do any lenders loan on the basis of bonus income?

I guess the question is what you do and how variable is your bonus?

I just recently financed through Wells Fargo and have received the same bonus for the past 3 years, with a letter from my employer they accepted it and included in the calculation.

My bonus though is more or less part of my compensation and a guaranteed amount in a range. I would guess if you are in a field such as banking where it could greatly fluctuate they would be reluctnant to include the whole thing.

not a trader/banker, so have had a steady and documented bonus history. a trader or banker might make $5mm or zero from year to year, but that's not me (more like a 10-20% swing based on how the company does overall). but I recently switched firms, for a higher -- but not guaranteed -- bonus, and my new employer can only provide a letter re future bonus. I can evidence historically via w2s.

did Wells give you 100% credit for your bonus income, or did they haircut at all?

The issue is that you switched jobs. If you remained with your same employer most lenders will give you 100% of your two year average bonus.

But having switched jobs it will be hard for banks to give you credit for any future bonus income with a new employer if it's not guaranteed in a contract, and especially if you haven't even received it yet.

Only to their own employees. But they check the 'to be canned next year list' first. Untroll me motherfkers.

NYM -- what is considered a guarantee? A letter that "Joe will receive a min amt of X [or a bonus payment in the range of X to Y], subject to overall profitability of the Company"? or a promise to pay come hell or high water? Some might consider the former to be guaranteed but others may not and expect something like the latter.

I got a 100% inclusion but that is because i have been with my current job for 11 years and the letter helped.

Switching jobs there are no guarantees, they would not even include at all unless i was able to prove at least 2 years of stability of the bonus.

You are lucky they even want to consider any of the bonus considering it is not even guaranteed.

Mikev, not true. People do switch jobs where the total comp is higher, but base salary remains the same. The offer letter often has the language I describe above ("Joe will receive a min amt of X [or a bonus payment in the range of X to Y], subject to overall profitability of the Company") AND that historically was viewed as a guarantee (at least before the financial crisis the last couple of years). I guess what I'm asking is whether that sort of "guarantee" language is still accepted by lenders.

My guess is that language should have never been allowed as a guarantee to begin with. I think most underwriters are not going to sign off on the what if scenario of how profitable a company may be.

I actually had to let it be that my wife's investment property was considered at 100% because i did not want to deal with the paperwork of proving only 50% ownership, tenant in place, etc. it did not effect me by leaving it so i decided it would have been a waste of time.

As for the letter if they are not guaranteeing a base plus a minimum bonus then no bank is going to go for it. But if the letter states you are getting X base and a guaranteed Y bonus, plus additional bonus depending on profitablility that would be a different scenario.

Somewhat related question - my parents are retired and received the vast majority of their income through investment properties that they rent. I believe one lender told them that income would be discounted at least 50% if they were to apply for a mortgage - has anyone else had more success in a similar situation? They've been renting most of these places steadily for years, which to me seems just as (if not more) stable than your typical 9-5 these days.

bjw, you could try a credit union and see if they've got a special program -- but I don't think any of the big banks (i.e., BoA, Chase, Wells, Citi) are going to do any better by your parents.

They all have to resell according to FNMA guidelines, and the market's just too tight right now.

ali r.
DG Neary Realty

Typically, we accept bonus income only when there is at least a 2 year history of receiving it with the same employer. And your employer must confirm that based on your history of receiving bonus, that it is "likely to continue." Otherwise, we can't count it toward your debt to income ratios. sunny.hong@bankofamerica.com

Thanks a lot, ali. My dad's a navy guy, so he may have already tried with their credit union, but I'll pass along the advice.

shong, do you have any experience with folks applying for a mortgage with rentals as their primary source of income?

bjw, i have some experience with buyers that only have rentals as their income. It completely depends on the tax returns and how things are reported. 9 out of 10 I see usually dont qualify for a mortgage based on what is reported on their tax returns.

Thanks shong - can you elaborate a bit? How should you report if you want to qualify?

I can't advise on how rental income should be reported. But I have been cases where there are excessive write-offs/expenses and the net income was negative income. It is what it is, if your income after expenses will support your new mortgage based on debt to income ratios then you may qualify for a mortgage. For example, if your income from your rental properties after expenses come out to 100k then you should be able to get some type of mortgage. If your income is 20k after expenses then probably not.