Are you an employee who receives RSUs (Restricted Stock Units) as part of your compensation package? If so, you may be wondering if mortgage lenders will accept RSUs as income when you apply for a home loan. The good news is that there are mortgage lenders out there who do accept RSUs as income. In this article, we’ll take a closer look at what RSUs are, why they can be a valuable source of income, and which mortgage lenders are most likely to accept them.
What are RSUs?
RSUs are a type of equity compensation that companies use to reward their employees. When an employee receives RSUs, they are granted a certain number of shares in the company. However, unlike traditional stock options, RSUs don’t give the employee the right to buy the company’s stock at a certain price. Instead, the employee receives the shares outright at a predetermined date in the future.
Because RSUs are a form of compensation, they are considered income by the IRS. However, they are taxed differently than traditional income. When RSUs vest (meaning the employee receives the shares), they are taxed as ordinary income at the employee’s marginal tax rate.
Why are RSUs valuable?
RSUs can be a valuable source of income for employees because they provide an opportunity to own a piece of the company they work for. Additionally, because RSUs are taxed as ordinary income, they can be used to qualify for a higher mortgage loan amount. This means that employees who receive RSUs may be able to afford a more expensive home than they would be able to based on their salary alone.
Which mortgage lenders accept RSUs?
Not all mortgage lenders accept RSUs as income when determining a borrower’s eligibility for a home loan. However, there are some lenders who do. Here are a few examples:
- Quicken Loans
- Bank of America
- Chase
- Wells Fargo
It’s important to note that each lender will have their own requirements for how RSUs can be used to qualify for a mortgage. Some may require that the RSUs have already vested, while others may allow them to be used even if they haven’t vested yet. Additionally, some lenders may require that the borrower has a certain amount of vested RSUs before they can be used as income.
How to use RSUs to qualify for a mortgage
If you want to use your RSUs to qualify for a mortgage, there are a few things you’ll need to do:
- Make sure your RSUs have vested (or will vest before you close on the mortgage).
- Get documentation from your employer that shows the value of your RSUs and how many you have.
- Provide this documentation to your lender when you apply for the mortgage.
It’s also important to note that using RSUs to qualify for a mortgage may require some extra paperwork and documentation. Your lender will likely require that you provide copies of your past two years’ tax returns and W-2s, as well as proof of your RSUs.
What are the benefits of using RSUs to qualify for a mortgage?
There are several benefits to using RSUs to qualify for a mortgage:
- You may be able to qualify for a higher loan amount than you would be able to based on your salary alone.
- You may be able to afford a more expensive home than you would be able to based on your salary alone.
- You may be able to get a lower interest rate on your mortgage.
Conclusion
If you receive RSUs as part of your compensation package, it’s important to know that there are mortgage lenders out there who will accept them as income when determining your eligibility for a home loan. By using your RSUs to qualify for a mortgage, you may be able to afford a more expensive home than you would be able to based on your salary alone. Just be sure to do your research and work with a lender who has experience working with borrowers who receive RSUs.