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Crowd funding ‘down’

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Asking for down payment cash gets easier

By Marilyn Kennedy Melia
CTW Features

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Cash. We all want it, especially aspiring homebuyers trying to come up with a down payment. Oddly, however, etiquette prevents us from asking for money outright. But in recent years, websites – wedding registries and “crowd-funding” sites – enable buyers to make their request at arm’s length.

Moreover, in late 2017, one lending company has rolled out a crowd-funding pilot program that eliminates the paperwork that’s routinely required by lenders whenever borrowers use gift money for a down payment.

The typical paperwork requires a letter from donors stating that they don’t expect any payback from the homebuyer. And, documentation that the gift-giver had the funds in his savings – and didn’t borrow the money – is required.

Wedding gift cash is “handled slightly differently,” said Neil Caron of Freedom Mortgage. Caron added that couples can expect to furnish their marriage certificate, wedding invitation and the deposit slips from the gifts.

Now, another site, HomeFundMe, received the blessing of Fannie Mae, the agency that oversees mortgage lending. Run by CMG Financial, a nationwide mortgage lender, the site lets borrowers collect down payment money, and when borrowers are ready to apply for their mortgage, typical gift-related paperwork is eliminated.

Like other crowd-funding sites, borrowers can plead their case as to why they want a home, and donors can be strangers, as well as friends or family who are alerted to the effort.

“In theory, if the story impacts enough people the entire purchase price could even be raised,” CMG Financial CEO Chris George said.

And, if borrowers also attend home buying education, CMG Financial may offer matching money on the gifts collected.

While HomeFundMe is a pilot, if loans made under this model are successful, meaning that borrowers don’t default on their mortgages, George believes more lenders will be rolling out similar programs.

© CTW Features

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