A borrower, Linda, receives a regular annual bonus and sales commission in addition to her base salary. She has received the bonus and commission consistently for the past five years. When qualifying Linda for a mortgage, how should a mortgage agent typically treat this bonus and commission income?

Question: A borrower, Linda, receives a regular annual bonus and sales commission in addition to her base salary. She has received the bonus and commission consistently for the past five years. When qualifying Linda for a mortgage, how should a mortgage agent typically treat this bonus and commission income?

Answer options: ✅ The mortgage agent should generally average the bonus and commission income over the last two years, then add it to her base salary for income qualification, ensuring consistency is demonstrated.

• Only the base salary is considered, as bonus and commission income are too variable to be relied upon by lenders.
• The highest single year of bonus and commission income should be used to maximize her borrowing capacity.
• Bonus and commission income can only be used if it constitutes less than 10% of her total income.

Correct answer: The mortgage agent should generally average the bonus and commission income over the last two years, then add it to her base salary for income qualification, ensuring consistency is demonstrated.

Explanation: For bonus and commission income to be included in qualification, lenders typically require a consistent two-year history and will often average the income over that period, adding it to the base salary, as per their income guidelines.