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Qualifying Income

Established Member

Qualifying Income

Can you typically count Stock Option Income as qualifying yearly income?  I have stock option awards that vest 25%/year over a 4 year period.  I have been with my company for over 10 years and have been awarded options every year.  So every year in June I have 4 sets of options each vesting 25%.  I have netted on average $20K per year each of the last three years from the sale of options.  Based on unvested awards and todays stock price I will be able to net about $25K per year on average for the next 4 years.  Will an underwriter allow me to use this income in my income calculation?  If it helps the stock options income is included on the W2 and taxed as standard income, ie say base salary is $10K, bonus is $1K and sale of options net $10K line one on my W2 would say $21K.

 

I also receive yearly bonus and can document 7 plus years of receiving this bonus.  Will this be included in income?

Message 1 of 11
10 REPLIES
Frequent Contributor

Re: Qualifying Income

yes


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Message 2 of 11
Established Contributor

Re: Qualifying Income

Yes, I have an almost identical employer stock grant program and my stock income was counted... it's definitely part of your annual income.

Mid-2010 Starting Scores: FAKO EQ 476 FAKO EX 506 FICO TU98 575
July 2017 Current Scores: Approx 710 (waiting for official updates)
Message 3 of 11
Valued Member

Re: Qualifying Income

Yes, excluding bonuses.

Late Summer 2011: EXP- 470's TU- 480's EQ- 480's
Fall 2011: EXP- 540's TU- 580's EQ- 560's
Winter 2011: EXP- 672 TU- 697 EQ- 692
April 2012 EXP- 776 TU- 718 EQ- N/A
Message 4 of 11
Established Contributor

Re: Qualifying Income

My bonuses counted too... I receive semi-annual bonuses every year and while they do fluctuate some, I always get them. I believe my LO just averaged my bonuses from the last 2 years to determine what he would include in my annual income.

Mid-2010 Starting Scores: FAKO EQ 476 FAKO EX 506 FICO TU98 575
July 2017 Current Scores: Approx 710 (waiting for official updates)
Message 5 of 11
Established Member

Re: Qualifying Income

Does anyone else have experience with this, we are working with several lenders and just received an answer back from the 1st one NVR.  They said they can not include stock option income as qualifying income.  And can also only include 50% of the last 2 years average bonus income.  Even though stock option and bonus income is included on the W2 as regular income this can not be used to qualify.

 

We provided documentation showing 6+ years of bonus income received, and a letter stating it is likely to continue.  For stock option income we provided documentation showing 3+ years of stock option income received,  and a letter stating we are likely to continue receiving stock options.  We showed proof of a guaranteed 5 years of option income at an amount equal to the three average income reported in 2009 - 2011.

 

It is strange because the other two lenders "Cole Taylor Mortgage" and "Canandaigua National Bank" seemed to be fine with using option income as qualyfying income.  I just called to ask the question and neither loan officer was concerned.  We are waiting to hear back later this week or next on what underwriting has to say from both banks.  Now I am freaking out.

Message 6 of 11
Moderator

Re: Qualifying Income

Every bank/lender has its own underwriting criteria.  It is individual to each lender.

 

It is perfectly plausable that two banks would allow the type of income you have and another would not allow it. Go with the lender that underwrites their own deals or with a mortgage banker that funds their own deals. That way you know when the approval comes through, it's a done deal because they already have addressed the income issue.

Message 7 of 11
Established Member

Re: Qualifying Income

Any other info?

Message 8 of 11
Senior Contributor

Re: Qualifying Income


lcd55023 wrote:

Any other info?


What specific further information are you looking for?  It is correct that banks have different guidelines. 


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Current Score: EQ 681 (04/05/13); TU 98 728 (01/06/12), TU 08? 760 (provided by Barclay 1/2/14), TU 04 728 (lender pull 01/12/12); EX 742 (lender pull 01/12/12)
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Message 9 of 11
Highlighted
Established Member

Re: Qualifying Income

I was hoping to hear if anyone had some examples of banks to try who may work with me.  In case the two I am currently work with decide they can not include the option income.

Message 10 of 11