What your RSUs are worth to a mortgage underwriter

If a large share of your pay arrives as restricted stock, you have probably had the experience of telling a lender your total compensation and then watching them quote you off base salary alone. It is frustrating, and it costs real buying power. In Santa Clara County it routinely decides whether a family buys a townhome or a detached house.

The good news is that equity income is countable on most of the loan programs my clients use. The rules are specific, and they are the reason two lenders can look at the same offer letter and land half a million dollars apart on what you qualify for.

The three questions underwriting asks

Every desk that counts equity income is really asking the same three things. How long have you been receiving it, how long will it continue, and what is it worth.

History is usually a two year requirement. Underwriting wants to see two full years of vested shares hitting your W-2, at the same employer or in the same field. A promotion or an internal transfer generally does not reset the clock. A move from a private company to a public one often does, because private grants were not countable in the first place.

Continuance is the second test. The unvested portion of your schedule generally needs to run at least three more years past closing. This is why the timing of a refresh grant matters more than people expect. A buyer six months from the end of a four year grant, with no refresh yet issued, can look much weaker on paper than the same buyer one month after a refresh lands.

Value is the third. Most lenders use a trailing average share price rather than today's price, commonly a 52 week or a 30 day average, whichever the guideline names. In a volatile quarter this protects you. In a quarter where your stock has doubled, it frustrates you.

A worked example, with sample numbers

Take a buyer with a $210,000 base salary, a $40,000 annual bonus paid for three consecutive years, and restricted stock that vested at $165,000 and $195,000 over the last two years, with four more years of schedule remaining.

A lender counting salary alone puts qualifying income at $17,500 a month. A lender counting all three sources uses the salary, a two year bonus average and a two year equity average, landing near $32,500 a month. At a 43% debt to income ratio and the sample pricing on my rate page, that difference moves the qualifying purchase price by roughly $1.6 million to $2.8 million. Same person, same paperwork, very different house.

The file did not change. The lender did. That is the entire trick, and it is why the first call should be about your compensation structure rather than your credit score.

Where files go wrong

• Selling shares for the down payment in the middle of underwriting, which creates a large unsourced deposit and a week of questions.
• Assuming pre IPO equity counts. Private company grants almost never do, so the file has to be built on salary, bonus and assets instead.
• Forgetting that a signing bonus paid once is not recurring income, no matter how large it was.
• Letting a lender pull credit before anyone has confirmed the equity guidelines. If the answer is no, you have spent an inquiry for nothing.

What to do before you shop

Export your equity portal history and your vesting calendar, and pull your last two W-2s. That is enough for me to tell you the qualifying income number in a day, before any credit is pulled and before you fall in love with a listing.

If you plan to sell shares for the down payment, tell me at the start. We will time the sale so the funds are seasoned and documented rather than explained after the fact. And if you are close to a refresh grant, that is sometimes worth waiting three weeks for.

None of this is exotic. It is simply the local version of a mortgage file, and it deserves a lender who has built a few hundred of them.

Sample figures for illustration only. Not an offer to lend or a rate lock. Actual pricing depends on credit, loan amount, property, occupancy, term and the market on the day you lock.