Yes, you can refinance on commission income. Lenders just count it differently than a paycheck. They average it over a long stretch, usually two years, and they use a lower number if your pay has been sliding. If your commission has been steady or growing, that average helps you. If it has dropped, the math can cost you. Here is how the numbers work, with a real example.

How lenders average commission income

They take your commission from the last two years, add it up, and divide by 24. That is your monthly commission income. Base salary is counted on its own, and the two are added together. A lender will also subtract unreimbursed business expenses that show up on your tax return, like mileage or a home office you were not repaid for, because that money never reached you.

The two year rule exists because one great quarter does not tell a lender anything about next year. Guidelines from Fannie Mae and Freddie Mac set the standard most lenders follow, and they ask whether the income is stable and likely to continue. Some lenders will work with 12 months of history if the rest of your file is strong, and a long track record in the same field helps. A brand new commission job with no history usually does not count at all.

The Consumer Financial Protection Bureau explains what lenders review before they approve a loan, and income stability sits near the top of that list.

A lender does not ask what you made last month. It asks what you can prove you will keep making.

A real example: $60,000 base plus falling commission

Say you live in Scottsdale, earn a $60,000 base salary, and earned $54,000 in commission in 2024 and $42,000 in 2025. You want to refinance a $380,000 balance from 7.25% down to 6.75%. Those rates are examples for the math, not a quote. The payment drops by about $128 a month, from roughly $2,592 to $2,465 in principal and interest. Add $520 for property taxes and insurance and $650 in car and card payments, and your monthly obligations come to about $3,635.

Now see what income the lender picks. The same file produces three different answers.

Same borrower, same loan, and the ratio moves five points depending on which year the underwriter trusts. Many conventional loans want debt to income at or below 45%, and automated underwriting can allow more with strong credit and reserves. At 45.4% you are right on the line. That is why a drop in commission matters more than the rate you are chasing. Our guide to debt to income ratio shows where those limits sit.

Run your own numbers

What documents commission income requires

Expect more paper than a salaried borrower. Lenders commonly ask for the last two years of W-2s, the last two years of full tax returns when commission is a meaningful share of your pay, and pay stubs covering the last 30 days with year to date totals. They also verify your job directly with your employer. Many will request IRS transcripts, with your signed authorization, to confirm your returns match what the IRS has on file. You can see your own through the IRS Get Transcript tool before you apply. For the full list, read our refinance document checklist.

If you are paid on 1099 instead of a W-2, the rules change, and bank statements may open options a tax return does not. See our post on 1099 income refinances in Arizona. If you recently moved to a new employer, read what happens when you change jobs during a refinance.

One more thing catches people off guard. Not every dollar on your pay stub counts as commission. Lenders sort your pay into base, commission, bonus, and overtime, and each has its own history test. A one time sales bonus or a spiff may be left out entirely. Draws against future commission are handled differently from commission you have already earned. If your employer reimburses nothing and you drive clients around Metro Phoenix all day, your mileage deduction shrinks your countable income, so it pays to know that number before the lender does. Our post on overtime and bonus income covers the sorting rules in more detail.

What to do if your numbers come up short

You have real moves, and the first is timing. If you are sitting on a strong second half, waiting a few months can lift your year to date figure and your average. Second, pay down the small debts. Clearing a $350 car payment lowers your ratio faster than a rate cut does. Third, check whether a streamline fits. An FHA loan can use an FHA streamline refinance, and a VA loan can use the VA streamline (IRRRL), and both can skip income verification when you already hold the loan and the refinance gives you a benefit. Fourth, add a co-borrower with steady income, if that makes sense for your household.

Do not forget the cost side. A lower rate only helps if you keep the loan long enough to recover closing costs. The refinance break-even guide walks through it, and a denied file is covered in why refinances get denied.

How to get ready before you apply

Pull your last two W-2s and tax returns now and add up your commission. Divide by 24. That is the number a lender is likely to start with. Then check the trend between the two years, because the trend tells you whether to expect the average or a lower figure. Do the same for your Valley rental or side income, if you have any, since that gets its own documentation.

Then talk to a lender before you lock anything. You can see the options on our loan programs page, and our process lays out each step from application to closing. If you are also thinking about a move in Metro Phoenix, start the home search on Arizona Luxury Property Search.

Meet the Pillar Mortgage Group team, see more at pillarmortgagegroup.com, then book a call or use the form below. We serve Scottsdale, Phoenix, and the whole Valley, and we will tell you the income number before you apply.

Frequently asked questions