Overtime, Commission, and Second-Job Income on a Seattle Mortgage

Overtime income can count toward a Seattle mortgage when it has a documented history and is likely to continue. An underwriter averages it over a year or two of pay records rather than reading your highest paycheck, and the same is true of shift pay, commission, tips and a second job. How long a history each one needs, and what a drop in hours does to the average, depends on the loan program.

Many of the buyers I work with on Capitol Hill and First Hill are not paid a flat salary. Nurses, techs and support staff at Swedish First Hill, Virginia Mason and Harborview pick up extra shifts. Servers and bartenders along Pike and Pine earn a large share of their pay in tips. Sales staff earn commission, and plenty of people hold a second job. All of that income is real, and much of it can be counted. The question an underwriter asks is not whether you earned it, but whether the record shows it is steady enough to keep earning.

For this page I read Fannie Mae's Selling Guide income sections (B3-3.1-01, B3-3.2-02, B3-3.3-01, B3-3.3-02 and B3-3.3-08), HUD Handbook 4000.1 in its current update, and the VA's underwriting regulation at 38 CFR 36.4340, on October 19, 2026. Freddie Mac has its own guide, which I did not cite here, and lenders can set rules stricter than any of them. I confirm the treatment on your file. Bonus pay and stock are on my RSU and bonus income guide, and staffing-agency W-2 work is on the contract worker guide.

How Overtime Income Counts on a Seattle Mortgage

Every program starts from the same idea: income used to qualify has to be stable and likely to continue. Fannie Mae's guide calls it "a stable and predictable flow of income." For overtime, that means three things.

• History. Fannie Mae recommends a two-year history for overtime, commission and tips, and allows a shorter one, but no less than 12 months, when other strengths in the file offset it (B3-3.3-02). FHA uses overtime received for the past two years, or for no less than one year if the lender documents it was earned consistently and is likely to continue. The VA regulation says the reliability of overtime generally cannot be shown unless it has continued for two years.
• An average, not a snapshot. The lender takes your year-to-date overtime and your earlier years' overtime from W-2s and pay records, and turns them into one monthly figure. A strong month in the summer does not set the number.
• Continuance. Fannie Mae does not require the lender to prove the overtime will continue unless something suggests it will not. The VA regulation asks for more: your work hours and conditions must allow "a clear conclusion" that the overtime can and will continue.

Documentation is usually your most recent paystub and two years of W-2s, or a written verification of employment from your employer, plus a verbal verification of employment shortly before closing.

Overtime Income Mortgage Seattle Math: How the Average Is Figured

The method depends on whether your overtime is going up, holding steady, or falling.

• Fannie Mae, stable or rising. The lender compares this year's monthly overtime with prior years. If it is steady or higher, the qualifying figure is year-to-date overtime plus the previous year's, divided by the number of months covered, with at least 12 months in the calculation.
• Fannie Mae, falling. If this year's overtime is running below last year's, the lender has to confirm it has leveled off after the decline. If it has not, the overtime cannot be used at all. If it has, the figure is built from the period since it stabilized.
• FHA. The handbook uses the lesser of two numbers: the average over the previous two years (or the time you have earned it, if shorter), and the average over the previous year. A decline flows straight into the lower figure.

Fannie Mae also allows one fair exception. When a documented, non-recurring event outside your control kept you from earning, the lender may leave that period out of the calculation. If you were out on leave this year, my parental leave guide covers how that is documented.

Hourly Pay, Variable Hours, and Shift Differentials

For hospital and service workers, the line between base pay and overtime is not always clean, and it matters.

Fannie Mae splits base pay in two (B3-3.3-01). Fixed base income is a set salary, or a fixed hourly rate with guaranteed minimum hours, and needs no minimum history. Variable base income is a fixed hourly rate with hours that go up and down, or an hourly rate that varies, and needs a 12-month history. The lender either averages year-to-date and prior-year earnings, or multiplies your average monthly hours over at least the most recent 12 months by your current hourly rate. A per diem or on-call schedule usually lands here. FHA averages varying hourly income over the previous two years, and can use a 12-month average of hours at your current rate if a raise is documented.

Shift differentials, the extra pay for nights, weekends or charge duty, are not named in any of the three guides. How they are treated depends on how your employer reports them: as part of a regular rate on guaranteed hours, or as a separate line that changes with the schedule. I ask your payroll office how the pay is coded, and the written verification of employment settles it.

Commission Income on a Seattle Mortgage

Commission is income paid when you close a sale or complete a service. Each program handles it a little differently.

• Fannie Mae puts commission in the same section as overtime and tips (B3-3.3-02), with the same history, documentation and averaging rules. The current section asks for a paystub and two years of W-2s, or a written verification of employment. It does not ask for tax returns for commission pay.
• FHA uses commission earned for at least one year in the same or a similar line of work that is likely to continue, and takes the lesser of the two-year average and the one-year average, like overtime.
• VA asks for more paper when all or most of your income is commission: written verification of commissions paid to date and how often they are paid, plus signed tax returns with schedules for the previous two years. The regulation says commission is generally stable at two years, and that less than one year will rarely be enough.

One boundary to watch. If your commission is paid on a 1099 rather than a W-2, or you own 25 percent or more of the business that pays you, you are qualified as self-employed. My self-employed two-year rule guide covers that path.

Tip Income for Capitol Hill Restaurant and Hospitality Workers

Tips count on the same terms as overtime under both Fannie Mae and FHA: a history, an average, and the expectation that they continue. The difference is the paper. Tips your employer reports show up on your W-2 and are documented like any other pay. For tips your employer did not report, Fannie Mae allows two years of personal tax returns with IRS Form 4137, the form used to report tip income, in place of the W-2.

That leaves one practical rule for servers, bartenders and hotel staff: income that never reached a W-2 or a tax return has no document an underwriter can count from. If you are a year or two from buying, reporting all of your tips builds the record you will need.

Second Jobs and Part-Time Income on a Seattle Overtime Income Mortgage File

A second job can count, and the rules are stricter than most people expect.

• Fannie Mae (B3-3.2-02) recommends a two-year history for each income source when you are qualifying with more than one job at the same time, and allows a shorter one, no less than 12 months, with offsetting strengths. When your history includes different employers, you may not have any gap in employment greater than one month in the most recent 12 months, unless the work is seasonal.
• FHA uses part-time income if you have worked the part-time job uninterrupted for the past two years and it is likely to continue, averaged over those two years.
• VA treats second jobs like overtime: generally two years to show reliability. Part-time or overtime income verified for at least 12 months that does not qualify as primary income may still be used to offset debts that run 6 to 24 months.

For a physician, moonlighting is a second-job question with its own wrinkles. My physician loan guide covers residents and attending doctors.

Seasonal Work and a Declining Overtime Trend

Seasonal work, such as a summer job or work that pauses each winter, needs a full two-year history under Fannie Mae, and the lender averages year-to-date income with the previous two years (B3-3.3-08). FHA asks that you have worked the same line of work for two years and are likely to be rehired, averages the previous two full years, and can count seasonal unemployment pay when it is documented for two full years.

A declining trend is where most variable-pay files get stuck. Hospital units change staffing, restaurants cut hours, and overtime drops. Under Fannie Mae, a decline that has not leveled off means the overtime cannot be counted at all. Under FHA, the lower average is used. Fannie Mae's guide adds that when a lender learns you are moving to a lower pay structure, for example a new job, the lower amount is the one used. If your hours are about to change, tell me before we apply, not after.

An Illustrative Example: Overtime Income and a First Hill Nurse

This example is illustrative only, with figures chosen for easy math on October 19, 2026. It is not a quote, uses no interest rate, and applies Fannie Mae's averaging method.

A nurse at a First Hill hospital earns $52 an hour on a guaranteed 36-hour schedule. Base pay is $52 times 36 hours times 52 weeks, divided by 12: $8,112 a month, counted as fixed base income. Overtime was $14,400 in 2025, and $11,700 from January through September 2026.

• Trend check: 2026 overtime is running $1,300 a month, against $1,200 a month in 2025. It is rising, so it is averaged.
• Overtime average: $11,700 plus $14,400 is $26,100, divided by 21 months, or about $1,243 a month.
• Qualifying income: $8,112 plus $1,243 is about $9,355 a month.

Now change one fact. Suppose the unit cut extra shifts and 2026 overtime is only $8,100, or $900 a month. That is a decline. If the lender can confirm the overtime has leveled off, it is figured from the period since it stabilized. If it cannot, the overtime drops out and qualifying income is the $8,112 base alone, about $1,243 a month less. That difference shows up directly in the price range you qualify for. My debt-to-income guide shows how the monthly income figure turns into a ratio.

What to Gather for an Overtime Income Mortgage in Seattle

1. Your two most recent W-2s from every employer, including a second job.
2. Your most recent paystub showing year-to-date earnings, with overtime, differentials, commission and tips broken out where your employer lists them.
3. Your last two years of tax returns, if you have tips your employer did not report, commission on a VA loan, or any 1099 income.
4. A note on any break in earnings, such as leave, an injury or a unit closure, with dates. A documented non-recurring event can sometimes be left out of the average.
5. Payroll contact information, so the lender can request a written verification of employment that states your hours and how each type of pay is coded.

If you are married and applying alone on an FHA loan, one more item matters. Washington is a community property state, and FHA counts a non-borrowing spouse's debts in your ratios unless state law excludes them. The marriage and mortgages guide covers it. For the full sequence of steps, see my how to get a mortgage guide, or the Capitol Hill neighborhood guide for the area itself.

FAQ: Overtime Income Mortgage Seattle Questions