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Will the bank count these funds? My company ESPP works like this:

25% of my bi-monthly paycheck (after taxes) is withheld and sent to some kind of company escrow account. This is done for 6 months. At the end of the 6 month period, the money is used to buy (and if I chose, immediately sell) common stock at either current days price or the price 6 months ago (which ever is lowest), minus 15% (I get a 15% discount on the purchase). Thus, I'm guaranteed at least a 15% return + all of the money that belongs to me from the escrow account. This growing account balance is shown on my bi-weekly pay stub. But the money is only accessible to me at the end of the period or if I get fired/quit.

My house closing is in 6 weeks. In 3 weeks the ESSP period ends and I'll be selling / cashing in that entire account. I'd like to use some of the funds for closing. I'm having a difficult time explaining this to the lender who is submitting to the underwriters. They basically want to ignore that money and not deal with it. However, i'd really like to use it for a larger down payment. The issue is, that has to be approved weeks before closing. Should I be able to force this issue? Or, am I stuck not counting any of that money as mine, even though I am guaranteed that money?

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    Side note - selling the same day causes that free 15% to be taxed as short-term gains, so effectively taxed as income. You should hold them long enough to sell them and only have to pay as capital gains.
    – Aaron D. Marasco
    Commented Apr 26, 2016 at 23:51
  • The problem with that is the stock prices could go up / down. As long as they don't go down 15%, I might not be too bothered. But, I could effectively lose all of that money. By selling immediately, i'm guaranteed 15%. So, i guess your advice is only sound if I'm really confident in my company's performance, or I'm not adverse to risk. :)
    – maplemale
    Commented Apr 27, 2016 at 0:13

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The problem is that you don't have the money now; so they can't know with 100% certainty that you will have it on settlement day.

What happens if you don't file the paperwork in time? or you change your mind because you think the company stock is going to go through the roof next quarter? They would have to pull the funding for the loan. The seller would be upset, and could even file for damages if the deal falls through.

It could even snowball because if they delay the sale then they can't buy the new place, which impacts another closing...

Frequently lenders want to see the money for the down payment long before settlement. They want to know the money is there, and it isn't a hidden loan. While you can point to the money in the ESPP, they would still like to see the money in a regular bank account.

Even if you do convince them to delay their evaluation you can count on being asked to prove the existence of the funds in the days before closing, or they will delay giving the loan.

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  • That makes sense! Thanks. However, to clarify: "What happens if you don't file the paperwork in time?" This isn't possible. The process is automatic. There is no paperwork to file. The money is mine, I've already paid taxes on it. The stock automatically shows up in my trade account at a specific time. If I get fired / quit before that time, I automatically get a paycheck (no stock).
    – maplemale
    Commented Apr 27, 2016 at 0:23
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ESPP shares, once purchased, are just normal shares that you got at a discount. They're just as much a part of your current net wealth as any other shares of stock.

What you can't do is claim that discount increases your salary, even if it does result in your effectively taking home more money. It's a benefit like the company contribution to your health plan, not a bonus.

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  • I don't think you understand... this question has nothing to do with how stock is counted. This money is not stock at all currently and won't be for more than a few milliseconds unless I decided to keep it. I'm not asking about how stock is valued as an asset at all.
    – maplemale
    Commented Apr 27, 2016 at 0:17
  • Stocks vaslue is whatever it can currently be sold for. Which is continuously changing, so thge bank uses an estimate. How they pick that estimate is up to therm.
    – keshlam
    Commented Apr 27, 2016 at 1:03
  • I don't understand how that's relevant since I don't currently own any stock. I simply have a large sum of money sitting in a company account which I already paid taxes on. Technically, it might not ever be used to buy stock, though it likely will at some point. So, however the bank wants to value our stock it's irrelevant since I don't own any?
    – maplemale
    Commented Apr 27, 2016 at 16:03

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