The Real Deal New York

Can’t afford a down payment? Don’t worry, banks and startups have a plan

Economists warn this could cause further supply strain
July 03, 2018 10:17AM

Bankers and family members lending money to a home for sale (Credit: Pixabay and iStock)

As renters struggle to set aside money each month, companies are coming up with others ways for them secure down payments on homes.

Nearly 40 percent of renters ages 25 to 34 don’t set aside any money each month for a down payment on a home, according to a survey last year by Apartment List. To help address this, startups and established lenders have found ways to provide these young prospective buyers with the funds necessary to secure a mortgage. For example, HomeFundMe, run by lender CMG Financial, allows prospective homebuyers to crowdfund down payments from family members and friends. Startup Loftium supplies up to $50,000 for a down payment if a buyer agrees to rent out one of the rooms in their new home through Airbnb and share the profits.

Other companies, including Unison Agreement Corp. and Landed Inc., offer “shared equity” contracts, which provide funds for down payments if the buyer promises part of the home’s future value to investors like pension funds or foundations, the Wall Street Journal reported. Even banks like Morgan Stanley and Bank of America provide programs that allow young buyers to get a mortgage with nothing down if their parents are willing to put up investment assets as collateral.

Some economists warn, however, that making it easier for buyers to rustle up a down payment compounds the problem of limited housing supply in an already fiercely competitive market. [WSJ] — Kathryn Brenzel