Can you qualify for a mortgage with variations in your income? My paycheck changes by a small amount each pay period and I want to understand if I can still get a mortgage.

By Harry Jensen, Trusted Mortgage Expert with 45+ Years of Experience

Edited by Michael Jensen, Mortgage and Finance Guru

Updated October 20, 2020

As long as you earn a regular income, have a two year employment history and the income differences each pay period are relatively small, you should be able to qualify for a mortgage, although depending on your type of employment and how you get paid, it may take a little extra effort.

If you are a full-time employee and receive a W-2 from your employer, then minor variations in your paychecks should not prevent you from qualifying for a mortgage. Lenders require that you provide two months of pay stubs and potentially a written explanation that addresses the small inconsistencies in your income, but this should not create a major issue.

If the fluctuations are more significant, lenders may average your income over the past one-to-two years to determine the loan you qualify for. If your income has decreased over the past several months, then lenders usually use your lower current income for your application. 

If you are self-employed or work as an independent contractor and receive a 1099, you still should be able to qualify for a mortgage as long as you have a two year track record of earning relatively steady income.  In this scenario, to account for income variations, the lender calculates your average monthly gross income, based on your tax returns for the prior two years, to determine the mortgage you can afford.  The higher your average monthly income, the higher the loan amount you qualify for.

Use ourMORTGAGE QUALIFICATION CALCULATORto determine the loan you can afford based on your monthly income and debt payments

If fluctuations in your income are caused by seasonal employment, lenders require that you have a two year work history in the same job or industry.  Seasonal workers can also use unemployment income to qualify for the mortgage as long as the income is attributable to regular, seasonal employment breaks.

Because qualification guidelines vary, we recommend that you contact multiple lenders to understand how they would handle your unique employment and income situation.  Shopping lenders also enables you to find the best mortgage terms including the lowest interest rate and fees.

Sources

"B3-3.1-01, General Income Information."  Selling Guide: Fannie Mae Single Family.  Fannie Mae, August 7 2019.  Web.