Can a Move-Up Buyer Count New Bonus Income on a Conventional Loan?

The Quick Read: Usually not yet, unless the bonus has at least 12 months of documented history. A bonus that has run 12 to 24 months can count when the rest of your file offsets the short track record. Two years or more is the clean case. Pay raises and promised future bonuses don’t change that.

The rule comes from the agencies that set conventional standards, not from any one lender’s whim. Across the wholesale programs Lendmire works with, the pattern is consistent: base salary counts at current pay, while bonus income gets averaged over the months you can document. Here’s how it works, where the exceptions sit, and what to do if your bonus falls short. For the broader picture, Lendmire’s conventional loan programs page covers what the product asks of a file.

How Do Lenders Treat Bonus Income?

Bonus income is variable. A lender can’t assume it will repeat, so it asks three things: Is it documented? Is it consistent? Is it likely to continue?

The Fannie Mae rule on this is Selling Guide B3-3.3-02. It recommends a two-year history. Income received for a shorter period, but no less than 12 months, may be acceptable if positive factors reasonably offset the shorter history.

Freddie Mac says nearly the same thing. Its Guide Section 5303.1 lists a two-year consecutive history for bonus, commission, overtime and employer-reported tips. A history of less than two years, but not less than one, may be acceptable.

Notice the word “may.” Neither agency promises anything. The final answer comes from the automated underwriting finding, the lender’s own overlays, and the full file.

What Does the 12-Month Line Mean in Practice?

Under 12 months, the bonus is generally left out of qualifying income. That’s the floor on both sides.

Between 12 and 24 months, the bonus can count, but the file has to carry its weight. Positive factors that tend to help include:

• Low overall debt compared with income
• Solid reserves after closing
• Strong credit
• Stable employment in the same field

Past 24 months, the history question mostly goes away. Then the lender looks at trend: rising, flat or falling.

Freddie Mac adds one more test. The income should be likely to continue for at least the next three years. Fannie Mae, by contrast, doesn’t require the lender to verify continuance unless something suggests the income may stop. So the two agencies aren’t identical, and the lender you work with may apply whichever standard its investor requires.

How Is Bonus Income Calculated?

Think of it as two separate numbers added together.

1. Base salary counts at your current pay.

2. Bonus is averaged over the months you can document.

For stable or increasing income, Fannie Mae averages year-to-date and prior-year earnings over the months covered by the paystub and W-2s. The lender determines the pay frequency, converts year-to-date income to a monthly figure, and compares it with prior years.

That’s why a big recent bonus doesn’t set your coverage figure. The lender uses the average, not your best year. For a move-up buyer, this often means the qualifying amount comes in lower than the household budget expects, so it pays to ask early how much of the bonus a lender would count.

Declining income is a different story. The Fannie Mae rule for variable base income requires the lender to confirm the income has stabilized, or it’s ineligible. Declining bonuses are treated cautiously, and a falling trend can reduce the amount counted or exclude it. Ask your loan officer how a lender would handle your pattern.

Which “New Bonus” Situations Count?

“New” can mean several things, and they don’t all land the same way. Here’s how these cases typically sort out.

A few of these deserve a closer look.

A first bonus at a new job. A first bonus isn’t “history.” Fannie Mae treats employment offers and contracts in a separate part of its guide, so ask your lender how a new-job file would be reviewed. Don’t assume the bonus carries over from a prior employer, even in the same field.

A pay raise is not a bonus. Fannie Mae’s pay-raise policy applies only to fixed base pay, is limited to purchase or limited cash-out refinances, and requires the increase to take effect no later than 60 days after the note date. Fannie Mae states that this policy doesn’t apply to variable income. So a promised bonus can’t be included the way a scheduled raise sometimes can.

More than one income source. Each income source needs its own history. Two years is recommended, with 12 months as the minimum.

Job gaps. When your history includes different employers, there can be no gap in employment greater than one month in the most recent 12 months, with seasonal income the exception. Fannie Mae’s March 2026 Selling Guide announcement also describes excluding job gaps caused by documented non-recurring events when calculating bonus, commission, overtime and tip income. Fannie Mae reorganized its income chapter at the same time, so older training material may cite outdated section numbers.

Why Is Move-Up Timing Different?

Move-up buyers face a problem first-time buyers don’t: two homes.

If you buy before your current home sells, the lender generally counts both housing payments in your debt picture. That squeezes the ratio, and it makes bonus income matter more. A bonus that doesn’t count can be the difference between qualifying and not qualifying.

Some points to weigh:

• Timing the application. If a bonus is a few months away from crossing the 12-month mark, waiting can change whether it counts at all.
• Selling first. Selling the current home before you buy removes the second payment from the picture and may relieve pressure on income.
• Sale proceeds. Equity from the old home can fund the down payment, which may strengthen the file even when the bonus is excluded.
• Leverage. On a principal residence, conventional purchase leverage runs to 95%, or 97% when at least one borrower is a first-time buyer. A move-up buyer who owned a home within the last three years typically falls under the 95% figure, subject to lender guidelines.

Above 80% leverage, mortgage insurance applies. You can request cancellation at 80% of the original value with a good payment history, no subordinate liens and no decline in value, and the servicer must terminate it automatically at 78%. Exact terms depend on the lender’s guidelines, property type, leverage, and a full review of the borrower’s file.

Can the Bonus Help Even If It Doesn’t Count as Income?

Sometimes. Income and cash are separate questions.

A bonus that can’t count toward qualifying income may still show up as cash for a down payment, reserves or closing costs. That cash generally has to be sourced, meaning the lender can trace where it came from. Large unexplained deposits slow files down, so keep statements clean.

There’s also a federal point worth knowing. The CFPB’s ability-to-repay guidance says lenders must generally consider and document income, assets, employment and monthly expenses. It doesn’t set a bonus-history number. The 12- and 24-month thresholds come from the Fannie Mae and Freddie Mac guides. And a lender needn’t verify extra income that isn’t needed to repay the loan, so a bonus you don’t need to qualify may not be scrutinized.

What Documents Should You Gather?

Pull these together before you apply:

• Most recent paystub showing year-to-date bonus
• W-2s for the past two years
• Employer contact for a written or verbal verification of employment
• Documentation of how and when the bonus is paid
• Statements for the accounts holding your down payment and reserves

Fannie Mae calls for either a completed Request for Verification of Employment, or the most recent paystub plus two years of W-2s, along with a verbal verification of employment. Missing documents are one of the most common reasons a file stalls, so get employer paperwork moving early. When two borrowers apply, each income source needs its own verification if both are needed to qualify.

What If the Bonus Doesn’t Count?

You have options. None are magic, and each has a cost.

1. Qualify on base pay alone. This may mean a smaller purchase price.

2. Wait for the 12-month mark. Waiting can add the bonus back to the file, though it means delaying the purchase.

3. Increase the down payment. Sale proceeds can lower the amount borrowed.

4. Pay down debts. A lower monthly debt load improves the ratio.

5. Add a co-borrower. Another income may help, but their credit and debts come along too.

6. Sell first. This removes the second housing payment.

The right choice depends on how tight the file is and how flexible your timeline is. If you’re a few months from seasoning the bonus and the market allows it, waiting often beats stretching. If the home you want won’t wait, a bigger down payment from your equity may be the better lever.

Mistakes to Avoid Before Applying

• Changing jobs mid-process. A new employer can reset the history question.
• Changing your pay structure. Shifting salary into bonus, or the reverse, can muddy the pattern.
• Assuming a promise counts. An offer letter or a verbal “you’ll get a bonus” isn’t history.
• Moving money around. Unexplained deposits create documentation work.
• Skipping the question. Ask your loan officer how many months of bonus they can document before you shop.

Key Terms Defined

Variable income: Pay that changes from period to period, such as bonuses, commissions and overtime.

Averaging: A method that spreads documented earnings over the months covered to get a steady monthly figure.

Compensating factors: Strengths in your file, such as low debt, reserves and strong credit, that offset a weaker point.

Lender overlay: A rule a lender adds on top of the agency minimum, which can make the requirement stricter.

Continuance: The likelihood that income will keep arriving; Freddie Mac asks for three years.

Verification of employment (VOE): A check with your employer confirming your job and pay.

Questions to Ask Your Loan Officer

• How many months of bonus can you document for my file?
• Will you average over the full history, or only the last year?
• Do you apply any overlay stricter than the agency minimum?
• What does the automated underwriting finding say with and without the bonus?
• If the bonus doesn’t count, what is my qualifying range on base pay alone?

If you are buying a home and want to see whether a conventional loan fits your file, Lendmire can help you compare the options and what each one asks of the file. Reach the team at 828-256-2183. Related reading: Lendmire’s piece Conventional Loan No-Cash-Out Refinance Rules for a Move-Up Buyer, and its look at whether a jumbo lender counts a signing bonus. Program details are subject to lender guidelines and full file review, and nothing here is a commitment to lend.

For your own numbers, request a scenario review with Lendmire.

About Lendmire

Lendmire (NMLS# 2371349) is a mortgage brokerage serving homeowners and home buyers in 16 states. FHA, VA, conventional and jumbo purchase and refinance loans are arranged through wholesale lending channels; Lendmire brokers the financing and the lender underwrites each application. Scotsman Guide named Lendmire a Top Mortgage Workplace in both 2025 and 2026.

References

1. Fannie Mae Selling Guide B3-3.3-02, Bonus, Commission, Overtime, and Tip Income

2. Freddie Mac Guide Section 5303.1

3. Fannie Mae Selling Guide B3-3.2-02, Standards for Employment-Related Income

4. Fannie Mae Selling Guide Announcement SEL-2026-02

5. CFPB, What is the ability-to-repay rule?