Through the COVID-19 pandemic, mortgage rates of interest dropped to historic lows — as little as 2.5%.
Quick-forward a number of years and charges soared — to highs nearing 8% in 2023, with the nationwide common 30-year fastened mortgage APR as of April 1 nonetheless at 6.84%.
The whiplash has left many individuals in search of to purchase houses shut out of the market.
However what if there was a technique to nonetheless get the rates of interest of years previous? With assumable mortgages, there is likely to be. An assumable mortgage is one the place an impressive mortgage is transferable to the customer.
Enter Roam, a New York-based startup with the mission of offering entry to “thousands” of houses with assumable mortgages throughout the nation.
CEO Raunaq Singh — who labored in product for 3 years at Opendoor — based Roam in September 2023. Roam helped facilitate $200 million price of house gross sales for “several hundred” patrons in 2024. And greater than 200,000 patrons have registered on its platform within the final 12 months. Whereas Singh didn’t disclose exhausting income figures, he informed TechCrunch that Roam costs every purchaser 1% of the acquisition worth. Doing the mathematics, 1% of $200 million interprets to Roam making $2 million in income in 2024.
Singh claims that assumable loans can save patrons as much as 50% on their month-to-month funds in comparison with purchases with present mortgage charges.
A vendor’s fairness have to be cashed out, Singh acknowledges, noting that Roam has constructed a product that makes it attainable “for buyers to bring as little as 5% down so they can get a 5% (or less) blended rate.”
For instance, he mentioned, for a house with a $420,000 gross sales worth, the place the vendor has a 2.25% price and $135,293 of fairness — the customer doesn’t have to convey the total quantity as a down fee.
“You can bring 20%, which is $84,000, and get gap financing for the remaining $51,000 to receive a blended rate of 3.45% to still save hundreds of thousands of dollars,” Singh mentioned. “As long as you qualify for an FHA or VA loan, you’ll qualify to assume a mortgage with Roam. If you can’t qualify for a home with Roam, it is unlikely you can buy a home at all.”
At present, the startup operates in 17 states, together with Arizona, California, Florida, Texas, and North Carolina. It has plans to be nationwide by 12 months’s finish and Singh expects that Roam will see $1 billion price of house gross sales facilitated by its platform in 2025.
It’d sound bold however Keith Rabois, managing director at Khosla Ventures, who led Roam’s new $11.5 million Sequence A financing, believes that the startup is the “future of the housing market.”
“There’s an affordable housing crisis in America, and Roam is the best-positioned company to address it,” Rabois informed TechCrunch.
The investor, who’s becoming a member of Roam’s board as a part of the Sequence A spherical, famous that he knew Singh and different members of Roam’s workforce from the founder’s time at publicly traded proptech firm Opendoor, which Rabois co-founded with Eric Wu in 2014. (Wu can also be an angel investor in Roam, and can also be becoming a member of its board as a part of the Sequence A.)
“Having worked with them previously, I was excited about their potential to mitigate the housing affordability crisis by reducing buyers’ monthly payments and bringing sellers with low-rate mortgages on the market,” Rabois mentioned. “While most companies that offer to help consumers save money help them to save a couple hundred dollars a year, Roam can save 30% of Americans more than $200,000 over the life of their loan.”
Additionally collaborating in Roam’s Sequence A is present backer Founders Fund. Notably, the spherical got here collectively one week after the startup began the increase course of, based on Singh.
“We had a pitch meeting on Monday, term sheet in hand on Tuesday, and had signed by Friday,” he informed TechCrunch completely.
Since its inception, Roam has raised a complete of about $16 million throughout three rounds. The newest spherical represents a tripling-down on Rabois’ half. In September of 2023, Roam raised $1.25 million in a pre-seed spherical led by Rabois when he was at Founders Fund. Wu, Culdesac CEO Ryan Johnson, and #ANGELS Founding Accomplice Jana Messerschmidt additionally participated within the spherical.
Then in Could of 2024, it raised a $3 million seed spherical — additionally led by Rabois, whereas nonetheless at Founders Fund. Different traders in that spherical included DoorDash founder Tony Xu, Figma founder Dylan Area, and Upstart founder Paul Gu. The startup shouldn’t be disclosing valuation.
The way it works
Traditionally, based on Singh, if patrons searched on Zillow for assumable mortgages in a metropolis like Houston, they’d doubtless discover little to no outcomes.
“Very few sellers or listing agents know they have an assumable mortgage, so they don’t think to advertise it,” he mentioned. With Roam, he claims patrons can discover greater than 2,000 assumable mortgages in Houston alone listed on the market at the moment.
And even when patrons had been conscious {that a} vendor had an assumable mortgage, getting approval for an assumption might take as much as 45 days, based on Singh.
“Fall-throughs for not being approved were extremely painful for the seller since they’d have to re-list the home, and this made listing agents skeptical of accepting assumable offers,” he mentioned. “With Roam, buyers can get a pre-approval before submitting an offer, which has dramatically increased the acceptance rate of offers made by Roam buyers.”
Singh additionally claims that Roam quickens the method of turning into a home-owner.
“Without Roam, it takes 180 days to close an assumable mortgage,” he mentioned. “With Roam, it’s 45 days.” And if Roam doesn’t shut in 45 days? It’ll pay a vendor’s mortgage till it does.
The corporate additionally works to make sure all sellers are launched from legal responsibility, and any subsequent funds the customer makes or doesn’t make won’t affect the vendor’s credit score.
Presently, Roam has 12 staff. Singh mentioned the startup has aimed to not develop headcount linearly — with workers growing about 2.5x year-over-year in comparison with income growing by about 5x 12 months over 12 months.
“We’ve found that the product allows revenue growth without linearly increasing variable costs,” he informed TechCrunch.
The chance is there, Singh believes.
“$1.4 trillion of fully assumable FHA/VA mortgages originated in 2020 and 2021,” he mentioned, citing paperwork from the Shopper Monetary Safety Bureau (CFPB). “One of three homes that were originated or re-financed during those low-rate years were eligible for the opportunity.”
