Can I use Restricted Stock Units (RSUs) for mortgage qualification

Restricted Stock Units (RSUs) are a common form of compensation in high-tech companies (and some not so high-tech). But using that income to qualify for a mortgage has been a challenge.

Well, not anymore!

Subject to certain guidelines, income from RSUs can now be considered qualifying income towards a mortgage.

RSUs are an eligible source of income for employees of publicly traded companies subject to the following requirements:

• No more than 35% of your total qualifying income may be generated from RSUs
• The stock must be from a publicly traded company; so if you work for a start-up even if its a super hot one – tough luck!
• The underwriter will use 75% of the current share price (most recent closing share price) to validate future earnings based on the RSUs

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What Kind of Vesting Schedule is Required

• RSUs must have been granted and vested (reported as income) for the previous 2 years with the current employer.

• Vested and future vested options are sufficient to support the amount using to qualify for at least 3 more years

• In addition to vested RSUs, the continuance of RSU awards must be verified. The additional RSU awards must be of an amount that is consistent with the RSU qualifying income.

What Documents Are Required to Qualify with RSUs?

• Obtain documentation confirming the current balance of vested and unvested RSUs.
• Obtain Restricted Stock Unit Award Agreement confirming terms and conditions of the award.

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Income From RSUs May Not Be Considered

• If there are concerns relating to the company’s financial situation and/or stock price performance, RSUs from the company should not be included in the qualifying income.

Note that stock options are not eligible to be used as a source of income. This post explains the difference between stock options and RSUs.

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