Commission based job - Conventional Loan Help

5 Replies

Hi BP,

A little background on what my situation is. 22 years old. Credit score 710 via credit wise.

Duplex I’m looking at: 154,900 asking, 4x2 full ba. It’s been on market for 368 days and I’m guessing because one side is pretty run-down. The owners are willing to remodel the entire side once under contract. I am looking to get it down to 130,000.

-Cash on hand: 13,500, should be around 17500 by December which is ideal closing time.
-Some family will help with a few thousand if necessary.
-Debt: $900 from my last semester at school. No Student loans, and I graduate in December.

I plan on putting 10% down as it will be owner occupied.
MHDC will grant me 4% of the purchase price.

The numbers (including P&I, cap ex, ins., PMI, taxes, vacancy, prop mgmt): ~$1150, I don’t have my analyses paper with me but it was that +/-$50

Each side rents for $900, but since I am in a college town I would bump it to $1000, 250/rm.

I’ve got a commission based job and I bring home around ~2500/mo with no debts, other than the 900 I will pay off at the end of this month. My school was paid for by athletic scholarships. A month or two after graduation, I will be heading to training to be a service manager (41-45k/year depending on monthly cash bonuses) for 19-21 weeks with all living expenses paid for by my company, so there is even more time to build up capital.

ANYWAY: Are there any loopholes or things that I can do to obtain a loan even though I’ve currently got commission based job? I’ve heard of lenders taking into account a job offer letter and future rents as income, but I’d like to know what any of you have to say?

This is a good ???...Commission based jobs seem to be harder to get loans with. The reasoning usually is because of it being commission income could be irregular..However, maybe if your selling a product that is widely bought on a consistent basis and the income hasn't been sporadic you might have a shot. 

I know if it's a w-2 job with commission and your in the same field and the commissions are consistently  of a higher level they will figure it into your income, and dti.

Hey Kathy, I see that you are in Missouri as well. Do you know of any lenders around the state that are flexible and are willing to work with investors that have tip based jobs?

@Kendall Short - There is nothing wrong with a commission-based job from a lending perspective, per se. However, a conventional lender will need to average the last 24 months income to determine your qualifying monthly income. So if you've been on that job for less than 2 years, you would be ineligible for a conventional loan. 

A job offer letter is only usable when it's a w2 hourly or salary based employment, not commission based, as there is no way. Future/projected rental income can be used as qualifying income.  If you have no history of rental income (i.e. do not have 2-year history of claiming rental income on your tax returns) then lenders would use 70% of the rent as qualifying income.

Thank you very much!! All of that helps a lot. The job they will be offering will be salary. I will screenshot this and save it for future reference.

Kendall,

Nothing wrong with a commission-based job. You just have to be able to provide documentation for the commission. 

A lender will average your salary/commission for the past 2-years. You might have to provide a Letter Of Explanation (LOE) from your employer stating that your commission is normal and will continue for the next 12+months.

You can get conventional financing on a duplex with as little as 5%-down - But with less than 20%-down, expect to have mortgage insurance (PMI).

I have never used a job-offer letter in the 15-years I have been doing mortgage lending. That being said, your money (no pun intended) may vary. However, the job would have to be within the same line of work or industry as your current job.

Lenders will use leases as a source of income but generally only if there is a preceding rental history (and usually 24-months at that). Without prior rental history, you probably won't be able to use rental income to qualify.

I've got a great lender here in MO that I can refer you to, should you want to get pre-qualified (which you should).

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