This App Lets You Crowdfund Your Way to a Down Payment on a Home
When Alexy Diaz got the call last December that the townhome he rented had gone up in flames, he thought there must have been a mistake.
With their 10-year-old son, Julian, in the house, he and his partner, Yoana Anoceto, were particularly cautious. They never even left the house with their Christmas tree plugged in.
But it was true. Firefighters said something sparked a flame in the outdoor air-conditioning unit and set their Tampa, Florida, home ablaze.
Diaz remembers Anoceto looking around the scorched townhouse and collapsing in a fit of tears.
It was only days before Christmas, and they lost everything — gifts for Julian and each other; brand-new living room and bedroom sets from Kane’s Furniture store that they were still making payments on; the TV, PlayStation and other electronics.
What survived the flames was damaged by water or soot, and no amount of washing could get the smell of smoke out of the few articles of clothing they could salvage.
“It’s hard,” Diaz said. “It’s hard to sit there, and the news is there filming you, and I see my face on [TV], and it’s like all the stuff that you worked for just went up in smoke.”
Along with all their possessions, their dream of homeownership was gone, too. With no renters insurance, they could barely afford new furniture, much less a down payment on a new house.
All the time they had spent saving money and slowly raising their credit scores to qualify for a home seemed wasted. At least that’s what they thought before a family friend told them about a new service called HomeFundMe, a crowdfunding platform owned by mortgage banking firm CMG Financial.
HomeFundMe works similarly to other crowdfunding websites like YouCaring and GoFundMe, but it specializes in putting the donation money toward buying a home.
Current law says only three sources can donate money to help you buy a home: close relatives, your employer or a nonprofit organization, said Paul Akinmade, chief marketing officer for HomeFundMe. And if you have someone willing to gift money for a down payment, the amount of personal information and financial paperwork required can be invasive and prohibitive.
With HomeFundMe, if someone gives less than $500, no documentation is needed.
For donations between $500 and $7,500, HomeFundMe automates the paperwork: The giver can electronically sign a gift letter, making it possible for more people to give more.
“If you wanted to buy a home and a stranger wanted to help you out, you couldn’t use those funds to buy a house today,” Akinmade said. But with HomeFundMe, “a stranger who sees your story can give. A cousin can give, a distant friend, somebody you went to high school with — any one of those people can now give.”
The only person who can’t give is the seller.
The company even allows donors to specify that the money they give is only for homebuying. If you don’t buy a house, they automatically get their money back.
People who use HomeFundMe must prequalify for a loan through CMG Financial and have to take a class about responsible homeownership to make sure they are ready for the purchase.
After that, all you have to do is set up a page and start sharing your link. HomeFundMe also has an income-based donation-matching program for those in need, and there are no transaction fees. Every dime you raise is yours to keep.
“Because we’re a mortgage company, we consider this a marketing expense for us,” Akinmade said. “So we waive the transaction fee… If you’re giving $100, the campaigner gets $100.”
Since launching in September 2017, HomeFundMe has helped 60 families raise more than $1 million for their down payments.
As with any kind of crowdfunding campaign, how much you raise depends on your network and your story.
The most successful campaigns usually follow a personal celebration like a wedding, or a tragedy like the fire Diaz and his family experienced.
When Diaz put their story up and started to share it, the money started to pour in a few dollars to a few hundred dollars at a time.
First it was from close friends and family. Then men Diaz played baseball with as a child and hadn’t seen since he was a boy. Then, the strangers started to donate, too.
Through their campaign, winnings from a CMG Financial contest and a HomeFundMe donation-matching grant, their total jumped to $5,181 for their down payment in just a few weeks. After that, the couple was able to raise another $2,340 through Facebook.
“I even saw some [messages] from Puerto Rico,” he said. “Those people went through a lot, and they are hoping everything goes good for me. I was touched by that.”
And the donations didn’t stop there.
Friends and strangers donated clothes and new beds. Even the former owners of their new home wanted to do their part: They left a dining room table to make sure Diaz and his family would have a place to eat dinner together.
Their new home is modest, but Diaz said his family loves it.
“It’s in a great location,” Diaz said. “We’ve got a nice front yard. It’s not huge, but it’s everything. It’s a beautiful house.”
Now that the fire is behind them and their family is back on their feet, Diaz and Anoceto are slowly furnishing the house. Every few weeks, they buy something else the home needs and continue to plan for the future.
“On TV, I told Fox 13 news that I was going to get a new home and by Christmas I was going to have lights up, and it’s going to happen… I’m going to keep my promise,” he said. “Now I know from here on out, if I can help out somebody, I’m going to pay it forward.”
Desiree Stennett (@desi_stennett) is a senior writer at The Penny Hoarder. She writes about how government and court actions impact your wallet.