• Prospective owner-occupied homebuyers who can't qualify for traditional financing may be able to tap real estate crowdfunder for alternative financing.
  • LendingHome might bring benefits of crowdfunding to consumers.

Prospective homebuyers who want to purchase homes to live in but can’t qualify for a traditional mortgage may soon be able to obtain a loan from a real estate crowdfunder.

LendingHome — which has raised over $550 million from institutional and individual investors to fund mortgages for developers — is in the process of expanding into funding mortgages for owner-occupant homebuyers.

“We’re here for the 10s of millions of creditworthy would-be homeowners who can’t get traditional financing,” reads LendingHome’s website.

LendingHome says it wants to fund mortgages for borrowers who often have difficulty qualifying for a traditional loans, including small business owners, independent contractors, entrepreneurs and service workers. It’s also seeking to meet the mortgage needs of people switching jobs, “on a tight timeframe,” repairing credit, building credit and people with high debt, among other demographics.

The firm says it’s currently testing its “non-qualified mortgage programs,” telling prospective customers to “stay tuned for general availability.”

“In the meantime, if a bank or traditional lender has failed to give you credit, we’d love to know “why not?”. Tell us your story,” reads its website. “We’ll try to build a custom tailored product for your needs.”

Crowdfunding to owner-occupant homebuyers

If LendingHome launches mortgage products of this kind, it might be the first company to bring the potential benefits of real estate crowdfunding to owner-occupant homebuyers.

Having raised $109.3 million to fund itself (not developers), LendingHome has found success funneling funds from institutional investors, including hedge funds, family offices or large financial services firms, to real estate developers, like certain types of home flippers, The Wall Street Journal has reported.

Real estate developers can apply for a loan from LendingHome on its website to potentially qualify for financing they might not be able to obtain from traditional lenders. LendingHome says it leverages technology, big data and streamlined operations to close a loan in as little as two weeks.

LendingHome taps both traditional and alternative data sources to estimate the value of a property and a borrower’s ability to repay a loan, “going well beyond a simple appraisal or FICO score, WSJ said.

For example, the startup can evaluate transactional data from a borrower’s bank statements using Intuit Connect to build a borrower profile, according to WSJ.

More recently, LendingHome has begun pooling money from non-institutional “accredited investors” to fund mortgages for developers, expanding into what is known as real estate crowdfunding (because it’s raising money from a “crowd” of investors).

Accredited investors who invest with LendingHome buy “fractional notes” backed by mortgages that yield upwards of 10 percent on average, according to LendingHome.

Other real estate crowdfunders, including RealtyShares and Realty Mogul, have branched out in the opposite direction as Lending Home, expanding from pooling money from accredited investors to also channeling funds from institutional investors. In other words, a group of real estate crowdfunders and LendingHome have expanded into each other’s wheelhouses, both now serving individual and institutional investors.

Now, LendingHome is seeking to offer the same service its provided to developers to consumers looking to buy homes to live in, rather than rent out or flip.

Email Teke Wiggin.

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