Last year was great—$120,000 in commissions. The year before was slower at $85,000. Your bank averaged them and qualified you on $102,500, but you know this year's tracking even higher. If you earn commission income—as a salesperson, real estate agent, financial advisor, or other commissioned professional—here's how lenders view your income and how to maximize your mortgage approval.
How Lenders View Commission Income
Lenders see commission income as riskier than salary because:
- It can fluctuate year to year
- It depends on your continued performance
- Economic conditions can affect your earnings
However, lenders also recognize that top commission earners often out-earn salaried employees—they just need the right documentation.
Commission Income Calculation Methods
Method 1: Two-Year Average (Most Common)
Lenders average your commission income over the past two years:
Example:
- Year 1 commissions: $85,000
- Year 2 commissions: $95,000
- Qualifying income: ($85,000 + $95,000) ÷ 2 = $90,000
Method 2: Lower of Two Years (Conservative Lenders)
Some lenders use the lower year:
Same example:
- Qualifying income: $85,000 (the lower year)
Method 3: Most Recent Year (If Increasing)
If your income is clearly trending up, some lenders weight the recent year:
Example with upward trend:
- Year 1: $75,000
- Year 2: $95,000
- Some lenders may use $95,000 or a weighted average
What You'll Need to Prove Commission Income
Standard Documentation:
✅ T4s (for employed commission earners)
✅ T4As (if paid as independent contractor)
✅ Two years of tax returns (T1 General)
✅ Two years of Notice of Assessment
✅ Employment letter confirming commission structure
✅ Pay stubs (if applicable)
Enhanced Documentation (Helpful):
✅ Commission statements for current year
✅ Year-to-date earnings report
✅ Employment contract showing commission terms
✅ History of commissions over multiple years
Commission Types and How They're Treated
Employed Commission Earners
If you receive a T4 and have an employer:
- Treated more like regular income
- Easier qualification process
- 2-year history typically required
- Lender calls employer for verification
Self-Employed Commission Earners
If you receive T4As and are independent:
- Treated as self-employed income
- May need stated income programs
- Business documentation required
- Often higher down payment required
Base + Commission
If you have salary plus commission:
- Base salary: 100% counted
- Commission: Usually 2-year average
- Combined for qualification
Special Considerations by Industry
Real Estate Agents
- Very common commission structure
- Well-understood by lenders
- 2-year average standard
- Consider lenders familiar with RE agents
Insurance/Financial Advisors
- Trailing commissions may count
- Renewal income is stable
- Some lenders value consistent book of business
Sales Representatives
- Employer verification important
- Quota attainment history helps
- Industry stability matters
Car Sales/Retail
- Often mixed base + commission
- Lenders may verify with manager
- Consistency matters more than peaks
Strategies to Maximize Approval
Build a 2-Year Track Record
If you're new to commission work:
- 2 years minimum for most lenders
- 1 year may work if same industry before
Document Your YTD Performance
If current year is strong:
- Provide pay stubs or commission statements
- Show you're on track to exceed prior years
- Lender may use current year if trajectory is clear
Maintain Consistent Employment
- Same employer is ideal
- Same industry works if you changed employers
- Gaps or drastic changes raise concerns
Consider Larger Down Payment
More equity = less lender risk:
- 20%+ opens more options
- May offset income concerns
- Avoids CMHC scrutiny
Work with a Specialist Broker
Brokers who understand commission income:
- Know which lenders are commission-friendly
- Present your file optimally
- Can navigate unusual situations
Common Commission Income Mistakes
Mistake 1: Providing Wrong Documentation
Lenders need complete tax returns, not just T4s.
Mistake 2: Inflating Income
Lenders verify against CRA. Claims that don't match cause declines.
Mistake 3: Not Explaining Fluctuations
A big drop needs explanation—new territory, market conditions, etc.
Mistake 4: Changing Jobs Before Applying
Stick with current employer until after approval if possible.
Mistake 5: Waiting Too Long
Commission earners often have strong years they should capitalize on.
FAQ
Q: Can I qualify with only 1 year of commission income?
A: Possibly if you have prior experience in the same industry and a strong current year.
Q: What if my commission dropped last year?
A: Lenders may question this. Prepare an explanation (market conditions, territory change, etc.).
Q: Is commission income treated differently for refinancing?
A: Same qualification rules apply whether purchasing or refinancing.
Q: Do bonuses count as commission?
A: Often yes, if they're regular and documented on T4s or tax returns.
Q: Can I use my partner's stable income to offset my variable income?
A: Yes. Joint applications can balance variable and stable income.
Q: What if I'm paid entirely by commission with no base salary?
A: This is treated like self-employment in most cases. See our self-employed guide.
What's Next
Commission income shouldn't stop you from buying a home. Connect with our team to discuss your specific situation and find lenders who understand variable pay structures.
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