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B3-3.3-01, Base Income (03/04/2026)

Introduction
This topic contains information on determining qualifying income for base pay, including:

Overview

Base income is received on a regular basis, independent of additional earnings such as overtime or bonuses. It is categorized as either fixed or variable:

  • Fixed base income refers to a set salary or fixed hourly rate with guaranteed minimum hours. These hours may have minor variances from pay period to pay period which does not alone preclude the borrower’s income from being considered fixed base income.
  • Variable base income refers to a fixed hourly rate with fluctuating hours, or an hourly rate that varies.
     

Fixed Base Income

The following table provides requirements for fixed base income.

CriteriaRequirements
Documentation

The lender must obtain

  • a completed Request for Verification of Employment ( Form 1005), or
  • the most recent paystub and most recent W-2.

Additionally, a verbal VOE is required. See B3-3.1-04, Verbal Verification of EmploymentB3-3.1-04, Verbal Verification of Employment, for specific requirements.

Income HistoryA minimum history is not required for inclusion as qualifying income.
Income ContinuanceThe lender is not required to verify continuance unless they have reason to believe the income may not continue.
Determination of Qualifying Income

The lender must calculate fixed base income as shown in the following table.

How Often PaidHow to Determine Monthly Income
AnnuallyAnnual gross pay / 12 months
MonthlyUse monthly gross payment amount
Twice MonthlyTwice monthly gross pay x 2 pay periods
Biweekly(Biweekly gross pay x 26 pay periods) / 12 months
Weekly(Weekly gross pay x 52 pay periods) / 12 months
Hourly(Hourly gross pay x average # of hours worked per week x 52 weeks) / 12 months

The borrower's qualifying income must be consistent with year-to-date base earnings. If year-to-date income does not reflect at least 30 days' of earnings, the lender must confirm qualifying income is consistent with the prior year's earnings.

Variable Base Income

The following table provides requirements for variable base income.

Criteria Requirements
Documentation

The lender must obtain

  • a completed Request for Verification of Employment (Form 1005), or
  • the most recent paystub and most recent W-2.

Additionally, a verbal VOE is required. See B3-3.1-04, Verbal Verification of EmploymentB3-3.1-04, Verbal Verification of Employment, for specific requirements.

Income HistoryA minimum 12-month history of receiving variable income is required.
Income ContinuanceThe lender is not required to verify continuance unless they have reason to believe the income may not continue.
Determination of Qualifying Income

The lender must calculate income using one of the two methods below. 

1. Average Income: Depending on the historical trend of the income, the lender must calculate qualifying income as follows:

  • Stable or Increasing: Calculate an average income amount using year-to-date and previous year's earning. The calculation must include a minimum of 12 months' income.
  • Decreasing: The lender must confirm the current income level has stabilized after the decline; otherwise, the income is not eligible for qualifying. To calculate income, use the year-to-date income divided by months elapsed in the current year.

2. Average Hours: The lender must multiply the average monthly hours (based on at least the most recent 12 months) by the current fixed hourly rate.

Note: When a documented, non-recurring event outside the borrower's control temporarily prevented them from earning income, the lender may exclude that period from the income calculation.

The pay raise policy in B3-3.2-02, Standards for Employment-Related IncomeB3-3.2-02, Standards for Employment-Related Income  does not apply to variable income. Any pay raises for variable base income must be in place prior to closing.

Recent Related Announcements

The table below provides references to recently issued Announcements related to this topic.

AnnouncementsIssue Date
Announcement SEL-2026-02 March 04, 2026
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