It’s been established that, for millennial would-be homeowners, the biggest hurdle to owning their own homes is a lack of down payment. Plenty of young buyers could afford a monthly mortgage payment, but can’t manage to save the large chunk of change needed to secure a house purchase.

In this age of social media, it’s said that ones’ online presence is a form of net worth. That’s the thought process that has some (mostly young) buyers using crowdfunding to try and raise that magical 20% (or lower, depending on what loan type they utilize). 

Crowdfunding Home Downpayment Trends

What is crowdfunding? Well, you’ve undoubtedly heard of Kickstarter, GoFundMe or similar websites for young entrepreneurs, people with emergency bills, or any other need requiring a major transfusion of cash. Through the use of social media, the crowdfunding individual spreads the word, and friends (and friends of friends) can chip in whatever amount they want to towards the goal, which normally has a time limit. In the best-case scenario, the campaign goes viral and the project, family, or business gets piles more money than they asked for. In the worst case scenario, hardly anybody contributes and the campaign is viewed negatively as begging for undeserved money. 

Best Options for Funding Your Home Downpayment

People trying to crowdfund a down payment have a few options. Here’s how one company works, from Realtor.com: “Using HomeFundMe, anyone can give up to $7,500 to a campaign without documentation. HomeFundMe also doesn't charge fees to use the platform, or take a cut of what's raised. The company will even give buyers $2 for every $1 they raise, up to $1,000, or up to 1% of the purchase price if they undergo home buyer counseling beforehand. Buyers who earn less than their area's median income can earn up to $2,500, or 1% of the home price.

So what's the catch? Crowdfunders must get their mortgage through HomeFundMe's parent company, CMG Financial. They have to close on a home within a year of accepting their first gift. And if they don't use the money to buy a home, funds marked "conditional on the recipient purchasing a home" are returned to the donor. The crowdfunder can keep the rest.”

There are various legal hurdles to crowdfunding a down payment, but the pros say that the biggest risk with this type of venture is that buyers who can’t save for a down payment are future homeowners who don’t know how to save, period. These owners are at the greatest risk for foreclosure or crippling credit card debt in the future if they cannot change their habits.