Phil Boos writes…
“Over the past five years or so, Restricted Stock Units (RSUs) and similar stock assets (*RSU loan options are limited to publicly-traded companies) have become a standard form of compensation for tech employees. Consideration of these assets may be the key to helping tech clients qualify for the home they want. Opes Advisors is one of the few lenders who offer RSU-friendly loan programs.
This is even more evident in the Seattle market. I recently had a client whose salary income was not enough to qualify them from a traditional guideline standpoint. They needed to use RSU income to get their debt ratios in line and we were able to help them purchase their home when other lenders could not.
Nikki James, a mortgage advisor and personal finance advisor for the Palo Alto, Calif. branch of Opes Advisors, a division of Flagstar Bank wrote a great article on how you can use Restricted Stock to purchase a home.”
In places like Silicon Valley and Seattle, soaring housing prices have made it increasingly difficult for people to buy a home. Tech workers with publicly traded companies often face an extra hurdle: they get a salary, but a significant portion of their annual compensation typically includes RSUs (restricted stock units) or similar stock assets.
An RSU is a type of compensation granted by an employer to an employee in the form of company stock. Once an employee has fulfilled his or her employer’s specified vesting period, the RSU can be considered income because the employee has the option of selling it at current market price. According to the IRS, with RSUs, the taxable income is the market value of the shares at vesting.
While it has become common among technology companies such as Google, Facebook and Apple to compensate employees with RSUs annually, other well-known publicly traded firms also provide key employees RSUs. This list includes retailer Nordstrom, restaurant firm The Cheesecake Factory, online behemoth Amazon, and many more.
Plain vanilla mortgage lending rules do not allow RSUs to be used in qualifying a borrower for a home loan. Opes Advisors, a division of Flagstar Bank, takes a different approach. Opes Advisors looks at borrowers’ lives from a holistic standpoint – and RSUs in publicly traded companies are material to an individual’s financial life.
Opes Advisors recognizes that RSUs are critical to many tech employees’ financial prospects, so it offers loan programs that consider how these assets fit into the borrower’s ability to purchase a home. Its underwriters have extensive experience with structuring home loans that consider a borrower’s RSUs.
There are general guidelines that come with the use of publicly traded RSUs and they can vary depending on each borrower’s unique situation:
- Verifiable history of vested RSUs is required.
- Granted RSUs do not qualify.
- A minimum of two years of vested shares is required.
- A vesting schedule must stretch a minimum of two years into the future.
- Underwriters apply stringent stability of income tests.
- Qualifying includes other risk thresholds, including minimum FICO scores, debt-to-income limits, and more.
Opes Advisors looks at the borrowers’ lives from a holistic standpoint. It has developed powerful software that models various purchase scenarios, letting borrowers preview how their purchase decision will affect their entire financial life—before they make a decision. Borrowers can use a mobile app, OpesView, to see the financial outcome before they buy.
Today, there are nearly as many different mortgage solutions as individuals are applying for a mortgage. Opes Advisors works with clients to help them find a solution that best fits their lifestyle now and supports their financial goals in the future.
Source: Written by Nikki James