Equity compensation, and why lenders disagree about it
If a meaningful share of your pay arrives as restricted stock, you have probably already discovered that lenders treat it inconsistently. One institution counts it in full. Another counts a portion. A third declines to count it at all and qualifies you on base salary, which can mean a loan roughly half the size you expected.
The variation is real and it is worth shopping deliberately rather than accepting the first answer.
The common thread across lenders that will count it is twofold. They want a history, usually two years of receiving it, and they want evidence of continuance, typically a vesting schedule showing the income persists about three years forward. Meeting both is generally the difference between counting it and not.
- Two years of receipt. Shown through W2s and year-end statements. A first grant that has not vested yet rarely counts.
- Documented continuance. Your vesting schedule, showing what is scheduled to vest going forward.
- Averaging. Most lenders average across the history rather than annualizing the best year, which matters if your grants have grown.
- Price volatility. Some lenders haircut the value or use a trailing average rather than the current price, particularly on a volatile stock.
Bring the vesting schedule and the last two years of year-end statements to the first conversation. Those documents decide the size of your approval, and producing them up front avoids the version of this where you get pre-approved on base salary and go shopping with the wrong number.
Bonus income has its own rules
Bonus is treated similarly but not identically. Two years of history is the usual expectation, and the lender will generally average it. A bonus that grew sharply in the most recent year gets averaged down rather than annualized up, which is often the opposite of what people assume.
If your bonus is discretionary rather than contractual, say so early. It does not necessarily disqualify the income, but it changes the documentation and occasionally the lender.
A market that has moved quickly
Culver City has appreciated sharply, and fast appreciation creates two specific financing situations worth knowing about.
The first is on the buy side, where rapid movement makes appraisal gaps more likely. A contract price set in a competitive moment can land above what the appraiser supports, and the difference comes out of your pocket or the deal renegotiates. Worth planning for before it happens rather than during.
The second is on the equity side. Owners who bought a few years ago are sitting on substantial appreciation attached to a first mortgage at a rate they would never give up voluntarily. A cash-out refinance replaces that low rate on the entire balance, which is an expensive way to access equity. A HELOC sits behind the first and leaves it alone, and that is the whole reason these have been so much of my recent work.
ADUs, which are everywhere here
California's ADU laws have produced a lot of accessory unit construction and conversion in Culver City, and an ADU affects financing in two directions.
Buying a property with one, a permitted unit reflected in the appraisal generally adds countable rental income and can improve what you qualify for. An unpermitted conversion usually adds nothing to qualifying and can become a condition requiring cure before funding.
Building one, the financing question is whether you are drawing on equity through a HELOC, refinancing, or using a renovation product. A line you draw as the work progresses usually costs less than financing the full budget from day one, particularly if the project runs long, which they generally do.
Culver City Mortgage FAQ
Will my RSUs count toward qualifying?
Often, with two conditions. Most lenders want roughly two years of documented receipt and evidence the income continues about three years forward, which your vesting schedule provides. The variation between lenders here is unusually wide, so a decline at one institution genuinely does not predict the answer at another. Bring the vesting schedule and your last two year-end statements to the first conversation.
My company IPO'd recently. Does that change things?
It complicates the history requirement, because pre-IPO equity and post-IPO RSUs document differently and the two-year lookback may straddle the event. It is workable, and the right lender depends on the specifics of your grant structure. This is a case where going to the wrong lender first wastes two weeks, so it is worth a conversation before you apply anywhere.
How is bonus income calculated?
Generally averaged across two years rather than taken at the most recent figure. If your bonus increased significantly last year, averaging works against you, and there is usually no way around that on a conventional file. Some non-QM programs treat it differently, which occasionally makes them worth considering even for a borrower who would otherwise qualify conventionally.
What happens if the appraisal comes in below my contract price?
The lender lends against the lower of price or appraised value, so the gap becomes cash you bring or a renegotiation with the seller. In a fast-moving market it is worth deciding in advance how much of a gap you would cover, because that decision is much harder to make calmly once you are in it.
Should I do a HELOC or a cash-out refinance?
If your first mortgage carries a low rate, almost certainly a HELOC. A cash-out refinance replaces that loan entirely and applies the new rate to your whole balance, not just the money you take. A HELOC sits behind the first and leaves it untouched, and you pay interest only on what you draw. If your first mortgage rate is already high, the comparison genuinely goes the other way and I will run both.
Can I count rent from my ADU?
If it is permitted and the appraiser accounts for it, usually yes. Unpermitted conversions typically cannot be counted, and on some programs the unit becomes a condition to resolve before funding. Given how much ADU activity there has been here, confirm permit status before your contingencies expire rather than assuming.