Crowdfunding for A Down Payment? - Article | Think Realty
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Crowdfunding for a Down Payment?

Although there are certainly plenty of programs out there designed to help homeowners avoid the dreaded 10% or 20% down payment, years of buyer surveys from the National Association of Realtors, lenders, and consumer advocates show that buyers still believe they will need a huge chunk of money in order to buy a home. That belief, accurate or otherwise, is stalling the buying process before it even begins for many households. Privately held mortgage banking firm CMG Financial is hoping to circumvent the issue entirely and create an entirely new customer base in the process with the debut of its pilot crowdfunding service, HomeFundMe, dedicated to helping would-be homeowners collect money for a down payment in order to receive a mortgage from CMG Financial.

Can Crowd Funding Really Help with Your Down Payment?

“Crowdfunding can help with your down payment if you’re a first-time homebuyer, you don’t think home ownership is possible, [or] you’re building your wedding registry,” the HomeFundMe webpage explains. The process starts when a potential borrower signs up for a free account, is prequalified to participate and enrolled in any incentive programs for which they are eligible, and sets up a profile to share with family and friends. Participants who earn less than their area’s median income may get matching donations up to $2,500 or one percent of the home’s purchase price. Those earning more than their area’s median income can get matching funds up to $1,000. Fannie Mae and Freddie Mac have approved the process and are involved in housing counseling associated with the home purchase.

Crowdfunding Popularity

The concept of asking for money for a down payment on a home or, for that matter, just requesting money in general has become widely popularized by crowdfunding platforms like GoFundMe, which allows users to set up accounts to fund just about anything. As people wait longer to get married and no longer have the same need for traditional wedding registries to help them establish households of their own, more couples are opting to ask for cash and funding for a variety of projects, of which saving for a down payment is only one. According to Sara Margulis, CEO of HoneyFund, an online wedding registry that solicits cash donations rather than gifts, her website raises about $2 million for down payment funds each year.

Of course, HomeFundMe does come with some limitations. Users are committed to using CMG for their loan, and if they do not buy a house the money may be returned, depending on how the profile is set up. On the other hand, thanks to the approval from Fannie and Freddie, HomeFundMe users can accept money for their down payments from a wider array of individuals than are permitted to contribute to down payments in other scenarios. Usually, only family and close friends receive lender approval to contribute. CMG also has a vested interest in the borrower’s success and offers coaching to would-be homeowners struggling to effectively publicize their accounts.


Carole Ellis is the editor for Think Realty Magazine. She can be reached at cellis@thinkrealty.com.