Does being part of a start-up make it hard to get a loan?

It doesn’t really make a difference, I suppose, I’m just curious.

I am likely going to join a start-up before the end of the year. Maybe not, we’ve been talking about it for at least 8 months now, but at least some progress is being made…

Anyway, while reading an article about “who can’t get a mortgage now” I started to wonder if I would have any problems if I were part of a start up.

And so I posted the question here.

Being an employee of a startup is not the same as being self-employed. As an employee, you have a w-2, which makes your salary more verifiable than if you were self-employed. When I had a business of my own, I was also an employee of the firm. That made life a whole lot more easy for me with respect to credit than if I said I was self-employed.

Generally lenders are also interested in how long you’ve worked at our current job. “Two weeks” is a less-good answer than “10 years”.

Right now with the ructions in the market, anyone’s anecdotal eveidence from even 6 months ago will be irrelevant. If things calm down (not the same as “improve”) a bit we may see sanity restored to underwritiing standards.

It shouldn’t really matter if you`re just an employee. In contrast to ASAKMOTSD’s experience, I haven’t found that lenders immediately grasp the difference between owning a business and being self-employed, if the business is less than a few years old like any start-up would be.

So if your employment includes a grant of shares, I wouldn`t suggest volunteering that information unless it seems dishonest not to. Lenders probably won’t necessarily “get” start-ups, so they might not see how being granted a small share of the company for the talent you bring is any different in being an equal partner in, say, a local bakery down the street.

There might be regional differences here, but my experience has been (warning: anecdote) that if you have a history of continuous employment and are currently employed, it doesn’t particularly matter if you’ve only been with your present employer for a short period of time. YMMV and IANALender and all that.

edit: I say there may be regional differences because I live in a part of the country and work in an industry where somewhat rapid job turnover is the norm, and lenders seem used to it. This may not be true everywhere - I don’t have much data about that.

I underwrite 2nd mortgages and it’s generally our policy that an applicant must be in the same profession for a minimum of one year if receiving W-2 income. If the person is self employed, or if we are able to verify income only with schedule C or E from tax returns, then the minimum is 2 years.

Exceptions can always be made if the applicant has good credit, good relationship with the bank, etc., but I would always require at least one year of tax returns. Of course, I don’t request income verification on every deal and a lot of customers lie about the duration, source or amount of their income anyway.