Better Startup Mortgage FAQs

Startups & Shares

What type of shares can be used as collateral?
Currently the program is limited to exercised, vested equity shares of Better or Carta.

How does Better determine the value of the shares?
Better Mortgage will estimate the collateral value of shares based on recent transactions or independent valuations; for Carta, it is the
the most recent transaction price on CartaX multiplied by an advance percentage of 40%.

How many shares am I required to pledge as collateral?
You must pledge shares with a collateral value of 20% of the home’s value. Better’s valuation of the shares will determine how many are required to reach 20%. To value Carta's shares, we start with the most recent CartaX transaction price. We reduce that number by a percentage to account for the higher risk and limited liquidity of startup shares. For example, 5,000 vested shares valued at $20 each would have a collateral value of $40k toward a $200k home.

Can I use a combination of pledged shares and a cash down payment?
At this time, to use the Better Startup Mortgage you must pledge shares with a collateral value of 20% of the home’s value, and there can be no cash component.

What if the value of the shares change over time? Will that impact the loan?
Better will not reevaluate the value of the shares over time, and changes to the company’s valuation will not impact your loan.

What are the restrictions on the shares I’ve used as collateral?
Any shares used as collateral may not be sold, repledged, or become subject to any other liens until the loan is paid off, the loan is refinanced, or the amount of the loan relative to the purchase value of the home reaches the share release targets in the schedule below:

The value of the home will be based on home purchase price or a new appraisal (at Better Mortgage’s request and cost).

What would happen if I wanted or needed to sell the shares I’ve used as collateral before I finish paying off my loan?
You would need to either make a cash prepayment to pay down the loan to below a 50-75% loan-to-value ratio (see schedule above) or refinance your loan.

We will also allow pledged shares to be sold in order to pay down the principal of the loan to meet the share release LTV schedule.

When will my shares be released from the hold?
The lien will be removed from your shares when your loan is paid off, when you refinance your loan, or when the amount of the loan relative to the value of the home reaches the share release targets in the schedule above.

What happens to other shares I have in addition to those I use as collateral?
Other shares you own that aren’t part of your share pledge are not impacted by your Better Startup Mortgage, and aren’t subject to any restrictions during the life of your loan.

What happens if the issuing company goes public during the loan process or after closing?
If the company transitions its shares from private to public, then the public shares that are issued in place of the private shares you’ve pledged continue as collateral for the loan. Your loan will stay the same.

What happens if the issuing company is acquired during the loan process or after closing?
If the company is acquired in a cash-for-stock transaction, the cash you receive in exchange for your pledged shares will be used to pay down the loan to a loan-to-value target as defined by the release schedule here.
If the company is acquired in a stock-for-stock transaction, the acquirer’s shares that you receive in exchange for your pledged shares become collateral.

In either scenario, you also have the option to refinance your loan to remove the lien on your pledged shares.

What happens to my shares if I default on my loan?
If you default on your loan, Better Mortgage will take ownership of the shares you pledged.

Borrower Requirements & Loan Process

What are the borrower requirements?
Borrowers must have a minimum FICO score of 700.

What types of loans are eligible?
Purchases of residential properties with up to four units in states in which Better offer mortgages. The properties can be a primary or secondary home or an investment property. The maximum loan size is $4,000,000 (though exceptions may be granted on a case-by-case basis).

What debt-to-income ratio (DTI) is required?
Customers must have a debt-to-income ratio of 50% or less.

How does a customer apply, and how is it different from our typical process?
You need to enter our pre-approval flow through the dedicated landing page to access this loan product.

In the pre-approval process, you’ll be asked to enter information about the value of your startup shares. Better Mortgage will confirm your startup share ownership with Carta.

You’ll work with a Home Advisor who will provide your pre-approval letter, help you evaluate your loan options, and help you move forward with the Better Startup Mortgage if it’s a good fit.

How do I get my pre-approval letter?
Get started online and we'll connect you with a Home Advisor who will send your customized pre-approval letter. They'll also be able to help you make any updates.

How does using this loan impact my closing time?
Closing timelines are the same as any other Better Mortgage.

I was asked to put an Initial Down Payment/Earnest Money Down Payment (EMD) on contract signing. What is an EMD and how does it work for a Better Startup Mortgage?
An earnest money deposit (EMD) is a deposit you provide your seller when you sign a purchase contract on your home.

You’ll need to pay the EMD in cash up front; at closing of your Better Startup Mortgage, we’ll reimburse you the difference between your deposit and your closing costs.

For example, assuming a $500,000 purchase price, and a 2% EMD, you’d need to put down $10,000 in cash on signing the contract for your home. Assuming closing costs of $5,000, you’d be reimbursed $5,000 by Better Mortgage at closing.

Can I get a verified pre-approval letter (VPAL) if I’m pre-approved for the Better Startup Mortgage?
Yes, you’ll be able to get a VPAL.

Who will service my loan?
Better Mortgage will service your loan after it closes. During this time, payment administration and collection will be handled by our sub-servicing partner called ServBank.

Glossary

What is loan-to-value ratio (LTV)?
Your loan-to-value ratio (LTV) measures how much equity you have in your home; the LTV is the percent you still need to put toward the mortgage principal balance to fully own your home. A typical mortgage has an LTV of 80-97% depending on what percent the customer pays in a cash down payment.

What is debt-to-income ratio (DTI)?
Your debt-to-income ratio (DTI) is a measure of your monthly debt compared to your monthly income, calculated by your monthly debt divided by your monthly gross (pre-tax) income. DTI is one of the factors used to determine how much you can afford in a monthly mortgage payment.

What is a lien?
A lien is a legal claim to an item of property until an owed debt is paid off. With a Better Startup Mortgage, there will be a lien both on your home and the shares you’ve pledged as collateral. If you fail to repay your loan, Better has the right to both your home and your pledged shares.

What is an issuing company?
An issuing company is the company who registers and distributes shares. For the Better Startup Mortgage, current eligible issuing companies are Carta and Better Mortgage.