How Startups Are Shaking Up Home Financing

Buyers interested in a home purchase but intimidated by the choice between a) large down payments or b) mortgage insurance and expensive monthly payments now have a third option of taking on a startup as a financial partner. Startups such as Unison will help front money to buyers so they can make larger down payments, and when the homeowner sells, the company recoups its investment. Although homeowners will ultimately share the sale with the startup, this process helps them avoid the mortgage insurance and higher interest rates that come along with not being able to pump in more for the initial costs. 

When Damien Vrana and his wife, who wed last year, began looking for a house in New Jersey, their lender suggested a rather novel approach to financing. For the down payment, they could co-invest with Unison, a San Francisco-based real estate company.  

Vrana, who owns a small business that rehabs and readies homes for sale, liked the idea.  

“As much money as I can reinvest back into my own business as opposed to tying it all up in a large down payment on a house just made a lot of sense to me,” he says.  

For the three-bedroom, two-bathroom split-level abode, which cost about $500,000, Vrana put down 12%. Unison supplied 18%, bringing the down payment to 30%, above the usual benchmark of 20%. Most clients, though, halve a 20% down payment with Unison, says CEO Thomas Sponholtz.

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