Crowdfunding

A new site allows you to crowdfund your mortgage downpayment.

No downpayment? No problem!

Add your mortgage downpayment to your business, artistic project and medical bills as something you can go online to crowdfund. Mortgage banking firm CMG Financial just launched HomeFundMe. The crowdfunding service is the first of its kind to get Fannie Mae and Freddie Mac approval, according to MarketWatch.

Here’s how MarketWatch says HomeFundMe works:

Each donor to HomeFundMe campaigns can give gifts up to $7,500. For people who earn less than their area’s median income, HomeFundMe will match two dollars for every dollar raised up to $2,500 or 1% of the home’s purchase price. Those who make more than their area’s median income will get match funds up to $1,000. The service has been in beta testing for about a month. CMG requires HomeFundMe’s users to go through housing counseling from an independent agency and will cover any related fees.

Already roughly 100 people have used the platform, the company said. CMG will pilot the program through June. Then it will review its results with Fannie and Freddie, at which point the mortgage-finance companies could open up crowdfunding for other lenders to explore, said Jonathan Lawless, vice president for product development and affordable housing at Fannie Mae.

CMG Financial started HomeFundMe to solve a major problem that has become especially acute for millennials. A majority of young adults want to own their own homes, but hit the downpayment roadblock especially hard, thanks to the student debt, high rents and underemployment endemic to post-Great Recession America.

CNBC reports HomeFundMe offers another option:

“This allows you to tell your story. It allows for folks to be able to buy into the story of what it is you have, your loan story, your home story,” said Christopher George, CEO of CMG Financial and vice chairman of the Mortgage Bankers Association. “Our tag line is, ‘Fund your way home.’ We think homeownership still is very sensible and, done correctly, is a good idea to step forward toward wealth, stability and quality of life.”

Until now, borrowers could receive down payment assistance from their close family members, employers, community nonprofits and their churches, all with significant documentation. This was so lenders could be sure they weren’t borrowing the down payment, adding debt on top of the mortgage. Lenders also wanted to be sure borrowers were able to make the monthly mortgage payments.

George said those who donate funds can’t expect a financial return. Instead, HomeFundMe donations will are gifts. Fannie Mae calls HomeFundMe a test project.

“What we’re doing today is we’re trying to test and learn a variety of solutions because the preferences for today’s homebuyers have changed significantly, and there is no silver bullet to solving a problem that’s as hard as how do you find a down payment,” said Jonathan Lawless of Fannie Mae. “What we prefer to do is source ideas from all sorts of different places. Our customers are a major one, lenders who are dealing every day with people trying to buy homes, and instead of trying to take those ideas and spend three years trying to roll out a major change, we’d rather test and learn.”

However you look at it, HomeFundMe is another example of technology’s impact on culture.

Crowdfunding your way into home ownership. Here’s how from CNBC.

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