If you are considering applying for a mortgage, you might be wondering if your RSUs or Restricted Stock Units count as income. RSUs are a form of compensation commonly offered by companies to their employees. They represent an ownership interest in the company and are often used as a retention tool or a bonus.
Understanding RSUs
RSUs are typically granted to employees as a part of their compensation package. They are a promise to deliver a certain number of company shares to the employee at a later date, usually vesting over a specific period of time. Once the RSUs vest, the employee can either sell them or hold on to them. The value of RSUs is based on the share price of the company’s stock.
Do RSUs count as income?
The answer to whether RSUs count as income for a mortgage application depends on several factors. In general, lenders consider RSUs as part of an applicant’s income if they are regular and predictable. If you have a history of receiving RSUs and they make up a significant portion of your income, chances are they will be counted when determining your mortgage eligibility.
Lenders typically require documentation to verify your RSU income, such as your offer letter, employment contract, or pay stubs. They will also consider factors such as the vesting schedule and whether the RSUs are fully vested or still subject to restrictions.
How are RSUs calculated as income?
When RSUs are considered as income, lenders will evaluate them differently depending on whether they are vested or unvested. For vested RSUs, the lender may consider the current value of the shares or an average value over a specified period.
On the other hand, unvested RSUs might not be considered as income by lenders unless they are likely to vest within the next 12 months. In such cases, lenders might include a percentage of the unvested RSUs as income, often around 50%, to determine your borrowing capacity.
Impact on mortgage eligibility
Including RSU income in your mortgage application can have a positive impact on your borrowing capacity. Since RSUs can be a substantial part of your income, including them can increase the amount of loan you qualify for. However, it’s important to remember that your overall financial situation, including credit score, debt-to-income ratio, and other income sources, will also be considered by lenders.
Considerations for mortgage applicants with RSUs
If RSUs are a significant part of your income and you want them to be considered when applying for a mortgage, there are a few important considerations to keep in mind:
- Provide proper documentation: Make sure you have the necessary documentation ready to validate your RSU income, including offer letters, employment contracts, and recent pay stubs or statements.
- Consult a mortgage professional: Speaking with a mortgage professional who has experience working with applicants with RSU income can help you understand how your RSUs will be assessed and provide guidance on your specific situation.
- Improve your overall financial profile: While RSU income can boost your borrowing capacity, it’s essential to strengthen your overall financial profile. This includes managing debts, maintaining a good credit score, and demonstrating stability in your employment and income.
Frequently Asked Questions For Do Rsus Count As Income For Mortgage : Uncovering The Impact On Loan Approval
Are Rsus Considered As Income For A Mortgage Application?
RSUs, or restricted stock units, are often considered as income by mortgage lenders. They can add to your overall borrowing power when applying for a mortgage.
How Do Rsus Affect Mortgage Approval?
RSUs can positively impact your mortgage approval as they contribute to your income. Lenders consider RSUs as a reliable source of funds, strengthening your case for loan approval.
Can Rsu Income Be Used For Down Payment?
Yes, the income earned from RSUs can be utilized for a down payment on a mortgage. This additional income can help you meet the financial requirements for a larger down payment.
Do Lenders View Rsu Income Differently From Regular Income?
Lenders typically treat RSU income similarly to regular income. However, they may require additional documentation to verify the stability and consistency of RSU income for granting mortgage approval.
Conclusion
RSUs can count as income for a mortgage application, especially if they make up a substantial portion of your overall earnings. However, it’s important to provide proper documentation and consult with a mortgage professional to determine how your RSUs will be evaluated by lenders. Additionally, ensuring a strong financial profile will increase your chances of mortgage approval and favorable terms.
Ismail Hossain is the founder of Law Advised. He is an Divorce, Separation, marriage lawyer. Follow him.
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