How Bay Area Tech Workers Can Use RSUs for Mortgage Approval

Summary: Tech workers in the San Francisco Bay Area (and elsewhere) often use restricted stock units to qualify for mortgage loans. These RSUs, for short, can be counted toward total income, helping the borrower qualify for a home loan. But not all Bay Area lenders allow restricted stock units, so you have to choose the right mortgage company.

Buying a home in the San Francisco Bay Area can be a daunting task, especially for tech workers. With a high cost of living and housing prices, many tech company employees find it difficult to qualify for a mortgage loan. They also tend to live and work in highly competitive real estate markets, like San Jose.

However, a growing number of them are turning to restricted stock units (RSUs) to boost their qualifying income and assets. In this article, we’ll explore why tech workers in the Bay Area are using RSUs to qualify for a mortgage loan, how RSUs work, and the advantages and disadvantages of using them for this purpose.

Challenges of Buying a Home in the Bay Area

The San Francisco Bay Area is one of the most expensive housing markets in the United States. According to the California Association of Realtors, the median home price in the Bay Area was $1,228,000 in March 2023.

In addition to the high cost of living, tech workers often encounter stiff competition from other home buyers, coupled with tight inventory conditions. Silicon Valley, for example, is one of the most competitive real estate markets in the country.

But a lot of tech company employees in the San Francisco Bay Area have realized they can use their restricted stock units to overcome mortgage hurdles. This type of employee compensation can be counted toward total income, for mortgage qualification purposes.

We will get back to the mortgage side of things in a moment. But first, let’s talk about what an RSU is and how it works.

What Are Restricted Stock Units (RSUs)?

Restricted stock units, or RSUs, are a form of equity compensation used by many tech companies in the Bay Area as part of a broader compensation package.

Through an RSU, the company promises to give an employee a certain number of shares of company stock at a future date. Once the RSUs vest, employees can sell the shares or hold onto them, depending on their investment strategy.

There are two main types of restricted stock units:

• Time-based RSUs are awarded to an employee based on the length of time they have been with the company.
• Performance-based RSUs are awarded based on the achievement of certain performance goals or milestones.

How Tech Workers Use Them for Mortgage Loans

One of the advantages of RSUs is that they can be counted toward a borrower’s total income and assets, for mortgage approval purposes. Tech workers who receive restricted stock units as part of their compensation package can use them to boost their income, when applying for a loan.

For example, let’s say that a Bay Area tech worker earns a base salary of $150,000 per year and also receives $100,000 in RSUs per year. The RSUs vest over a four-year period, with 25% vesting at the end of each year. This means that the tech worker has $25,000 in RSUs that have vested and are available to be sold or held at the end of the first year.

When applying for a mortgage loan, this borrower could potentially use the $25,000 in vested RSUs as additional income. That would bring the total qualifying income up to $175,000 per year, instead of $150,000. This could help the borrower qualify for a larger mortgage loan, which can come in handy in an expensive real estate market like ours.

Did you know: the San Francisco Bay Area is home to nearly 380,000 tech workers, as of 2023. That puts it ahead of all other major metro areas in the U.S.

But Not All Lenders Work With RSUs

As you can see, restricted stock units can be a helpful asset when it comes to buying a home in the Bay Area. But it’s important to realize that not all banks and lenders accept them. And among those that do, some are not well versed in how to adjust the income based on the RSU, to help the loan clear underwriting.

The point being, if you want to use an RSU when applying for a mortgage loan, you have to choose the right company.

Bridgepoint Funding is a Bay Area mortgage broker that specializes in this type of financing. We offer a wide variety of mortgage loan options and regularly assist tech workers who want to use restricted stock units.

If you have questions about this financing strategy, please contact our staff. We can review your current financial situation – including your employment compensation package – to determine how much you might be able to borrow.

Summary of Key Points

We’ve covered a lot of information in this article. Here are the most important points to remember:

• Bay Area tech workers are using restricted stock units (RSUs) to qualify for mortgage loans due to the high cost of living and housing prices in the area.
• RSUs are a form of equity compensation used by tech companies that promise employees a certain number of company shares at a future date.
• RSUs can be counted towards a borrower’s total income and assets, making it easier to qualify for a mortgage loan.
• But not all lenders accept restricted stock units, and some may not know how to adjust income based on them for underwriting.
• Bridgepoint Funding is a Bay Area mortgage broker that specializes in RSU financing and can assist tech workers in using them to obtain financing.