September 24, 2015
We recently got a question regarding commission income and how it may be reviewed by the lender. More specifically, the question is about whether the nature of the reader’s income is truly “commission income” and how the lender might view that on the FHA loan application. The reader asks:
“On my pay stub next to earnings it says commission, but this actually isnt true commission pay. We arent selling anything, we deliver to stores. Its just how my company decided to pay us. So my question is do I fall under this category of commission based salary, where I would need a year of income or would that not matter in my case?”
Unfortunately, the answer to this question would come from the lender.
The loan officer’s job is to insure the applicant’s income is stable, reliable, and likely to continue. Regular pay and salary arrangements are viewed one way, but FHA loan rules and lender standards require “alternative” forms of compensation with closer attention to the details of those arrangements.
So in this case the lender would have to review such an arrangement on a case-by-case basis. Lender standards would apply as well as FHA loan rules, so for questions like these it’s best to have a discussion with the loan officer to see what issues may arise with such a pay arrangement, and what additional forms of documentation might be required if any.
Do you work in residential real estate? You should know about the free tool offered by FHA.com. It’s designed especially for real estate websites–a widget that displays FHA loan limits for the counties serviced by those websites.
It is very simple to spend a few seconds customizing the state, counties, and widget size for the tool; you can copy the code and paste it into your website with ease. Get yours today: http://www.fha.com/fha_loan_limits_widget
Joe Wallace has been specializing in military and personal finance topics since 1995. His work has appeared on Air Force Television News, The Pentagon Channel, ABC and a variety of print and online publications. He is a 13-year Air Force veteran and a member of the Air Force Public Affairs Alumni Association. He was Managing editor for www.valoans.com for (8) years and is currently the Associate Editor for FHANewsblog.com.
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