A mortgage applicant with stable employment for several years consistently receives overtime pay, which significantly boosts their annual income. The employer provides a letter confirming the likelihood of continued overtime. How would most prime lenders evaluate this overtime income when calculating the borrower's qualifying income?

Question: A mortgage applicant with stable employment for several years consistently receives overtime pay, which significantly boosts their annual income. The employer provides a letter confirming the likelihood of continued overtime. How would most prime lenders evaluate this overtime income when calculating the borrower's qualifying income?

Answer options: ✅ Prime lenders will generally consider a portion (e.g., 50%) or an average of the overtime income over two years, provided there's a strong history and employer confirmation of continuation.

• Overtime income is never considered by prime lenders due to its inherently unstable nature.
• The full amount of overtime income from the most recent year will be added to the applicant's base salary.
• Overtime income is only considered if it is specifically guaranteed in the employment contract.

Correct answer: Prime lenders will generally consider a portion (e.g., 50%) or an average of the overtime income over two years, provided there's a strong history and employer confirmation of continuation.

Explanation: While less stable than base salary, many prime lenders will consider a portion or an average of consistent overtime income over the past two years, especially if supported by an employer's letter indicating its likelihood of continuance, as per their specific income guidelines.