As the level of hopelessness rises for many millennials dreaming of purchasing their first home, startups are popping up left and right to help aid their goals. We recently featured Loftium, a startup that helps you pay for a home if you agree to Airbnb out a room. The latest big idea is HomeFundMe, a crowdfunding site that helps you save for the down payment on a home in the United States. The site was launched by CMG Financial, a privately held mortgage-banking firm.
"HomeFundMe users are incentivized to complete homebuyer education or housing counseling in exchange for a grant opportunity ranging from $1,000 to $2,500," according to CMG Financial. "The counseling fee is covered, and once completed, HomeFundMe will match donations at two dollars for every dollar raised up to the qualified grant limits. There is no fee to crowdfund — 100 percent of the funds raised go to the recipient."
But why would CMG Financial invest in such a site?
"Folks that go to counseling tend to be more informed, and they also tend to be better borrowers," said Christopher George, CEO of CMG Financial, to CNBC. "We've looked at this as advertising dollars and have said, listen we think this promotes homeownership, we think it's something that we would otherwise spend either through the internet or through social media. We've put our money here where we think it has its best use."
Basically, you create your own fundraising campaign and have a year to get it funded through friends, family, and strangers. The timeline starts once you've received your first gift. You'll be assigned a fundraising coach to help you with campaign strategies and to walk you through the home buying process as well. The funds from your campaign will be deposited into an escrow holding account with the merchant's bank, and will be held there until you purchase a home or cancel the campaign.
But what happens if you haven't raised enough money in 12 months? Your fundraising coach will conduct an assessment to determine if your home goal is still attainable. In some cases, an extension will be applied to your campaign. If the goal is not attainable, non-conditional funds will be disbursed to you and conditional funds will be returned to the contributor. What does this mean? Campaign contributors have the option to submit conditional or non-conditional gifts. Non-conditional gifts will go to you even if you don't buy a home and conditional gifts will be returned to the contributor.
Only time will tell if these down payment help startups are the answer to homeownership. In the meantime, best of luck from us.