In recent years, crowdfunding has become a popular way to pay for a remarkably wide range of ventures. Want to back a sliced-ketchup product, a self-serve cocktail machine, or maybe a charity race? Just pull out your smartphone. But more recently the technology has been moving a bit closer to home—right up, in fact, to your doorstep. Crowdfunding is becoming an increasingly popular way for aspiring home buyers to tap into their networks to come up with down payments.
A new wave of crowdfunding platforms, like Kickstarter for real estate, could be a game changer for younger, tech-savvy generations of home buyers saddled with student loan debt. 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.
“The No. 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. “Crowdsourcing is an interesting new way that a person can generate a down payment, one made possible by technology. … We think there is a great future for it.”
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. These pages can be shared with family and friends.
“[Many] people find they can afford [mortgage] payments, but not the down payment to own a home,” says Christopher George, CEO of CMG Financial, a San Ramon, CA–based mortgage banking firm that launched HomeFundMe late last year.
George, a father of four millennial sons, came up with the idea for HomeFundMe in 2016 after seeing the financial struggles of his kids’ generation. The crowdfunding platform is the only one of the bunch designed solely for down payments and is the first to be backed by mortgage industry giants Fannie Mae and Freddie Mac.
“We’re talking to millennials saying their social…