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Why Use RSUs or Bonuses to Qualify for a Mortgage?
For high-earning professionals, RSUs (Restricted Stock Units) and bonuses can be a significant portion of total compensation. These income sources can boost your mortgage approval chances if used correctly. Understanding how to leverage them is essential, as lenders have specific guidelines for accepting non-salary income.
How RSUs and Bonuses are Considered for Mortgage Qualification
RSUs as Qualifying Income
RSUs are shares awarded by employers as part of a compensation package, typically vesting over time. Lenders may consider them as qualifying income if:
- You have a history of receiving RSUs over at least 2 years.
- The vesting schedule is predictable and ongoing.
- Your employer’s stock is stable and publicly traded.
To use RSUs as income, you may need to provide:
- Evidence of past RSU grants and vesting schedules
- Recent brokerage statements showing available shares
- Proof of continued employment
Internal Link: Learn more about non-traditional income mortgages
Bonuses as Qualifying Income
Bonuses can be counted as income if they are consistent and likely to continue. Lenders typically require:
- A 2-year history of regular bonuses
- Employer confirmation of future bonus eligibility
- Recent pay stubs and W-2 forms
Consistency is key, as large fluctuations may lead to a lower average income calculation.
Internal Link: Explore mortgage options for self-employed borrowers
How Lenders Calculate RSU and Bonus Income
Lenders use a conservative approach to ensure income stability, often averaging the last 2 years of RSU or bonus payouts. Here’s a typical approach:
- Average the Past Two Years: Calculate the average annual RSU or bonus earnings.
- Verify Future Payments: Confirm ongoing eligibility and expected future grants.
- Apply a Discount: Some lenders may discount RSU income by 20-30% to account for market volatility.
Potential Challenges and How to Overcome Them
- Market Risk: RSUs depend on stock performance, which can be volatile.
- Consistency Requirements: Inconsistent bonuses or RSU vesting may reduce qualifying income.
- Documentation Burden: Expect detailed paperwork and employer confirmations.
Internal Link: Find out how to get a mortgage as a high-income earner
FAQ
Can I use future RSUs to qualify for a mortgage?
Lenders usually only count vested RSUs, as future grants are not guaranteed.
Are bonuses from commission-based jobs considered differently?
Yes, commission income may require even more extensive documentation to demonstrate consistency.
Read Next
- How to Qualify for a Mortgage Without W-2 Income
- Understanding Debt-to-Income Ratio for Mortgage Approval
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- Fast pre-approvals-no W2s required
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- Scale your portfolio with confidence
Our advice is based on experience in the mortgage industry and we are dedicated to helping you achieve your goal of owning a home. We may receive compensation from partner banks when you view mortgage rates listed on our website.
