No Savings? No Problem. These Companies Are Helping Home Buyers With Down Payments
Many home buyers find it hard to come up with a 20 percent down payment but there are options such as crowdfunding if you have less than that—or even nothing.
While most mortgages require some kind of down payment, 20 percent is far from standard.
Black homeownership has dropped to its lowest level since at least 1970, and myths surrounding down payments are not helping. These myths deter some borrowers from homeownership. A National Association of Realtors Aspiring Home Buyers Profile showed that 22 percent of non-homeowners believed they needed at least 10-to-14 percent down to buy a home. Many believed they needed 20 percent or more.
The high cost of real estate and rising consumer debt make it difficult for first-time buyers to save money for a home. Nearly 40 percent of renters age 25 to 34 said they are not saving anything for a down payment, according to a survey by rental-listing company Apartment List, Wall Street Journal reported.
At least a third of Americans have FICO scores below 670. Silicon Valley-based credit-scoring company FICO measures consumer credit risk and has become a fixture of U.S. consumer lending. FICO scores range from 300 to 850. Credit scores between 580 and 669 are fair, while scores below 579 are considered poor, according to credit bureau Experian. Even the average credit score 675 is too low to qualify for the best rates on conventional mortgages, Bankrate.com reported.
Here are some companies helping with down payments if you have good credit and good income but little or no savings:
HomeFundIt: Formerly known as HomeFundMe, HomeFundIt was launched in October 2017 by lender CMG Financial. Users are prequalified for mortgage financing, then build out a unique campaign page with photos, video, and text updates. Friends and family can contribute online. The campaign page can be used as an alternative wedding registry and shared on wedding invitations or a wedding website.
Unison Agreement Corp. offers “shared equity” or co-investment contracts that let buyers get money for their down payments in exchange for promising part of the home’s future value to investors such as pension funds or foundations. Unison says it has invested in $3.5 billion worth of homes. Formerly known as FirstREX, Unison is a 14-year-old San Francisco company and one several that is helping buyers afford homes. Homes are becoming increasingly expensive now that the market has recovered from the housing bust and subprime mortgage crisis of the Great Recession.
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Nothing down if your parents pledge investment assets as collateral: Some banks including Bank of America Corp. and Morgan Stanley have programs that let young adults get a mortgage with nothing down if their parents pledge investment assets as collateral, Wall Street Journal reported.
FHA, Fannie and Freddie Mac: Borrowers have been able to take out mortgages with small down payments as low as 3.5 percent through the FHA (Federal Housing Administration). Fannie and Freddie Mac back loans with down payments as low as 3 percent, but there are high monthly costs associated with these loans including mortgage insurance. Initially, most of the payments can go to interest, not principal.
Nerdwallet listed its picks for 10 Best Lenders for Low- and No-Down-Payment Mortgages in 2019.