New start-up changes rent-to-own game, opens door to homeownership for millions

Aly J. Yale
The Mortgage Reports contributor

Renting to own your dream home

Just because your credit score is low, you’ve got lots of debt or your income is less than predictable doesn’t mean homeownership is out of reach just yet. In fact, thanks to a new real estate start-up called Divvy, you could own the home of your dreams in just three years.

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Reinventing rent-to-own

A new spin on the rent-to-own set-up, Divvy allows potential home buyers to move into their dream home early – long before they’re in the financial place to afford it all on their own.

Rent-to-own homes: Move in now, buy later

Here’s how it works: the buyer picks out any home on the market, and Divvy purchases it outright. The buyer pays 2 percent down, and on a monthly basis, makes a payment that goes toward both rent and equity in the home. The goal is for the buyer to have 10 percent equity in the property in three years.

After three years is up, the buyer has the option to buy the home and take out a mortgage on the rest of the balance. They can use their existing equity in the property as a down payment.

According to Raymond Tonsing, founder of Divvy investor Caffeinated Capital, the new start-up should help solve America’s growing affordability issue.

“Housing affordability is a massive problem,” Tonsing said. “We’re excited about bringing a tech-enabled solution to market to help more young buyers bridge the gap between renting and owning. Divvy provides a more flexible homeownership option.”

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The benefits of tech

But Divvy doesn’t just ease the process of buying for many cash-strapped Americans. It also streamlines the typically burdensome mortgage process by leveraging technology from start to finish.

Lenders may never again ask you for pay stubs, W-2s, or bank statements

According to Divvy investor and Paypal co-founder Max Levchin, this use of tech could even improve pricing for Divvy’s buyers.

“Real estate is an industry plagued by manual processes,” Levchin said. “The technology Divvy is building around application processing, underwriting, and managing these homes will allow Divvy to scale operations and provide better pricing to consumers compared to traditional institutions.”

Divvy is currently operating in Cleveland and Atlanta and helps about 200 buyers every week.

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Verify your new rate (Mar 24th, 2019)