Millennials are buying their first homes with these alternative down payment options
The biggest hurdle to home ownership? The down payment. Coming up with tens or even hundreds of thousands of dollars to put down is tough for most but, especially, for the next generation hoping to hit the market.
That generation—suburban-minded millennials, often with a baby in town or en route, are trying to pull together the cash needed to head to the suburbs and find a place to call “home.” But, given the increased costs tied to city living plus record-high student loans means many don’t have the 10% to 20% many lenders require.
The solution, then? For many, it’s something decidedly millennial: an alternative down payment approach anchored in crowdfunding. CMG Financial’s HomeFundMe program, for example, helps would-be homeowners set up a custom crowdfunding page so they can quickly and easily solicit down payment support from family and friends.
Another option is newcomer—and another very millennial-inspired alternative down payment option—Loftium which gives buyers up to $50,000 for a new home. The only catch? They need to commit to renting at least one room via Airbnb, and split the revenues with Loftium.
Also on the rise is the concept of “shared equity” contracts. Unison Agreement Corp. and Landed Inc. offers prospective buyers a down payment, with an agreement that part of that property’s future net worth will be contributed to pension funds and other investor groups.
These alternative down payment options represent a major shift in a landscape dominated by traditional banks and lenders—and traditional paths to purchase that don’t necessarily work for today’s prospective buyers. Given these new entrants, there’s no telling how many millennials and otherwise shut-out buyers will be able to dive into homeownership and, with it, be better positioned to find the right suburb to call “home.”
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