Quick answer: If part of your pay is verified as nontaxable and likely to continue, Fannie Mae lets the lender add 25% to it, so $3,000 a month counts as $3,750. On an $800,000 Louisville 80027 home with 20% down at 7.24%, that extra $750 can carry about $49,523 more loan.
By Katerina Veteskova, Colorado real estate broker license FA.100082955, eXp Realty, LLC
Some Louisville buyers have pay that is partly or fully tax-free, and lenders do not always count it at full strength on the first pass. It is worth asking about before you set your price range.
This guide uses an $800,000 purchase in the 80027 zipcode with $160,000 down and a $640,000 30-year fixed loan.
How does nontaxable pay help a Louisville mortgage approval?
It can be grossed up by 25% before the debt ratio is figured.
The Fannie Mae general rules on qualifying pay say that once a lender verifies that a source is nontaxable and likely to stay that way, it should add an amount equal to 25% of that pay. If taxes for a wage earner in a similar bracket would be higher than 25%, the lender may use that higher amount.
What does $3,000 of nontaxable pay count as?
$3,750 a month.
Take a buyer earning $10,000 a month, with $7,000 taxable and $3,000 nontaxable. Adding 25% of $3,000, or $750, brings qualifying pay to $10,750. At a 45% debt ratio, the room for monthly debts rises from $4,500 to about $4,838.
How much more loan does that carry?
About $49,523 at 7.24% over 30 years.
The extra room is $337.50 a month, which is 45% of $750. That amount carries roughly $49,523 of mortgage principal at the Freddie Mac 30-year fixed average of 7.24% as of October 29, 2026. These are my own figures, for illustration only.
Louisville listings from $700K for buyers with tax-free pay
Email me new Louisville listings from $700,000 as they come on the market, so I can shop at the price my full qualifying pay supports.
What is the payment on the $640,000 Louisville loan?
About $4,362 in principal and interest.
That fits under the $4,838 of room in this example, but property tax, insurance and other debts count too under the Fannie Mae debt ratio rules, which cap the ratio at 50% through DU and generally 45% on manual loans. A full payment with taxes and insurance can use most of the remaining room.
What proof does the lender need?
Paperwork showing the pay is nontaxable and will continue.
Fannie Mae lists award letters, policy agreements, account statements and tax returns as examples. If the pay has a set end date, the lender must document that it will continue for at least three years from the application date.
What if my pay is about to change?
The lender must use the lower figure.
Fannie Mae says that if a lender is told you are moving to a lower pay structure, such as a pending retirement or a new job, it has to qualify you on the lower amount and confirm that amount is stable.
Should you ask your lender about a gross-up?
Yes, if any part of your pay is tax-free.
Ask about it if:
- Part of your monthly pay does not show up as taxable on your return
- You have an award letter or policy document showing the amount
- Your debt ratio is close to the cap at your target price
It matters less if:
- All of your pay is taxable
- Your ratio clears the cap with room to spare
- The nontaxable pay ends within three years with no proof it continues
Is $800,000 a realistic price in 80027?
It is close to the 80027 median, which covers Louisville and Superior together.
For the three months ending September 2026, Redfin showed an 80027 median sale price near $826K, about 51 days on market and 98.4% of list. Louisville listings are in the Louisville homes from $700K, Louisville 80027 homes from $700K and Louisville $700K to $1M searches, with larger homes in Louisville homes from $1.2M.
Where else can an $800,000 budget go near Louisville?
Next door, compare Superior homes from $700K, Superior 80027 homes from $700K and Superior $700K to $1M.
To the east, see Broomfield homes from $700K and Broomfield $700K to $1M, or north to Lafayette homes from $700K. Further afield, Front Range $700K to $1M widens the search, and buyers moving here can read relocating to Boulder County.
Broker view: "I ask every buyer whether any of their pay is tax-free, because it is easy to miss on a first application. When it applies, it can widen the range we search." - Katerina Veteskova, eXp Realty, LLC
What this guide does not cover: which specific benefits or allowances are nontaxable, tax advice, VA and FHA rules, jumbo loans, property tax, homeowners insurance and HOA or metro district amounts. This is not tax or financial advice, and your lender verifies what counts.
Sources: Freddie Mac PMMS 30-year fixed, 7.24% as of October 29, 2026. Fannie Mae Selling Guide B3-3.1-01 on general qualifying rules and B3-6-02 on debt ratios, checked November 4, 2026. Redfin 80027 data for the three months ending September 2026, checked November 4, 2026. Pay, room and loan figures are my own math, for illustration only.
Shopping Louisville near $800,000? Call or text 720-646-4685, or request a tour.
Frequently asked questions
What does it mean to gross up nontaxable pay?
When part of your pay is verified as nontaxable and likely to continue, Fannie Mae lets the lender add an amount equal to 25% of it to your qualifying pay, because you keep more of it than taxed pay.
Can the gross-up be more than 25%?
Yes. If federal and state taxes for a wage earner in a similar bracket would be more than 25%, Fannie Mae lets the lender use that larger amount.
What documents prove pay is nontaxable?
Fannie Mae lists award letters, policy agreements, account statements and tax returns among the documents a lender can use.
What if my pay is about to drop?
Fannie Mae says that if the lender learns you are moving to a lower pay structure, such as a pending retirement or a new job, it must qualify you on the lower amount.
Katerina Veteskova is a Colorado real estate broker (license FA.100082955) with eXp Realty, LLC. Call or text 720-646-4685, or request a tour.