Does Overtime Count for a Mortgage? How Lenders Count Overtime, Bonus, Per Diem, and 1099 Income

Pull up last year’s W-2 and the overtime might be what made the year. For refinery operators working a turnaround, field crews on long hitches, nurses picking up extra shifts, and plenty of hourly workers in between, the extra hours aren’t a bonus. They’re how the job pays.

So it’s frustrating to hear a lender might not count all of it. Here’s the better news: overtime, bonuses, and contract pay can count toward a mortgage when you have a track record of earning them. The rules simply reward a track record, and they’re written down in the guidelines lenders follow. Once you know them, you can line up the right paperwork and walk in knowing roughly what a lender will use.

This guide covers how Fannie Mae, Freddie Mac, FHA, VA, and USDA treat overtime, bonuses, shift and rotation pay, per diem, 1099 income, new jobs, and gaps in work, then shows how that same income lines up with Texas down payment assistance limits. If you work in oil and gas, refining, or the ports, our guide to down payment assistance for oilfield and energy workers puts it all in that context.

Three things people get wrong about overtime and mortgages

1. “Lenders don’t count overtime.” They do, regularly. Overtime is eligible income under every major loan program. What lenders want is evidence it’s likely to continue, which usually means a history of receiving it.
2. “They’ll use my best year.” They won’t, and that’s actually protective. Lenders average variable income over time. If your overtime has been rising or steady, the average works in your favor. If it’s been falling, the lender has to see it level off first, and then uses the lower, current pace.
3. “Getting paid on a 1099 means I can’t qualify.” Not true. Contract and day-rate income is usually reviewed under self-employment rules, which mostly changes the paperwork: expect to show tax returns, generally for two years, instead of just pay stubs.

If one of these has been holding you back, the rest of this page shows what each loan program actually requires.

Does overtime count as income for a mortgage?

Yes, overtime counts as income for a mortgage when you can document a history of it and it’s likely to continue. The exact history requirement depends on the loan type.

The pattern across all five is the same: lenders count overtime that has a track record. A few months of heavy overtime at a new job, with nothing before it, usually can’t be counted yet. A couple of years of it, even uneven, usually can.

How lenders calculate overtime income

Lenders don’t take your biggest paycheck and multiply it by 12. Under Fannie Mae’s rules, if your overtime has been steady or increasing, the lender averages your year-to-date overtime with last year’s over at least 12 months. If it’s been decreasing, the lender has to confirm it has stabilized and then uses only the income since it stabilized.

Here’s a simple example. Say you earned $26,000 in overtime in 2025 and $19,200 from January through August 2026. That’s $45,200 over 20 months, or about $2,260 a month, which a lender may add to your base pay when figuring what you can afford. If 2026 had been running well below 2025 instead, the lender would base the figure on the newer, lower pace once it had leveled off.

Fannie Mae’s guide also lets a lender set aside a period when a documented, one-time event outside your control kept you from earning income. If a storm or an unplanned outage cost you weeks of overtime, that’s worth bringing up with your lender.

If your base pay itself moves because your hours swing week to week, Fannie Mae treats that as variable base income and requires at least a 12-month history of it.

Action step: pull your final pay stub from last year and your most recent one this year. If both show year-to-date overtime, you already have most of what a lender needs to average it.

Do bonuses count as income for a mortgage?

Yes, on the same terms as overtime. Fannie Mae, Freddie Mac, and FHA all group bonus income with overtime, so the same history and averaging rules apply: about two years, with shorter histories considered in some cases. For FHA, bonus income received for less than two years can count if it’s been consistently earned for at least one year and is likely to continue.

The bonuses that tend to count are the recurring kind, like annual performance or safety bonuses. A one-time payment, such as a signing bonus, has no history behind it, so it generally can’t be treated as ongoing income. It can still help in another way, as money toward your down payment or reserves.

Shift differentials, hazard pay, and rotation pay

This one surprises people: none of the major lending guides name civilian shift differentials or rotation premiums. Hazard pay shows up only in the rules for military income. In practice, lenders generally review pay that rises and falls with your schedule as variable income. Freddie Mac’s guide, for example, describes fluctuating earnings as pay that varies based on factors such as hours, job type, and performance.

A rotation schedule like 14-and-14 or 21-and-7 isn’t a problem in itself. What matters is that the total pay is steady over time and shows up in your pay stubs and W-2s the same way year after year.

Is per diem considered income for a mortgage?

It depends on the loan program and how the per diem is paid. Fannie Mae’s Selling Guide, the FHA handbook, and the VA handbook don’t address per diem as qualifying income. The USDA handbook is the exception: it counts taxable per diem that appears on your pay statements as gross earnings, with a one-year history, according to USDA HB-1-3555 Chapter 9. USDA also subtracts unreimbursed business expenses from the income it uses.

Because the conventional, FHA, and VA guides are silent, how a lender handles per diem, especially non-taxable travel reimbursement, can vary. Don’t build your budget around it until a lender has looked at your pay stubs.

What to do: check how per diem appears on your pay stubs and W-2. If it’s listed as taxable earnings, say so up front. If it’s a non-taxable reimbursement, plan on qualifying with your other income and treat any per diem that does count as a bonus.

1099 mortgage requirements for contractors and landmen

If you’re paid as an independent contractor, like many field landmen, pipeline inspectors, and consultants, your income usually arrives on a 1099 instead of a W-2. Lenders generally review that income under self-employment rules. Here’s how each program handles it.

One thing catches a lot of contractors off guard: lenders qualify you on the income left after business expenses on your tax return, not the gross on your 1099s. Most write-offs that lower your tax bill, such as mileage, fuel, and travel, also lower the income a lender can count, although lenders add back some non-cash deductions such as depreciation. If you’re planning to buy in the next year or two, that’s worth a conversation with your tax preparer before you file.

Can I get a mortgage with a new job?

Often, yes. Changing jobs isn’t a problem by itself, especially in fields where people move between employers and contracts. Fannie Mae’s employment income standards say that borrowers who change jobs frequently but still earn consistent, predictable income have a reliable flow of income for qualifying.

You may even be able to close before your first day. Here’s how the programs handle a signed job offer:

• Fannie Mae. Under its employment offers or contracts rule, one option lets a lender qualify you without a pay stub for a purchase of a one-unit primary residence, using fixed base income only, when the job starts no earlier than 30 days before closing and no later than 90 days after. You also need reserves set aside to cover your payments and other obligations until the job starts.
• Freddie Mac. Its future-employment rule allows a start date within 90 days after closing for a one-unit primary residence, with extra documented funds to cover the months until you start.
• VA. A verifiable offer of employment that begins at or after closing can be considered.
• USDA. A contract with a new employer starting within 60 days of closing may qualify if your reserves cover the payments until work begins.
• FHA. The FHA handbook doesn’t spell out an offer-letter option, so ask your lender how they treat a pending start date on an FHA loan.

Keep in mind that the offer-letter routes count your base pay. Overtime at the new job builds a history over time before it can count.

Employment gaps, layoffs, and seasonal work

A layoff in a downturn doesn’t erase the work history you built before it. The question lenders ask is whether you’re back at work and earning steadily now.

• FHA after a long gap. If you were out of work for six months or more, your current income can count once you’ve been in your current line of work for at least six months and had a two-year work history before the absence.
• FHA and frequent changes. More than three employers in 12 months, or a switch to a different line of work, triggers extra documentation, though FHA exempts fields that regularly use multiple employers, such as temporary work and union trades.
• USDA. The USDA handbook doesn’t set specific criteria for when a gap in employment is acceptable and asks for one year of history for base wages, which can be with different employers.
• Unemployment benefits. Fannie Mae, FHA, and VA count unemployment income only when it’s tied to seasonal work, and Fannie Mae and FHA want a two-year history. A one-time layoff benefit won’t count as income.
• Seasonal work. Seasonal income can count with a two-year history in the same line of work and a reasonable expectation that you’ll be rehired.

Action step: write a short list of every employer and contract for the past two years with start and end dates. If there’s a gap longer than a month, add one line on why. Lenders ask for exactly this, and having it ready keeps your file moving.

Where your averaged income lands: debt-to-income ratios

Once a lender settles on your qualifying income, it compares your monthly debts, including the new house payment, to that income. Fannie Mae’s debt-to-income guidelines allow up to 50% for loans approved through its automated system and 36% for manual underwriting, or up to 45% with strong credit and reserves. FHA’s manual underwriting standard is 31% for housing and 43% for total debt, with higher ratios allowed when you have compensating factors. In the Texas programs, TSAHC allows up to 45% on manually underwritten FHA loans, and TDHCA allows up to 45% on manually underwritten loans.

Does overtime count against Texas down payment assistance income limits?

This is a separate question from qualifying for the loan, and the answer depends on the program. Texas’s two housing agencies measure income differently.

The limits themselves are higher than many people expect. After TSAHC’s 2026 increase, announced in July, the Home Sweet Texas limit is at least $152,250 in every Texas county for a household of any size, and it reaches about $163,350 in Midland County and $201,600 in the Austin area. Our guides to TSAHC income limits and TDHCA income limits list every county, and a participating lender can run your income against each program before you choose one.

Documents to gather before you talk to a lender

• Pay stubs covering your most recent 30 days, with year-to-date overtime and bonuses showing
• W-2s for the past two years
• Complete federal tax returns, with all schedules, for the past two years if any of your income is on a 1099 or you’re self-employed
• Your 1099s, and a year-to-date profit-and-loss statement if you work for yourself
• A signed offer letter or contract if you’re starting a new job
• A list of employers and dates for the past two years, with a short note on any gaps
• Your DD-214 if you’re a veteran, since it can open additional programs

Action step: put these in one folder before your first lender conversation. With variable income, the paperwork is the application, and a complete file is the fastest way to a clear answer.

Uneven pay isn’t a reason to put off buying a home. It’s a reason to understand which history counts and to show it clearly. Two years of records, a lender who works with variable income every day, and the right program can turn a paycheck that looks complicated on paper into one a lender can work with.

Overtime, bonus, per diem, and 1099 income: FAQ

Overtime, bonus, per diem, and 1099 income: FAQ

† ShopDPA is The Texas Down Payment Assistance Marketplace, a home loan and down payment assistance referral service. We are not a mortgage lender, mortgage broker, or loan officer, and we do not originate, fund, or service loans. We connect Texas homebuyers with licensed mortgage professionals and with down payment assistance programs. We are not affiliated with Fannie Mae, Freddie Mac, HUD, FHA, the VA, USDA, TSAHC, TDHCA, or any government agency. Underwriting guidelines summarized here are set by those agencies and investors, are subject to change and lender overlays, and are not a commitment to lend or a determination of your eligibility. Examples are illustrations only. Confirm current requirements with a participating licensed lender. Equal Housing Opportunity.