South Florida Variable Income: Using Bonuses, Commission, and Self-Employment Earnings on a Conventional Mortgage

Positioning and Purpose of This Guide

Variable income can strengthen a mortgage application if it is presented with the right structure. In South Florida—where careers span finance and healthcare to hospitality, tech sales, and a massive entrepreneurial ecosystem—bonuses, commissions, and self‑employment earnings are common. Conventional underwriting will use your variable income when it appears stable, ongoing, and well documented. This guide explains how lenders read the numbers, how to prepare supporting documents that actually move a file forward, and how to time your application so automated findings and human underwriters say yes quickly. It is written for real estate investors building portfolios, first‑time home buyers who earn more than their base pay, and homeowners planning a refinance that relies on variable income.

How Conventional Underwriting Sees Variable Income

Underwriters start with categories. Base pay is usually the easiest to count because it is level and predictable. Variable income includes bonuses, commissions, overtime, tips, shift differentials, and sometimes equity compensation that vests as W‑2 income. For business owners and partners, Schedule C, S‑Corp, or partnership income is also “variable” from a lender’s perspective because it fluctuates year to year. Conventional loans typically average variable income over twenty‑four months. A trailing‑twelve‑month review refines that picture and helps catch rising or declining trends. Rising income is helpful when it looks durable; declining income is often averaged conservatively or reduced to the lower, most recent level. Two principles guide the process: continuity (reasonable expectation that the income will continue for at least three years) and stability (no concerning downward drift).

Bonuses: Seasonal Spikes, Year‑End Awards, and Discretionary Payouts

Bonuses can be used when they are consistent and documented. Pay stubs and W‑2s, paired with a written verification of employment (WVOE), show cadence and totals. If you receive an annual bonus each February, underwriters will look for a track record of payouts and whether the employer considers them discretionary. A discretionary label does not disqualify the income; it just means the underwriter will weigh the length of history and trend more carefully. If your bonus amount fluctuates, expect a two‑year average unless the most recent year is materially lower—in that case, the lower figure may drive the qualifying number. Practical strategy: if your bonus is imminent and predictable, consider aligning your application window to include it in year‑to‑date (YTD) earnings so the average captures it.

Commission Income: Month‑to‑Month Volatility with a Long‑Run Story

Commission earnings can vary widely by quarter, especially in South Florida sectors like medical device sales, logistics, yachting, and real estate services. Conventional underwriting commonly uses a twenty‑four‑month average, with extra attention on the latest twelve months. When commissions rising sharply are supported by written employment terms, pipeline reports, or territory expansions, underwriters may accept the average as representative. If the latest twelve months decline, the qualifying income may be capped at the lower trend. Draws against commission are handled as either advances that net against earnings or as separate liabilities, depending on your pay structure; clear employer letters and YTD stubs prevent confusion. A helpful tactic for commission earners is to minimize new debt and keep revolving balances low in the three to six months prior to application—this stabilizes debt‑to‑income (DTI) ratios while your averaged income is being reviewed.

Self‑Employment Earnings (Schedule C, S‑Corp, Partnership)

Self‑employed borrowers are common across Miami‑Dade, Broward, and Palm Beach counties. Conventional underwriting generally requests two years of personal returns and, for corporations or partnerships, two years of business returns with K‑1s. Some files can qualify with one year when the business is established and trends are strong, but that is case‑by‑case. Underwriters focus on the net income available to repay the mortgage after legitimate business expenses. Certain non‑cash expenses—like depreciation or depletion—may be added back. Large one‑time expenses can be explained and excluded when properly documented. For S‑Corp and partnership income, distributions and business liquidity matter: K‑1 income that is not distributed may still be usable if the company’s balance sheet shows cash to support it and you have access to those funds. A clean, current year‑to‑date profit‑and‑loss (P&L) and recent business bank statements help tie the story together.

Documentation Blueprint for Variable Income

Strong documentation removes friction. For W‑2 borrowers with bonuses or commissions, gather the last two years of W‑2s, your most recent thirty days of pay stubs (or longer if stubs show less detail), and authorization for a WVOE. If your employer maintains an online portal with year‑to‑date totals broken out by income type, capture those screenshots. For self‑employed borrowers, collect the last two years of personal returns (all pages), the last two years of business returns where applicable (1120‑S, 1065, K‑1s), a current YTD P&L, and the last two or three months of business bank statements. If you recently changed compensation plans, request a letter on company letterhead confirming the new structure and its effective date. When your numbers are complex, add a one‑page summary explaining your role, how you are paid, and why the income will continue; concise borrower letters make underwriters more comfortable.

Debt‑to‑Income (DTI) Strategy with Irregular Earnings

DTI compares your total monthly obligations to your gross qualifying income. With variable income, two linked levers matter: how much income underwriting will count and how many debts you are carrying. A higher FICO score, a slightly lower LTV, or a stronger reserve position can offset borderline DTIs. For example, shaving utilization on credit cards to below ten percent of limits can lift scores into a better pricing tier and modestly expand DTI headroom. If PMI is present, choosing a single‑premium or lender‑paid structure can reduce the monthly payment compared with monthly borrower‑paid MI, which helps DTI. You can run first‑pass scenarios with Premier Mortgage Associates’ Mortgage Calculator to see how MI choices, rate assumptions, and down payment interact: https://www.premiermtg.com/calculators/ Then, a PMA loan specialist can model the file using actual underwriting rules for a precise view.

Handling Declining or Interrupted Income

Life and markets change. If your variable income dipped due to an industry slowdown or a temporary interruption, assemble evidence that the decline has reversed. For bonus and commission earners, a trailing twelve‑month summary that shows re‑acceleration alongside pipeline contracts or employer territory letters can be persuasive. For self‑employed borrowers, year‑to‑date P&L statements, contracts in progress, and bank‑deposit histories help. Underwriters are cautious about counting a rebound too early, so timing matters. If your next quarter includes a known bonus or booked contracts that will hit statements soon, waiting a few weeks can change the averaged math. If the interruption is structural—like a job change into a different role or compensation type—ask your loan officer whether additional history is needed before application.

Second Homes and Investment Properties with Variable Income

Occupancy changes the bar. Second‑home and investment‑property purchases often require stronger reserves and may cap LTV compared with primaries. Investors with variable income must also navigate rental‑income treatment for qualification: signed leases and market rent schedules from the appraisal can offset the payment on the new property, subject to vacancy factors. If you hold several financed properties, be ready for reserve stacking across the portfolio. For short‑term rentals, confirm condominium or HOA restrictions early; some buildings in Miami Beach, Ft. Lauderdale, and West Palm Beach restrict stays shorter than a month, which affects both underwriting and your pro forma. When your variable income is robust but uneven, a conservative scenario—lower counted income, slightly larger down payment, and higher reserves—can deliver approvals that are durable across market swings.

Mortgage Insurance (MI) Choices for Non‑20% Down Buyers

MI strategy is a lever for both cash flow and approval odds. Borrower‑paid monthly MI (BPMI) keeps cash at closing lower and can be cancelled later when equity passes certain thresholds. Single‑premium MI trades a one‑time cost for a lower monthly payment, which may help DTI on commission‑heavy files. Lender‑paid MI (LPMI) bakes the cost into the interest rate and removes the MI line from the payment, which can look attractive for cash‑flow planning—just remember it typically cannot be “cancelled” without refinancing. Variable earners should model break‑evens: if large bonuses or commissions allow an early principal reduction, pairing that prepayment with BPMI might let PMI drop sooner; if you prefer steady low payments from day one, single‑premium may win. Your PMA loan officer can show side‑by‑side lifetime‑cost comparisons so you see beyond the first month’s payment.

Rate Locks, Timing, and Cash‑Flow Planning

South Florida’s hurricane season creates scheduling risk for appraisals and insurance binding, while bonus season or quarterly commission payouts create windows when your income averages look strongest. A realistic sequence is to gather employer letters and YTD documentation first, pre‑screen your file with underwriting logic, and then lock once the appraisal is ordered and insurance quotes are in hand. Many lenders offer 30‑ to 90‑day locks; some include a float‑down if rates improve during the lock. Build a small timing buffer in September and October when storms are more frequent. If you receive a large payout mid‑year, ask about a recast after closing: a recast keeps your rate and term but lowers the payment after you make a one‑time principal reduction—useful for smoothing cash flow when income arrives in chunks.

South Florida Location Intelligence (Local SEO Section)

Local costs and rules influence underwriting results and your monthly budget. In Miami‑Dade, Broward, and Palm Beach counties, wind and flood insurance costs vary by distance from the coast, elevation, and building updates like impact windows and roof age. Wind‑mitigation credits can meaningfully reduce premiums; an insurance agent’s quote that includes those credits helps DTI. Flood‑zone status determines whether separate flood coverage is required; check FEMA maps and confirm whether a condominium’s master policy includes flood. Property taxes differ by county and whether the home is homesteaded. If you are moving within Florida, portability can carry a portion of your Save Our Homes benefit to the new property, easing tax jumps. In condo‑dense areas—Brickell and Downtown Miami, Fort Lauderdale’s Central Beach and Flagler Village, and West Palm Beach’s SoSo and El Cid—association budgets, reserves, and special assessments affect both appraisal and underwriting. Ask for the condo questionnaire, master insurance, and latest budget early so any building‑level frictions are known before you lock your rate.

Condo‑Specific Considerations for Variable Earners

Condo project health can make or break approvals that rely on variable income. If your file is close on DTI, a building with strong reserves and reasonable insurance deductibles may push you over the line, while a building with thin reserves or pending litigation can undo a solid borrower profile. For buyers counting commissions or bonuses, the safest path is a limited‑review project when eligible; otherwise, be prepared for a full review and the extra documents that come with it. Provide appraisers with a summary of your unit’s upgrades and any special features that influence value—impact glass, renovated kitchens, dedicated parking or storage—so the valuation reflects what the market will pay. When special assessments exist, underwriters ask how long they last, whether they are fully funded, and whether owners are paying on time. Plan your cash to close to include any association capitalization fees and the HO‑6 premium that bridges gaps in the master policy.

Pre‑Approval that Holds Up Under Scrutiny

A strong pre‑approval uses conservative, documented income and anticipates guideline overlays. Your PMA team can review base, bonus, commission, and self‑employment sources separately, then decide how much to count for qualifying. They will run automated underwriting, flag any conditions that a human underwriter is likely to add, and give you a document checklist to upload through a secure portal. A typical variable‑income packet includes two years of W‑2s, thirty to sixty days of pay stubs with YTD detail, a WVOE or employer letter for bonuses and commissions, two years of personal and business returns for self‑employed borrowers, current P&L, and two to three months of bank statements. If you are refinancing, add your current mortgage statement and insurance declarations. Clean, legible files shorten turn times and reduce the odds of a last‑minute condition while your rate lock is ticking.

Worked Examples Across Income Types

Bonus‑heavy finance/tech role in Brickell. A buyer with $110,000 base and an average $35,000 year‑end bonus wants a condo in Downtown Miami. Averaging two years of bonuses adds roughly $2,900 per month of qualifying income. Because bonuses post in February, the buyer waits until March to apply so the YTD stub captures the payout. The resulting DTI drop improves pricing by moving LTV from 90% to 85%, allowing a smaller MI charge. The offer becomes more competitive without raising cash to close.

High‑commission sales professional in Fort Lauderdale. A medical‑device rep averages $180,000 over twenty‑four months, with the latest twelve months at $195,000 and a strong pipeline letter from the employer. The file includes an employer letter confirming the commission plan, a twelve‑month earnings summary, and bank statements that align with stubs. The underwriter accepts the twenty‑four‑month average but stresses reserves because commissions ebb and flow. The buyer elects single‑premium MI to keep the payment steady during slower quarters.

Self‑employed S‑Corp owner in West Palm Beach. A contractor shows $140,000 of W‑2 wages from their S‑Corp and $45,000 in K‑1 pass‑through income after add‑backs. The business balance sheet shows healthy cash, and distributions match the K‑1. A YTD P&L supports trend, and two months of business bank statements tie to deposits. The borrower qualifies for a rate‑and‑term refinance that removes monthly MI and shortens the amortization by five years, improving total interest cost while keeping payment close to current levels.

Common Pitfalls and How to Avoid Them

Undocumented large deposits can sideline otherwise strong files; if you transfer savings between personal and business accounts, keep a clean paper trail. Overestimating usable income is another trap: lenders qualify you on taxable or net income after adjustments, not gross billings or contract values. Changing jobs into a different role or compensation type just before applying can reset the clock on qualifying income; when possible, make career shifts after closing. For condo buyers, ordering an appraisal before the project review passes can waste money if the building turns out to be ineligible. Finally, rate locks that ignore hurricane‑season realities can expire at the worst time; add a small buffer when storms are active.

Tools, Links, and Next Steps

You can model payments, down‑payment options, and MI structures with Premier Mortgage Associates’ Mortgage Calculator: https://www.premiermtg.com/calculators/ When you are ready for tailored guidance, connect via our Home Page: https://www.premiermtg.com/ Share your pay history, employer letters, and tax returns through our secure portal, and we will map a conservative‑to‑aggressive range of qualifying income so you can shop with confidence across South Florida markets.