27 million American households priced out of homeownership in 2022 -
what can help potential homebuyers in the current state of affairs?
LendingTree declared last week that “a down payment on a home across the nation’s 50 largest metros averages $62,611. For comparison, that amount is 35.3% higher than when LendingTree last published this study in September 2021, when the average down payment across the nation’s 50 largest metros was $46,283.”
A 35% increase YoY in down payment cannot be taken lightly. It affects the majority of potential homebuyers across the country, and provides another cause (among many) to the declining number of new mortgages in the US in the past year. This happens not only because real estate prices have gone up, but also because the terms for a loan have become more rigid. As such, the negative effect on affordability is doubled.
Is buying a home becoming a privilege affordable only by high income buyers while all others are forced to rent? In the current terms with the current offerings - most people would say yes. But if potential borrowers get an alternative that suits their needs as well as their capabilities, that answer can change. At Contigo Capital we believe there is another way to make homeownership more affordable for more people.
While there are ways to reduce the down payment and not be obliged to put down 20% of the home price, the financial products that offer that are priced accordingly. Be it the cost of the Private Mortgage Insurance when taking an extra 10% LTV, or private financing such as equity loans, these products increase the cost of the loan for homebuyers. Also, in both of the above mentioned products, when house prices depreciate, homebuyers don’t have the 1st lien (and sometimes not even the 2nd lien), which means every little bit of equity they had can suddenly vaporize.
Contigo Capital’s products aim to reduce the down payment (as well as the monthly payment), in exchange for a portion of the future value of the property. Our innovative financial infrastructure offers a variety of home-loan products thanks to its proprietary technology. By shifting housing risk from homeowners to investors in exchange for favorable eligibility criteria and unparalleled affordability terms, Contigo Capital can provide a much needed solution in the current economic climate, and increase the number of potential homebuyers all over the country.