Couple reviews mortgage documents in their Reno home.

New Commission Job Mortgage in Reno Nevada: Qualify Sooner

Q: Why are mortgage lenders in places like Reno cautious about new commission-based income?

A lender's seasoning period is a mandatory waiting time after you purchase or refinance a property before you can access the full after-repair value (ARV) for a cash-out refinance. Most DSCR lenders require a seasoning period of 6 to 12 months. Refinancing before the seasoning period concludes typically means the lender will base the loan amount on your original purchase price plus rehab costs, which severely limits the amount of equity you can cash out. Waiting until after the period allows you to borrow against the full market value you created through your renovations.

Q: Is a two-year history of earning commission always required to get a mortgage?

To justify a higher appraised value, you should provide the appraiser with a detailed and organized renovation packet. This packet removes guesswork and provides concrete evidence of the work performed. It should include: a cover letter summarizing the major upgrades, a detailed scope of work document itemizing all improvements, compelling before-and-after photos showing the property's transformation, copies of paid invoices and receipts for materials and labor, and copies of any official building permits that were issued for the work.

Q: How can my previous work experience help my mortgage application if I just started a new commission role?

No, LTV limits for cash-out refinances vary significantly among different DSCR lenders, as each has its own guidelines and risk tolerance. While purchase loans may reach 80% LTV, cash-out refinances are often capped at 70% or 75% LTV. The specific LTV offered to an investor is influenced by several factors, including: Credit Score (higher scores typically qualify for higher LTVs), DSCR Ratio (a stronger income-to-debt ratio may result in a better LTV offer), Property Type (a single-family home might receive a higher LTV than a multi-unit property), and Loan Amount (some lenders may offer different terms based on the size of the loan).

Q: What information should my employment contract contain to help with mortgage qualification?

Your property's monthly rental income is the foundation of a DSCR loan approval. The formula is: DSCR = Gross Rental Income / Total Monthly Housing Payment. A higher rent results in a higher DSCR. This proves to the lender that the property can comfortably support a larger loan payment, which in turn allows you to qualify for a larger loan amount and maximize your cash-out.

Q: Can I use just my base salary to qualify for a mortgage if my commission income is too new?

Yes, it is often possible to pay for closing costs with the proceeds from your new loan, meaning you don't need to bring cash to closing. However, these costs are not added on top of your loan limit. Instead, the closing costs are subtracted from the total cash-out funds available to you after your existing mortgage is paid off. The total loan amount, including these costs, cannot exceed the lender's maximum LTV limit based on the property's appraised value.

Q: What are the most effective ways to strengthen my mortgage application if I rely on commission income?

Investors can make several avoidable errors that reduce their available cash-out funds. The most common mistakes include: Poor Documentation (failing to provide an appraiser with a thorough renovation packet can lead to a conservative and lower valuation), Refinancing Too Soon (not waiting for the lender's seasoning period to expire is a costly mistake that forces the loan to be based on cost rather than value), Lacking a Tenant (attempting to refinance a vacant property is less favorable, as lenders prefer the security of a signed lease over estimated market rents), and Ignoring Lender Differences (accepting the first loan offer without comparing options can mean missing out on better LTV limits or shorter seasoning requirements from other lenders).

Q: Will I be charged a higher interest rate on my mortgage because my income is commission-based?

The ideal time to begin the refinance process is 30 to 45 days before your lender's seasoning period expires. This allows you to gather all necessary documentation, secure an appraisal, and complete underwriting so that you can close immediately once the seasoning requirement is met. Crucially, by this time, the property should also be 'stabilized,' which means you have a qualified tenant in place with a signed lease and have collected at least the first month's rent.

Specialized In Jumbo Loans, Investor Loans, DSCR Loans, Non-QM Financing, Commercial Mortgages, and Tax-Informed Lending Strategies

Published By

David Ghazaryan

Owner / Broker / Banker

Contact Me At

(702) 766-3744

NMLS 1486726

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TL;DR

When seeking a mortgage in Nevada with a new commission-based job, lenders perceive higher risk due to the lack of a predictable income history. However, you can often overcome this challenge and qualify sooner by focusing on key strategies:

Leverage Your Strengths: A strong employment contract, verifiable base salary, and extensive industry experience can significantly improve your chances.
Strengthen Your Application: Properly documenting your earning potential and building up financial assets are crucial steps toward getting approved.
Focus on Stability: The goal is to demonstrate to the lender that despite the variable nature of your pay, you are a reliable borrower with a high probability of success.

Why Lenders are Cautious About New Commission Income in Reno

When you apply for a mortgage, lenders are primarily focused on one thing: your ability to repay the loan. A steady, predictable income is the cornerstone of their risk assessment. Salaried positions offer this predictability. A W-2 employee earning $80,000 a year provides a clear, verifiable figure for calculating your debt-to-income (DTI) ratio.

Commission-based income, especially when new, introduces uncertainty. A lender in Reno looking at your application sees potential volatility. They have no historical data from you in that role to confirm that your projected earnings are realistic and sustainable. They ask questions like:

Will the income be consistent month to month?
What if you have a few slow sales months?
Is the 'on-target earnings' (OTE) figure in your offer letter achievable or just an optimistic projection?

This caution isn't meant to penalize you. It's a fundamental part of underwriting designed to ensure the loan is a safe investment for them and a sustainable debt for you. Without a track record, your income is considered variable and less stable than a fixed salary, requiring more documentation and a stronger overall profile.

The Standard Two-Year Rule and Its Exceptions

Traditionally, lenders want to see a two-year history of receiving commission income to consider it for mortgage qualification. (The data, information, or policy mentioned here may vary over time.) They typically average your earnings over the last 24 months to arrive at a qualifying monthly income figure. For someone who just switched to a commission-based role, this rule seems like a dead end.

However, this two-year rule is not absolute. Underwriting guidelines, particularly for conventional loans backed by Fannie Mae and Freddie Mac, allow for exceptions. These exceptions are crucial for professionals in fields like tech sales, real estate, or high-end retail who transition into lucrative commission-heavy roles. Lenders can make a case for using your income with less than a two-year history if you have strong compensating factors, which demonstrate your likelihood of success and reduce the lender's risk.

Can a Strong Industry History Help Your Sparks Application?

Absolutely. One of the most powerful compensating factors is a proven track record in the same industry or a similar line of work. If you switch from a salaried sales manager to a commission-only account executive role within the same industry in Sparks, you are not starting from scratch.

Lenders can use this history to build a narrative of probable success. Here’s how it helps:

Demonstrates Expertise: Your past success proves you have the skills and network to perform in the new role.
Verifiable Performance: Past W-2s and tax returns, even from a salaried role, show you have a history of consistent employment and performance in your field.
Reduces Perceived Risk: A sales professional with five years of experience in the medical device industry is a much lower risk than someone entering that field for the first time. The lender can more confidently project that you will meet or exceed your target earnings.

For example, if you were a salaried marketing manager at a casino in Reno for four years and now have a commission-based role as a senior sales executive for a hospitality tech company, the industry continuity is clear. You can prove your ability to earn and succeed in that specific economic environment.

A professional sales executive confidently presenting to clients, representing a strong industry history.

What Documents Prove Your Potential Earnings?

Without a two-year history, your employment documentation becomes the primary evidence of your income. You must provide a comprehensive picture that leaves no room for doubt.

The Power of a Detailed Employment Contract

Your signed offer letter and employment contract are critical. A vague letter won't suffice. A strong contract that lenders can work with should clearly detail:

Base Salary: The fixed, non-variable portion of your income.
Commission Structure: Exactly how your commission is calculated. Is it a percentage of revenue, a flat fee per unit sold, or a tiered system? The more detail, the better.
Draws: If you have a recoverable or non-recoverable draw against commission, the terms must be clearly stated.
Guaranteed Pay: Any guaranteed commission or bonus for an initial period (e.g., the first six months) is extremely valuable as it provides a stable income floor while you ramp up.
On-Target Earnings (OTE): The contract should state the realistic expected total compensation if you meet 100% of your quota.

Using Your Base Salary for Qualification

Even if the lender is hesitant to use your full projected commission, they can always use your base salary. If you have a base salary component, it can be used to qualify for a mortgage immediately.

Example: You take a new sales job in Sparks with a $70,000 base salary and an OTE of $150,000. While you work on documenting your commission, the lender can qualify you based on the $70,000. This might not be enough for your dream home, but it establishes a baseline DTI and shows immediate repayment ability. If your DTI works with just the base salary, getting approved becomes much simpler. An underwriter can then view the future commission as an additional positive factor, even if they don't use it in the calculation.

Strengthening Your Mortgage Application Beyond Income

When your income stream is perceived as risky, you must strengthen every other part of your mortgage application. These are known as compensating factors that can sway an underwriter's decision.

Leveraging Assets and Reserves

Cash reserves are a powerful tool. Reserves are the funds you have left over after your down payment and closing costs are paid. They are measured in months of your future housing payment (PITI: principal, interest, taxes, and insurance).

Standard Requirement: Most loans require 2-3 months of PITI in reserves. (The data, information, or policy mentioned here may vary over time.)
Strengthening Your File: For a commission-based borrower, having 6 to 12 months of PITI in reserves significantly reduces risk. It shows the lender that if you have a few slow months, you can still easily make your mortgage payments without issue.

Example Scenario in Reno:

Home Price: $550,000
Down Payment (20%): $110,000
Loan Amount: $440,000
Estimated Monthly PITI: $3,200

To make a strong impression, you should show liquid assets of at least $19,200 (6 months x $3,200) after paying your down payment and closing costs. This demonstrates financial stability and foresight.

Stack of documents including financial statements and a calculator, symbolizing a strong mortgage application.

Other Compensating Factors

High Credit Score: A credit score above 740 shows a history of responsible debt management. (The data, information, or policy mentioned here may vary over time.)
Large Down Payment: A down payment of 20% or more lowers the loan-to-value (LTV) ratio, reducing the lender's risk. It also eliminates the need for private mortgage insurance (PMI). (The data, information, or policy mentioned here may vary over time.)
Low Debt-to-Income (DTI) Ratio: If your other debts (car loans, credit cards) are low, your DTI will be strong even with just your base salary, making your application much more appealing. (The data, information, or policy mentioned here may vary over time.)

Will a New Commission Job Mean a Higher Interest Rate?

This is a common misconception. Your interest rate is not directly penalized because of your income type. The rate you receive is determined by your overall risk profile, which includes:

Your credit score
Loan-to-value (LTV) ratio
The loan program you choose (e.g., Conventional, FHA)
Overall market conditions (The data, information, or policy mentioned here may vary over time.)

The challenge with new commission income is qualifying for the loan in the first place. Once an underwriter approves your income and deems your file stable, you are eligible for the same standard interest rates as a salaried borrower with a similar profile. You will not be offered a higher rate simply because your pay structure is commission-based. The key is to present a strong, well-documented file that meets the lender's guidelines, proving your income is stable and likely to continue. If you've recently transitioned to a commission-based role and are concerned about qualifying for a mortgage, don't assume you have to wait two years. A knowledgeable mortgage strategist can help you navigate underwriting requirements and effectively present your income and compensating factors. Proper planning is the key to turning your new, higher earning potential into homeownership.

Don't let the two-year myth delay your homeownership goals. With the right strategy, your new commission income can be your greatest asset. If you're ready to see what's possible, we'll help you build a strong application that underwriters understand. Apply now to start your journey.

Author Bio

David Ghazaryan is the expert mortgage strategist and founder behind iQRATE Mortgages. With a mission to fund home loans that traditional banks won't touch, David specializes in helping clients with unique financial situations, including those recovering from foreclosure or bankruptcy. He expertly crafts smart, strategic, and stress-free mortgages by leveraging a vast network of over 100 lenders to secure competitive rates for investors and homebuyers alike. Praised for exceptional customer service, David has helped hundreds of families with a 97% satisfaction rate, guiding them to the mortgage they deserve.