March 12, 2019

This company will help with a down payment, but it wants a stake in your new home

When Ricardo and Catherine Soto were looking to buy a home in Chula Vista, they knew that even after selling their old house in El Cajon they would be able to afford a down payment of only about 10%.


But when buying a home, 20% is the magic number. It means not only borrowing less but also avoiding mortgage insurance, which can cost hundreds of dollars a month.

Some cash-strapped home buyers might have opted to tap a relative or retirement savings, but the Sotos tried something new. When they bought their home for $650,000 in September, the couple came up with the 20% after all — thanks to an unusual arrangement with a newcomer to the mass mortgage market.


Unison, a 12-year-old San Francisco company, offered to match the $65,000 that the Sotos brought to the table in exchange for what amounts to an ownership stake in their house.


The Sotos don’t have to pay anything back — not for a while, at least. But when the couple sell their house they will owe Unison the $65,000 it invested, plus 35% of the value their home gains. Should the market suffer a setback, Unison will share in the loss.


The company, formerly called FirstREX, is one of a handful of firms developing novel financial products aimed at helping buyers afford increasingly expensive homes now that the market has recovered from last decade’s housing bust.


Read the full article here.