EXCLUSIVE— Potential homebuyers can be barred from entering the market simply because of the cost of a mortgage down payment. CMG Financial, a mortgage banking firm, is looking to change that with its new crowdfunding platform, HomeFundMe.
The platform, announced by the firm yesterday, is designed exclusively to help consumers crowdfund the necessary money for a mortgage down payment — something that is becoming increasingly difficult for consumers to do, thanks to rising rental costs and already high amounts of debt.
“It’s almost impossible to save for your down payment if 55% of your income goes to your rental agreement,” Chris George, president for CMG Financial, told Bank Innovation. “We see a segment of the market that’s underserved.”
Signing up to HomeFundMe, a potential homeowner is given a personalized advisor to help with the process. There are safeguards: the user’s information has to be verified, and a guarantee is made that they will be using the money specifically for a mortgage. In fact, donors can even give money “conditionally” — funds that will only be applied if they are used for a mortgage.
CMG’s crowdfunding platform allows users to set the amount they want to raise, where family, friends, and total strangers can contribute without transaction fees. 100% of the money raised goes to the users, Paul Akinmade, chief marketing officer for CMG, told Bank Innovation.
Users under the AMI, or Area Median Income, for the region they are searching in will also receive a grant by CMG Financial up to $2,500: the company will match each donation to a user’s fund 2:1 until they reach that limit, so long as the user takes a homebuying education or housing consulting course.
This is important because one of the biggest obstacles for a first-time homebuyers is the down payment, according to Akinmade.
“When we talked to [clients], a common them kept presenting itself, which was that the biggest hurdle is the ability to get a down payment,” Akinmade said. “That’s why we put together a platform that allows people to crowdfund and raise money for their home.”
CMG’s HomeFundMe platform marks the latest mortgage startup focused on addressing the problems of rising costs and higher debt among younger potential homebuyers.
Startups like Unison are addressing the problem by “investing” in the home alongside the buyer, while others, such as Loftium, are providing users with up to $50,000 so long as the buyer agrees to be an Airbnb host for one to three years. Others, like Eagle Mortgage, have even created programs where they will pay off some of the potential buyer’s student loan debt.
Using crowdfunding for the purpose is a little different, however, at least according to George.”
“This is a gift, there is no expectation that the people giving will get some kind of return from their investment,” George said. “You could crowdfund your down payment and still be eligible [for Unison].”6 - Readers Like This Post