Do you work for Google, Apple, Facebook, Salesforce or one of many flourishing startups in California? If so, it’s likely you are earning Restricted Stock Units as part of your overall compensation. When you have a non-traditional income from working at either a privately held or publicly held company, you may wonder whether or not it can qualify towards your new mortgage. Learn more about what Restricted Stock Units are and how to qualify for a loan using RSUs.
Table of Contents
- What are Restricted Stock Units?
- Can RSUs be used as income for a home loan?
- How can you use vested income to qualify for a mortgage?
What are Restricted Stock Units?
Restricted Stock Units are company shares granted by an employer. However, they’re considered “restricted” because you cannot sell them until they vest. This typically happens after you’ve been at the company for a predetermined amount of time. RSUs often vest in stages, allowing you to access portions of the shares every year. In addition to tenure milestones, your employer may also offer RSUs based on performance.
An important feature to understand about RSUs is the way they are taxed. They’ll count towards your taxable income the year (or years) in which the RSUs vest. Depending on the value of the stock at the time (and other factors,) the loan amount you may qualify for will vary.
Can RSUs be used as income for a home loan?
Qualifying for a loan using Restricted Stock Units can be tricky if you’re not working with the right lender. In fact, many mortgage lenders don’t allow applicants to use RSUs for a loan at all. This is especially true of lenders who aren’t familiar with compensation packages that are more common to technical and financial industries. At Carlyle Financial, we partner with regional lenders that understand using Restricted Stock Units to qualify for a mortgage. We work with you to document your RSUs and other types of vested income as part of your application requirements.
The success of every mortgage application depends on individual circumstances. That’s why it’s imperative to find a mortgage bank that understands complex and nuanced financial scenarios. If you own vested RSUs, it’s certainly possible to have them counted towards your income, especially when you work with Carlyle Financial. Contact us to find out how.
How can you use vested income to qualify for a mortgage?
There are a few basic requirements when using RSU income to apply for a mortgage.
As an example, you may be asked to provide:
- A copy of your RSU vesting schedule
- A copy of your current RSU balance
- Documentation showing your history of earning RSU income, wither via statements of granted RSUs or statements from the financial institution maintaining the company stock units
Please note, your Restricted Stock Unit amounts will need to be verified, and you can only use vested RSUs — not granted RSUs. Typically, a minimum of two years is required to allow use of vested shares, and your vesting schedule should last at least an additional two years from the time of application. If you have been with your current employer for less than two years, some lenders will allow for RSU income to be used if you gave a history of earning RSUs from your previous company.
Just as we do with any other mortgage application, we’ll work directly with your employer to obtain a written verification of employment and confirm continuity of RSU earnings. Credit scores, debt-to-income ratios, and other standard requirements are also taken into consideration.
Are you interested in learning more about how your Restricted Stock Units can be used to qualify for a mortgage? Working with the right lender goes a long way when finding a loan product that works with all of your income sources. Restricted Stock Units don’t have to restrict your ability to qualify for the home of your dreams. Contact a mortgage banker at Carlyle Financial today to learn more