Divvy homes offers customers the opportunity to purchase their home after three years. This allows buyers to qualify for a mortgage and build equity. This is a great option for people who have a hard time saving money or cannot afford to make a down payment.
Divvy homes charges buyers a monthly rent/home savings payment that builds up over the lease term. This is higher than renting or purchasing outright, but Divvy also covers maintenance costs.
Buying a home without a down payment
Divvy Homes leverages the rent-to-own model to help buyers get into a home without the large down payment typically required by mortgage lenders. The company buys a home, then leases it to the buyer for three years. During that time, the monthly rent payments include built-in savings for a future down payment on the home. Divvy also covers maintenance and repairs. Divvy hopes that the buyer will be able to qualify for a mortgage loan within three years, at which point they will have boosted their credit scores and earned equity in the home.
One drawback to this approach is the long-term commitment. Divvy’s buyers must enter into a three-year lease agreement, and can only terminate the contract early for a fee. This can be difficult if the market or life changes, and could damage the buyer’s credit score. The company also sets the home’s rent based on the fair market value of the neighborhood, which can lead to overpricing.
Getting pre-approved for a home loan
Divvy Homes is one of several new rent-to-own companies that are helping people get into their dream home. Their business model aims to make homeownership more accessible for individuals with credit challenges or minimal down payment savings. However, there are some concerns about these programs.
When a Divvy customer finds the house they want, the company will buy it and lease it to them for three years. During the lease period, the renter earns equity credits that are set aside for future use in a down payment. Divvy also pays for mortgage fees, closing costs, and taxes.
The company also uses a “soft” credit check, which does not affect the applicant’s credit score. In addition, Divvy only leases homes in cities where the company is licensed and operates. If the renter decides not to purchase the home at the end of the three-year lease, they can choose to walk away with their initial payments and built-in savings (minus a relisting fee). They can also terminate their lease early with 60 days notice.
Renting a home with a future down payment
Divvy is a home buying startup that allows its customers to lease a house, earn equity in the property through monthly payments and eventually purchase the house when they are ready. This process allows aspiring homeowners to get a feel for homeownership and build savings for a mortgage down payment at the same time.
During the lease term, Divvy covers maintenance costs and other expenses. It also helps its customers set aside money for a future down payment through an extra “home savings” fee included in each rent payment. At the end of the lease, buyers can buy the home for a pre-determined price or walk away with their savings, minus a 2% buyback fee.
Divvy only works with buyers who can prove that they can manage debt and raise their credit scores over time. The company carefully screens applicants and only accepts those who can make timely payments. It also requires a soft credit check, which does not affect your credit score.
Building home equity
Divvy helps people who want to own their own home but don’t qualify for financing. They use a rent-to-own model that allows a renter to choose their dream home, make a small down payment, move in, and start making monthly lease payments. Over the course of three years, they build equity in their home and prepare to qualify for mortgage eligibility.
The company checks a buyer’s credit score and debt-to-income ratio to ensure they can afford the property and pay their mortgage. They also verify income, and may run a “hard” credit report (which can lower the buyer’s credit score) to uncover information they might not know about.
During the rental period, a portion of each month’s lease payment is set aside into a home savings fund that will be used for the eventual purchase of the house. If they decide not to buy the home at the end of their lease, Divvy will repurchase it for an agreed-upon price that reflects projected future home price appreciation.