ESPP (Employee Stock Purchase Plan) Funds on Mortgage Loan Application
The problem is that you don't have the money now; so they can't know with 100% certainty that you will have it on settlement day.  What happens if you don't file the paperwork in time? or you change your mind because you think the company stock is going to go through the roof next quarter? They would have to pull the funding for the loan. The seller would be upset, and could even file for damages if the deal falls through.  It could even snowball because if they delay the sale then they can't buy the new place, which impacts another closing... Frequently lenders want to see the money for the down payment long before settlement.  They want to know the money is there, and it isn't a hidden loan. While you can point to the money in the ESPP, they would still like to see the money in a regular bank account. Even if you do convince them to delay their evaluation you can count on being asked to prove the existence of the funds in the days before closing, or they will delay giving the loan. ESPP shares, once purchased, are just normal shares that you got at a discount. They're just as much a part of your current net wealth as any other shares of stock. What you can't do is claim that discount increases your salary, even if it does result in your effectively taking home more money. It's a benefit like the company contribution to your health plan, not a bonus.
The mortgage I got last year through Wells Fargo explicitly indicates in its terms that excess payment will be considered against future payments (i.e., pay $500 extra in January and you owe $500 less in February) unless indicated otherwise. It goes on to state that with electronic payments you do not get to specify where excess payment goes, so excess payment made electronically always goes toward future payments. If you want to make excess payments toward principal, you must actually send them a check and your payment stub, with the appropriate box ticked.  This won't be very different for other major banks, I wouldn't imagine. Some other answers mention the ability to sell at grant. This is very important. If you have that ability, think about your guaranteed return. In my case, I get a 15% discount on the lowest 6 month window price from the last two years.  If you do the math, the worst case return can be calculated: 1) Money that from the beginning of the window, I make 15% for 6 months (30% annual return guaranteed) 2) Money at the end of the window (say the last month) is 15% for one month (180% annual return guaranteed) In the end, your average holding window for your money is about 3 months (you can calculate it exactly). At that rate, you have a guaranteed 60% annual return. You can't beat that anywhere, with a significant upside if your company stock is increasing. So, if your company has an instant sell at grant option, you have to be brain dead not to do it. If it takes time to get your shares, then you need to look at the volatility of the stock to see how big the chance of losing money is. To generalize to a formula (if that's what you want): WM = purchase window (in months); D = Discount Percentage; GR = Guaranteed Return GR = 12/(WM/2) * D = 6*D/WM One last thing, If you are going to participate in ESPP, make you that you understand how to do your taxes yourself. I haven't found a tax person yet who does ESPP correctly (including an ex IRS agent), so I always have to do my taxes myself to make sure they get done correctly. Easier to copy paste than type this out. Credit: www.financeformulas.net Note that the present value would be the initial loan amount, which is likely the sale price you noted minus a down payment.   The loan payment formula is used to calculate the payments on a loan.   The formula used to calculate loan payments is exactly the same as the   formula used to calculate payments on an ordinary annuity. A loan, by   definition, is an annuity, in that it consists of a series of future   periodic payments. The PV, or present value, portion of the loan payment formula uses the   original loan amount. The original loan amount is essentially the   present value of the future payments on the loan, much like the   present value of an annuity. It is important to keep the rate per period and number of periods   consistent with one another in the formula. If the loan payments are   made monthly, then the rate per period needs to be adjusted to the   monthly rate and the number of periods would be the number of months   on the loan. If payments are quarterly, the terms of the loan payment   formula would be adjusted accordingly. I like to let loan calculators do the heavy lifting for me. This particular calculator lets you choose a weekly pay back scheme. http://www.calculator.net/loan-calculator.html Long ago when I was applying for my first mortgage I had to list all my income and assets. At the time I had some US Savings Bonds from payroll deduction. I asked about them. The loan officer told me that unless I was willing/planning on selling them to make the down payment, they were immaterial to the loan application. So unless you have a habit of turning RSUs into cash, or are willing to do so for the down payment, it is no different from having money in a 401K or IRA: the restrictions on selling them make them illiquid. Something very similar to this was extremely popular in the UK in the late 1980s.  The practice has completely vanished since the early 2000s.  Reading up on the UK endowment mortgage scandals will probably give you an excellent insight into whether you should attempt your plan. Endowment mortgages were provided by banks and at their peak were probably the most popular mortgage form.  The basic idea was that you only pay the interest on your mortgage and invest a small amount each month into a low fee endowment policy.  Many endowment policies were simply index tracking, and the idea being that by the end of your mortgage you would have built up a portfolio sufficient to pay off your mortgage, and may well have extra left over. In the late 1990s the combination of falling housing market and poor stock performance meant that many people were left with both the endowment less than their mortgage and their house in negative equity. A security is a class of financial instrument you can trade on the market.  A share of stock is a kind of security, for example, as is a bond. In the case of your mortgage, what happens: You take out a loan for $180k.  The loan has two components. a.  The payment stream (meaning the principal and the interest) from the loan b.  The servicing of the loan, meaning the company who is responsible for accepting payments, giving the resulting income to whomever owns it. Many originating banks, such as my initial lender, do neither of these things - they sell the payment stream to a large bank or consortium (often Fannie Mae) and they also sell the servicing of the loan to another company. The payment stream is the primary value here (the servicing is worth essentially a tip off the top).  The originating bank lends $180k of their own money.  Then they have something that is worth some amount - say $450k total value, $15k per year for 30 years - and they sell it for however much they can get for it.  The actual value of $15k/year for 30 years is somewhere in between - less than $450k more than $180k - since there is risk involved, and the present value is far less.  The originating bank has the benefit of selling that they can then originate more mortgages (and make money off the fees) plus they can reduce their risk exposure. Then a security is created by the bigger bank, where they take a bunch of mortgages of different risk levels and group them together to make something with a very predictable risk quotient.  Very similar to insurance, really, except the other way around.  One mortage will either default or not at some % chance, but it's a one off thing - any good statistician will tell you that you don't do statistics on n=1.  One hundred mortgages, each with some risk level, will very consistently return a particular amount, within a certain error, and thus you have something that people are willing to pay money on the market for. If the money is a gift the lender will make everybody acknowledge that the money is a gift. They will not care if the gift triggers tax forms for the giver. Signing the gift forms specifying it is a gift when it isn't a gift is fraud, and there are penalties attached to that. If it is a loan that will not erase the PMI requirement. Because the lender for the main part of the mortgage will want to protect their investment. Related to other impacts. The money is paid to investors who bought those mortgage backed securities. The company that services those loans is responsible for making sure the money is paid to the right investors I don't think you are reading the stock chart right.  ORCL has a beta of 1.12 which means it has more volatility than the market as a whole.  See image below for a fairly wild stock chart for a year.   I would not truly consider ESPP participation investing, unless you intend to buy and hold the stock.  If you intend to sell the stock soon after you are able, it is more speculation.  ESPP's are okay based upon the terms.  If the stock was a constant price, and you could sell right away, then an ESPP plan would be easy money.  Often, employees are often given a 15% discount to purchase the stock.  If you can sell it before any price drop, then you are guaranteed to make 15% on the money invested minus any commissions.   Some employers make ESPP participants hold the stock for a year.  This makes such a plan less of a value.  The reasons are the stock can drop in price during that time, you could need the money, or (in the best case) your money is tied up longer making the ROI less. The reasons people invest in stock are varied and is far to much to discuss in a single post.  Some of your colleagues are using the ESPP solely to earn the discount in their money. "There are two ways that mortgages are sold: The loan is collateralized and sold to investors. This allows the bank to free up money for more loans. Of course sometime the loan may be treated like in the game of hot potato nobody want s to be holding a shaky loan when it goes into default. The second way that a loan is sold is through the servicing of the loan. This is the company or bank that collects your monthly payments, and handles the disbursement of escrow funds. Some banks lenders never sell servicing, others never do the servicing themselves. Once the servicing is sold the first time there is no telling how many times it will be sold.  The servicing of the loan is separate from the collateralization of the loan. When you applied for the loan you should have been given a Servicing Disclosure Statement Servicing Disclosure Statement. RESPA requires the lender or mortgage   broker to tell you in writing, when you apply for a loan or within the   next three business days, whether it expects that someone else will be   servicing your loan (collecting your payments). The language is set by the US government: [We may assign, sell, or transfer the servicing of your loan while the   loan is outstanding.] [or] [We do not service mortgage loans of the   type for which you applied. We intend to assign, sell, or transfer the   servicing of your mortgage loan before the first payment is due.] [or]   [The loan for which you have applied will be serviced at this   financial institution and we do not intend to sell, transfer, or   assign the servicing of the loan.] [INSTRUCTIONS TO PREPARER: Insert   the date and select the appropriate language under ""Servicing Transfer   Information."" The model format may be annotated with further   information that clarifies or enhances the model language.]" Can anyone recommend a good textbook that covers Fannie Mae and Freddie Mac, or more broadly the US home mortgage market? A basic search seems to mostly turn up books that aim to make an ideological point rather than attempt to provide an actual explanation.  I have a basic financial knowledge including a basic understanding of derivatives at the level of say the textbook by Hull, but know very little about the US mortgage market specifically. I don't mind technical detail, and am not afraid of math. I don't mind if the book is broader, as long as it includes a reasonably in depth look at these GSEs and their role.  This seems to be a pretty basic piece of knowledge for many financial professionals, so I assume there must be at least one standard textbook on this that I just haven't been able to find.  EDIT: I'm looking for something post 2008 of course. This is what is called a Structured Product.  The linked page gives an overview of the relative pros and cons.  They tend to hold the bulk of funds in bonds and then used equity index futures and other derivatives to match returns on the S&P, or other indices tracked.  All combine to provide the downside protection. Note that your mother did not receive the dividends paid by the constituent companies.  She only received the capital return. Here is a link to Citigroup (Europe) current structured product offerings. Here is a link to Fidelity's current offerings of structured products. Here is Investopedia's article detailing the pitfalls. The popularity of these products appears to be on the wane, having been heavily promoted and sold by the providers at the time your mother invested.  Most of these products only provide 100% protection of capital if the market does not fall by a specified amount, either in successive reporting periods or over the life of the product.  There are almost as many terms and conditions imposed on the protection as there are structured products available.  I have no personal experience buying this type of product, preferring to have the option to trade and receive dividend income. The underlying investment is usually somewhat independent of your mortgage, since it encompasses a bundle of mortgages, and not only yours. It works similarly to a fund. When, you pay off the old mortgage while re-financing, the fund receives the outstanding debt in from of cash, which can be used to buy new mortgages. You should always always enroll in an espp if there is no lockup period and you can finance the contributions at a non-onerous rate. You should also always always sell it right away regardless of your feelings for the company.  If you feel you must hold company stock to be a good employee buy some in your 401k which has additional advantages for company stock.  (Gains treated as gains and not income on distribution.) If you can't contribute at first, do as much as you can and use your results from the previous offering period to finance a greater contribution the next period.  I slowly went from 4% to 10% over 6 offering periods at my plan. The actual apr on a 15% discount plan is ~90% if you are able to sell right when the shares are priced.  (Usually not the case, but the risk is small, there usually is a day or two administrative lockup (getting the shares into your account)) even for ESPP's that have no official lockup period. see here for details on the calculation. http://blog.adamnash.com/2006/11/22/your-employee-stock-purchase-plan-espp-is-worth-a-lot-more-than-15/ Just a note  For your reference I worked for Motorola for 10 years.  A stock that fell pretty dramatically over those 10 years and I always made money on the ESPP and more than once doubled my money. One additional note....Be aware of tax treatment on espp.  Specifically be aware that plans generally withhold income tax on gains over the purchase price automatically.  I didn't realize this for a couple of years and double taxed myself on those gains.  Fortunately I found out my error in time to refile and get the money back, but it was a headache. You're not responsible for the mortgages on the property - those are agreements between the lender and the borrower. The risk you have is that the title search missed something.  If the seller (i.e., the bank or banks who foreclosed) did not have full rights to sell the property, and there was another party who had a lien on the property or had an interest in it in some fashion, that party could make a claim that would interfere with your purchase.  You wouldn't be responsible for the loan, but you might not end up with the title to the property if that happened.