If you earn commissions—as a real estate agent, sales professional, or contractor—you already know your income can swing month to month. Mortgage underwriters know it too, which is why they treat commission income more conservatively than W-2 salary. Understanding their process helps you set realistic expectations and avoid surprises during underwriting.
The two-year tax return requirement
Underwriters almost always require your last two years of personal tax returns (1040s) to verify commission income. They're looking at your Schedule C if you're self-employed, or your W-2 plus any 1099-MISC forms if you're an employee who also earns commissions. Recent pay stubs are helpful and required, but they supplement the tax returns—they don't replace them. A large commission check you deposited last week matters far less than the average you've sustained over 24 months.
How the 24-month average works
Underwriters calculate your qualifying income by averaging the commission portion over the prior two years. If you earned $72,000 in commissions in year one and $84,000 in year two, your average is $78,000 annually, or $6,500 per month. That monthly figure is what gets added to your other stable income when determining how much house you can afford. These figures are illustrative; rates and products are subject to change and this is not a commitment to lend.
If your commission income is trending downward—say $90,000 two years ago and $70,000 last year—the underwriter may use the lower year or apply additional scrutiny. Declining income raises questions about sustainability, and some lenders will use only the most recent 12 months in that scenario.
Why recent big checks don't instantly help
You just closed three deals and deposited $18,000—shouldn't that increase your buying power? Not immediately. Underwriters are measuring *sustainable* income, not windfalls. A strong recent month is a good sign, but it won't move the needle unless it's part of a consistent two-year pattern. If you're relatively new to commission work and lack two full years of history, expect the lender to either exclude that income entirely or average only the months you can document, which shrinks your qualifying amount.
Documentation you'll need
Gather your last two years of signed tax returns (all schedules), your most recent two months of pay stubs, and year-to-date profit-and-loss statements if you're self-employed. If you changed jobs or brokerage within the same industry, a letter from your employer confirming continued commission structure can help bridge the gap. Consult a CPA or attorney; this is not tax or legal advice.
The Alliance take
Commission earners can absolutely qualify for competitive financing—you just need to plan ahead. If you're six months from buying, this is the time to ensure your tax returns accurately reflect your income and that you're documenting everything cleanly. Start an application once you have two years on file, and we'll walk you through exactly what underwriting will calculate.