Overtime, Bonus, or Tip income refers to income that the Borrower receives in addition to the Borrower’s normal salary.  The Mortgagee may use Overtime, Bonus, or Tip Income as Effective Income if the Borrower has received this income for the past two years and it is reasonably likely to continue.  Periods of Overtime, Bonus, or Tip Income less than two years may be considered effective income if the Mortgagee documents that the Overtime, Bonus or Tip Income has been consistently earned over a period of not less than one year and is reasonably likely to continue.

For employees with Overtime, Bonus, or Tip income, the Mortgagee must calculate the Effective Income by using the lesser of:

•             the average Overtime, Bonus or Tip Income earned over the previous two years or, if less than two years, the length of time Overtime, Bonus or Tip Income has been earned; or

•             the average Overtime, Bonus or Tip income earned over the previous year.

For additional information, see Handbook 4000.1 II.A.4.c.v or II.A.5.b.v. available at:  https://www.hud.gov/program_offices/administration/hudclips/handbooks/hsgh