For many would-be homeowners, getting a mortgage is less of a concern than building up adequate savings for a down payment. Especially in high-rent areas like Seattle, those with lucrative careers could struggle to save money while renting. The expenses associated with renting, combined with the need for a down payment, has left many millennials and young professionals feeling like they can’t become homeowners.
Thankfully, the way that banks approach mortgages and down payments is slowly changing to reflect the realities of the modern American economy. In the meantime, however, would-be borrowers and home buyers need help to secure financing. Companies like the startup Loftium realized that this need represents a business opportunity. Now, young professionals and first time homeowners have another option available.
Loftium Helps Those Who Can’t Save Enough While Renting
The mortgage industry standard for down payments on owner-occupied homes has always been 20 percent. Those who don’t have 20 percent often have to pay massive monthly premiums for private mortgage insurance. When you combine the need to save up one-fifth of the home’s price with Seattle’s average home prices you have a dire situation. After all, that could mean saving up $100,000 or even more, depending on the price and location of the home.
Some mortgage programs, like VA loans or FHA loans, may accept lower down payments or even no down payment. Even so, mortgage insurance could make monthly payments too high for buyers. Lower down payments are increasingly common these days. Loftium is helping help home buyers secure a property without having to save even 5 percent of the purchase price.
How Loftium Helps You Buy a Home without a Second Loan
Loftium partnered with Umpqua Bank and Airbnb to create an alternative option for would-be home buyers. Buyers can purchase a home with an agreement to set up at least one bedroom as an Airbnb rental, allowing for passive income. You only need 1 percent of the purchase price in your own funds to work with Loftium to buy a house in the Seattle area.
Loftium will even manage your Airbnb contracts and account for you. Once you start hosting, you earn a share of the profits. Once you’ve completed the terms of your agreement and repayment for the down payment, which typically takes between 12 and 36 months, you will own your home (minus your mortgage balance). Additionally, you’ll already have an established income stream through Airbnb.
Buyers submit mortgage applications to one of the lenders that works with Loftium. Once you are pre-approved, you can begin the process of shopping for a house. With as hot as the Seattle real estate market has been over the last year, this process can often require patience and diligence. Based on the offer you will make on the home, you will receive a quote for the down payment. Loftium can provide as much as $50,000 toward the purchase of a home.
Loftium Offers Additional Benefits to Buyers
One of the best things about working with Loftium is the potential for ongoing, passive income after you complete your contract. While there is certainly a learning curve to working as an Airbnb host, you can choose your own terms. You don’t have to make breakfast or provide any over-the-top amenities. Instead, you just need to focus on providing a safe, clean and accessible room for your guests. A little bit of extra work could amount to hundreds of extra dollars in income every month, once your profit-sharing term with Loftium is over.
You also won’t have to worry about repaying the sometimes-exorbitant fees and costs associated with a private down payment loan.