Got Bonus? Part 2: Stocks

On Part 1 of Got Bonus, I covered how lump sum cash or increases to salary are treated when it comes to qualifying for a home mortgage loan. In this post, I’ll address how bonuses that are in the form of company stock are treated by lenders.

Recently several companies have offered employees bonuses largely due to the new tax reforms and better than expected performance. Companies such as Apple, Starbucks, Royal Caribbean and Verizon are offering bonuses in the form of stocks. Lenders treat stock differently than cash reserves.

Here’s some basic information on how lenders may view bonuses that are received in the form of stock.

Using company stock bonuses as qualifying income.  Conventional mortgages (specifically Freddie Mac) recently changed how they calculate income, such as bonus, that is paid to employees in the form of stock (restricted stock and restricted stock units). The calculations vary slightly depending on whether the stock earned was based on vesting (time) or performance based.

If the stock (RS or RSU) is awarded based on performance, then the 52-week average stock price as of the application date is multiplied by the number of vested shares and then divided by 24 (two years). If the RS or RSU has been distributed as cash equivalent, the total dollar amount distributed (pre-tax) from the cash equivalent vested shares in the past two years is divided by 24. The result is the monthly income that could be allowed.

If the stock (RS or RSU) is subject to time-based (vesting) then the same formula is used except instead of a 2 year average, it’s based on 1 year.

With most all forms of income, it must be likely to continue for three years. If it’s a one time bonus, then the stock may be used as an asset.

Stocks as an asset. If the stock is being used as an asset, either as savings or funds for closing, lenders will typically deduct 30% of face value of the stock due to volatility and potential tax implications. If the funds are in a retirement account, and being used for funds for closing, an additional 10% may be deducted due to early withdrawal penalties. Note: this is why some borrowers elect to see if they can borrower from their 401k vs. pull cash out – so they can avoid the 10% penalty.

FHA will only allow stock to be treated as an asset – such as reserves or funds for closing.

If you’re thinking about buying or refinancing a home located anywhere in Washington state, I am happy to help you! Click here to start the preapproval process and apply online or click here for a mortgage rate quote.



  1. Hi Ronda, I really thinking about refinancing my home in this year and your site has helped me a lot. Thanks soh much!

    • Thank you, Aline! I’m so glad you’ve found The Mortgage Porter helpful. If the home you are refinancing is located in Washington state, where I’m licensed, I would love to help you!

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