How are RSU's factored into Income during loan qualification?

Question

I'm new to the tech industry and was wondering how RSU's factor into loan qualification.

RSU's particularly at more established companies are essentially cash. They may change with the stock price but that variance is often not that large. Ex think Microsoft. When companies offer you comp they often add the RSU estimated value and consider it your take home pay package.

I also notice that many companies make a good percentage of compensation RSU based. How do loan qualifications / ability to pay calculations factor that in?

Examples which are probably each different (I'm curious about all of the above): Credit card income questions, mortgage qualifications, auto or personal loans etc?

I understand cash and previous years bonuses are considered your income but what about RSU's? Stock options aren't considered income (I believe) right? Is there a significant different between taking salary vs RSU shares of similar value?

Does it differ between companies ex a local credit union vs. Wells Fargo?

Answer 1

RSUs are not "essentially cash". "R" in the RSU stands for restricted. These awards have strings attached, and as long as the strings are attached - you don't really own the money.

As such, most banks do not include RSUs in the income considerations. Some do, especially if they have a specific agreement with your employer (check your HR/benefits coordinator). Specifically for mortgage loan, where the underwriting is very strict, I'm not aware of banks that include RSUs as income without a specific agreement with the employer as a perk. For credit cards/car loans, where you just need to write a number, they would probably care less.

Some banks (but not all) consider past performance, and would include bonuses (and maybe RSUs) if you can show several consecutive years of comparable bonuses.

Answer 2

Long ago when I was applying for my first mortgage I had to list all my income and assets. At the time I had some US Savings Bonds from payroll deduction. I asked about them. The loan officer told me that unless I was willing/planning on selling them to make the down payment, they were immaterial to the loan application.

So unless you have a habit of turning RSUs into cash, or are willing to do so for the down payment, it is no different from having money in a 401K or IRA: the restrictions on selling them make them illiquid.