What This Guide Covers
- How Fannie Mae requires RSU income to be documented and averaged
- The three conditions that must all be satisfied for RSU income to qualify
- What happens when your employer is private vs publicly traded
- How RSU income interacts with base salary for total qualifying income
How Underwriters Qualify RSU Income
RSU (Restricted Stock Unit) income qualifies under Fannie Mae Selling Guide B3-3.1-09 as a form of variable income, provided three conditions are all satisfied simultaneously.
First, the borrower must have a two-year history of receiving RSU vests. The income is verified using the prior two years of W-2s (RSU vests appear in Box 1 as ordinary income) and the paystub showing YTD vests.
Second, the employer must be publicly traded. Fannie Mae requires that the underlying shares have a determinable market value. Private company RSUs, where shares cannot be easily valued or sold, generally do not qualify under standard agency guidelines.
Third, the borrower must have sufficient shares in the vesting pipeline. The underwriter must confirm that there are enough unvested shares scheduled to vest over the next three years to sustain the income level. This requires the most recent vesting schedule or equity award summary from the employer's stock plan portal.
The income is calculated by averaging the total RSU vest proceeds over the most recent 24 months from W-2s, divided by 24 to arrive at a monthly figure.
Required Documentation
- ✓Two years of W-2s showing RSU vest income (typically reflected in Box 1)
- ✓Most recent paystub with YTD RSU vest amounts
- ✓Current equity award summary or vesting schedule showing remaining unvested grants
- ✓Offer letter or most recent equity grant agreement confirming ongoing RSU program participation
- ✓Employer verification that the company is publicly traded (ticker symbol or public filing)
- ✓Two years of federal tax returns if RSU income creates complexity with other income types
What Most Lenders Get Wrong
- 1.Not requiring the vesting schedule. Without confirming that sufficient shares remain in the pipeline, the underwriter cannot satisfy the continuance requirement. This is the most common condition issued on RSU income files.
- 2.Qualifying RSU income from a private employer under the same framework as a public company. Private company RSUs are not directly eligible under standard Fannie Mae guidelines due to the indeterminate value of non-publicly-traded shares.
- 3.Using only one year of W-2 data when two years are available. RSU vest timing often clusters in the first or last quarter of the calendar year, so a single year can overstate or understate the average significantly.
- 4.Confusing RSU income with stock options. RSUs and stock options are treated very differently. Options have strike prices, exercise decisions, and tax treatment that require a completely different analysis.
Vesting Schedules and the Continuance Problem
The continuance requirement is what separates RSU income from simpler income types. An underwriter qualifying commission income needs to verify two years of receipt and an employer letter. For RSU income, the underwriter must also project forward to confirm the income stream will persist.
A borrower with a 4-year vesting schedule who is in year 3 has only one more year of grants vesting under their current award. If no new grant has been issued, the income cannot be counted for the standard three-year continuance period. This is a real problem for borrowers who are late in their initial grant cycle and have not yet received a refresh grant from their employer.
The solution is documentation of new grants. If the borrower can show a current equity award summary that includes a new refresh grant with vesting extending three or more years beyond closing, the continuance problem is resolved.
For tech workers at large employers with well-documented annual refresh programs, this is usually straightforward. For employees at smaller or less-structured companies, getting the equity award documentation in the right format to satisfy an underwriter requires extra legwork.
Private Company RSUs and Non-QM Alternatives
Many Kern County borrowers who work at private companies receive RSUs as part of their compensation package but cannot use them under standard Fannie Mae guidelines because the shares are not publicly traded.
This is a legitimate income source that standard agency guidelines simply are not designed to evaluate. The shares may have significant value based on the last 409A valuation, and the vesting schedule may be long-term and predictable, but without a public market price, the income does not satisfy Fannie Mae's verifiable-value requirement.
For these borrowers, there are two paths. The first is to document the base salary plus any other qualifying income and purchase without counting the RSU income. If base salary alone supports the loan, this works cleanly.
The second is portfolio or non-QM lending, where the lender writes its own guidelines. Some non-QM lenders will accept private company RSU income with sufficient documentation of the 409A valuation, the vesting schedule, and the company's financial health. The tradeoff is a higher interest rate compared to agency financing. For borrowers whose base salary alone gets them close but not quite to approval, the non-QM path is worth evaluating.
RSU income qualification is one of the most document-intensive income types I handle. The underwriter needs the W-2 history, the paystub, the vesting schedule, and confirmation of employer public trading status, all in a format that tells a clear story. The deals that fall apart are the ones where the borrower does not understand what the lender needs and the lender does not know how to ask for it. I map out the document requirements on day one so nothing surfaces at underwriting.
Do you have RSU income and want to know how much counts toward your loan?
Call Dan at (661) 342-9381. He will review your specific situation and documentation in a free call.