SAN RAMON, Calif.–A mortgage lender has launched a new service that allows potential homebuyers to crowdfund the downpayment on a house.
CMG Financial has rolled out HomeFundMe, an online platform that allows borrowers to crowdfund the downpayment on a home purchase without fees and with the backing of mortgage giants Fannie Mae and Freddie Mac.
The company reaffirmed what many analysts have said, which is those entering the home market are often so encumbered by student debt or high rent that they cannot pull together the downpayment.
"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," Christopher George, CEO of CMG Financial told CNBC.com. "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 downpayment 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 downpayment, adding debt on top of the mortgage. Lenders also wanted to be sure borrowers were able to make the monthly mortgage payments.
George said that while many business crowdfunding platforms offer returns on the investment, HomeFundMe does not—it is simply a gift. George said the individual gifts will be small, in the $50 to $250 range. The platform can be linked to wedding and baby registries, according to CNBC.com.
As an incentive for encouraging prospective homeowners to attend credit education courses and counseling, CNBC reported borrowers can also receive grants of up to $2,500 once they've completed the free classes. After that, the platform will match donations at $2 for every $1 raised, up to $2,500.