SpaceX went public on Nasdaq in June and raised $85.7 billion once underwriters exercised their overallotment, the largest offering ever completed. One pre-IPO trading platform estimated ahead of the listing that roughly 4,400 current and former employees would clear a million dollars in stock.
Very few of those employees could walk into a conventional loan application tomorrow and document that wealth as qualifying income. Their shares also sit under staggered lockups extending 180 days past the listing, so much of the group cannot sell into the market yet either.
The wealth in that offering did not appear in June. It accumulated over two decades inside a private company, which increasingly describes how compensation works across the technology sector. Yet underwriting still expects wealth to arrive through a public market on a date the market can verify.
Conventional guidelines assume a public-market workforce
Fannie Mae’s Selling Guide treats restricted stock as eligible income once shares vest and reach the borrower without restriction, supported by 12 months of receipt history for time-based grants and 24 months for performance-based grants. Sensible rules on their face.
Two provisions do the damage. Receipt history accumulated while the company was private counts for nothing toward the requirement, and the income calculation runs off a trailing 200-day moving average of the share price.
Follow that through with a SpaceX engineer who spent eight years accumulating equity. Her clock started at zero on listing day. The stock will not produce a 200-day trading history until spring 2027, and her receipt history will not clear 12 months until that summer. Her balance sheet would satisfy any credit committee in the country. Her income documentation fails.
Employees at companies with no listing scheduled wait longer still. Technology companies going public over the past decade have been roughly 12 years old at listing, against seven to eight in the mid-1990s, per Ritter’s IPO data at the University of Florida. Vested private shares also struggle to serve as reserves, since no exchange has priced them.
Jason Schloetzer, a Georgetown business professor, put it plainly to Fortune after the listing: Equity worth millions on paper does not sit in a bank account. Underwriters who want verification before counting income have a defensible reason for it, and the trouble sits in a guideline that defines verification narrowly enough to exclude a growing share of well-capitalized borrowers.
Who says yes to this file?
Non-QM lenders resolve much of it, typically through asset depletion, which divides a borrower’s eligible assets across a set term and converts the result into a monthly figure underwriting can treat as income. A borrower who moved seven figures out of a tender offer and into a brokerage account qualifies on the strength of that account rather than on a pay stub that captures a fraction of total compensation.
Loan amounts in these markets clear conforming limits, so most of these files land in jumbo on size alone. That label settles nothing, since plenty of jumbo programs run the conforming income calculation, including the trailing 200-day average, to satisfy the investor buying the loan. What makes a program workable here is exception-based review, with an underwriter authorized to weigh a grant agreement against a brokerage statement. Brokers with wholesale access can shop a file until they find it.
Private banks reach the same borrower through pledged assets and securities-based lending, though a pledge requires marketable collateral that unlisted shares cannot supply.
Every channel here wants the equity either sold or priced on an exchange. Borrowers whose companies have no listing scheduled need a lender that can approve on the overall financial picture without the stock carrying the file. A lender that sells its loans answers to whoever buys them, while a lender holding them on its books sets its own terms, and several credit unions with technology-heavy membership have built real competence with equity-compensated files.
Flexibility gets priced in all of these channels, with rates above agency execution and reserve and down payment terms that tighten alongside them. Exception authority varies by investor and by underwriter, so confirm how the program calculates income before positioning it with a client.
What to sort out before the application
One question routes the file faster than any other: How close is this borrower’s company to a public market? A borrower at a company with a functioning secondary market and an IPO the trade press treats as imminent sits nowhere near one at a company that only just closed a Series B last spring, and the two borrowers will have very different experiences when getting qualified for a home loan. Asking in the first conversation beats discovering the answer after an offer gets accepted.
Then collect the paperwork underwriting will work from. Grant agreements and vesting schedules establish what the borrower holds and when it arrives. Where the forward schedule looks unclear, HR can confirm it faster than the borrower can reconstruct it. Options add a step, since the borrower funds the exercise in cash where restricted stock units (RSUs) deliver shares outright. Records from prior tender offers or secondary sales carry more weight than any valuation the borrower supplies. Tax can land on shares still inside a lockup, so ask what the borrower has set aside for it. That liability distorts debt-to-income at the worst possible moment.
Those lockups belong on the closing timeline too. A borrower under a staggered release schedule may be unable to fund a down payment when the contract requires it. Build the closing date around the releases where the transaction allows, and confirm which shares the lender counts toward reserves. Have that conversation before the house hunting starts, since execution sets the achievable price point.
Austin, TX, sends us more of these borrowers than its size suggests. One arrived after several lenders declined him, his compensation running mostly through SpaceX stock that carried no trading history they would use. We placed the loan with a wholesale lender whose underwriter was willing to read the grant agreement and the brokerage statements together, and he closed ahead of the historic IPO. Nothing about his finances changed between the declines he received from other lenders and the approval. The only variable was the lender who accepted it.
Cases like his get solved one lender at a time until acceptance becomes the norm and denial becomes expensive. Self-employed borrowers spent years as an underwriting problem before non-agency lenders answered with bank statements and profit-and-loss documentation. Equity compensation sits at a similar point. With more than 1,300 private companies carrying billion-dollar valuations, every listing ahead mints another cohort whose wealth conventional documentation cannot recognize for a year or more.
The definition of a qualified borrower has always followed how people earn, and compensation moved first this time. Lenders who build the capability now will own the segment by the time the guidelines catch up.
Eric Bernstein is the President and Co-founder of LendFriend Mortgage.
This column does not necessarily reflect the opinion of HousingWire’s editorial department and its owners. To contact the editor responsible for this piece: [emailprotected].