Yes. Commission income can be used to qualify for a mortgage, but lenders require a 2-year history of commission earnings and average the income over 24 months. If your commissions have been increasing, the 24-month average may be lower than your current earnings. If they have been declining, lenders use the lower trend, which can produce a qualifying income well below your most recent year. Documentation requires two years of W-2s and federal tax returns, plus recent pay stubs showing year-to-date commission earnings.
How Lenders Calculate Commission Income
Commission income is averaged over 24 months. The lender takes total commission earnings from two years of tax returns, adds them together, and divides by 24 to arrive at a monthly qualifying figure. If year one was $60,000 in commissions and year two was $90,000, the average is $6,250 per month, not the $7,500 from the most recent year. This is why high-earning commission workers sometimes qualify for less than they expect: the calculation looks backward, not at current production.
The Declining Income Problem
If commission income has been declining, the calculation is more conservative. Fannie Mae guidelines indicate that when income is declining, the lender should use the lower amount or may not be able to use the income at all if the decline is significant and there is no reasonable expectation of recovery. A real estate agent who earned $120,000 in 2024 and $75,000 in 2025 has a declining income trend. Lenders will either average the two years ($8,125/month) or use the lower year ($6,250/month) depending on how they interpret the trend. Some lenders will decline to use the income entirely.
W-2 Commission vs 1099 Commission
The documentation and calculation differ depending on how your commission is reported. W-2 commission employees (paid by an employer who withholds taxes) have a straightforward 24-month average using W-2 and tax return data. 1099 commission earners (independent contractors) are treated as self-employed, requiring two years of Schedule C or Schedule E and the full self-employment income analysis, which accounts for business expenses and may significantly reduce the qualifying figure. The difference between being W-2 commission and 1099 commission can produce very different qualifying incomes from the same gross earnings.
What You Can Do to Strengthen the File
If your commissions are growing and you have been in the same role for 2+ years, the 24-month average is straightforward and you should qualify based on that figure. If your income recently spiked, applying at the right point in time, after the strong year is fully documented, can improve the average significantly. An employer letter confirming that commissions are expected to continue at or above current levels is a helpful supporting document. If you have significant fluctuations, bringing a written explanation of any unusual years (a down year due to a specific market event, a transition to a new employer with a guaranteed ramp) can support the analysis.
Commission income files require more analysis than standard W-2 files, but they are absolutely workable. I spend more time upfront on these because the income calculation is the whole story. I look at both years of tax returns, the current pay stub, and the trend before I give a pre-approval number. A client who comes to me thinking they qualify for $500,000 based on their current commission rate might actually qualify for $380,000 based on the 24-month average. I would rather deliver that number accurately at the beginning than have the deal fall apart in underwriting.
Have a situation like this?
Call Dan at (661) 342-9381. He will review your specific situation in a free call.