Posted on: 25th Dec, 2010 11:43 pm
I want to ask if I have salary and commission pay on 9/2009 to present, can it count on my income. Because I heard some people says commission have to be over 2 years.
As Jay ssid it would be calculated as income but ofcourse after 2 years.
Commission Income:
Calculation of commission income is normally a 24 month average but not less than 12 months if it has been received continually and is likely to continue in the future. This is obtained from the employer. Certain circumstance as always, comes into play and therefore it may be calculated differently. **If it is guaranteed and is documented as the same amount each month, and normal for the employer to pay guaranteed commission; it would be counted regardless. Usually, commission income fluctuates and therefore must be averaged.
Example: January - $1546, February $1200, March $250 etc. with
2009 total commission = $5000
2008 total commission = $2500
$7500 ÷ 24 = $312.50
If the income years were reversed and $2500 was the commission for 2009, most underwriters will go with the current lower level of $208.33 monthly. This is showing that the level of commission has changed for some reason and is not consistent with the previous year and therefore the most conservative approach was used. As always other factors may come into play also.
Calculation of commission income is normally a 24 month average but not less than 12 months if it has been received continually and is likely to continue in the future. This is obtained from the employer. Certain circumstance as always, comes into play and therefore it may be calculated differently. **If it is guaranteed and is documented as the same amount each month, and normal for the employer to pay guaranteed commission; it would be counted regardless. Usually, commission income fluctuates and therefore must be averaged.
Example: January - $1546, February $1200, March $250 etc. with
2009 total commission = $5000
2008 total commission = $2500
$7500 ÷ 24 = $312.50
If the income years were reversed and $2500 was the commission for 2009, most underwriters will go with the current lower level of $208.33 monthly. This is showing that the level of commission has changed for some reason and is not consistent with the previous year and therefore the most conservative approach was used. As always other factors may come into play also.
Calculation of commission income is normally a 24 month average but not less than 12 months if it has been received continually and is likely to continue in the future. This is obtained from the employer.
Are you more "base plus some commission" or "small base, primarily commissioned?" That may save a lot of questions and make our answers more accurate.
Your income would loosely be:
Current Salary
+ Average of Commissions
- Certain business expenses on your tax return
=total
If you qualify on your salary alone, this is easy peasy. If not...
The logic of using a 2-year average of 15 months' commissions is valid. You're not too far off from filing tax returns. Right now, I'd be doing tax / mortgage planning. Example: Huge home office deductions is basically an audit trigger anyway, but it probably wouldn't be wise if you are trying to get a home.
Are you the "base plus" or "mostly commissioned" type?
------------------
Chris Richter
Senior Mortgage Planner
Luett Mortgage Group, a production unit of Wintrust Mortgage
773-931-2424 - direct
crichter (at) luettmortgagegroup.com
http://www.luettmortgagegroup.com/
------------------
Your income would loosely be:
Current Salary
+ Average of Commissions
- Certain business expenses on your tax return
=total
If you qualify on your salary alone, this is easy peasy. If not...
The logic of using a 2-year average of 15 months' commissions is valid. You're not too far off from filing tax returns. Right now, I'd be doing tax / mortgage planning. Example: Huge home office deductions is basically an audit trigger anyway, but it probably wouldn't be wise if you are trying to get a home.
Are you the "base plus" or "mostly commissioned" type?
------------------
Chris Richter
Senior Mortgage Planner
Luett Mortgage Group, a production unit of Wintrust Mortgage
773-931-2424 - direct
crichter (at) luettmortgagegroup.com
http://www.luettmortgagegroup.com/
------------------
both salary and commission, so I need to wait next year after I file 2010 tax return.