Financing in Seattle>Question Details

mr, Home Buyer in Seattle, WA

Restricted stock can \ cannot count as income?

Asked by mr, Seattle, WA Mon Jun 11, 2012


I’m in the process of buying a 2nd home. My employer Microsoft has 3 parts to their compensation.

1) Base Salary
2) Cash Bonus
3) Stock Awards – “Restricted Stock Units” Which is just treated as income on the vesting date.

In my case I have given the lender previous years W2s, Tax Returns, Paystubs and a signed letter from Microsoft that indicates how many shares I have received each year and will receive this year, next year and so on. Underwriting is telling me that this does not count as income because of a new rule with Fanny Freddie. I’m afraid they are thinking these are Sock Options which they are not. They are simply a fixed number of shares I receive on each year’s vesting date as long as I am still am employee. In this case this makes a 30k difference in my income and likely affects whether I get the house or not.

Any advice or info would be most helpful.


Help the community by answering this question:


Hello,I have many Microsoft clients and see this all the time, they are correct it won't be counted as income unless you show that you cashed in those as income on your Capital gains on your return for the past 2 years straight. The new rules for using that as income are very strict and they chop the income by a large amount. It's complex , best of luck to you.
1 vote Thank Flag Link Tue Jun 12, 2012
I'm in the same situation and can show I've liquidated my RSU's the past two years. What kind of proof other than showing them my W2 do I need to show them? Do you have a specific regulation I can point to?
Flag Sat Feb 1, 2014
Can you show in previous tax returns where they were reported as income? I would demonstrate this with a letter explaining that they are not options, but income subject to the value of the stock at such time that you liquidate them.
1 vote Thank Flag Link Mon Jun 11, 2012
Your 'Stock Awards' sound like income, at least after the vesting date. How do you declare the stock on your federal income tax? Does Microsoft provide a written explanation of the Stock Awards? Start with a detailed explanation, in writing, and ask your loan officer to have the underwriter review the information. Good luck.
1 vote Thank Flag Link Mon Jun 11, 2012
Just a thought.....if this loan doesn't work out, try Washington Federal Savings. WaFed is a 'portfolio lender'. That means they don't sell their loans, instead they keep your loan. They may be able to construct a custom loan to fit your needs, without jumping through all the Fannie/Freddie hoops. It's worth a try. (I have my mortgage with WaFed because they are local, and because they are so easy to work with). Good luck.
Flag Mon Jun 11, 2012
Thanks Ray. It just gets lumped in with the rest of my income. After vesting it shows up as a line item on my pay check that says "Stock Award Spread" I have a signed letter from Microsoft that lists the number of shares I get on the vesting date each year. They seem to be adament that according to Fannie \ Freddy that cannot be counted as income even though it shows up on my paycheck \ W2s. Just wondering if anyone is aware of this or maybe they think these are Stock Options. Thanks.
Flag Mon Jun 11, 2012
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0 votes Thank Flag Link Sat Apr 19, 2014
Thanks everyone! I think I may have convinced the lender that this meets the criteria and can be counted as income. If not I'm going with a local portfolio lender.
0 votes Thank Flag Link Wed Jun 13, 2012
Hi, I'm having the same issue with my lender, were you able to get this to go through counting your stock award as income? Thanks,
Flag Thu Oct 4, 2012
I agree with both of these answers. Hope they help:-) Good luck
0 votes Thank Flag Link Mon Jun 11, 2012
who was the lender?
Flag Fri Jul 18, 2014
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