Divvy Homes, as its name implies, is making homeownership easier for some buyers by helping them save for a down payment and helping renters become qualified buyers within 3 years through their approach to rent-to-own homes also known as lease purchase agreements.
How Does Divvy Homes’ Rent-to-Own Program Work
The rent-to-own process with Divvy Homes is quite simple and fully disclosed.
- The customer applies through their website. Divvy then approves the customer for a set limit on their purchase price and rent.
- The client shops for a home and makes a cash offer on a home with their real estate agent on the home that they want to buy.
- Divvy charges a fee of 2% to 3% of the purchase price of the home. This money goes directly towards savings for the home’s future purchase.
- The renter makes above-market-rate payments. The rent is around 25% more than the comparable market rent. That 25% goes towards a savings account that can be used by the renter towards their down payment when they decide to buy the home from Divvy at the end.
- If the customer decides not to buy the home back from Divvy, Divvy will charge a relisting fee of 1.5%. This fee is deducted from the savings account.
What is the Catch? How Does Divvy Homes Make Money
Divvy makes money from the monthly rent that they charge. The monthly rent that they charge includes all the expenses involved in owning a home (mortgage, taxes, insurance, and other fees).
When Divvy rents that home, they are charging you a fee to cover all of their expenses, plus they are charging you an additional 25% that goes towards your savings escrow account. This money can be used by the renter in the future towards their down payment or can be used to buy another property if you decide not to exercise your option to purchase.
If you decide not to purchase the home from Divvy when your purchase option matures, Divvy may end up charging you a “relisting fee” if you choose not to exercise your option to purchase the home at the set future price of the home.
What is the Credit Score Limit for Divvy Homes?
The minimum credit score to qualify through Divvy’s rent-to-own program is 550.
Which Homes Are Eligible for Divvy?
Divvy does not have a limit as to when homes were built. Generally, they would prefer that homes are newer or in good condition. That means that the home will not need expensive repairs.
Type of Homes:
- Single-family homes or Townhomes
- Condos are not eligible
- For the Metro Atlanta market, Divvy limits homes to between $130K to $500K.
Size of Lot
- The lot cannot be larger than 2 acres.
Home Condition Limit
- HVAC less than 15 years old.
- Water heater less than 10 years old
- Roof that is less than 15 years and in good condition
- Divvy does not finance properties that are in distress or close to being distressed.
- Divvy does not purchase foreclosures, pre-foreclosures, short sales, bank-owned, county-owned, or Fannie/Freddie-owned properties.
Who is responsible for Repairs During the Lease?
Divvy does not cover cosmetic issues with a property such as peeling or fading paint and dings in drywall.
They are primarily concerned about issues that may affect the safe habitation of a property. These may include issues with the HVAC system, roof, water, foundation, etc.
Divvy Will pay the contractors directly after the repairs are satisfactorily completed.
Divvy must approve repairs being done to the property.
Who is Divvy’s Rent to Own Program For?
In short, Divvy’s rent-to-own program is best for people who are close to qualifying for a home through a traditional mortgage company, however, they fall just short of qualifying.
This program allows future homeowners time to get on their feet as they get a foot in the door of homeownership.