Should I sell stocks to create a history of capital gain to pave way for home buying?

Today is the last day of the year, and I am considering selling part of my stock portfolio to create some income on paper from capital gain (with the intention to rebuy these stocks after 30 days) for 2024. But I wonder if that’s the right thing to do.

Here’s my financial situation. After living and working overseas for 10+ years, I have recently moved everything back to the U.S. and plan to start a whole new life from scratch in SoCal. I worked in a niche business overseas and I probably won’t find work in the same line of business here in America, so I am taking a gap year to regroup and search for a new career path forward, with possibility of starting my own small business.

My wife and I are currently jobless and make minimal income, but we have a combined saving of around $350K (~150K in cash / the rest in stocks). I currently have around $56K of unrealized capital gain in these stocks. We plan to have kids within the next two years, and would like to buy a home in the near future.

In the meantime, given the high cost of living in CA, I try to take advantage of Medi-cal and Calfresh to make our savings go further as we are finding our footing here. On the other hand, I know we can’t stay jobless and incomeless forever if we want to prepare for home ownership.

A family member advises me to report ample income and pay the resulting income tax despite of my lack of actual income, all for the sake of creating a good financial history to pave my way to mortgage application. I figure, instead of paying income tax for nothing, why not sell some stocks to lock in those capital gains and enjoy the 0% capital gain tax rate (since it is below the $94K tax bracket)?

Is it a smart thing to do? Does my $56K of income from capital gains tax do anything at all in the eyes of a banker? I know I will probably lose my Medi-cal and Calfresh benefits if I realize those incomes. I don’t know if it is worth it.

If I get any of these rules/facts wrong or if my expectations on home-buying is unrealistic, l’d love to hear your thoughts too.

Any insight is much appreciated.

Most mortgage companies are looking at monthly income. What you are proposing is simply capital gains not income. Suggest you and wife get jobs to establish steady income. Also, how are you proposing to come up with a down payment?? On a $600k home in Cali you gonna need over $100k upfront.

Short answer: no. The income you’ve created is not sustainable given your portfolio size.

Get a W2 job - boom sustainable income.

I’m not a mortgage expert, but I would never remove myself from a great position to a position of high risks, which based on what you’re explaining seems to be. I think you should rent, get a stable job or bring in stable income, and then get a home. I would wait until the end of next year to re-evaluate things, one year isn’t that long. You are in a great position now with a decent amount of money saved, don’t remove yourself from that position! Give yourself time, settle back in, strategize, the house will always be there waiting when you’re ready. You can really mess everything up doing things in the wrong order. Just my $0.02 - Good luck back in the U.S brother.

I would explore other ways to make it work first. If you have assets, there are ways to use those assets as a projected income source, still have control of the assets and not have to liquidate all of them. I would pursue this first. Some programs do not require a two-year history of this, just an active plan. If I can help further, let me know. TY Matt

I’m not 100% sure about the answer to your exact question, but having recently completed a mortgage refinance in Dec 2024 in the Bay Area, I can tell you that mortgage bankers view stocks etc as assets just like they will treat cash, so there’s no real need to liquidate your stock positions unless you HAVE to. You can just show the stock brokerage statements as proof of assets (just like you would with cash in a savings/checking account).

No. Here’s why - you need 2 years of job history to qualify for a mortgage… ‘some’ capital gains from selling stocks one time is not going to satisfy them.

This will not work. Capital gains is one of the more difficult income types to qualify with and you do not have sufficient assets to support a recurring expected capital gain at that level.

Capital gains for Fannie/Freddie backed loans also require you to have additional assets to offset the mortgage, which you don’t have.