A new program from Fannie Mae and Freddie Mac will allow borrowers to crowdfund their down payments from multiple sources, including their employers. HomeFundMe was created by mortgage banking firm CMG Financial, and allows employers to contribute directly to employees’ accounts for the express purpose of helping that employee purchase a home. The program also includes incentives that allow lenders to contribute as much as two dollars for every dollar raised through the crowdfunding system, with the cap on that amount dictated by the amount of income a borrower earns over the average median income in the area in which they wish to make a purchase.
Incentives for Relocation
The money raised in the system cannot be used for any purpose other than making a down payment on a property. It is held in escrow until closing and settlement. Chris George, president of CMG Financial, suggested that employers might use the program to “retain and attract the best and brightest talent” to their company. He added, “Millennials are looking for the lifestyle perks that will help them achieve their goal [of homeownership].”
The Ins and Outs
Buyers wishing to use the HomeFundMe program first use social media to create a user account, then go through a prequalification process to help make sure that they will be eligible for a mortgage and determine the amount of the loan they might obtain. Then, they are guided through a process of “campaign” building and story-sharing online. Interestingly, learning about the mortgage process is considered the step after starting up their campaign by sharing their story. The program also offers a variety of educational programs to help buyers make wise financial decisions. Buyers have a year from the start of their campaign to close on their home.
The program promises not to launch a campaign for anyone who does not meet the prequalification requirements for a mortgage. It also permits both conditional and non-conditional gifts, meaning that a giver can designate the funds solely for the purchase of the home or permit the borrower to keep the money whether they buy a home or not. HomeFundMe also notes that it does not collect taxes or fees on donated money, but this does not necessarily mean the gifts will be tax-free for the recipient. Your buyer should also consider that some lenders require a certain percentage of a down payment to come directly from the borrower in order to reduce the risk of a loan.
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