Does Overtime Count as Income for a Mortgage? A Guide for Firefighters and Police

Yes, in most cases it does. For a lot of firefighters, deputies, police officers and paramedics, overtime is a big part of what they earn, and leaving it out can cost you a lot of buying power. Here's how lenders look at it.

The two year rule (and when less works)

Most programs want to see about two years of overtime history before they'll count it. Fannie Mae, which sets the rules for most conventional loans, says a lender can sometimes use 12 to 24 months when there are positive factors, like a long history in the same department. FHA has a similar standard.

How the number is figured

Lenders usually average your overtime over the last two years using your W2s and a current pay stub. If this year is running higher, the average still pulls it down. If this year is running lower, the lender may use the lower, current number. A steady or rising trend is what you want.

Shift differentials and specialty pay

Night shift differentials, acting pay, specialty assignment pay and bilingual pay can usually count too, as long as they show up consistently on your pay stubs and your employer confirms they're likely to continue.

Strike team and deployment pay

Strike team and mutual aid pay can be counted when it's part of a steady history. A single huge fire season followed by a quiet year can make the average tricky. I'll look at your year to date and prior years so we use the strongest number we can support.

Second jobs

A lot of first responders work a second job, like teaching at an academy, EMT shifts or construction on days off. Second job income can usually count when you have about two years of working both jobs at the same time.

How to make sure your overtime counts

• Keep your last two years of W2s and your most recent 30 days of pay stubs
• Make sure year to date overtime shows clearly on the stub
• Tell me about any big changes, like a promotion, a move to a new station or a new schedule
• Get a fully underwritten approval before you shop, so you know your number is real

Every department pays a little differently. The quickest way to know is to send me your pay stubs and W2s and I'll show you exactly what counts.

Sources: Fannie Mae Selling Guide B3-3.1-01. General information, not legal or tax advice. Program rules can change.