This chapter is for you if some of your down payment will come from company stock or an investment account rather than a savings account. It walks through how to turn that stock into cash, what you'll owe in taxes, and how to get the money ready for a lender. If your down payment is coming from savings, a family gift or a 401(k) loan, skip ahead to Other sources and Seasoning; those sections apply to everyone.
In SF, a lot of buyers fund their down payment with RSUs (restricted stock units, shares your employer grants you over time), a tender offer (a chance to sell private-company shares), a sale after an IPO, or a loan against a brokerage account. Each route has three steps, and each step has a trap. First you get the cash out. Then you pay California and the IRS. Then a mortgage underwriter has to accept where the money came from.
The short version
- Only stock that is vested, unrestricted and sellable can become a down payment. Unvested RSUs, locked-up shares and private stock count for zero with lenders, and they should count for zero in your plan too.
- Taxes are brutal in California. Top combined marginal rates are about 37% on long-term gains and 50–54% on short-term gains and RSU income. California taxes capital gains as ordinary income at up to 13.3%, and it does not recognize QSBS.
- RSU withholding is too low for high earners. The 22% federal and 10.23% CA supplemental rates can leave a six-figure bill in April. Money you owe the IRS can't go toward your down payment.
- Securities-based lines of credit (SBLOC/PAL) at roughly SOFR + 1.75–3.75% let you buy without selling, and Fannie Mae lets lenders leave their payments out of DTI. The risk is a margin call if most of your account is in one tech stock.
- ISO exercises and AMT: for 2026, the AMT exemption starts phasing out at $1M MFJ / $500k single at a 50% rate. Don't exercise-and-hold in the year you need maximum cash without running the numbers first.
- Season the money: lenders read two months of statements and want every large deposit sourced. Get proceeds into their final account 60+ days before you apply if you can.
Step 0: sort what you own by how easy it is to sell
| Bucket | Examples | Usable for down payment? | Lender view |
|---|---|---|---|
| Cash | Sold RSUs, tender proceeds in a bank account | Yes | Asset (once sourced/seasoned) |
| Liquid public stock | Vested, unrestricted shares of a listed company | Yes, after sale or as SBLOC collateral | Reserves at ~70% of value; may count as RSU income after 12 months of vests |
| Restricted public stock | Post-IPO shares under lockup; insider shares during a blackout | Not until released | 0% reserves, 0% SBLOC advance |
| Private stock / units | OpenAI, pre-IPO Anthropic, any startup | Only through a tender or approved secondary | Zero, for both income and assets |
| Unvested grants | RSUs or options that haven't vested | No | Zero; sign-on grants are never income |
A lockup is the period after an IPO when employees can't sell. A blackout is when company insiders can't trade, usually around earnings. Reserves are savings a lender wants to see left over after closing.
Getting the cash out
Public-company RSUs: sell at vest
When RSUs vest, the full value is taxed as ordinary wage income, whether you sell or not. Your cost basis (the price the IRS treats you as having paid) is the vest-date price. Selling right at vest creates almost no additional gain, so vesting RSUs are usually the cheapest down-payment source you have. Many buyers simply switch their vests to "sell all" 6–12 months before a purchase and let the cash build up.
Shares you held after vest are a different story. Gains on shares held over a year are long-term; under a year, they're taxed at ordinary rates. Sell the shares you paid the most for first (your broker calls this specific-lot identification) to keep the tax down.
Insiders: trading windows and 10b5-1 plans
If you're subject to your company's insider-trading policy, you can only sell during open windows. Those typically open a couple of days after earnings and close weeks before quarter end. A down payment due in escrow in the middle of a blackout is a real problem.
A Rule 10b5-1 plan schedules sales in advance so they can go through during blackouts. The SEC's 2023 amendments added mandatory cooling-off periods between setting up a plan and the first trade:
| Who | Cooling-off period |
|---|---|
| Directors and officers | Later of 90 days or 2 business days after the 10-Q/10-K for the adoption quarter (max 120 days) |
| Other employees covered by the policy | 30 days |
(The 10-Q and 10-K are a public company's quarterly and annual reports.) Set up a 10b5-1 plan at least a quarter before you expect to make offers. Single-trade plans are limited to one per 12 months. Your company's legal team usually has to approve the plan.
Tender offers (OpenAI, Anthropic, and other private companies)
Private AI companies have been running regular tenders: the company, or outside investors, buy employee shares at a set price.
| Company | Recent tender | Notes |
|---|---|---|
| OpenAI | ~$7B at an $852B valuation, closed Aug 2026 | A company buyback, not outside investors; an IPO is now reportedly expected in 2027 |
| OpenAI | ~$6.6B at ~$500B, Oct 2025 | Per-person cap reported at $30M; reports conflict on details |
| Anthropic | $350B pre-money, ran ~Feb–Apr 2026 | Eligibility required at least 1 year of tenure; employees reportedly sold less than expected ahead of an IPO |
How tender proceeds get taxed depends on what kind of equity you hold:
- Shares from exercised ISOs (incentive stock options), sold more than 1 year after exercise and 2 years after grant: long-term capital gain.
- ISO shares sold earlier than that: a disqualifying disposition. The bargain element (the gap between the share value and what you paid to exercise) becomes ordinary income.
- NSOs (non-qualified stock options) exercised in the tender, or RSUs settled into the tender: ordinary income, often with withholding taken at the supplemental rates.
- Shares you early-exercised with an 83(b) election (a filing that starts the tax clock at exercise): usually capital gain measured from the exercise price.
Each company's equity works a little differently (some have used non-standard units). Read the tender documents and go over them with a CPA before you choose how much to sell.
IPOs and lockups
After an IPO, employee shares are usually locked up for around 180 days. Staggered schedules are increasingly common. SpaceX (IPO June 12, 2026) is releasing employee shares in batches: about 20% after Q2 earnings, then 7% slices at roughly days 70–135 (reported dates include Oct 10 and Oct 25, 2026), and a full release around day 180.
Anthropic confidentially submitted a draft S-1 (the filing a company makes before going public) on June 1, 2026. A mid/late-November 2026 Nasdaq listing has been reported (WSJ/Reuters) but not confirmed by the company as of Oct 6, 2026. If it happens, here's the realistic order of events for an employee who wants to buy:
- Pre-IPO: lenders ignore your equity, except as cash from a tender.
- Lockup: shares are restricted. That means 0% reserves value and 0% SBLOC advance.
- Post-lockup: vested shares become liquid assets and SBLOC collateral.
- About 12 months after the IPO: RSU vests start counting as qualifying income under agency rules. Lenders need 12 months of post-IPO distributions and a 200-day price history. History built up while the company was private doesn't count.
Also remember that a lot of employees get their money on the same day, and they're shopping for the same houses (The SF market right now).
The tax bill on the way out
The numbers in this section are rough planning figures, not tax advice. Have a CPA run your own situation before you sell, exercise or borrow.
California taxes capital gains as ordinary income. Rates run up to 12.3%, plus the 1% Mental Health Services Tax on taxable income above $1M, for a top rate of 13.3%. Wages (including RSU vests) also pay 1.3% CA SDI (state disability insurance) in 2026 with no wage cap. Approximate top combined marginal rates for a California resident in 2026:
| Income type | Federal | NIIT / Medicare | California | Approx. top combined |
|---|---|---|---|---|
| RSU vest / NSO spread (wages) | 37% | 2.35% Medicare | 13.3% + 1.3% SDI | ~54% |
| Short-term capital gain | 37% | 3.8% NIIT | 13.3% | ~54% |
| Long-term capital gain / qualifying ISO sale | 20% | 3.8% NIIT | 13.3% | ~37% |
NIIT is the federal net investment income tax. Your actual rate depends on your bracket. The 13.3% CA rate applies only above $1M of taxable income; below that, the top CA rate is 12.3%. Treat these as worst-case planning numbers.
Example: how much stock to sell for a $600k down payment
You need $600k net for a down payment. You'll sell long-held stock where 70% of the value is gain, at ~37.1% long-term capital gains (LTCG) tax.
Tax per dollar sold = 0.70 × 37.1% ≈ 26%. To net $600k, you need to sell about $810k of stock, and about $210k goes to taxes.
| Funding route | Stock sold | Tax due | Ongoing cost |
|---|---|---|---|
| Sell long-term shares (70% gain) | ~$810k | ~$210k | None |
| Sell short-term shares (70% gain) | ~$970k | ~$370k | None |
| Sell RSUs at vest | ~$600k + tax already withheld | ~$0 additional (vest income is taxed regardless) | None |
| Borrow $600k on a PAL at ~6.1% | $0 | $0 now (deferred) | ~$36.7k/yr interest, floating, plus margin risk |
Why RSU withholding falls short
Employers withhold on RSU vests at flat supplemental rates: 22% federal (37% on supplemental wages above $1M in a year) and 10.23% California. For someone in the 35–37% federal bracket and 12.3–13.3% in CA, that leaves a gap of about 15 points.
For example, say you earn a $350k salary plus $650k of RSU vests in 2026. At a ~15-point gap, roughly $100k of extra tax is due by April 15, 2027. If you spent the vest proceeds on a down payment in November, that bill has to come from somewhere. Lenders reading your statements may ask the same question.
Estimated taxes and safe harbors
A big tender or stock sale mid-year can trigger underpayment penalties on top of the tax itself. A "safe harbor" is a payment level that protects you from those penalties. AGI is adjusted gross income; MFS means married filing separately.
| Federal | California | |
|---|---|---|
| Safe harbor via prior-year tax | Pay 110% of last year's tax (if last year's AGI was over $150k) through withholding and estimates. No penalty, even if this year's income spikes. | Same 110% rule, except if this year's AGI is $1M or more ($500k MFS): then you must pay 90% of this year's tax. The prior-year safe harbor isn't available. |
| Installment schedule | 25% each: Apr 15, Jun 15, Sep 15, Jan 15 | 30% / 40% / 0% / 30%: Apr 15, Jun 15, (Sep 15), Jan 15 |
| Lumpy income | Annualized income method (Form 2210, Schedule AI) | Annualized method (Form 5805) |
Two practical points:
- Withholding counts as paid evenly through the year, even if it happens in December. Raising your W-4 withholding late in the year can fix a federal shortfall better than a late estimated payment does.
- The California $1M AGI rule catches exactly the people who just sold a large tender. Ask your CPA to calculate a CA estimated payment as soon as the sale settles.
ISOs and AMT
Exercising ISOs and holding the shares adds the spread (fair market value minus your strike price) to your income for the alternative minimum tax (AMT), a parallel tax calculation that often catches option holders. Under the 2025 federal tax law (OBBBA), for 2026:
| AMT parameter (2026) | Single | MFJ |
|---|---|---|
| Exemption | $90,100 | $140,200 |
| Phaseout starts | $500,000 | $1,000,000 |
| Phaseout rate | 50 cents per $1 (was 25 cents) | same |
| AMT rates | 26% / 28% above $244,500 of AMTI | same |
(MFJ is married filing jointly; AMTI is income as figured for AMT.) In the phaseout band, the effective marginal AMT rate is roughly 28% × 1.5 = 42%. Exercising $1M of ISO spread can easily create a six-figure AMT bill, due in April, on shares you can't sell (if private). That's cash taken out of your down payment and reserves. Some of the AMT comes back later as a credit, but slowly.
QSBS: federal yes, California no
Section 1202 (QSBS, qualified small business stock) can exclude federal tax on gains from qualifying C-corp stock. For stock issued after July 4, 2025, the 2025 federal tax law raised the cap to $15M, raised the gross-asset limit to $75M, and added tiered exclusions of 50% / 75% / 100% at 3 / 4 / 5 years of holding. Two caveats for SF buyers:
- California does not conform. CA residents pay full state tax (up to 13.3%) on QSBS gains.
- The big AI companies blew past the gross-asset test long ago. QSBS mostly helps early employees and founders at small startups who exercised early, not someone receiving OpenAI or Anthropic grants today.
Borrowing against your portfolio instead of selling
Securities-based lines of credit (SBLOC / PAL)
A securities-based line of credit (Schwab calls theirs a pledged asset line, or PAL) lets you borrow against a brokerage account at a floating rate, usually within days. The rate is set as a spread over SOFR, a benchmark short-term interest rate.
| Provider (published/secondary pricing) | Spread over SOFR |
|---|---|
| Schwab Pledged Asset Line | +3.75% (under $250k) → +2.25% ($1–5M) → +1.75% ($5–25M) |
| Morgan Stanley Liquidity Access Line | +3.0% ($500k–1M) → +2.25% ($1–5M) → +1.50% ($5–25M) |
| UBS, Goldman, JPMorgan private banks | Often tighter, with $1M+ minimums |
With SOFR at ~3.88% (early Oct 2026), a $1–5M Schwab PAL runs about 6.1%. That's currently below a 30-year jumbo (~7.6%), but it floats. Pricing comes from secondary sources, so confirm current rates with the bank.
Typical advance rates (how much you can borrow per dollar of collateral): Treasuries 85–95%; diversified ETFs 65–75%; a single large-cap stock 50–70%; concentrated positions 25–50%; restricted or lockup shares 0%.
Common uses:
- All-cash offer, then refinance. Draw on the line, close in cash (a strong offer in SF), then get a mortgage afterward and repay the line. Fannie Mae's delayed financing exception allows a cash-out refinance within about 6 months of a cash purchase. Jumbo lenders have their own versions.
- Down payment without selling. Under Fannie Mae B3-6-05, lenders can leave payments on a loan secured by financial assets out of DTI (debt-to-income ratio, the share of your income that goes to debt payments). The borrowed amount is subtracted from that account when counting reserves. Jumbo lenders set their own rules, so ask.
- Bridge between buying a new place and selling an old one.
Example: what happens if most of it is one stock. You hold $3M of one tech stock and draw $1.2M (40% LTV, or loan-to-value) for a down payment. Interest at SOFR + 2.25% ≈ 6.13% comes to about $6,130/month, floating. If the max advance on a concentrated position is 50%, you hit a shortfall once the stock falls below $2.4M, a 20% drawdown. Single tech stocks fall 20–40% routinely. A margin call (the bank demanding you pay down the loan or add collateral) forces you to sell at the bottom, possibly at short-term rates, just when you also owe a mortgage.
Pledged-asset mortgages
Some large brokerages and private banks (Morgan Stanley among them) let you pledge securities in place of part or all of the cash down payment. The assets stay invested, and you can often avoid PMI (private mortgage insurance). A typical structure pledges about 30% of the loan amount, and the pledge is released once LTV thresholds are met. You may be asked to add more collateral if the investments drop. Availability and terms vary, so ask at the private banks covered in Mortgages for tech buyers.
Other sources, briefly
- Gifts from family: For a 1-unit primary residence, Fannie Mae allows the whole down payment to be a gift, with a signed gift letter and a documented transfer. Gifts over $100k/yr from foreign individuals require IRS Form 3520 (no tax, but stiff penalties for not filing). Foreign limits on moving money out (China ~$50k/yr, India LRS $250k/yr) mean you should start early.
- 401(k) loans: capped at the lesser of 50% of the vested balance or $50k. The balance typically comes due quickly if you leave your job, so think about how likely a job change is.
Seasoning: making the money lender-ready
Underwriters typically review two months of statements for every account you'll use. Any large deposit must be sourced with a paper trail. On agency loans, that's generally any single deposit over 50% of your monthly qualifying income, and jumbo lenders can be stricter. Funds that have sat in an account for 60+ days are "seasoned" and need less explanation. This applies however you're funding the down payment, including savings and gifts.
- Pick the one account the down payment will live in, and move proceeds there early. Every hop between accounts adds documentation.
- Keep tender documents: the offer letter, your election, the settlement statement, and the wire confirmation.
- For stock sales, keep brokerage statements showing the sale and the transfer out.
- Convert crypto to dollars and season it in a bank account well before applying. Many lenders won't touch it otherwise.
- Wire foreign gifts into a US account months ahead, with English translations of donor documents.
- Don't make large unexplained deposits, cash deposits, or Venmo transfers during the statement window.
- Keep set-aside tax money in a separate account so you don't count it as your down payment by mistake.
A timeline for getting your cash ready
- 6–12 months out: List what you own by how easy it is to sell. Have a CPA estimate taxes (including CA, AMT and safe harbors) for selling vs. borrowing. Switch RSU vests to "sell to cover all" if you'll need the cash.
- 4–6 months out: If you're an insider, set up a 10b5-1 plan. If a tender or lockup release is coming, decide how much to sell now. Open an SBLOC on diversified assets as a backup (most charge nothing until you draw, but ask).
- 3 months out: Move down-payment funds into their final account. Set aside estimated taxes. Make CA/federal estimated payments if a big sale has already happened.
- 2 months out: Get fully underwritten with a lender who has seen your actual statements, RSU history, and SBLOC terms.
- Offer to close: Don't sell more stock, change jobs, exercise options, or open new credit without talking to your lender first.
Next: Mortgages for tech buyers
Sources & verification›
- Restricted stock units and restricted stock employment income (B3-3.3-07) — Fannie Mae, updated Mar 4, 2026
- Monthly debt obligations (B3-6-05) — Fannie Mae Selling Guide
- Borrowed funds secured by an asset (B3-4.3-15) — Fannie Mae Selling Guide
- Personal gifts (B3-4.3-04) — Fannie Mae, updated Feb 4, 2026
- Pre-IPO equity and mortgage underwriting — HousingWire, Sept 1, 2026
- OpenAI buys back $7 billion of employee shares in tender offer — Bloomberg, Aug 10, 2026
- OpenAI completes $7 billion employee stock tender offer — Quartz, Aug 11, 2026
- Anthropic plans employee tender offer at $350 billion valuation — Bloomberg, Feb 4, 2026
- Anthropic wraps up tender offer as employees resist selling — TipRanks, Apr 2026
- Anthropic confidential draft S-1 — Anthropic, Jun 1, 2026
- Anthropic targets mid-November IPO: report — Invezz, Oct 1, 2026
- SpaceX IPO employee lockup release dates — Darrow Wealth Management, 2026
- Tender offer tax guide — RSU Advisors
- ISOs, the AMT, and new rules in the OBBBA — Crestwood Advisors
- 2026 tax brackets and AMT — Tax Foundation
- OBBBA and QSBS — RSM
- State tax treatment of QSBS — EisnerAmper
- California 2026 SDI rate — Vensure, 2026
- 2025 Instructions for Form FTB 5805 (underpayment, $1M AGI rule, 30/40/0/30 schedule) — California Franchise Tax Board
- Estimated taxes — IRS
- Rule 10b5-1: Insider trading arrangements and related disclosure — fact sheet — SEC, Dec 2022
- SBLOC rates 2026 — Stockstead, 2026
- Schwab pledged asset line for a home purchase — Stockstead, May 2026
- Mortgage lending for more than just your home — Morgan Stanley (Broadridge)
- Policy rates (SOFR) — sofrrate.com, Oct 2, 2026