Look, I'm reading some really interesting reporting from HousingWire about a challenge that's starting to show up in my conversations with tech workers looking to buy homes. The basic issue is this: a lot of people working in tech companies accumulate serious wealth through company stock, but conventional mortgage lenders have no idea how to count that wealth when you're trying to qualify for a loan. According to HousingWire, even employees who made millions when companies like SpaceX went public can't walk into a conventional lender and have that equity treated as qualifying income, because the agencies that set lending rules require specific documentation that just doesn't exist for pre-public company stock.
The rules themselves make sense on the surface. Fannie Mae wants to see twelve months of documented receipt history before counting restricted stock as income, and the income calculation is based on a 200-day trading average once the company goes public. But here's where it breaks down: all those years an engineer was accumulating equity at a private company don't count toward that twelve-month clock. So someone who's been with a company for eight years starts from zero on the day it lists, and won't qualify on that stock income until well into the next year. Meanwhile, the person's balance sheet looks rock solid, but the income documentation fails.
The real world problem gets worse when you consider that tech companies are taking much longer to go public than they did twenty years ago. According to HousingWire's reporting, companies that went public in recent years were typically around twelve years old at listing, compared to seven or eight years in the 1990s. That means employees at companies that haven't even announced an IPO yet could be waiting decades for their equity to become lender-friendly. Even when shares vest and have value, private company stock can't really serve as reserves because no exchange has priced it, so it's invisible to lenders.
The solution is out there, but it requires working with lenders willing to look at the whole financial picture instead of just the paycheck. HousingWire reports that non-QM lenders can use what's called asset depletion, where they take your total eligible assets and convert them into a monthly income figure for underwriting purposes. If someone received proceeds from a tender offer or secondary sale and moved that money into a brokerage account, a flexible lender can approve based on that account rather than insisting on a pay stub. Jumbo lenders with exception authority can do this too, though you need to find ones that will actually exercise that authority. Some credit unions with technology-heavy membership have built real expertise here, and they're approving files that conventional lenders are declining.
The practical side of this is crucial. When someone comes to me with significant equity compensation, the first question I ask is how close their company is to a public market. That answer changes everything about timing and strategy. I need to see the grant agreements and vesting schedules, understand what taxes they'll owe on shares that might still be locked up, and figure out whether they can actually fund a down payment when the closing timeline needs them to. All of that needs to happen in the first conversation, before anyone makes an offer on a house, because it determines what price point they can actually achieve.
What I am seeing locally here in the Bay Area and East Bay is that this is becoming more common among my younger buyers and sellers who work in tech. Some of the best-capitalized borrowers I meet are getting declined by lenders who just can't process their compensation structure, while borrowers with traditional W2 income sail through. The good news is that lenders exist who understand equity compensation and will approve these files, but you have to shop around and ask the right questions about how they calculate income before you position your client with them. It's not a problem anymore if you're working with someone who knows how to handle it.
