A Closer Look at How Overtime Works

A Closer Look at How Overtime Works

Broker | Owner | Mortgage Consultant
Josh Lewis
Published on October 26, 2021

A Closer Look at How Overtime Works



Here's how overtime pay is factored in when you're applying for a mortgage.

This week's question comes from Romaine Newton. She asks, "I get a lot of overtime. I make a $55,000 base, and in the last two years I have made $60,000. How much of my overtime will they include in my yearly income?"

Here's the thing: Any variable income is going to be averaged over the last two years in a year-to-date. If you made $60,000 both years, you're going to get credit for all of the $60,000 of overtime assuming that you're somewhere around $30,000 year-to-date. 

Let's say you've only got $20,000 year-to-date. They'll use the lowest figure, so the $20,000 average over six months. In this case, instead of your lender adding $60,000 to your income, they’ll only add $40,000. That applies to any bonuses, commission, and other income that's not guaranteed.

Contrary to popular belief, you don't need proof that it's going to continue to qualify. As long as the employer doesn't state that it will stop, the lender will still use that income. Most employers won't do that.

If you have any questions about this topic or anything else, don't hesitate to reach out via phone or email. I look forward to hearing from you soon.

Broker | Owner | Mortgage Consultant
Josh Lewis Broker | Owner | Mortgage Consultant
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(714) 916-5727

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