No Savings? No Problem, Not sure how to afford a down payment to
buy a home until this offbeat idea: crowdfund the money from friends and family.
A 28-year-old construction technician, set up an online profile with a program called HomeFundMe to solicit donations. Her parents and a few others responded, and in March they closed on a $320,000 home in Cheyenne, Wyo.
HomeFundMe, a service launched by lender CMG Financial last year, is among a growing suite of services that help borrowers cobble together the funds to buy homes. These companies—startups and established players in the housing market alike—say they’re offering options for borrowers who have good credit and income but are struggling to save.
Rising consumer debt and high prices have made it tough for first-time buyers to save for a home. Nearly 40% of renters ages 25 to 34 said they were saving nothing each month for a down payment, according to a survey last year by rental-listing company Apartment List.
A few organizations, like Unison Agreement Corp. and Landed Inc., offer “shared equity” contracts through which buyers get money for their down payments in exchange for pledging part of the home’s future value to investors like pension funds or foundations. And some banks, have programs through which young adults can get a mortgage with nothing down if their parents pledge investment assets as collateral.
Yet some worry that helping borrowers get down payments could actually exacerbate the housing market’s main problem:
Economists caution that actions such as loosening credit standards or supplying borrowers with more down payment money worsen the problem by creating more demand in a supply-constrained market, leading to a further overheating of home prices.
Jonathan Lawless, vice president for product development and affordable housing at mortgage-finance giant Fannie Mae, said the agency is currently focusing not just on making credit available but also on increasing housing supply. For example, Fannie is looking at ways to make it easier to get loans to fix up dilapidated homes and make it simpler to finance the purchase of mobile homes.
Borrowers for years have been able to take out mortgages with small down payments.They can get mortgages with down payments as low as 3.5% through the Federal Housing Administration, and Fannie and Freddie Mac back loans with down payments as low as 3%. But these loans tend to have high monthly costs: They usually require mortgage insurance, and the bulk of the first payments can go to interest, not principal.
About 400 borrowers have used HomeFundMe to help buy homes since the program launched in October. On average, they raise about $2,500, though CMG also can kick in matching grants, and most borrowers have some of their own money saved as well.Friends and family can also make their gifts conditional, meaning borrowers won’t get the money unless they actually purchase the home.
She felt uncomfortable at first asking for help through HomeFundMe. But the budget was tight after paying for their wedding, and a credit union had already denied their mortgage application because they didn’t have enough in savings.
“Whenever I emailed people the link, I would explain, ‘This isn’t fake, this is real,’” Now, some of her friends are interested in following suit. “It just worked out so well,” she said, “that people were like, ‘No way, I want that!’”
When it comes time to Sell or Buy, We have a wealth of information and 18 years of experience to help you get started. Visit us at WWW.PrecisionReal-T.com or if you prefer a more personal touch Call us today at 801 809-9866.
#RealEstateForSale #Homeownership #UtahRealEstate #Mortgage
Source: Realtor.com
A 28-year-old construction technician, set up an online profile with a program called HomeFundMe to solicit donations. Her parents and a few others responded, and in March they closed on a $320,000 home in Cheyenne, Wyo.
HomeFundMe, a service launched by lender CMG Financial last year, is among a growing suite of services that help borrowers cobble together the funds to buy homes. These companies—startups and established players in the housing market alike—say they’re offering options for borrowers who have good credit and income but are struggling to save.
Rising consumer debt and high prices have made it tough for first-time buyers to save for a home. Nearly 40% of renters ages 25 to 34 said they were saving nothing each month for a down payment, according to a survey last year by rental-listing company Apartment List.
A few organizations, like Unison Agreement Corp. and Landed Inc., offer “shared equity” contracts through which buyers get money for their down payments in exchange for pledging part of the home’s future value to investors like pension funds or foundations. And some banks, have programs through which young adults can get a mortgage with nothing down if their parents pledge investment assets as collateral.Yet some worry that helping borrowers get down payments could actually exacerbate the housing market’s main problem:
Economists caution that actions such as loosening credit standards or supplying borrowers with more down payment money worsen the problem by creating more demand in a supply-constrained market, leading to a further overheating of home prices.
Jonathan Lawless, vice president for product development and affordable housing at mortgage-finance giant Fannie Mae, said the agency is currently focusing not just on making credit available but also on increasing housing supply. For example, Fannie is looking at ways to make it easier to get loans to fix up dilapidated homes and make it simpler to finance the purchase of mobile homes.
Borrowers for years have been able to take out mortgages with small down payments.They can get mortgages with down payments as low as 3.5% through the Federal Housing Administration, and Fannie and Freddie Mac back loans with down payments as low as 3%. But these loans tend to have high monthly costs: They usually require mortgage insurance, and the bulk of the first payments can go to interest, not principal.
About 400 borrowers have used HomeFundMe to help buy homes since the program launched in October. On average, they raise about $2,500, though CMG also can kick in matching grants, and most borrowers have some of their own money saved as well.Friends and family can also make their gifts conditional, meaning borrowers won’t get the money unless they actually purchase the home.
She felt uncomfortable at first asking for help through HomeFundMe. But the budget was tight after paying for their wedding, and a credit union had already denied their mortgage application because they didn’t have enough in savings.
“Whenever I emailed people the link, I would explain, ‘This isn’t fake, this is real,’” Now, some of her friends are interested in following suit. “It just worked out so well,” she said, “that people were like, ‘No way, I want that!’”
When it comes time to Sell or Buy, We have a wealth of information and 18 years of experience to help you get started. Visit us at WWW.PrecisionReal-T.com or if you prefer a more personal touch Call us today at 801 809-9866.
#RealEstateForSale #Homeownership #UtahRealEstate #Mortgage
Source: Realtor.com
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