Way back in 1997, Jeff Bezos set forth his bold business plan for Amazon, with proviso #9 reading: “We will hire and retain the best people and we will not pay them with cash.” Wait. What???
So I guess it’s no longer any secret that many technology professionals are compensated with Restricted Stock Units, also known as “RSUs.” And here at the epicenter of the high tech world, namely the Silicon Valley and San Francisco Bay Area, we see a lot of paystubs and verification of employment forms (“VOE”) that include base pay, bonus income and RSU compensation. But can we, as the home loan lender, use RSU income when qualifying a homebuyer for a mortgage? As you’ll see below, the general guidance on this will vary based on both the borrower (you) and the investor (us).
For How Long and For How Long?
If an investor (loosely defined as the entity — bank, credit union, investment firm, etc. — that will be funding your loan) will consider RSU income as allowable for the purposes of determining a borrower’s debt-to-income ratio (DTI), you can expect that they will typically want a history of RSU receipt. Usually this is going to default to a two-year history. So here in 2017, we’d probably expect to see RSU income on the pay documentation for 2015 and 2016 and these specific documents might be year-end paystubs, W-2 forms and the aforementioned VOE. Next, most investors will want to review the RSU vesting schedule extending three years into the future. Documenting expected future receipt confirms a borrower’s ability to repay (ATR) and that is the gold standard for a loan qualification in the highly-regulated Dodd-Frank era of mortgage lending.
Can I Still Get a Great Rate if I Use RSU Income?
Using RSU income to qualify for a mortgage, so long as you work with a lender that offers programs that allow RSU income in the first place, does not in any way hinder your ability to get a great loan at a great rate. Once qualified, all program types should similarly be available; 30-year fixed, ARM loans and even interest-only mortgages. Some of our best-priced, super jumbo lenders permit RSU income and because home prices in the Silicon Valley and the broader San Francisco Bay Area can be significantly above national averages, this is vitally important to the homebuyer who may work for Apple, Google, Salesforce or many of the other companies who attract employees to this part of California. We are also one of the few lenders who will allow a 10% down payment for a super jumbo purchase where we will do an 80-10-10 mortgage using RSUs as a component of the income qualification.
Innovation has become the hallmark of the best high tech companies in California and this extends to the way they pay some of their best and brightest employees. If RSU income is a part of your compensation package and you require expert guidance on getting a mortgage to fit your needs, let me know how I can be of service. I understand complex income and we have the programs and pricing to enable home ownership in the neighborhoods close to where you work.
Vice President of Mortgage Lending
Cell/Text: 415-367-5959 Fax: 415-366-1590
Marin Office: 324 Sir Francis Drake Blvd., San Anselmo, CA 94960
Berkeley Office: 1400 Shattuck Ave., Suite 1, Berkeley, CA 94709
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