Gifting is Great. But Getting Paid Back is Better (Transmission #273)

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Is there a true Kiva of real estate? A platform helping average people fund home ownership, the same way Kiva empowered average people to invest in small business loans?

I’ve been thinking about this question since 2016.

The challenge most young people have is the down payment, not the monthly payment. The friends of mine who have bought homes have generally been helped heavily by family members. Those without family financial support, haven’t bought homes. If a platform existed to help fund the down payment component of the transaction, perhaps we’d see more people buy homes earlier in their lives.

Of course, home down payments in the United States are exponentially higher than in most places in the world. Despite interest rates at historic highs, the premise that monthly payments aren’t an issue if there is a sufficient down payment remains solid.

It’s my belief that regulations have been the roadblock. Those are slowly coming down. Freddie Mac’s HFA Advantage is a conventional mortgage available to housing finance agencies (HFAs) and approved lenders to advance homeownership opportunities for very low-, low- and moderate-income borrowers. And its Home Possible program allows down payment and closing cost funds to come from gifts and a variety of sources, as well as rental proceeds to be used as qualifying income for a mortgage.

Crowdfunding has gone mainstream over the past 15 years, and is even commonly used to afford other high-priced personal expenses like medical debt. Users have become acclimated to the “ask” from their friends and loved ones when times are tough. With the affordability crisis hitting would-be homeowners across the country, now is the time for crowdfunded down payments to become commonplace.

MODERNIZED TAKE ON CROWDFUNDING
The next step is to natively enable our communities to better our reach for the American Dream. The closest that currently exists is HomeFundIt, which is owned, designed, and operated by CMG Financial. It allows friends, family, or anyone else to “give gifts up to $5,000 each online with a debit or credit card”—all without taxes, fees, and offline paperwork. Users follow a pretty simple signup process and are then heavily incentivized—through affiliate online retailer networks offering a percentage of purchases back into the down payment kitty—to share their campaign page with their entire social network. The concept is available to everyone who uses the Home Possible program by Freddie Mac.