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In booming tech hubs like San Francisco, Seattle, and Austin, many tech professionals find themselves equity-rich but cash-flow tight. Restricted Stock Units (RSUs), a common form of compensation in tech companies, often represent a significant portion of a homeowner’s net worth. However, leveraging RSU income for credit purposes—especially to qualify for a Home Equity Line of Credit (HELOC)—can be challenging.
This article explores how RSU income can be applied toward HELOC qualification, lender considerations, IRS guidelines, and best practices for navigating this process effectively.
Understanding RSUs and Their Role in Income
RSUs are company shares given to employees as part of their compensation package. Unlike stock options, RSUs have guaranteed value once they vest, making them a relatively predictable form of compensation—especially in well-established companies. However, their value can fluctuate based on market conditions and company performance.
Vested vs. Unvested RSUs
Only vested RSUs can be counted as income for lending purposes. Vested RSUs are taxed as ordinary income upon vesting, meaning the IRS treats them as income even if you don’t sell the shares.
How Lenders Evaluate RSU Income for HELOC Qualification
Lenders have grown more open to including RSU income, especially in high-income, tech-centric regions. However, approval criteria vary across institutions.
Typical Lender Requirements:
- Two-Year History: Most lenders require a consistent two-year history of RSU vesting and sale activity.
- Ongoing Award Schedule: Lenders will want to see an ongoing and predictable award schedule.
- Stable or Growing Stock Value: Lenders may assess your employer’s stock performance and volatility.
- Tax Returns and Pay Stubs: Proof of RSU income via W-2s, tax filings, or brokerage statements is crucial.
Pro Tip: Organize your RSU transaction history and stock compensation summary before applying to streamline the underwriting process.
IRS and Compliance Considerations
The IRS treats vested RSUs as ordinary income at the time of vesting. This income will appear on your W-2, which is advantageous when applying for loans. However, since RSUs can lead to significant tax implications, it’s critical to plan your equity strategy carefully.
You may also want to consult a tax advisor before selling vested RSUs to avoid surprises—especially around capital gains.
Need help navigating taxes and equity compensation? Schedule a consultation with our financial planning team.
Strategic Advantages of Using RSUs for HELOCs
In appreciating real estate markets where home values climb rapidly, HELOCs offer a flexible borrowing tool. By using RSU income to qualify:
- Access more equity: Lenders may offer higher limits if RSU income supplements your DTI (debt-to-income) ratio.
- Avoid primary mortgage refinance: Keep your low-rate mortgage intact while tapping equity.
- Diversify your portfolio: Use HELOC funds to invest beyond your employer’s stock, helping reduce over-concentration risk.
Case Study: Using RSU Income in San Francisco
A software engineer in San Francisco with $150,000 in annual RSU vesting secured a $200,000 HELOC by:
- Presenting a two-year RSU income history.
- Submitting employer award documentation.
- Demonstrating stable income with W-2s and brokerage reports.
- Working with a lender familiar with tech compensation.
Best Practices When Applying
- Work with tech-savvy lenders: Institutions like First Republic, SoFi, and some credit unions understand RSU-based income models.
- Document everything: Keep detailed records of vesting, sales, and grant schedules.
- Consider timing: Apply shortly after a large RSU vest for maximum income impact.
- Stay below 80% CLTV: Most lenders cap HELOCs at 80% of your home’s appraised value, including the primary mortgage balance.
Ready to explore HELOC options? Talk to one of our mortgage advisors today. We’ll help you assess if RSU income can increase your borrowing power.
FAQ: RSUs and HELOC Qualification
Can unvested RSUs be counted as income?
No. Lenders only consider vested RSUs as income because they represent realized compensation.
Do all lenders accept RSU income?
No. Policies vary. Larger banks and lenders familiar with tech-sector clients are more likely to accept RSU income.
How can I improve my chances of qualifying using RSU income?
Ensure you have a consistent history of vesting and selling RSUs, maintain solid credit, and keep your total debt manageable.
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Conclusion
In fast-growing tech markets, where equity-based compensation is the norm, using RSU income to qualify for a HELOC can unlock powerful financial flexibility. While not every lender views RSUs equally, with the right strategy, documentation, and partners, you can leverage your stock compensation to fund investments, pay off debt, or improve your home—without sacrificing your primary mortgage rate.
Maximize your equity and stay financially agile. Get in touch with a mortgage expert now to see how your RSU income can work for you.
Let me know if you’d like this formatted as a downloadable Google Doc, or if you want variations tailored to a specific market like Seattle, Austin, or New York.
Unlock Your Home Equity with Figure
- Approval in 5 minutes. Funding in as few as 5 days
- Borrow $20K-$400K
- Consolidate debt or finance home projects
- Fastest way to turn home equity into cash
- 100% online application
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.
