With the average first-time buyer putting down between 5% - 10% on a home purchase, gone are the days of the ideal 20% down payment. Until now. New industry-disrupting companies are popping up left and right, it was only a matter of time before some of them took on the homebuying process.
For homebuyers (first-time buyers especially) debt and well, life, can make it hard to save up for that magic number down payment of 20% where PMI disappears, interest rates lower, and monthly mortgage payments get smaller. Because of this, buyers are either having to borrow around 94% of the home price or, in a lot of cases, they’re just not buying at all.
Enter Loftium, Landed, and Unison. Let’s look at how these three startups are changing the way people do down payments.
Loftium saw an opportunity to not only help people own a home, but to also make a little extra income through another popular, innovative service –– Airbnb. To help aspiring homeowners, Loftium provides the down payment. There is no interest and no monthly payments (you heard me!), all the buyer needs to do in return is rent out one of their new bedrooms to Airbnb guests. Loftium and the buyer then split the Airbnb income over the next 12-36 months until Loftium is paid back in full. As if that isn’t cool enough, they even provide their home partners with all the tools and training they need to be a quality Airbnb host! Currently located in Seattle, they hope to expand to new cities soon.
Calling all teachers! This one’s for you. Landed’s long-term goal is to help essential professionals who want to own a home, starting with educators. Often, educators’ salaries aren’t enough to save up for a 20% down payment on a home – especially in expensive housing markets. This is where Landed steps in. Assuming you have some savings to put down, Landed will give you the rest as an investment , not a loan. Therefore, they are a partner in your homebuying process, not a lender. Landed is repaid when you sell your home and they get return on their part of the investment. Right now, they only offer their services to teachers, but hope to soon offer down payment assistance to other essential professionals like firemen, nurses, and police officers. Landed is currently in Colorado and California, but will be available soon in new cities.
Unison works similarly to Landed, except their services are not exclusive to essential professionals. They too act as an investor, a partner alongside your homebuying experience, investing money into your home and providing you with enough funds to meet that 20% down payment. There is no monthly payment for Unison’s services since it is not a loan, instead, they make their money back when you sell your home and their investment is returned, or if you decide to buy out their share of the investment. Unison’s goal is to bring together homeowners who need flexibility in financing their home purchase and investors who want to invest in the housing market. Unison is currently available in 23 states. Check here to see if they’re in your state!
My, how times are a’changing! All in all, I believe these companies represent an exciting future for homebuyers, agents, and the housing market in general. It should be noted, however, that using a down payment service like the ones listed above doesn’t negate any other part of the homebuying process. If you’re a homebuyer, you still need to work with an agent, get approved by a lender for your home loan, and make sure you are able to keep up with the monthly expenses that come with owning a home. Buy responsibly!