Yes, you can get a mortgage on commission income, but underwriters do not count it the way they count a salary. They average it over time, document it from your tax returns, and ask whether it is likely to continue. That is how commission income mortgage approval works in Lynchburg and everywhere else, and the lender you pick can change the outcome.
Written by Duane Buziak, NMLS #1110647 | Coast2Coast Mortgage LLC NMLS #376205
Realtors, car sales professionals, insurance agents, and medical device or pharma reps often assume irregular pay rules them out. It usually does not. Below is how the math works, what paperwork to bring, why one lender’s answer can differ from another’s, and how Duane Buziak shops commission files across hundreds of wholesale lenders.
How Underwriters Turn Variable Commission Pay Into a Qualifying Number
A few terms drive everything. Base pay is the guaranteed salary or hourly wage. Commission is pay tied to sales or production. A bonus is a periodic payment, often discretionary. Qualifying income is the monthly figure an underwriter will actually use to test your debt-to-income ratio (DTI), which may be lower than what you feel you earn.
The test underwriters apply to variable income is whether it is stable and likely to continue. Base pay passes that test easily. Commission has to prove itself through history, so lenders look backward at what you have actually been paid.
Averaging instead of picking your best month
Lenders typically average commission over a documented history, most often two years, rather than using your best month or quarter. Fannie Mae’s Selling Guide addresses this in its section on variable income, and as of 2026 the general expectation is a history of about two years, with the lender analyzing whether the trend is stable, rising, or declining. Check the current text of that section, because guidelines are updated periodically.
Some programs allow less than two years when you have a strong prior history in the same field, for example a rep who moved to a new employer in the same industry with similar pay. That flexibility is program-specific and lender-specific, so it should be confirmed against the exact loan you are applying for before you count on it.
The most common misconception
A great recent quarter does not raise your qualifying income if the multi-year average is lower. A record quarter helps your savings, and it may help you in a future application once it sits inside a longer history, but today the underwriter will blend it with the weaker periods. The reverse also matters: if your income is trending down, some underwriters will use the lower recent figure instead of the average.
The Paperwork Commission Earners Need to Have Ready
Commission files are won or lost on documentation. A typical list includes:
- Two years of federal tax returns, with all schedules
- Two years of W-2s
- Recent pay stubs showing year-to-date commission
- A signed commission agreement or an employer letter describing how you are paid
- Bank statements showing commission deposits, if requested
The year-to-date stub matters because it lets the underwriter compare the current year’s pace against prior years. If you are on track to earn well below last year, expect questions.
W-2 earners versus 1099 and self-employed sales reps
A W-2 commission earner is an employee whose employer reports pay. Underwriters start from your W-2 and pay stubs. A 1099 or self-employed sales rep is usually evaluated on tax returns after business deductions, which often lowers the number considerably. If you write off vehicle use, home office, travel, and meals, your taxable income can be far below your gross receipts, and the lender will generally qualify you on the taxable figure.
Expenses that can reduce qualifying income
Even W-2 reps can be affected. Unreimbursed employee business expenses (historically claimed on Form 2106-type deductions) and Schedule C expenses can be subtracted from income in the underwriting analysis. The exact treatment depends on the loan guidelines and the lender’s interpretation, so ask your loan officer how your specific deductions will be handled before you apply, not after.
The practical tip: gather these documents before you apply. When a broker can run your numbers against real tax returns early, you learn your true qualifying income while there is still time to adjust the plan.
A Worked Example: Averaging Two Years of Commission
This is a hypothetical illustration, not a quote or a guarantee. Suppose a Lynchburg sales rep earns a $40,000 base salary. Commission was $32,000 in year one and $44,000 in year two.
- Two-year average commission: ($32,000 + $44,000) ÷ 2 = $38,000
- Annual qualifying income: $40,000 + $38,000 = $78,000
- Monthly qualifying income: $78,000 ÷ 12 = $6,500
Note that the rep’s most recent year totaled $84,000, yet the file qualifies at $78,000. That gap is the averaging effect.
The declining-income variant
Now reverse the commission: $44,000 in year one and $32,000 in year two. The simple average is still $38,000. But because income fell, an underwriter may use the lower recent figure of $32,000, or apply another conservative method. Treatment varies by lender. Using $32,000:
- Annual qualifying income: $40,000 + $32,000 = $72,000
- Monthly qualifying income: $72,000 ÷ 12 = $6,000
Same two-year earnings, $500 less per month in usable income.
What that means for DTI
DTI is your total monthly debts divided by gross monthly income. Using an illustrative 45% ceiling (actual limits vary by program, credit profile, and underwriting findings), the first scenario allows up to $6,500 × 0.45 = $2,925 in total monthly debts. Suppose the proposed housing payment is $1,900 and other debts (car, student loan, cards) total $600, for $2,500 overall. That is $2,500 ÷ $6,500 = 38.5%, comfortably inside the ceiling.
In the declining scenario, the ceiling drops to $6,000 × 0.45 = $2,700. The same $2,500 in debts is 41.7%, still inside the limit but with far less cushion. Pay off a $300 monthly obligation and the margin widens again. These figures are for illustration only and are not a loan offer.
Why the Same Commission Income Can Get Different Answers From Different Lenders
Every loan sits on top of agency or program guidelines, but individual lenders add their own stricter rules, called overlays. A retail bank or credit union generally offers one set of products under one set of overlays. If your file hits one of them, the answer from that shop is simply no, even when the same file would be acceptable elsewhere.
Duane Buziak is an independent broker with access to hundreds of wholesale lenders. Instead of fitting your income to one rate sheet, he matches your file to the lender whose guidelines suit it. Overlays commonly differ on how business expenses are treated, how declining income is handled, and how much history is required. Some single-lender shops are more conservative on these points than others, and a broker can route around that.
| Feature | Duane Buziak / Coast2Coast | Single-shelf retail lender | Why It Matters |
|---|---|---|---|
| Number of lender options | Hundreds of wholesale lenders | One institution’s products and rate sheet | More guideline variety means more chances your income structure fits |
| Borderline income file | Can be placed with a lender whose guidelines suit the file | Judged under one set of overlays; a stricter overlay can end the discussion | Commission files are often borderline on history or expenses, not on ability to pay |
| Credit pull at pre-approval | NoTouch Credit soft pull, no hard inquiry | Often requires a hard inquiry to pre-approve (varies) | You can see where you stand without a credit hit while you plan |
| Who to ask when a guideline blocks you | A broker who can move the file to a different lender | The same institution’s underwriter, under the same rules | A blocked guideline becomes a routing question, not a dead end |
Dare to Compare: if you already have a quote or a denial, bring it to Duane. He will take a second look at the same commission file and show you the wholesale alternative, at no cost.
Loan Programs and Credit Checks That Matter for Commission Earners
Conventional, FHA, and VA loans each treat variable income under their own rules. Conventional loans follow Fannie Mae and Freddie Mac guidance plus lender overlays. FHA loans follow HUD’s Handbook 4000.1, which also looks for a stable history of variable earnings. VA loans follow VA underwriting standards, described in part on the VA home loans page. Specific history requirements and averaging methods differ, so veterans in Lynchburg and Central Virginia should ask how a lender will apply VA guidelines to commission pay before assuming an answer either way.
NoTouch Credit and VantageScore 4.0
Duane’s pre-approval process starts with NoTouch Credit, a soft-pull review that lets a commission earner see where they stand without a hard inquiry. Some lenders require a hard pull before they will issue a pre-approval. Duane’s process also uses VantageScore 4.0 credit assessment as part of the review. Note that the score a lender uses at final underwriting may be a different model, so this is a planning tool, not a lock on the final result.
The 2026 loan limit
As of 2026, the FHFA announced a baseline conforming loan limit of $832,750 for one-unit properties. The earlier $806,500 figure was the 2025 baseline. Lynchburg is a standard-limit area, so the baseline applies. Confirm the current figure on FHFA’s site if you are shopping near the limit.
Steps to Strengthen a Commission-Based Application in Lynchburg
You can improve a commission file well before you apply. Work through these steps:
- Review deductions with your tax professional. Where tax advice allows, avoid taking large unneeded deductions in the year before you apply, since they reduce the income an underwriter can use.
- Pay down revolving debt. Lower monthly payments reduce DTI, which offsets conservative income treatment.
- Keep commission deposits documented. Deposit commission checks into an account you can show, and keep statements and commission statements together.
- Avoid job changes mid-process. A new employer or pay plan can reset your history and force the file to be re-underwritten.
Pre-qualify before you tour. Buyers weighing homes near Blackwater Creek Trail or around Peaks View Park can set a realistic price range first, using documented income rather than hope. Compare that range against current local prices; Virginia REALTORS publishes housing market data you can use to check the median price for Lynchburg and surrounding Central Virginia localities. Check the current figure there rather than relying on a number that may have moved.
Duane’s realtor relationships in Lynchburg also matter at the offer stage. A pre-approval built on documented, averaged commission income gives a listing agent confidence, and your realtor can present an offer that is ready to move.
Commission Income Mortgage FAQ
How long must I be on commission?
Most programs look for about two years of commission history. Some allow less when you have a strong prior history in the same field, but that is program- and lender-specific and should be confirmed.
Can I use my best year?
No, lenders generally average commission over the documented period instead of using your best year or month. If income is declining, an underwriter may use a lower, more conservative figure.
Does a drop in commission hurt approval?
It can. A declining trend may lead the underwriter to use the lower recent income or require additional explanation, and treatment varies by lender.
Are 1099 sales reps treated differently?
Yes. Self-employed and 1099 reps are usually evaluated on tax returns after business deductions, which can lower qualifying income compared with a W-2 earner.
Does a higher base help?
Generally yes. Base pay is the most stable part of income, so a larger base reduces how much of your qualifying income depends on averaged commission.
Do I need a commission agreement letter?
Often, yes. A signed agreement or employer letter explaining how commission is earned and paid helps the underwriter confirm it is likely to continue, though requirements vary.
Can VA or FHA loans work with commission income?
Yes, both programs can consider variable income that has a documented, stable history. Exact history requirements and calculations differ by program and lender, so ask before you apply.
Does NoTouch Credit affect my score?
No. NoTouch Credit is a soft-pull pre-approval review, so it does not create a hard inquiry on your credit report.
Documented Commission Income Counts: Start With a Soft-Pull Review
Commission income is usable when it is documented and averaged, and the right lender match can decide whether a borderline file gets approved. Schedule your free consultation today to explore loan options tailored to your goals, with no-impact credit pre-approval using VantageScore 4.0 and expert local guidance every step of the way. Schedule your free consultation today, or call Lynchburg Mortgage Broker by Duane Buziak at (434) 443-7028 for a NoTouch Credit pre-approval review. See your loan options without a single credit hit. Pre-approval is soft-pull, with no hard inquiry. Already have a quote or denial? Bring it in and Duane will shop it against hundreds of wholesale lenders.
