Often, yes. If restricted stock units (RSUs) are a regular part of your pay, lenders can usually count them toward qualifying income, as long as you have enough vesting history and the vesting is expected to continue. For many tech employees around Seattle and Portland, RSUs are a large share of total pay, so how they’re counted can change how much you qualify for.
The rules below are Fannie Mae’s, which apply to most conventional loans. Jumbo lenders set their own rules, and they vary, which is one reason it pays to compare lenders.
Time-based vs. performance-based RSUs
Most RSUs vest on a schedule as long as you stay employed (time-based). Some vest only if the company or you hit targets (performance-based). Lenders treat them a little differently:
- Time-based RSUs: You need at least a 12-month history of vesting from your current employer.
- Performance-based RSUs: Lenders generally want a two-year history. Twelve months can work when your future vesting is equal to or greater than what has vested so far and continues for at least two more years.
The vesting has to keep going
For recurring annual grants, lenders generally don’t need to prove future vesting unless something suggests it’s ending. For a one-time grant, the lender has to document that vesting continues for at least three years from your closing date.
How the income is calculated
Lenders average what has actually vested, usually over 24 months (or over your actual months of history, if it’s between 12 and 24):
- If you receive shares, the lender multiplies the shares that vested by the stock’s 200-day moving average price, then divides by the number of months. Using a moving average means a recent jump in the share price won’t count in full, and a recent dip won’t hurt you as much.
- If your RSUs pay out in cash, the lender averages the pre-tax cash you received.
What doesn’t count
- Sign-on RSU grants. Stock awarded as a hiring bonus isn’t eligible as qualifying income, however long it vests.
- Private company stock. For RSU income to count, the stock has to be publicly traded.
- Unvested grants on their own. A new grant with no vesting history yet doesn’t count as income, though it may help show the income will continue.
Shares that have already vested and sit in your brokerage account are a separate matter: they’re assets, and they can often help with the down payment or reserves.
Documents to have ready
- Your current vesting schedule, showing past and future vesting
- Brokerage statements showing shares you’ve received
- A recent pay stub and your last two years of W-2s
- Your offer letter or grant agreements, if you’ve changed jobs recently
What this means for you
Send us your vesting schedule and brokerage statements before you start shopping. We’ll calculate your RSU income the way an underwriter will, compare lenders whose rules fit your situation, and give you a pre-approval you can rely on. Call 425.659.3388 or get a quote.
Source: Fannie Mae Selling Guide B3-3.3-07, Restricted Stock Units and Restricted Stock Employment Income.
This article is general information, not a loan offer or commitment to lend. Programs, guidelines and eligibility change; talk to a LoanZilla loan officer about your situation. Super T Financial Inc. dba LoanZilla, NMLS #67412. Equal Housing Opportunity.