Need money for a down payment on a house? There’s an app for that.

HomeFundIt combines crowdfunding and a new cash-back shopping
program to help you raise money for a down payment

Saving for a down payment is one of the biggest impediments to
homeownership, and while some lenders will extend a mortgage with a
down payment as low as three percent, many low-income renters
simply don’t have the means to come up with thousands of dollars
to put down on a mortgage.

But mortgage lender CMG Financial has a division called HomeFundIt that’s tasked with
coming up with creative ways to allow people to save. A year ago,
the program, then called HomeFundMe, launched as a crowdfunding
platform that lets prospective homeowners’ friends and family
pave the way to their American Dream by contributing to a down
payment fund.

This week, HomeFundIt launched
UpIt,
a cash-back program that puts a percentage of your
shopping bill with qualified retailers in an account that can later
be used on a down payment for a house. Anyone can set up a fund and
anyone can contribute so long as they shop through the platform,
and the fund can stay active for as long as it takes to raise
enough money.

“You’ve got somebody who’s really trying to become a
homeowner in a low income area, but it’s likely their [personal]
network is in a low income area, too,” said HomeFundIt’s Paul
Akinmade. “So how do you reach that person? What other mechanisms
out there exist that through creative engineering we could apply to
this space and help a lot of people? That’s how we came up with
the shopping component. Every demographic shops.”

Akinmade says HomeFundIt’s crowdfunding platform has helped
about 500 families raise $1.5 million funds for down payments, with
an average down payment of seven percent. The platform provides
free homeowner education services to ensure buyers know how to
manage their property and mortgage.

UpIt provides another layer of funding that can be mixed with
money from a crowdfunding effort, or be used as a standalone
source. UpIt is launching with dozens of name-brand retailers,
including Walgreens, Overstock.com, and Expedia. Depending on the
retailer, the percentage of a transaction that goes into the UpIt
fund can be as high as 10 percent. In addition to the web
platform—including iOS and Android apps—where users can shop,
the company plans to add a Google Chrome extension sometime in
2019.

As a measure to protect donors, funds collected from
crowdfunding are good only for a year, although Akinmade says the
company will work with the prospective buyer even if they don’t
have the total amount after a year. But the UpIt funds won’t have
an expiration date, which provides intriguing possibilities to
anyone who’s planning long term.

“If you have a kid, you essentially could set them up with a
home savings account,” Akinmade said. “By the time they’re
done with school and are ready to lay down roots, they’ll have
those funds readily available to become a homeowner.”

For prospective homebuyer, down payments are often a source of
stress—and confusion. According to
a 2017 survey from the Urban Institute,
53 percent of renters
said a down payment was the primary reason they were not
homeowners. But the same survey showed that renters didn’t have
an accurate understand of how much a down payment really is. Only
12 percent of renters believed you could buy a house with a down
payment of five percent or less. Almost 40 percent of renters
believe you need more than 20 percent for a down payment.

A mortgage that’s sold to Fannie Mae and Freddie Mac—which
make up about 95 percent of all mortgages—can have a down payment
as low as three percent. A mortgage through FHA has a floor of 3.5
percent, while a VA mortgage can be 100 percent financed.

Source: FS – All – Architecture 10
Need money for a down payment on a house? There’s an app for that.