Even if you have a stellar credit history, in order to receive the lowest possible mortgage interest rate, you’ll need a sizable down payment. For conventional loans, that threshold is at least 20% cash down.
If you have access to that much cash without straining, you can avoid the need to pay for PMI (private mortgage insurance). You’ll also have the luxury of a lower mortgage payment. Shedding PMI alone can save you hundreds of dollars a month.
However, coming up with a 20% down payment can be a huge hurdle for many home buyers. In a fast-rising real estate market like Phoenix, it can also feel as if home prices are climbing quicker than you can save.
A company in San Francisco has developed a solution to bridge the gap. Unison’s program partners homebuyers with institutional investors to achieve a large down payment. These institutional investors (university endowments, pensions, insurance companies, and hedge funds) need a vehicle for safe and consistent returns. They are are sitting on billions in cash.
On the other end, homebuyers control a traditionally safe and resilient investment vehicle in U.S. residential real estate. Nevertheless, some buyers need the additional cash to avoid the less-glamorous side of mortgages; PMI, and higher interest rates.
It’s institutional investor cash for buyers interested in avoiding higher loan costs. It’s an ideal marriage.
In this fourth episode of The Arizona Report™ podcast, I bring Michael Micheletti into the Scottsdale studio. Michael is the Director of Corporate Communications for Unison. He maps out how the program works across all price ranges and many property types. Unison is available on $150,000 condos or $2,500,000 luxury homes.
Benefits of the Unison Homebuyer program for home buyers:
- Buyers receive increased purchasing power
- No monthly payment on the borrowed Unison funds
- No interest charged on the borrowed Unison funds
- Avoid PMI (private mortgage insurance) requirement
- Buyer retains original equity plus 65% of gains when the property is later sold
- 30-year timeline until repayment required
- Lowers your monthly mortgage payment by 15% or more
- Option to buy out the Unison agreement after 3 years
- Use in conjunction with conventional or jumbo loans
- Keep more of your cash in the bank
- No need to liquidate 401(k)s and stocks
- If home loses value, Unison and homeowner share the loss
Benefits of the Unison Homebuyer program for institutional investors:
- Long-term exposure to the U.S. housing market for institutional money
- Receives 35% of the profit (price gain, not the equity) when the seller decides to sell
- Diversifies assets geographically across U.S. housing market
This form of shared down payment partnering has been available for decades with commercial real estate. Unison began pioneering the concept in residential real estate in 2007 and began retail relationships with Phoenix mortgage lenders in 2016. The company has a footprint in 12 other states and plans to add at least 8 more states within the next calendar year.
It is important to note that Unison Homebuyer shared down payment program is applicable only to owner-occupied principal residences. The down payment participation funds are not available for second homes, vacation homes, or non-owner occupied investment properties.
Additionally, Unison has a partner network of Greater Phoenix mortgage companies from which buyers will need to source their home loan in order to participate in the Unison products. Local mortgage lenders include Guild Mortgage, RPM Mortgage, HomeStreet Bank, and Guaranteed Rate. To learn more about Unison Homebuyer, contact representatives at www.unison.com or contact a participating Phoenix lender directly.
This episode was recorded in Scottsdale, Arizona on Thursday, October 12, 2017. I received no incentive or compensation from Unison as a result of this podcast.
It all comes down to interest rates. As an investor, all you’re doing is putting up a lump-sump payment for a future cash flow. – Ray Dalio, American investor and founder of Bridgewater Associates, one of the largest hedge funds in the world