Overtime and bonus income refers to income that the FHA mortgage applicant receives in addition to the FHA mortgage applicant’s normal salary. The Mortgagee may use overtime and bonus income as effective income if the FHA mortgage applicant has received this income for the past two years and it is reasonably likely to continue. Periods of overtime and bonus income less than two years may be considered effective income if the Mortgagee documents that the overtime and bonus income has been consistently earned over a period of not less than one year and is reasonably likely to continue.
For FHA VA mortgage applicants with overtime or bonus income, the Mortgagee must average the income earned over the previous two years to calculate effective income. However, if the overtime or bonus income from the current year decreases by 20 percent or more from the previous year, the Mortgagee must use the current year’s income.