As the sun rises into the sky, the men cut and shape the timbers while the women prepare a meal. By twilight, a family has a new barn.
The Amish and Mennonite tradition of barn-raising traces back to 18th-century rural America.
Several hundred years later, a community of one’s family, friends and coworkers assemble with credit cards and checkbooks in-hand to contribute to a starter pot for a new home.
Actually, this all takes place on a secure web browser after solicitations have gone out on social media, linking interested donors back to a campaign page on one of several down payment gifting platforms.
This fairly-new opportunity just might be the 21st-century variety of barn-raising, except that it benefits homebuyer-hopefuls and mortgage professionals alike.
Who’s Doing It?
In 2018 the pioneering CMG Mortgage rolled out HomeFundMe. The name was quickly changed to HomeFundit to avoid confusion with popular crowdfunding platform GoFundMe.
At that time the housing market was just glimpsing the rise in prices and interest rates that is today’s stark reality. Nowadays first-time homebuyers are having an increasingly tougher time saving for a down payment, just to see prices inch up yet again.
It takes prospective buyers three or four years on average to save a down payment, according to the National Association of Realtors. Meanwhile, those who do have a generous donor or two in mind (mom and dad, please?) typically don’t get around to telling their lender until the end of the loan process. Then they need to scramble to get letters from donors indicating that their donation was a gift that doesn’t have to be repaid and sometimes even bank statements to show when the donations were made.
“There was no great mechanism for collecting those down payment gifts; it was paper-based and very inconvenient,” CMG Director of Affordable Finance and Fair Lending Doug Nesbit says. “And so we concluded that there needs to be a better way of putting together a down payment and bringing in all these people who might want to help. Let’s make the gift letters electronic, let people donate with a debit or credit card and stop this paper-based, friction-filled system that happens too late. That’s where HomeFundit really shines. That’s why we built it.”
How does it work?
Borrowers can set up a campaign link, tell everyone they have a lifetime ticket to all backyard barbecues with one small donation and wait for the money to add up. Meanwhile, talk over living preferences and the homebuying process with a real estate agent and CMG-affiliated loan officer.
“When you graduate from college or get married, you send out an announcement to people who love you and they send money and gifts,” Nesbit says. “There is this group of people who know you, love you, and want to support you and be there for those milestones and that’s who we see helping in a HomeFundit campaign.”
“This really allows us to engage with people who are not ready and help them get ready faster. That’s where the rubber meets the road for LOs and real estate agents.”
Doug Nesbit, Director of Affordable Finance and Fair Lending, CMG
Many campaigners put their QR code on wedding and graduation announcements next to or as an alternative to a link to a traditional gift registry.
HomeFundit is free to users and there are no taxes and fees. The lender matches gifts two-to-one up to a total of $2,000 or 1% of the closing cost. UpIt, the platform’s online shopping donation funnel, partners with over 1,000 online retailers. Donors can also use this and a portion of their purchases will be rebated to the down payment fund. Additionally, people get $10 towards their $2,000 lender grant each time they share their campaign on social media.
There’s no limit to the fundraising total, just a $5,000 limit per donor.
“A well-shared, good-looking campaign will raise $5,000 to $15,000,” Nesbit says. “We routinely see campaigns reach the $40,000 to $50,000 mark.”
The platform is available to move-up buyers as well, but they don’t benefit from the lender grant.
In terms of the gift letters, individual donors who give more than $500 electronically sign a statement indicating their contribution is a gift and not a loan.
The platform’s original 12-month deadline for campaigns is long gone, so users have as much time as they need to keep campaigns running before they get to closing on a home.
“It’s perfect for people who are doing long-range planning and it allows loan officers and real estate agents to work with buyers who are further out,” Nesbit explains. “As we moved into this market where home prices are staying firm and rates have gone up, people are planning further and further out on real estate purchases; the average length of a campaign has grown steadily. It’s around five or six months now. We also routinely see campaigns finishing up that are a year-and-a-half old or longer in some cases.”
What’s In It For LOs?
“This is a game-changer for loan officers and real estate agents because it allows you to engage at this super early stage when people are still getting their act together, dreaming of buying a house,” Nesbit says. “The huge thing we’ve realized the last few years on HomeFundit is the difference between prospective and current homebuyers. We’ve tended to lump them all together as buyers but there’s a big difference. This really allows us to engage with people who are not ready and help them get ready faster. That’s where the rubber meets the road for LOs and real estate agents.”
Agents can set up their own HomeFundit portals, offering buyers the chance to launch a campaign. About 4,000 agent portals are buzzing around the internet.
“Many times a buyer starts at the real estate agent end; many times they start at the LO end,” Nesbit says. “Either way we can deploy HomeFundit to a buyer through those channels.”
More than 95% of campaigns that begin raising funds reach completion, meaning they get to the point where the individual is headed to closing.
“It’s a significant chunk of our first-time buyer business,” Nesbit says, adding, “We see downstream business coming in like crazy for folks that have larger campaigns. More donors means more points of referral for an LO, as all those donors have their own networks.”
That long list of elderly borrowers who bought their home decades ago? The “call me when your kids are ready to buy” promise can get lost in time.
“One of the great ways to monetize a client list is to let your older clients who have dependents hoping to buy a home someday know about this program,” Nesbit says. “Tell them, ‘we’ve got this great new tool that can help your kids buy real estate sooner.’ It’s a way for you to take an older client who’s non-monetizable and reach the next generation of buyers.”
He prefers not to call it crowdfunding.
“I like to say this is the first and only online, down payment gifting platform,” Nesbit says.
But it’s not the only one — not anymore.
Downpayment.gift was launched in 2020 by Loren Winzeler, former loan officer and branch manager of Frost Mortgage in Santa Rosa, Calif. This site invites any MLOs to partner with the downpayment registry software (free trial, then fee-based) to get connected with campaigns and close more purchase loans.
Feather the Nest and HoneyFund are similar platforms. The latter started as a donation platform for honeymoons but has since expanded.
GoFundMe, still the most widely-used crowdfunding platform, also has users that are fundraising for down payments.
Down payment crowdfunding has earned the stamp of approval by real estate agents and others in the homebuying industry.
On its YouTube Channel, eXp Realty’s Myrtle Beach-based Hereda Team’s Tiffany Hereda encouraged borrower-hopefuls to consider the benefits of crowdfunding down payments.
“You don’t have to meet any income requirements to qualify; you can purchase any home in any location; you don’t have a requirement of how long you have to live in your home after closing … basically you don’t have any of those restrictions that can come along with the traditional down payment assistance programs that are out there,” Hereda said.
Mike Grumbles, who owns Gray Fox Realty in Franklin, Tenn., helped his daughter start a HomefundIt campaign before she graduated from college and started her new job in a new city. “Instead of getting a gift that depreciates, it’s way better to get a gift that’s going to help me purchase something that will appreciate,” the elder Grumbles said. “Home prices will outpace your ability to save and buy a house in this market. The more people we can get into homes that they’re owning and out of rentals the better the US economy is going to be as a whole.”
It Takes A Village
Maybe they’re not digging a foundation and raising beams, but a community does indeed surround each and every person who achieves their home sweet home through online down payment gifting.
“People are always surprised how many people helped,” Nesbit says. “When we talk to folks after a campaign they will say, ‘it’s not so much how much I raised from each person, but it’s the fact that I had support from those people, they were with me for the process.’ This is a fantastic way for a whole family and friends to help young people get ready to buy a home sooner.”
This article was originally published in the NMP Magazine October 2023 issue.