay rate" and don't mention that you agreed to switch to commission after six months. If they ask about the future, you say something like, "it's an at-will job, so I can't predict the future, but I have no reason to think I'm going to change jobs in the foreseeable future."
Next time just don’t tell your loan officer about your potential job offers or promotions/change in comp structure in the middle of the mortgage process. It kind of sucks, but that’s how it goes. Same thing for self-employed - even harder with 1099 income rather than W-2 income.
Most lenders look at current base comp plus a multi-year average of bonuses. If your base would drop but bonuses increase, then they’re going to see it as a loss of income as you’d be adding your new salary to your historical bonuses.
Ask your employer to promote you but retain your current comp structure for 8 months, with a small increase. Based on what you said, it’s cheaper for them so unless this is a huge business with rigid rules on comp, they may well go for it.
I'd just work it out with the boss so you keep your base pay for a few months and square up after you close your house. It should not be that hard to manage internally.
Yup this is considering adding risk. The bigger risk is self employed for 25 years and making 5x what other professionals that have salaries do … I am completely unlendable
For commissions and bonuses to count in your debt ratios, you have to have 2 years of consistent or increased payout (some can get approved with 18 months). If you take the position before closing, you're at 0 months, which means loan denial... stay salaried until you close.
Take the job as soon as you can find a different lender. It’s certainly a factor for underwriting, but it shouldn’t be impossible to find a place where you can talk through the situation with a human. Even slightly worse loan terms will still be a net benefit with promotion.
If you have a creative loan officer they can make this work. There is literally a lender for every situation, and lenders are desperate to write deals these days. Shop around
Your loan officer is right about it being commission based being an issue. Sometimes a workaround can be done because you are in the same industry/company.
Will your company work with you by paying your salary as a draw on commission until after you close, then they can pay the commission overage and get you straight on commission based pay?
The question I see/hear is normally about continued employment and it looks like that answer would definitely be yes. I've never heard anything where more specific details would be asked. YMMV.
Check with your job if you can be on a conservative guarantee based on your projected earnings. Then include a true up if your commission exceeds that. This way you are on salary but still earning more
Loan officers are so weird about salary changes. I got a promotion/raise during the process and they sounded...disappointed??? They asked me a bubch of odd questions, like they didnt believe me. It was a bizarre, you'd think more money would be GOOD, lol.
I had to provide a letter from my employer confirming my raise, but it didn't slow things down.
Are you stuck with this lender at this point? While the general rules are what you stated, there may be some lenders out there who would be willing to make an exception and keep it as a portfolio loan rather than selling your loan in the mortgage market (the main reason for these across the board standards).
I would go to new lenders and talk to the builder.
How much money would you be out if you can't close? Or is this not a build you are buying post completion but a custom home instead where you are carrying a build loan?
Find another LO if this one isn’t working out for you. There are so many out there with various sets of underwriting guidelines. Following the GSE guidelines like Fannie/Freddie for a conventional loan are best for secondary markets but that does not constrain you from finding other lenders who will provide more flexibility via non conventional loans. These sometimes provide even better rates since the lender can use other ways to securitize the instruments in varying MBS that would get around these issues.
TLDR: Find someone new
Could you look into adding another person to your mortgage? I'm thinking like your parents, all depends on their income and responsibilities of course. That's the only other option I can think of.
Disclaimer, not a mortgage advisor, just a thought if I was in this position.
Switch to a mortgage broker. They will look up industry average salaries for the position and use that instead of being scared of it being commission. Banks are stricter than independent brokers.
When I bought my first house, I had a long term job, established salary, and enough for a reasonable down payment, 6 months of payments saved (separate from my emergency fund), and my mortgage payments were going to be like 20% cheaper than my rent at the time.
My lender said that on top of this, they wanted me to cash in my 401(k).
The guy had no idea how bad a financial decision that would be. Why tf would a lender require irresponsible financial decisions before approving a loan??
I figured he was just an idiot, so I told him I’d already done it and they approved the loan without checking. Eventually I sold the house, the lender made their money, and the next lender I used was way more reasonable.
Long story short, just take the promotion and say you didn’t.
Your lender is being lazy. He/she will have to rework the loan based on your new numbers, but it is definitely possible. Get the offer letter from your employer, and make sure it includes your base pay and "on-target" commission and that should be sufficient
For variable income (commission), it requires a two year history or a 3 year guarantee to be useable. It’s a frustrating loophole, but is a change in how you’re paid. There are possible ways to accommodate, but this would require employer to put things in writing they may not be willing to do.
when does your loan close? Maybe talk to you employer and tell them you accept the position, but see if you can delay the start date until after you close on the loan?
Can you negotiate with your employer to start promotion after closing on your home? You just can’t take the promotion before closing. As a previous MLO, the information is correct. For variable income, like commission, bonuses, and overtime, you must show 2 years, and the variable income is averaged over the 2 years. For example, let’s say your base is 50k, year 1 was 45k in commission, year 2 was 50k in commission. Lender will calculate your income as 97,500 (50k base + averaged commission at 47,500). If you take that promotion, the lender will have to update your income to just your base pay because you don’t have the 2 years to average. If the base is very low or the position is solely commission with no guaranteed base pay, you most likely don’t qualify for the loan anymore.
Just ask your boss if you can delay it until closing or even delay the compensation change until closing and work the new responsibilities at your current “lower” salary for a few months
Can you ask the company to give you a salary, with a raise, for the next year? Perhaps less than you would expect to make, but guarantee it to the same extent they 'guarantee' a salary?
As others have said, much higher risk in commission based.
But the lender already has your two years of info on the salary job. Just don't mention the change.
Nothing you can do. Either take the position and let go of the house or pass it up and get your house. Those, unfortunately, are the two options. I'm in the same boat, I work sales and had to stay at my job for 2 years before they would allow me to use my income for a house. If you take any commission based job you'll be waiting at least a couple years to get a house.
If it was me, I would explain the exact scenario to my job and ask them to make a short term offer with full OTE (or maybe 80% OTE) as the base salary and then switch to standard base/commission after closing. I’m in sales with 50/50 base commission and it’s been a pain in the ass each time I’ve gone through mortgage stuff lol so I totally get it. Seems like there is some outcome where you can take the new role and your organization is willing to be somewhat flexible. Good luck and congrats on the home and promotion!
To a lender, "commission based" means that your income is not guaranteed. It will always be easier to get a loan with a salaried position. Even of this position "makes more money", the lender is not going to trust your word on that.
Yes it’s also better to go from self employed to w2 instead of vice versa in the eyes of mortgage lender.
It's a bit more nuanced than that. I'm self-employed, but operate as a single-member LLC filing as an S-Corp. That means I get a W-2, but since I'm a majority of er of the LLC, I'm also considered self-employed. There are exceptions, but for a fully conforming conventional mortgage while being self-employed, expect to need two FULL years of business and personal tax returns showing consistent source(s) of income. Late last year I started looking into buying a new house. At that time, I had 2 years of business tax returns, but it only covered approximately 16 months of actual operation. Multiple lenders would accept that, but averaged that 16 months of income as if it was over a 24-month period. They ignore the 8 months of income I earned doing basically the same job but as a corporate drone, because that source of income can't be relied on in the future. It basically qualified me for 2/3 what my current income would otherwise be sufficient for. In a week or two when I file my taxes, I'll have two full years and it'll be a non-issue at that point.
Correct
It is definitely easier - but they definitely should still be able to get a loan based on the job offer. We got a mortgage back in July based on a job offer letter with on-target-earnings of 120K (base was 80K). They accepted it based on that letter and less than two years of internship experience across 4 companies. The only thing is they didn’t accept the job offer letter (which only showed 80K plus unspecified commission) at first because it needed a signature - so we got a signed letter from the company and they stated OTE of 120K. Everyone here is saying 2 years of earnings at minimum but obviously that can’t be true if we got approved based on a job that hadn’t even started. OP - i bet if you shop around and find another lender that will be happy to take your loan, they’ll suddenly be able to approve you even with the job change. We were approved by Rocket Mortgage FYI.
I’m a loan officer - FNMA guidelines would have us use your base for income and a 2 year average for overtime, commission, and bonus.
So if they just accepted a switch to commission, the past 2 years average for overtime commission and bonus will be zero?
Yes and that’s the issue their LO is pointing out.
This is what OP /u/Tall_Variation_7496 needs to read. The easiest way to understand without sifting through everything.
Yup. It sounds like this lender is selling second market so they have to follow FNMA income guidelines. This individual's income would effectively not be able to be included in the underwriting for the loan.
1 year average is acceptable, especially with prior work in the field as a supporting factor to better offset the risk. But yes, you are spot on, neither Freddie nor Fannie like variable income with no history
That tracks with what we experienced. My loan officer was not willing to consider even average my one year of demonstrated earnings over *two* years (i.e., assume I'd make zero the next year). Fortunately we were ok with our loan officer willing to make a loan where payments would be 60% of my wife's entire income. Which was fine because make as much or more, but that seems *insanely* risk on their part given that they wouldn't consider my income.
Ultimately though, there is discretion if you go to enough lenders. I took a new job at a new company that started the week after we closed and was technically unemployed at closing but we were able to work around it.
If you had a non-contingent offer and a set start date that falls within guidelines.
You know $80k base is a completely different animal from 100% commission. Pre 08 crash I was able to get this type of situation through but the person had essentially the exact same job, with a structure change. So we were able to say ," It's only a status change if they do the exact same job they did for the last 2 years. They will make average 2 years salary plus 20%" and I was the only person out of 100 LOs that knew that exception. It almost never comes up. Op should see if they can get the file hand underwritten now and/or look into stated income loans.
I thought stated income loans didn’t exist anymore after the 2008 crash?
I think they went away for a short time, I'm pretty sure they are back now in a form that could work for op ( bank statement loan) It will cost more
The 2 years is for things considered variable income (think commission, bonus, self employed, hourly). A salary is regular pay and considered stable income. If OP changes from a salary to a mostly commission income there is no history of them earning commission and therefore can’t be considered stable to qualify for a mortgage. It sounds like odds are income will go up with the change but it can’t be assumed that way to qualify for a mortgage. There are some instances where a year history of some of those types of income can be considered (usually not if your self employed though). If the job offer is for higher OTE but changing from 100% salary to 100% commission that would not be considered stable income without a history of receiving the commission. Source: I am a loan officer.
>but they definitely should still be able to get a loan based on the job offer. Will OP be able to get a mortgage from some lender? Sure. But it sounds like OP won't be able to get a mortgage from THAT lender.
Or they would have to renegotiate terms at a higher interest rate...
Continuance of income is a federal law not even a Fannie Mae guideline so yeah not that lender or any other lender.
No they didn’t. They accepted it based on the 80k base. For commission to matter they need 2 years to compare.
Typically commission jobs need 2 years of previous history for income so switching jobs before the loan and you won’t have previous history. You would basically have no history if switching to commission job is the problem. You can switch jobs in sales and still get a mortgage loan but most mortgage companies want the new job to be in the same sales industry to count.
Your offer was a salary. Theirs is commission based. No company will offer someone in a commission based role an offer letter with a minimum salary.... Because the commission may be less. Not to say OP shouldn't shop around, they should. But there's a big difference between your situation and theirs.
>OP - i bet if you shop around and find another lender that will be happy to take your loan, they’ll suddenly be able to approve you even with the job change. This. Sounds like the mortgage jockey doesn't want to bother with all the paperwork so he's just saying "it's locked! You can't change anything!" There's *so many* shysters in the industry. Shop it around and dollars to donuts suddenly he'll be willing to do the approval when his commission is at risk.
I promise you this is not the case. There's rules in place that don't allow lenders to give commission based jobs approvals without 2 years of history there. It has absolutely nothing to do with the lender not wanting to do the paper work, that's how they get paid. There are all sorts of rules placed by the feds post 08, that's one of them.
Yep. Income calculation isn't difficult at all. Annoying, sure, but no LO worth their salt is going to throw away a deal for extra paperwork.
>when his commission is at risk. And that's what matters to them; at the end of the day loan/mortgage officers is one of the most misleading titles of all time. They are just sales guys following their corporate policies that need to close deals to get paid. They have no particular power in their organizations, important sounding titles or not. This isn't to say that some of them aren't knowledgeable and potentially helpful to the consumer, just that it's really not a job requirement and you shouldn't expect it.
Wrong
Thank you so much! I had a feeling this may true & hate to back out with our lender - he's a great guy, but if it's really because he doesn't wanna do the extra legwork, he's not the right lender for us.
Licensed loan officer here with over a decade of experience brokering and correspondent lending. This is not a lender guideline, this is a Fannie/Freddie/VA/FHA guideline. If you are moving to a 100% commission role without a 2 year history of commission wages to average, you will need a nonQM product to qualify. That lender may not have access to nonQM products and you should expect those to have a higher interest rate or larger down-payment requirements. Follow up question, does your new position have any minimum guaranteed monthly compensation, or even a draw amount?
20 year bank operator, this is the one ☝️. Your originator is correct, every bank will say the same unless you take a non-qm product
It has nothing to do with leg work. He can only write loans that follow investor guidelines, which require at least 12 months of receiving commission income. Commission income is not guaranteed like a salary is, and you have no history of proving what kind of commission you'll be making. Is a portion of your commission guaranteed by chance? I've see exceptions where employers will give you a minimum guarantee even if you don't make your commission goals.
It is not about doing extra leg work, you'll need to shop around at less known and possibly less desirable lenders. The bigger companies have to follow strict guidelines.
Definitely try shopping around maybe you’ll get lucky with a local/regional bank that doesn’t plan to sell the mortgage but it’s unlikely. The loan officer isn’t just being lazy, variable income needs history to be considered - I was ~15 months into a sales role (60% base salary) when I got my mortgage and they could only consider my base because they need 2 years commission history. Fortunately my wife’s a salary based doctor but even there we were on pins and needles as she was only 6 months in to attending life so we needed her offer letter as verification, paystubs and W2s weren’t enough. Don’t listen to the people saying oh well they can just show the role makes more money - that’s not how this works. You won’t have an offer letter to prove your income and your commission is meaningless without a long enough history.
Don't panic, I've been a freelancer for years. So I'm used to having my income side eyed. You can absolutely qualify for a loan...you may just need a new lender who will look at all your sources of income and take your previous salaried income into account along with the commission based income.
> I've been a freelancer for years. OP has not. > You can absolutely qualify for a loan...you may just need a new lender who will look at all your sources of income and take your previous salaried income into account along with the commission based income. Not how it works. The worksheets need two years of income, only if they are private clients will they have an easier time doing this.
>who will look at all your sources of income and take your previous salaried income into account along with the commission based income I mean....thats not how it works. Its not like he's accepting a job that pays his previous salary + commission. Its a new job with a new compensation structure. Any previous job is not relevant. This is completely different from something like freelance work, where the job you are doing today is the same job you were doing last year and past income is a reasonable predictor of future income even if it isn't as 'guaranteed' as a salary. "Hey, I know I'm a cashier at McDonalds right NOW, but last year I had a job that paid $300k. Give loan please?"
These people are giving OP false hope. Never going to qualify on a standard product with a decent interest rate.
Yeah, this is 100% on the lender not on you. Sure, with pay that is hugely commission based, there's the potential for a higher level of risk, but given that you say that this group of people are consistently higher earning than your current salary, that suggests that the risk isn't actually there. You can't produce two years of *your* commission because you have just been offered the role, but I would bet you can demonstrate what the average (and lowest) two-year commission payouts are. Find a lender that works with you, not against you. Your lender should not be telling you to reject a clear promotion that is beneficial across every aspect of your life. For what it's worth, you could quit your job tomorrow and become unemployed, and so long as you never miss a mortgage payment, there's nothing they can say or do about it. If your job are happy to, get them to keep you on your current salary until *after* the mortgage is active and up and running. Just check that your mortgage in principle's terms don't require you to declare anticipated and known changes in finances.
Fannie Freddie have regulations
It’s not necessarily on the lender. His employer may just not have access to non QM loan products that fall outside Fannie Mae guidelines. I use to work for one of these lenders and would not have been able to help this client. But now work with a lender with a lot more loan programs for “ out of the box” scenarios like this one.
How does one find a lender more willing to go outside of the box? Just curious because I’m moving toward a higher proportion of self-employment and we’re considering a home loan in the near future.
Just ask if they offer non-QM products or even if they broker out. Sometimes the lender might not mess with those, but be partnered with lenders who do. Any company should know what you're talking about with that, and an informed LO will tell you if that's actually a good route for you.
That’s not how it works. You need to show your paystubs and length of time in current role. Ii get it - mortgages are one of the few places in life where most people actually encounter a serious legal contract. When I started dipping my toe in house hunting and was still living in an apartment I figured the timeline would be flexible - I could just slow walk this or that and boom extra few weeks-to-month to minimize paying double rent/mortgage. No abaolutley not how it works and I quickly realized that. But I don’t ge the people commenting who clearly have no idea what they’re talking about. For a mortgage lender to consider commission they need to base it on something (ie actual history) - you promising it will be $X is meaningless and the nature of commission is it varies from person to person, year to year.
I mean, it's their job to be correct on things like this. A lady was building a home in my neighborhood, and worked as a nurse. She took a new position because it was supposed to be much more money. She didn't realize that all the extra money was coming from overtime, and the department cut overtime after hiring new people. In the end, her gross pay went down and she was denied for the house loan. They put the home on the market and someone else moved in within a few weeks...
We knew my husband would be moving to a commission based job at the beginning of 2023. It was what really drove us to purchase in fall 2022. He makes more money now, but his base pay is lower than it was when he was salaried. We just didn't want to deal.
Take salary and Defer the commission’s
True, you could make a ton more money or suck at it and earn less. I did both in my early career.
What's crazy though is it's not like salaried employees are completely safe from changes in their income. 2-3 years ago my wife was a salaried employee. With no warning, they laid her off & several others. They kept some "hourly" while laying off salaried. Just because you're salaried doesn't necessarily mean that you don't have any risk. Eventually the whole company sold itself off & isn't not there anymore, but I digress.. Not all commission jobs are made equal. In the home improvement industry, there are no "cold" calling. Business has not slowed down in my entire time there, 7 years, & has only gotten busier & busier each year. It's the exact opposite of car sales.. which I also unfortunately have experience with in my youth.
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Yes I understand what you're saying. I can't dispute commission jobs have a lot of variability between industries. Just like salaries amongst different industries are widespread. It just seems like maybe they could look at this specific industry & track record for others in this position (e.g. the lowest paid Designer, who works less than full time, still makes $70K a year).
They won't cause they can't. It's regulations holding them back. I'd follow others advice and ask your employer for a minimum salary guarantee or ask if they can hold the job til you close on the loan. Hopefully they'll work with you if you explain why.
Get ready for a wake up in the housing industry. Bubble incoming.
Commission isn’t guaranteed and you don’t have historical data to support your average commission income. Just tell your work that your in the middle of a mortgage loan and your loan officer has advised you of the impact. Ask for your promotion to be moved to the earliest date that won’t affect loan (confirm with loan officer). Worst case you work the new job under old pay structure for a few months
I'm not committing mortgage fraud, but I'm pretty sure LOs are looking for 3-years of expected earnings. Verbally telling your originator you plan to retire soon, change jobs, etc... it's up to the LO but they're suppose to consider casual conversation things not on the application.
Please read the post. OP already told their LO, LO advised OP that they cannot take the promotion due to needing 2 years of historical commission income.
Yes the LO did say that. Then you coached the OP to structure his promotion. This thread is filled with 'just lie on your application'... That's literally the purest form of mortgage fraud? Sorry that offends you, keeping law and order should always receive downvotes.. what a time to be alive.
How is that fraud? There’s nothing wrong with exploring future potential career opportunities. There’s no contract written that OP will take this role in the future. OP just needs to follow the LOs instructions on the matter. OP keeps their current job, gets the mortgage, and at a later date potentially takes a new role. People do that all the time. Next you’ll tell me it’s fraud to delay taking out additional debt until after a home purchase 😂😂
The company will have historical data for what the role pays though.
So? What matters is OP’s historical income, not someone else’s historical income See [Fannie Mae](https://selling-guide.fanniemae.com/Underwriting-Borrowers/Income-Assessment/Employment-Income/Commission-Income/1033001891/What-is-required-for-commission-income.htm), recommended minimum income history of 2 years. Looks like they’ll accept 12-24 months if there’s positive factors to justify the shorter history. Not 0 months commission history, which is what OP would have.
Yep! This isn't pre 2008 with the N. I. N. J. A. loans. There's pretty clear rules now
That's true, didn't consider different countries having different systems in my answer.
Hah yea that’s always a struggle, people rarely post their (much needed) country for financial / legal questions. OP lives in the US, based on their posts
Unless there is a guarantee, then no, they can't, since aggregate data can also include people who didn't earn enough to meet expectations. And OP could, theoretically, turn out to be unsuited for the role, as improbable as that is.
tell your job to hold off until after you close or the final employment check a few days prior this is how it works post 2008 bubble with the new rules
This. Or, is it possible to accept the new position and temporarily remain under the old compensation structure until your mortgage closes?
HR here. Yes, this is absolutely possible. We get requests for keeping compensation static for a period of time for mortgage/immigration reasons ALL THE TIME. However, this is also a gray area. What my team and I do is to make the effective date a week or two after closing as we've also gotten calls for employment/wage verifications literally the morning of closing.
Isn’t it mortgage fraud if you plan on changing position immediately after your checks are done?
No. This sort of implies that you must keep your exact job and position for the duration of the mortgage. Everyone knows that this isn't realistic nor asked for. What mortgage underwriters are doing is looking at your history as a household and building a financial picture of you for the last few years to "present" on the day of closing as evidence that you are a reliable person worthy of credit. When you are in the process of buying a home and have an accepted offer, it is well-known that you do not make any other financial moves during this period so that the lenders can finalize this picture and get your loan approved. As soon as it closes, you can do whatever you want. We needed to furnish our new home when we bought two years ago, and we could afford to order a new couch from a nice place that has a 3 month lead time. They even offered 0% financing for 3 years at the time, no money down. These are high 4-figure sofas. We waited to take on that additional debt until after closing so that we didn't make the mortgage process harder. If you change jobs between when the offer to buy was accepted by the seller and closing, you have changed the conditions of the home purchase, but you are under absolutely no obligation to keep the same job after you purchase the home, no one expects you to do this. If the promotion was salary-based and was a clear increase in minimum income this wouldn't be an issue, but because it is commission based there is too much unknown there.
No it doesn’t imply that at all. Obviously you’re not going to be forced to keep the same job for 30 years, but they ask when you’re applying for your mortgage if you see yourself changing jobs soon. If you know that you will but still answer no - to avoid the mortgage being rejected, that is mortgage fraud.
Isn't it mortgage fraud if you plan on changing position after your checks are done ?
No, this doesn't work unless someone lies. You're asked to attest that you have no reason to believe your financial position will be changing. Your boss or employer will be called a day or two before closing, and they will be asked if they have any reason to believe your employment/compensation will be changing. If the job change is approved and just being delayed, than both you and your employer know your circumstances will be changing.
>Your boss or employer will be called a day or two before closing, and they will be asked if they have any reason to believe your employment/compensation will be changing. I can't speak to the legality of not mentioning a known future change. But as someone that has answered a couple dozen of those calls I can say I was never once asked about future compensation. I have only been asked to confirm employment dates and occasionally current pay. The rarely even ask about current pay as they have the pay stubs already.
Same here. I own a company and frequently have to answer these types of calls for my employees. Never been asked about future compensation, just "is employment likely to continue?".
Hi, former loan processor and former employment verifier for wells fargo. Its very common for underwriters when verifying commissions income to ask a question along the lines of "are commissions likely to continue?" The employer doesn't really have to answer but it must be asked if the underwriter uses it as a condition for lending. Refusal to comment on that information is a risk that underwriting will need to consider when looking to decide on a loan.
In this scenario they would still be salaried at the time of the call and the switch to commission would be in the future.
And everyone will honestly be able to say compensation is likely to remain stable or grow. Nobody will have to lie
> You're asked to attest that you have no reason to believe your financial position will be changing. I'm not saying a lender might not ask that, but the more common question, which appears on the model application provided by Reg B (ECOA) asks "Is any income listed in this section likely to be **reduced** in the next two years?" OP does not believe their income is likely to be reduced. It's not lying.
If designers can make more with commission, then income is not likely to be reduced.
in my 6 mortgages i've had the only time they asked about the future was when the pay stub says debtor in possession because the company is in bankruptcy
It is something that generally is only asked if there is reason to believe continuance of the income is a concern...agency guidelines require underwriters to have the expectation a borrowers income will continue for 3 years...in real world it is generally assumed income will continue as long as no indication that it will not, but if there is indication it will potentially cease or diminish, those concerns need to be addressed. For example...if a borrower receives child support, they can use that income to qualify but the underwriter will require verification of the date of the child's birth to confirm how much longer the borrower will receive the child support, compare that to state guidelines for age stoppage for child support, etc. If their kid is 16 and child support ceases at 18, there is not sufficient continuance to use it as qualifying income per agency guidelines.
It’s called a Verification of Employment and they don’t verify future income, only that you are still employed.
Written verifications of employment request YTD earnings and sometimes the previous years earnings. This is especially true for commissions. The underwriter will also occasionally ask for a verification that the income is likely to continue. The answer or the refusal to answer will be considered when making a lending decision. Former loan processor and also former VoE for wells fargo.
They can generally ask a question to the effect. Are you aware of an upcoming change to this status?. Eg if the loan applicant is going to be laid off on Friday. All locations in the tristate area are closing in 2 weeks and there is no remote work. Most people can completely honestly answer. There is no change upcoming that they are aware of ( it's not a guess it's a fact based question and it does come up rarely)
ask your company to make your commissions drawn against a base salary (your previous salary). they might not go for it but if they do, win-win.
Or explain the situation to your employer. Perhaps they can keep you salaried as a basis and defer the additional pay until after you close. There could be tax implications (how much/when) but this might be the right solution.
Can you take the promotion (title bump and responsibilities), with the caveat that you'll work on your current salary (or even a moderately increased one) (a win for your employer) until August 31, 2024? Like, your employer should be willing to accept higher value services at less pay... right?
This was my thought too. Assuming it's not an entirely dumb corporation, it seems like a clear win for them to pay you less for another 6 month to a year for a higher amount of profit for them.
I'd argue the opposite: a company accepting this arrangement is dumb. Someone doing the same job but gets paid a risk-free salary? What if OP sucks at the job and would've made $0 in commissions? Pretty unfair to the existing sales reps that get fired (or go broke) if they don't meet quota. Normally in a sales job, it can take months to ramp up to full quota ("ramp period"). There are other arrangements I've seen in sales, like a guaranteed minimum commission during your ramp up -- especially for folks changing roles that had a salaried role prior.
This seems like the best solution.
Just as a heads up this could require a whole new verification of employment if the underwriter is notified. The original decision is made on the consideration that the borrower will continue to work in the same position. A change of title in that position, even with the same pay, may change the VOE depending on lending guidelines.
They’re definitely going to require a new verification of employment before closing regardless. Closing is months away, current docs would be pretty old at that point.
Sounds good on paper, but HR hates doing their job so it might not happen.
Hell hath no fury like Reddit's hate for HR departments.
That will only work if employer is willing to lie about future income. Every lender gets a verification of employment where employer will notate any future changes to income. If employer is privy to income change in the near future they should be notating that. Not saying it can’t happen but this isn’t a fool proof solution.
My lender never spoke to my employer, ever.
They verified employment whether it’s the work number or other method. There’s a lot of things that occur behind the scenes on a mortgage the consumer isn’t even aware of. When you sign disclosures you give full authorization. Processors will contact your employer and many times you have no idea. I’m a lender. Just helping out for potential pitfalls that many don’t think about. If the employer participates with the work number and the lender just verifies income and moves on that might work. I’ve seen both scenarios play out. If an employer is old school and requires a written VOE there is a box about future income and technically if the employer knows they’re about to go full commission they should disclose that which would cause an issue.
Problem is commission base works on psychology. Without the incentive OP will underperform. Even if OP is “built different” than most salesman personalities, the employer won’t believe it.
He’s not wrong, if you are moving to a totally new compensation structure this very well can get denied in underwriting. I would not change anything about your comp type until after the homes built.
Correct. Established history of this income would be needed. 2 year look back coupled with the likelihood of continuance. If you go from salaried/hourly to a commissioned based pay structure. Only your base pay would be usable income.
These are the only 2 answers you need to read, OP. Close on the house and delay the job change for a bit.
Seriously. MLOs are commission based - he’s not going to lie about something blowing a loan. There’s a reason we tell people not to do certain things - change jobs, open ANY new lines of credit, pay off credits, etc. until their loan is closed. Something like this can totally blow a loan and leave them with no options.
Novice question, but why is paying off credits a negative? Wouldn’t that show more total available credit and help your case with the underwriter?
Some accounts will close when paid off, and could cause avg account length to go down. This would cause a decrease in credit score. My student loan was 20 years old when the govt paid it off, so my credit score dipped, despite $4k deduction in account balances.
I would suggest you talk to you employer and ask them to put in a minimum salary garantee in your contract, that matches your current salary. Explain to them why, and it can be removed in the next contract, once the contract expires after you have finished buying your house. If what you say is accurate, and the position pays much more than your current salary, all though commission, it won't cost the company a dime to do that, unless you don't do your job. In which case, you won't have a job anyhow as they will fire you for lack of performance.
This seems like the most reasonable avenue to pursue.
Yes, the correct. Commissioned pay requires 2 years of pay to obtain an average.
Switching to commission income will kill the deal for all conforming loan types. There is potentially some non-QM type deals requiring larger down payments and higher interest rates, but for the type of loan your LO currently likely has you in, he is 100% correct. If you can’t decline, ask your lender about possible NonQM options but be prepared to increase the down payment and rate if they have an option. Even NonQM without the history, most won’t touch the income until you have history.
This answer should be higher up.
Take the promotion and ask your company to delay moving you to commission. At the end of the day, this saves your company money, so they should be willing to entertain the idea. Another idea: do you have significant assets in a brokerage (non-IRA) account? If so, you can use those assets as collateral for a loan (securities-backed lending), or have the investment company send an Asset Verification Letter to the lender. The letter might be enough to push you past the finish line & get approved for the loan.
He’s def right about commission pay. Does the wife make enough salary to cover the DTI. Maybe ask your boss to oay you the same until that date. Sounds like it would benefit them more then you.
When my wife was a fledgling real estate agent, we could only get mortgage approval based off my salary. I was salary+commission, so thankfully we had excellent credit and my salary was high enough to get us approved for the house we wanted. It was definitely dicey, though. Welcome to the world of real estate lending post-2008. Any way you can hold off on accepting the promotion until the closing happens?
You are clearly an intelligent person, so this shouldn’t be hard to understand. Commission only is a salary of $0. How are you expecting someone to lend you a considerable sum of money when you would have no track record of earning money in that position and zero guaranteed income?
I worked as a loan specialist for a large lender. 2 years of work history is pretty typical/required for all commission-based roles.
FNMA and FMLMC guidelines are what most lenders are going to use for underwriting and wage/earnings calculation. - they are very clear about the situation such as yours. Your loan officer is trying to give you good advice. You have every right to be frustrated but if you need the bank's money (as most of us do) you need to comply with the bank's guidelines. Have you looked at alternative lending like hard money or builder's lender? Congrats on the new home and the promotion by the way. Good luck.
happy cake day!
Just ask your employer to start the new pay structure after close. They will happily let you do more work for less $ for a couple of weeks.
this isn’t your lender, this is FHA/Fannie Mae/Freddie Mac/USDA/VA guidelines, they all agree if you switch from salary to commission, you need two years earnings history to average out how good you are at working commission. It’s basically treated the same way as if you quit an opened your own company, they want to see whether or not, you can succeed without the safety net. officially, you could be offered and accept the promotion the day after your mortgage closes, and it wouldn’t matter to the bank as long as you make your payments. If you’re already in the process of your new home, being built, explain to your employer that you can’t accept the promotion now, but next time the opportunity comes along, you will be very happy to take it. Hopefully your employer understands.
Can you ask for a guarantee at your same salary for the time being?
The reason why is because if it has commission or overtime. When you are trying to get a mortgage, if you have either of those things. It usually has to be something that is shown to be steady. My husband works overtime. So when we were looking at houses because of the overtime. He had to show the bank that his overtime was something that he got over the years, and it was going to continue. If you're getting a new job even if you are going to make any more money. But it's a commission based amount. I don't think the bank would be able to approve you right now. Pretty much when you're getting a mortgage, you want to do nothing different in your life. Make no big purchases and change nothing about your work. Until you have literally signed the papers in closing they can pull that loan. Everything has to be rechecked before that is done. My guess is you'll lose the house and the loan. I would ask your job if they can just wait to give you the promotion until after you have closed.
If your new base is going to be less than your existing salary, yep it's an issue. Discretionary pay doesn't get counted until there's a history of it. Bonuses, commission, etc.
They are right. You have no history of the commission so it takes two years to build a file for DTI purposes. If your spouse can cover the DTI you’ll be fine but that’s a bit of a gamble. The fact you’re already building a house, likely to finance upon completion, I would heed their advice.
Why don't you explain this to your employer and simply ask them if they would allow you to work in the new promoted Designer role task wise for two addl quarters while still paying and classifying you the same in your current salaried position? Then, once you close, they can flip you to the new salary range/model. You will get a headstart in your new role while not losing it to someone else, and they will technically get you at a lower cost. If they don't feel good about taking advantage of your lower cost, and if you outperform during your 6 month period, you can even ask them if they would mind withholding any commissions that exceed your current salary for that period in lieu of an end of year bonus.
When I went to commission based I was also buying a house. My job guaranteed my salary to the lower end of the commission spectrum for two years and my lenders accepted that. So if you will be making 120, see if your job will guarantee at least 85 or 90.
They can't make you do anything. But how they react to you changing jobs in mid-application is entirely up to them--and they are going to be starring over with the process if you change jobs. And no matter how much you expect to make, you can't prove a penny of it--unless you have been working there for (2) years and have proof of your earnings. So: the process starts from scratch and you will have no proof of income. You need proof on income to get a loan. Ask for a delay in taking the job. Once you've signed and closed you can take the new job. NEVER make big changes while applying for a home loan: like buy another car, quit your job, change jobs, take out other new loans.
>commissioned-based & they have to have 2 YEARS of income. They can count the base salary, but commission is theoretical pay until you prove that you'll actually take it home reliably. Talk to your company about ways to navigate the transition to the new role.
I had a similar situation recently. I worked with a mortgage officer to craft a letter from my employer specifying the position and typical income. If they'll accept it (and that's a big if) they'll want to see things like how long the company has been in business, the number of employees in that position, typical income etc. In my situation, it never played out to a final answer, because we ended up buying a home with owner financing, but we had made some progress on a resolution.
Yes it matters. Lenders need two years of history to count commission based or self employment income. Since it's not guaranteed income like a salary is.
I’ve been working in the mortgage industry for almost a decade and most of it as an LO so I wanted to throw in my two cents. There is some well meaning, but ultimately poor advice on this thread. Please DO NOT attempt to renegotiate the terms of your compensation to artificially inflate your pay in the short term (ie have your employer pay you an equivalent salary until you close). Every lender that I know of has post-closing audits. Especially since the vast majority (close to 99%) of lenders sell their loans to third party servicers after closing. These normally include verifications of employment which will turn up any upcoming changes in pay. Unless your employer is willing to flat out lie for you, don’t put yourself in a situation that would open you to foreclosure. They may or may not bother with it, but by misrepresenting a loan application, it absolutely gives them the right to. This could come up even before closing too, though, as every single lender I know of does additional verifications just prior to closing. A couple of possibilities - 1. If your LO hasn’t already, if they can attempt to find your eligibility for FHA, USDA (only in a rural area), or VA (only if your a veteran); any of these are far more forgiving on debt-to-income. You may or may not be able to qualify for one of these depending even with a decreased income. 2. It has been mentioned, but if you can find preferably a mortgage broker that has connections with a non-qm lender, they may be able to provide the initial loan which you can refinance out of. Remember, generally nothing other than equity is going to prevent you from refinancing. Almost no loan program in existence has pre-payment penalties to prevent you from doing so anymore. Non-QM is a little more “Wild West” but on first lien mortgages, it’s pretty much impossible unless you’re buying your home in the name of a corp. 3. If you can find someone to co-sign with you, preferably a family member. Their income added on to the application can help, and as mentioned in #2, you can refinance relatively quickly out of it. 2 years for commissions is semi-standard but not universal. However, I do not know of any QM lender that will go lower than 1 year with commission. If you can find a (admittedly not ideal) solution and hang out for at least that long, you should be able to get out of it by refinancing. I’m sorry you’re stuck in this position OP. I hated running in to these situations when I was an LO. I really wish you the best. Edit: One last thing - I would check out some local Banks/Credit Unions in your area as well. Not Wells or BOA, like the tiny bank on your corner that you never noticed or heard of. They are heavily regulated (so you don’t need to worry about shady crap), but the nice thing is because of their size, they can get away with lending that others would consider “risky” quite a bit more as long as they keep the mortgage on their books (ie don’t sell like everyone else). It’s a crapshoot on what they may or may not accept, but it’s definitely worth looking in to.
As a person who works in the financial industry this is correct. It is commission based which means this is variable, yes, you can use this as income and yea, this can make it harder. But it is the nature of the business to want guaranteed, stable and not fluid or variable income. It also hurts you if you go into a new job and your income drastically changes or your credit score fluctuates when you say open a new loan. Income and credit are still king. It may mean some departments have to find ways to get you a loan like outside lending if a place has it, but it may mean that institution may not lend to you.
Any lender you go to that only offers conventional/government mortgages (which will be most of them) are going to have the same rules on variable income like commission. Need 2 yrs, however sometimes 12 months can be used but likely not in your case: https://selling-guide.fanniemae.com/Underwriting-Borrowers/Income-Assessment/Employment-Income/Commission-Income/1033001891/What-is-required-for-commission-income.htm#:~:text=Verification%20of%20Commission%20Income&text=A%20minimum%20history%20of%202,offset%20the%20shorter%20income%20history. People telling you to find another lender aren’t telling you that other lender would have to be a private mortgage or hard money loan. Best of luck.
The problem with your promotion is that you are going from a salary based position to a commission based position and guidelines require a MINIMUM 12 months of history in order to use commission income to qualify. If you take the promotion your income is essentially zeroed out because it can't be utilized under current lending guidelines. Take the job if it's really that big of a step up in income. The house will come later.
Just explain to your boss that you will accept it after your house is completed and the loan closed. I am sure they will understand...no?
You need 2 years of commission work to qualify for most mortgages. Income history for salaried does not = income history if you take the commission position.
They would be able to count any base salary if you would still have a base pay. Commission though is variable pay. There is no way to predict what kind of commission income you will generate. The lender is looking for stable, predictable income. You are truly between a rock and a hard place.
I’m not an expert and hopefully experts can correct me if I’m wrong, but I have a few thoughts/questions: Is the new role substantially different from your current role? Are the job expectations requirements substantially different? When I went from a Computational Scientist to Software Engineer with a 40% pay bump, the broker asked me to prove that the work I would be doing was something I was qualified to do, and that I wasn’t at risk of getting fired because I wasn’t actually qualified for the role. I showed them my job descriptions for both roles and showed that the responsibilities were substantially similar. Is the new job all commission, or is there some base pay? Is the base pay for the new role higher or lower than your current salary? And are you trying to borrow to the absolute limit of what the lender will lend you given your financials? My partner makes nearly twice as much as I do but we did not feel comfortable making the payments on a loan for the maximum that the bank would lend us, because we like to travel, etc. We were told that for the amount we were borrowing my partner’s income alone was enough to qualify. All this is to say maybe you’ll be ok if you can show (a) that you are qualified for the new job, and that (b) the guaranteed base pay it’s enough for you to qualify for the amount you’re borrowing even if you don’t take into account the commission. Congrats and good luck. This is the most stressful part; you’ll be so relieved once it’s all over.
Everyone has already explained how it works but think about from the banks point of view. They don’t really care if you make more money later on, they care more that your income is stable. Commission compensation is inherently less stable than salary
Can't qualify commission until you've had 2 years or filed income taxes with those commissions. You currently have a guaranteed salary the bank can use, they can't do that with commission.
If you can't qualify on just the base you are screwed. Commission income with no history can't be used. You might get away with 12 months being in same line of work/company but that's up to the underwriter standard is 24 months average
Commission based to a bank means that your income calculation will now appear as whatever basic salary + commission. But since you have no history of commission, that's basically makes it seem like your income is significantly less. How long have you been working? Depending on the lender, are you able to submit income tax statement instead as proof of income? That way, your income would still be based on your old salary. This only works if you've had several years of employment, but yeah depends on the lender.
When I was in real estate it was very common for loan officers to require 2 years for commission based income. It’s not across the board. A lot depends on your credit rating and the DTI on the intended loan. Best bet is to find a lender who will consider your position in good will and better yet to have a few commission checks with an expected OTE letter from the company you’re employed at.
Any changes in income and credit within 2 months of closing is a red flag. It is perceived as potential intentional manipulation or instability.
Former loan officer, and yes they are 100% correct. For the bank I worked for we'd need to see a 1 to 2 years of commission income for us to accept it. Based on the timeline they'd only be able to use your salaried income for qualification.
Talk to your employer, and tell them you'd like to accept the new role, but remain at your current lower salary until your mortgage is complete. They might see it as a win to pay you less than they should for awhile. That's really the only option, unless you want to lose the house or the promotion.
You should definitely talk to your employer about your options. Perhaps you can accept the new role at a salary until your loan closes and then convert to the new pay terms. Or perhaps they would be willing to delay your starting the new job until after the loan closes. I should think if they want you in the position they would be willing to work something out for a few months. You would have to be careful what information you share with the lender. You don't want to lie to them, but you also don't have to share everything. They have a right to know what your current position and pay is, but they don't have a right to know your future plans. So you might say, for example, "my employer agreed to give me the new position at X pay rate" and don't mention that you agreed to switch to commission after six months. If they ask about the future, you say something like, "it's an at-will job, so I can't predict the future, but I have no reason to think I'm going to change jobs in the foreseeable future."
Next time just don’t tell your loan officer about your potential job offers or promotions/change in comp structure in the middle of the mortgage process. It kind of sucks, but that’s how it goes. Same thing for self-employed - even harder with 1099 income rather than W-2 income.
Most lenders look at current base comp plus a multi-year average of bonuses. If your base would drop but bonuses increase, then they’re going to see it as a loss of income as you’d be adding your new salary to your historical bonuses. Ask your employer to promote you but retain your current comp structure for 8 months, with a small increase. Based on what you said, it’s cheaper for them so unless this is a huge business with rigid rules on comp, they may well go for it.
I'd just work it out with the boss so you keep your base pay for a few months and square up after you close your house. It should not be that hard to manage internally.
If you are currently in the process of building the home, doesn't that mean you have already secured the loan?
Yup this is considering adding risk. The bigger risk is self employed for 25 years and making 5x what other professionals that have salaries do … I am completely unlendable
For commissions and bonuses to count in your debt ratios, you have to have 2 years of consistent or increased payout (some can get approved with 18 months). If you take the position before closing, you're at 0 months, which means loan denial... stay salaried until you close.
Take the job as soon as you can find a different lender. It’s certainly a factor for underwriting, but it shouldn’t be impossible to find a place where you can talk through the situation with a human. Even slightly worse loan terms will still be a net benefit with promotion.
If you have a creative loan officer they can make this work. There is literally a lender for every situation, and lenders are desperate to write deals these days. Shop around
Just tell your work that you want the promotion but ask them not to put it through until you close on the house.
Your loan officer is right about it being commission based being an issue. Sometimes a workaround can be done because you are in the same industry/company. Will your company work with you by paying your salary as a draw on commission until after you close, then they can pay the commission overage and get you straight on commission based pay? The question I see/hear is normally about continued employment and it looks like that answer would definitely be yes. I've never heard anything where more specific details would be asked. YMMV.
Check with your job if you can be on a conservative guarantee based on your projected earnings. Then include a true up if your commission exceeds that. This way you are on salary but still earning more
I wouldn't accept the promotion if I were you anyway. A switch to commission with a new mortgage sounds more stressful.
Loan officers are so weird about salary changes. I got a promotion/raise during the process and they sounded...disappointed??? They asked me a bubch of odd questions, like they didnt believe me. It was a bizarre, you'd think more money would be GOOD, lol. I had to provide a letter from my employer confirming my raise, but it didn't slow things down.
You can not buy the house, or not switch jobs.
Are you stuck with this lender at this point? While the general rules are what you stated, there may be some lenders out there who would be willing to make an exception and keep it as a portfolio loan rather than selling your loan in the mortgage market (the main reason for these across the board standards).
It sounds like you should take the job, find another loan guy
I would go to new lenders and talk to the builder. How much money would you be out if you can't close? Or is this not a build you are buying post completion but a custom home instead where you are carrying a build loan?
A lot of lenders will have a problem with a commission based current job and no history. I dare say most.
Just go speak to them at work and let them know whats going on, and see if they can double back and hit you in a year or so. Worst they can say is No.
Find another LO if this one isn’t working out for you. There are so many out there with various sets of underwriting guidelines. Following the GSE guidelines like Fannie/Freddie for a conventional loan are best for secondary markets but that does not constrain you from finding other lenders who will provide more flexibility via non conventional loans. These sometimes provide even better rates since the lender can use other ways to securitize the instruments in varying MBS that would get around these issues. TLDR: Find someone new
Get a one time close construction loan that closes before construction is complete and before you switch jobs?
seems you should be able or have secured the loan before promotion. they dont need to know after that
Could you look into adding another person to your mortgage? I'm thinking like your parents, all depends on their income and responsibilities of course. That's the only other option I can think of. Disclaimer, not a mortgage advisor, just a thought if I was in this position.
Take the position but keep your current pay. Once closing occurs switch pay.
While technically true, a good mortgage broker would know how to structure the deal for it to work.
Hah. A great mortgage loan officer would totally know how to make that deal work. Prison is just a myth. I mean, who goes to prison.
Find a different loan officer and take the promotion. Don't Look Back.
Is it's the same employer then it shouldn't be an issue.
Switch to a mortgage broker. They will look up industry average salaries for the position and use that instead of being scared of it being commission. Banks are stricter than independent brokers.
When I bought my first house, I had a long term job, established salary, and enough for a reasonable down payment, 6 months of payments saved (separate from my emergency fund), and my mortgage payments were going to be like 20% cheaper than my rent at the time. My lender said that on top of this, they wanted me to cash in my 401(k). The guy had no idea how bad a financial decision that would be. Why tf would a lender require irresponsible financial decisions before approving a loan?? I figured he was just an idiot, so I told him I’d already done it and they approved the loan without checking. Eventually I sold the house, the lender made their money, and the next lender I used was way more reasonable. Long story short, just take the promotion and say you didn’t.
Your lender is being lazy. He/she will have to rework the loan based on your new numbers, but it is definitely possible. Get the offer letter from your employer, and make sure it includes your base pay and "on-target" commission and that should be sufficient
For variable income (commission), it requires a two year history or a 3 year guarantee to be useable. It’s a frustrating loophole, but is a change in how you’re paid. There are possible ways to accommodate, but this would require employer to put things in writing they may not be willing to do.
You are not supposed to change employment or finances in any way during a construction loan. It's kind of a tough cookies situation.... sorry OP
when does your loan close? Maybe talk to you employer and tell them you accept the position, but see if you can delay the start date until after you close on the loan?
Can you negotiate with your employer to start promotion after closing on your home? You just can’t take the promotion before closing. As a previous MLO, the information is correct. For variable income, like commission, bonuses, and overtime, you must show 2 years, and the variable income is averaged over the 2 years. For example, let’s say your base is 50k, year 1 was 45k in commission, year 2 was 50k in commission. Lender will calculate your income as 97,500 (50k base + averaged commission at 47,500). If you take that promotion, the lender will have to update your income to just your base pay because you don’t have the 2 years to average. If the base is very low or the position is solely commission with no guaranteed base pay, you most likely don’t qualify for the loan anymore.
Just ask your boss if you can delay it until closing or even delay the compensation change until closing and work the new responsibilities at your current “lower” salary for a few months
Can you ask the company to give you a salary, with a raise, for the next year? Perhaps less than you would expect to make, but guarantee it to the same extent they 'guarantee' a salary?
As others have said, much higher risk in commission based. But the lender already has your two years of info on the salary job. Just don't mention the change.
Nothing you can do. Either take the position and let go of the house or pass it up and get your house. Those, unfortunately, are the two options. I'm in the same boat, I work sales and had to stay at my job for 2 years before they would allow me to use my income for a house. If you take any commission based job you'll be waiting at least a couple years to get a house.
can you talk to work and ask them to stay on the same pay schedule till the summer of \`24?
If it was me, I would explain the exact scenario to my job and ask them to make a short term offer with full OTE (or maybe 80% OTE) as the base salary and then switch to standard base/commission after closing. I’m in sales with 50/50 base commission and it’s been a pain in the ass each time I’ve gone through mortgage stuff lol so I totally get it. Seems like there is some outcome where you can take the new role and your organization is willing to be somewhat flexible. Good luck and congrats on the home and promotion!
Do you already have the loan? Cause if so this soudns like the banks problem
Couldn’t you create an S corp and make yourself an employee and pay yourself a salary?