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Should Buyers Crowdfund Their Way Into Homeownership?

It's an idea that is gaining traction, with sites such as HomeFundMe and Feather the Nest, which helps folks raise money for down payments and repairs, and online registries such as HoneyFund, which includes the option of gifting a down payment contribution. 1 challenge that we hear from millennials in terms of their ability to buy a home is the down payment," says Jonathan Lawless, vice president of customer solutions for Fannie Mae. Users who are typically pre-qualified for a mortgage can create personal pages on these platforms, on which they can talk about their journey toward homeownership, illustrated with photos and maybe video. What you need to know about a crowdfunded down payment Using gifted funds for a down payment can be tricky—mortgage lenders typically require a letter from the giver, specifying that the money is a gift, not a loan, and there are no strings attached. HomeFundMe also doesn't charge fees to use the platform, or take a cut of what's raised. The company will even give buyers $2 for every $1 they raise, up to $1,000, or up to 1% of the purchase price if they undergo home buyer counseling beforehand. Crowdfunders must get their mortgage through HomeFundMe's parent company, CMG Financial. The dangers of crowdfunding your down payment However, there are risks to buyers relying on crowdfunding to come up with money for a home. "If somebody is not able to save for their own down payment, it might be because they are stretched financially. So helping more people who haven't mastered the art of saving, or who may be so financially stretched that they can't afford to save, is worrisome.