Tips & Overtime Pay Just Got a Boost — Here’s What It Means for Mortgage Qualifying

 

A quiet but powerful shift just happened in the mortgage world—thanks to the new One Big Beautiful Bill Act, tips and overtime pay are now tax-exempt.

That may not sound flashy, but for thousands of hourly workers, servers, healthcare professionals, and tradespeople, this is a game-changer—especially when it comes to qualifying for a home loan.

What’s Changed?

Before this law:
Tips and overtime were taxable, reducing take-home pay and limiting how much could be counted as qualifying income for a mortgage.

Now:
With tips and overtime excluded from taxable income, borrowers keep more in their pockets and see an increase in their effective qualifying income.

In short?
Less tax. More house.

Why This Matters in Mortgage Qualification

Mortgage lenders look at your gross monthly income to determine how much home you can afford.
When a portion of that income is taxed, your debt-to-income (DTI) ratio takes a hit—shrinking your buying power.

With this change:

  • A server making $35,000 in base pay + $25,000 in tips now has non-taxable income factored in more favorably.

  • A nurse regularly earning overtime now sees more of her income count toward qualification.

  • The buyer’s DTI ratio improves, potentially qualifying them for a better loan program or a higher-priced home.

 What Realtors & Buyers Should Do

🏡 Buyers: If your income includes overtime, bonuses, or tips, it’s time to revisit your pre-approval. You may now qualify for more home than before.

🤝 Realtors: Reach out to clients who were just on the edge of qualifying. This change could be the difference between “not yet” and “yes!”

Real-World Impact

Let’s say Maria is a restaurant manager earning $50,000 salary + $15,000 in consistent overtime. Before, she’d be taxed on the full $65,000.
Now, with $15K in non-taxable overtime, her lender can potentially “gross up” this income using FHA, VA, or Conventional guidelines—improving her ratios and unlocking better financing.

Bottom Line

This isn’t just a tax win—it’s a homeownership win.

The One Big Beautiful Bill Act delivers exactly what its name promises: a bold, borrower-friendly boost for working Americans. It helps everyday earners—especially those in service and shift-based industries—take a real step toward their dream of owning a home.

If you or your clients earn tips or overtime, let’s talk about how this can increase qualifying power and reshape your buying strategy.

Let’s Run the Numbers
I'm here to help you or your clients understand how this law impacts their mortgage potential—starting today.

 Schedule a call: https://www.natecarver.com
Or listen in: https://www.betweentwodoors.com for more real estate stories that matter

Follow for mortgage updates, lending strategies, and new episodes of “Between Two Doors.”

#MortgageTips #HomeBuying2025 #OneBigBeautifulBill #MortgageLoans #RealEstateNews #RealtorLife #LoanOfficer #QualifyingIncome #TaxSavings #PremierLending

Loan TypeGross-Up Rate
Conventional25%
FHA15% (or actual tax rate)
VA~20% (based on IRS tables; can't be used for residual income)
USDA25%

Case Study: Meet Your Buyer

  • Base Pay: $35,000

  • Tips: $25,000

  • Overtime: $15,000

  • Monthly Debts: $1,000

  • Target Home Price: $250,000

Old Law vs. New Law Impact

Loan TypeMonthly Income (Old)Grossed-Up Income (New)DTI (Old)DTI (New)Max Price (Old)Max Price (New)
Conventional$6,250$7,08343.2%38.1%$266,544$321,691
FHA$6,250$6,75043.2%40.0%$266,544$299,632
VA$6,250$6,91743.2%39.0%$266,544$310,662
USDA$6,250$7,08343.2%38.1%$266,544$321,691

What This Means for You

  • Buyers previously priced out may now qualify.

  • You can revisit old pre-approvals.

  • More flexibility in matching homes to budgets.

Action Steps for Agents

  • Reach out to past clients who earn tips or overtime.

  • Market this change in your buyer consultations.

  • Send buyers to get requalified—they may afford $30K–$55K more!

Want Help Re-Running Scenarios? Let’s team up to see who you can get back in the game.

Contact Nate Carver Website: https://www.natecarver.com
Pre-Approval Help | MoveTube Access | Podcast Guest Invitations

About Between Two Doors
Between Two Doors is a podcast where I talk with Realtors about their journey, aiming to connect home buyers and sellers with agents on a more personal level. I ask "right brain" questions that go beyond transactions, focusing on the experiences, values, and passions that make these professionals great at what they do.

Listen to more episodes at: https://www.betweentwodoors.com

Sponsored by:
Premier Lending, Inc.
https://www.natecarver.com

NMLS Numbers:
NMLS: 2004738
Licensed by the Department of Financial Protection and Innovation (DFPI). Equal Housing Opportunity.
https://www.nmlsconsumeraccess.com

📞 Contact: 972-832-5761

Follow Us on Social Media:
Facebook: https://www.facebook.com/NateCarverTheMortgageGuy/
LinkedIn: https://www.linkedin.com/in/natecarver/
Twitter: https://twitter.com/NathanC90662223
TikTok: https://www.tiktok.com/@nateyourfavmortgageguy
YouTube: https://www.youtube.com/@betweentwodoors












Location: McKinney, TX, USA

Comments

Post a Comment

Popular posts from this blog

Meet Ashley Hart: North Texas Real Estate Expert Redefining Real Estate and Resilience

Image
  Meet Ashley Hart: North Texas Real Estate Expert If you’re looking to buy or sell a home in Flower Mound, Texas, or the North Dallas Metroplex , you need to meet Ashley Hart . With a background in marketing and architecture, she has taken the real estate industry by storm, making a name for herself as one of the top 1% of agents in her market. From Marketing to Real Estate: Ashley’s Journey Ashley’s journey into real estate started while she was working as a marketing coordinator for her father’s architecture firm . At the same time, she and her husband were investing in properties. To save on agent commissions, her husband suggested she get her real estate license. Once she started taking classes, she realized real estate was a perfect combination of her skill sets —marketing, customer service, and business management. In March 2019, Ashley earned her real estate license and embarked on her new career. The first year was tough—Ashley had zero clients . But through perseverance,...
Read more

Between Two Doors: A Conversation with Tracey Goens – Heart, Homes, and Hope in Daphne, AL

Image
  In this episode of Between Two Doors , I had the pleasure of sitting down with Tracey Goens, a top-producing Realtor and lifelong Baldwin County resident who’s built her real estate career on heart, hustle, and an unwavering commitment to community. From the moment we started talking, it was clear that Tracey doesn’t just sell homes—she builds lasting relationships. With nearly 20 years in the industry and a place among the top 1% of Baldwin County Realtors, she blends expertise with a personal touch that turns transactions into lifelong friendships. A Local with Deep Roots and a Heart for Service Tracey’s real estate journey began in Daphne in 2005, and she’s never looked back. What drew her in wasn’t a love for houses—it was a love for people. She finds joy in learning about her clients’ lives, hearing their stories, and helping them through major life transitions with grace and empathy. Whether it’s a first-time homebuyer, a couple navigating a divorce, or a growing family,...
Read more

Housing Market Analysis Empowering Realtors, Homebuyers & Sellers with the Latest Insights: May 16th 2025

Image
  Housing Market Analysis Empowering Realtors, Homebuyers & Sellers with the Latest Insights: May 16th 2025 1. Mortgage Rates in a Rangebound Market Even with daily headlines about inflation, tariffs and fiscal policy, 30-year rates have hovered between high-6% and just under 7%: May 14, 2025 national average: 6.86% (30-year fixed) 15-year fixed average: 6.08% Rates have remained “rangebound” despite CPI prints and jobs data Fed’s pause on benchmark changes keeps markets in a “wait-and-see” mode What this means: Buyers know the range. Competitive pricing and rate-buy-down strategies can keep your clients in the “sweet spot” below 7%   . 2. Strong Purchase Demand Persists Contrary to many forecasts, mortgage demand continues to hold firm—even with higher rates: New listings have normalized as spring winds down Demand has stayed between 7.25%–6.64% all year Realtor tip: Share this narrative with prospects—rates aren’t chasing buyers away What thi...
Read more