Source: https://clockwage44.com/tools/overtime-income-mortgage-calculator/

ClockWage44 is a free hours and pay tracker app for iOS and Android: log shifts across every job and see take-home pay after federal tax, state tax, FICA, overtime and deductions.

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# Overtime Income Mortgage Calculator

Estimate the monthly income a mortgage lender may count from hourly pay and overtime: base pay, your overtime average, and the lower figure if it is falling.

_Interactive tool: open [the web page](https://clockwage44.com/tools/overtime-income-mortgage-calculator/) to use it. This Markdown copy has the text only._

Estimates only, not a loan approval or lending, tax or legal advice. Lenders apply their own rules, and an underwriter makes the final call.

The trend compares this year's monthly pace with last year's monthly average. History adds this year's months to each earlier year with overtime, stopping at the first year without any.

### What This Estimate Assumes

- The conventional (Fannie Mae) method. FHA and VA lenders can reach a different figure (the FAQ below covers FHA's rule).
- A fixed hourly rate. If your regular hours vary, enter your 12-month average: a lender multiplies it by your current rate.
- Overtime ran all year in any year with a total above zero. A year with none breaks the history, so overtime from two years ago counts only when last year had some.
- When overtime is falling, the months on your stub stand in for the months since it stabilized. That matches Fannie Mae's method only if the drop came before January.
- Gross income before tax. Debt-to-income limits and a lender's own stricter rules aren't applied.

## How a Lender Turns Your Overtime Into a Monthly Number

A lender doesn't take your best pay stub and multiply it out. It splits your pay into base pay and overtime, handles each one its own way, then adds them into one monthly figure.

Base pay comes first, at your current rate. For a fixed hourly rate, Fannie Mae's Selling Guide (B3-3.3-01) uses hourly rate × average weekly hours × 52 ÷ 12. At $25 an hour and 40 regular hours, that's $4,333.33 a month. The common shortcut of four weeks to a month gives $4,000, about 8% short, because a month averages 4.33 weeks. The [hourly to salary calculator](https://clockwage44.com/tools/hourly-to-salary-calculator/) runs the same conversion for any rate.

Overtime gets averaged. For a steady or rising trend, Fannie Mae's rules for bonus, commission, overtime and tip income (B3-3.3-02) add this year's year-to-date overtime to last year's total and divide by the months they cover, with at least 12 months in the calculation. With the defaults above, ($6,750 + $8,400) ÷ 21 months = $721.43 a month. Add the $4,333.33 of base pay and the qualifying income comes to $5,054.76.

Every figure here is gross pay, before taxes and deductions. Lenders qualify you on gross, so your take-home amount doesn't enter into it. One thing to watch when you read about this elsewhere: Fannie Mae reorganized its income chapter in March 2026 and moved overtime to B3-3.3-02, so a page that still cites B3-3.1-01 for overtime predates the change.

## When Overtime Is Falling, the Lower Number Wins

Fannie Mae has no tolerance band for a decline. If overtime is decreasing, the lender must confirm that the current level has stabilized. If it hasn't, the guide says the income is not eligible for qualifying. If it has, the lender uses the current, lower figure instead of the average.

Here's what that does to the numbers. Take $22 an hour with $4,500 of overtime through September, against $8,400 last year. This year's pace is $500 a month and last year averaged $700, a drop of 28.6%. Averaging the two years would give $614.29 a month, but part of that average is overtime you no longer earn. The calculator counts $500, for a qualifying income of $4,313.33.

Freddie Mac's training material on fluctuating income draws the lines in percentages. A change of up to 10% from the prior year counts as consistent. A rise of more than 10% and up to 30% needs support, such as a verified raise, and anything bigger needs more analysis. A decline of more than 10% calls for further analysis. In the material's worked example, the lender confirms the decline has leveled off and qualifies the borrower on this year's earnings only.

That's why this calculator never averages across a drop: an average of a strong year and a weak one describes neither. One limit: Fannie Mae divides this year's overtime by the months since it stabilized, while the calculator uses the months on your stub. The two match only if the drop happened before January.

## Two Years, One Year, or Not Yet: History by Loan Type

Lenders want overtime with a track record and a reason to expect more of it. How long that record has to be depends on the loan.

| Loan | History lenders look for | How overtime is averaged |
| - | - | - |
| Conventional (Fannie Mae) | Two years recommended; at least 12 months with offsetting strengths | This year plus last year over the months covered; falling overtime at this year's figure once it has stabilized |
| Conventional (Freddie Mac training material) | Two years, consecutive | Recent years plus year-to-date over the months of history, checked against the 10% and 30% bands |
| FHA (HUD Handbook 4000.1) | Two years, or at least one year earned consistently | The lesser of the two-year average and the previous year's average |
| VA | Lenders generally want two years (lender guides) | Lenders generally average two years of overtime over 24 months (lender guides) |

The history has to be continuous. Overtime two years ago doesn't count toward the two years if last year had none, so the calculator sets it aside in that case. With under 12 months of overtime, expect a lender to count none of it yet.

FHA's lesser-of rule handles a decline on its own: rising overtime counts at the two-year average, and falling overtime at the lower recent year. HUD's text doesn't say whether "the previous year" means the last calendar year or the past 12 months, so this calculator follows the conventional method and doesn't model FHA.

Once overtime qualifies, it counts toward your debt-to-income ratio like the rest of your income. Fannie Mae's limits (B3-6-02) are 36% for manually underwritten loans, up to 45% when credit score and reserve requirements are met, and 50% through Desktop Underwriter. Overtime that doesn't qualify does nothing for that ratio, however much of it you earn.

## Build the Record Before You Apply

A lender's numbers come from documents, so gather them before you apply:

- Your latest pay stub, with the year-to-date overtime line. The [YTD income projection calculator](https://clockwage44.com/tools/ytd-income-projection-calculator/) shows where that year-to-date total is heading.
- The final pay stub from each of the past two years. A W-2 shows total wages, not overtime, so these stubs carry each year's overtime total.
- A written verification of employment from your employer that breaks out overtime by year.

Between stubs, keep your own record so you can see each week's overtime as it happens. In [ClockWage44](https://clockwage44.com/#download), you set your overtime rule once and log each shift. Each week's totals show overtime hours next to gross pay, so you'll spot a slide while there's still time to plan around it. For what a single week's overtime pays, the [overtime calculator](https://clockwage44.com/tools/overtime-calculator/) does the math.

A log you keep yourself supports the documents but can't replace them. The [proof-of-income guide](https://clockwage44.com/blog/proof-of-income-variable-hours/) explains why, and lists what lenders and landlords accept.

Everything on this page is an estimate of how a lender may count your overtime. It isn't a loan approval, a pre-approval or lending advice, and it isn't tax or legal advice. Lenders can add stricter rules of their own (called overlays), and an underwriter makes the final call.

## Frequently Asked Questions

Common questions about overtime income mortgage calculator

### Can I use overtime income to qualify for a mortgage?

Yes, if it has a track record and is likely to continue. Fannie Mae recommends a two-year history and allows at least 12 months when other strengths offset the shorter record. FHA wants two years, or at least one year of overtime earned consistently. Lenders count your base pay at your current rate and average the overtime.

### How do mortgage lenders calculate overtime income?

For a steady or rising trend, Fannie Mae adds this year's year-to-date overtime to last year's total and divides by the months covered. With $6,750 through September and $8,400 last year, that's ($6,750 + $8,400) ÷ 21 = $721.43 a month. The lender documents it with a recent pay stub and two years of W-2s, or a written verification of employment. A W-2 doesn't break overtime out, so last year's figure comes from the verification or from your final stub of the year ([where to find it on a stub](https://clockwage44.com/blog/how-to-read-a-pay-stub/)).

### How many years of overtime history do I need?

Two years is the standard. Fannie Mae recommends it, FHA treats it as the norm, and Freddie Mac's training material lists two consecutive years. VA lenders generally want two years as well, according to lender guides. Fannie Mae and FHA can go down to 12 months. Under 12 months, a lender will usually count none of the overtime.

### Does a small drop in overtime count as declining?

Under Fannie Mae's rule, yes: any decrease is a decline. The lender must confirm it has stabilized and then uses this year's lower pace instead of the average. A small dip costs little, though. If your pace slips 1%, from $700 to $693 a month, the lender counts $693.00 instead of a $697.00 average. Freddie Mac's training material adds further analysis once a drop passes 10%. The [proof-of-income guide](https://clockwage44.com/blog/proof-of-income-variable-hours/) covers how to document a drop.

### If my overtime is going up, will a lender count this year's higher amount?

Usually not. Rising overtime is averaged with last year's, so the counted figure sits below your current pace. Freddie Mac's training material treats a change of up to 10% as consistent, may ask for support such as a verified raise when the rise is between 10% and 30%, and calls for more analysis above 30%. If a raise explains the jump, the [pay raise calculator](https://clockwage44.com/tools/pay-raise-calculator/) shows what it adds to your pay.

### How does FHA count overtime differently from a conventional loan?

FHA (HUD Handbook 4000.1, II.A.4.c.v) uses the lesser of two averages: the average over the past two years and the average over the previous year. So rising overtime counts at the two-year average, and falling overtime counts at the lower recent year. This calculator follows the conventional (Fannie Mae) method, so an FHA lender's figure can differ.

### Does the no-tax-on-overtime deduction change the income a lender counts?

No. The deduction lowers your federal taxable income when you file: up to $12,500 for single and head-of-household filers and $25,000 for married couples filing jointly, for tax years 2025 through 2028, phasing out above $150,000 and $300,000 of modified AGI. It covers only the overtime premium, and it doesn't change your gross pay. Lenders qualify you on gross pay, so the overtime they count stays the same. The [no tax on overtime guide](https://clockwage44.com/blog/no-tax-on-overtime-deduction-2026/) explains who can claim it.

### Why does my lender want a written verification of employment for overtime?

A W-2 shows total wages, not overtime. Fannie Mae accepts either a Request for Verification of Employment (Form 1005) or a recent pay stub plus two years of W-2s, and it requires a verbal verification of employment either way. Lenders will also ask whether your overtime is guaranteed, required or just allowed, because that bears on whether it's likely to continue.

## Related Tools

- [12 Hour Shift Pay Calculator](https://clockwage44.com/tools/12-hour-shift-pay-calculator/): Calculate 12 hour shift pay for 2-2-3, DuPont, and 4-on-4-off rotations. Get true per-week overtime, gross pay, and an estimated take-home figure.
- [Blended Overtime Calculator](https://clockwage44.com/tools/blended-overtime-calculator/): Enter the hours and pay rate for each job you work in a week to get the FLSA weighted-average regular rate and the blended overtime pay you're owed.
- [Double Time Pay Calculator](https://clockwage44.com/tools/double-time-calculator/): Calculate double time pay at 2x your hourly rate, with time-and-a-half and regular pay. Includes a California mode for the over-12 and 7th-day rules.
- [Holiday Pay Calculator](https://clockwage44.com/tools/holiday-pay-calculator/): Enter your hourly rate, holiday hours, and premium multiplier to see holiday pay, regular pay, and total gross in seconds.