"My total comp is $400K — why does the bank only approve a $1.2M loan?" It's the most common confusion I hear from tech clients. The answer: the number on your offer letter and the income a bank qualifies are two different things. This piece explains how RSUs and ESPP actually work in a mortgage, ending with a full worked example.
How Banks View RSUs
Whether RSUs count toward your home-buying income hinges on three hard rules:
- A 2-year vesting history is required. Banks want to see 2 years of RSUs actually received. New hires whose RSUs haven't vested for 2 years usually get zero credit.
- Counted at a haircut. Even with history, banks typically count only ~70–75% to buffer stock-price risk.
- Proof of continuity. You usually need grant/offer docs showing at least 3 more years of vesting ahead, or it's treated as one-time income.
| Income type | Bank credit | Condition |
|---|---|---|
| Base salary | ~100% | Employment letter, W-2 |
| RSU | ~70–75% | 2-yr history + 3-yr future vesting |
| ESPP | Usually none | Treated as one-time/voluntary |
| Sign-on bonus | None | One-time |
| Annual bonus | ~2-yr average | Needs 2 consecutive years |
Why ESPP Basically Doesn't Count
ESPP (Employee Stock Purchase Plan) is you voluntarily buying discounted stock with after-tax pay — essentially an investment, not income. Banks won't count it as qualifying income. Its real role in buying is as a down-payment source: selling ESPP shares for the down payment is fine, but mind the holding period and capital gains tax.
Base vs Total Comp: DTI Is the Key
Approval hinges on DTI (debt-to-income), whose denominator is qualified monthly income, not total comp. The higher the qualified income and the lower existing debt, the larger the loan. So the two levers tech buyers have are:
- Solidify the 2-year RSU history (frequent job hopping breaks it).
- Cut other monthly payments (auto, student, credit cards) — every $500/month less unlocks meaningful loan capacity.
Washington's Jumbo Loan Threshold
In most WA counties the 2026 conforming limit is in the $800Ks; above that you enter Jumbo Loan territory. King County's limit is higher due to prices, but tech families buying above $1.2M almost always hit Jumbo. Jumbo features:
- Slightly higher rates, or higher credit-score and reserve requirements.
- Stricter RSU-income scrutiny — all the more reason to use a loan officer fluent in tech income.
- Commonly 20% down; some products allow 10–15% with pricing add-ons or PMI.
Full Example: $250K Base + $150K RSU
| Item | Amount |
|---|---|
| Base (100%) | 250,000 |
| RSU $150K avg × 75% | 112,500 |
| Qualified annual income | 362,500 |
| Qualified monthly income | ~30,200 |
| Target DTI (incl. mortgage) 43% | ~12,986/mo for total debt |
| Existing monthly debt (auto, etc.) | 800 |
| Available for mortgage PITI | ~12,186/mo |
In the current rate environment, ~$12K/month PITI (principal, interest, taxes, insurance) roughly supports a $1.2–1.5M loan; with 20% down, a healthy purchase price lands around $1.5–1.9M. That explains the opening confusion — $400K TC, but only $362K qualified, so the loan isn't sized on $400K.
Three Practical Tips for Tech Buyers
- Don't disrupt your RSU grant structure in the 2 years prior — protect the history.
- Don't take on big new debt before buying (a new auto loan eats loan capacity directly).
- Get pre-approved with a loan officer who knows tech income, settling the RSU haircut and Jumbo review upfront. By employer: Microsoft see Redmond Guide; for overall city choice see the Tech Employee Home Buying Guide.
This is general information, not tax or lending advice; rely on your CPA and lender for your specific numbers.
