Struggling to get your finances in shape to buy a house? This startup wants to help

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A startup that aims to turn renters into homeowners just raised $165 million in venture capital. New York-based Landis says it will use the cash infusion to expand its rent-to-own program for first-time homebuyers.

For would-be homeowners, Landis fills many roles. It coaches them on boosting their credit scores. It oversees the bank accounts where they build their down payments. And the startup buys homes and then serves as landlord while its clients get their finances in shape.

“The goal is to transition as many renters to homeownership as possible,” says Cyril Berdugo, a co-founder of the company.

Landis today announced that it raised money from a group of investors led by Sequoia Capital, the Silicon Valley venture firm. Other backers include actor Will Smith and Jay-Z’s Roc Nation. Earlier this year, the venture fund of the National Association of Realtors announced funding for Landis. And in another endorsement, the nonprofit National Community Reinvestment Coalition lauded Landis’ offering as a way to close a stubborn racial gap in homeownership and wealth.

The big-name support might alleviate some of the qualms surrounding the rent-to-own concept. Some bad actors have earned an unsavory reputation for stringing along buyers but never delivering a home.

Landis says it’s geared to help renters achieve their goal of homeownership. “We’re aligned with them,” Berdugo says. “We want them to buy the house as early as possible.”

Heather Torres, a Landis customer in North Carolina, says she used the company to afford a house in High Point. During the time she worked with Landis, Torres boosted her credit score from 560 to 780.

“I hadn’t had any credit cards in 10 to 12 years, so I had to build my credit score up and budget accordingly,” Torres says. “Landis led me through the process by creating a personalized financial plan.”

How it works

For now, Landis offers its rent-to-buy model in 11 states: Alabama, Georgia, Indiana, Kentucky, North Carolina, Maryland, Ohio, South Carolina, Pennsylvania, Tennessee and West Virginia.

If you’re a renter in one of those states, you can apply at Landis’ website. It’s looking for consumers with spotty credit histories and thin cash positions — but also the potential to become creditworthy, with a bit of work.

Once you’re approved, you’ll find the home you want. Landis buys the house and then leases it to you at the going rental rate.

Landis’ plan is for you to become qualified for a mortgage within two years. Landis works with its clients to improve credit scores and build down payments.

Once you’re ready, you’ll buy the house from Landis for 3 percent more than it paid on your behalf — so if Landis bought the property for $250,000, you’d pay $257,500.

Berdugo says Landis’ business model isn’t built on cashing in on increasing home values but on moving renters into homeownership. With home prices soaring 10 percent to 15 percent in the past year, many of the company’s borrowers are seeing prices rise out of their budgets.

“We are leaving money on the table,” Berdugo says. “Our clients are buying a house back at a 3 percent premium, so we’re leaving 7 percent to 12 percent on the table. We’re fine with that.”

What you can do

If you’re not shopping for a home in one of the 11 states where Landis operates, you can still prepare yourself for homeownership. Four key steps:

  • Boost your credit score. This is the single most important factor in determining whether you qualify for a home loan and how much your mortgage costs. The best deals go to borrowers with credit scores of 740 or higher — but you can still land a loan with a lower score.
  • Build up your down payment. In today’s seller’s market, cash is king. That means buyers with little cash available for down payments find themselves at a disadvantage. With rents soaring, scraping together cash isn’t easy. Still, try to find ways to build your savings.
  • Research loan programs. Some mortgage programs allow you to put down as little as 3 percent. Federal Housing Administration loans require just 3.5 percent and are available to borrowers with credit scores in the 600s. And loans from the Department of Veterans Affairs are available with no money down and no credit score requirements. One caveat: These programs carry higher costs.
  • Look into first-time buyer programs. Many states, cities and employers offer grants and low-interest loans to help homebuyers overcome the down payment hurdle. These programs generally require you to complete credit counseling and basic homebuyer education.

Learn more:

Written by
Jeff Ostrowski
Senior mortgage reporter
Jeff Ostrowski covers mortgages and the housing market. Before joining Bankrate in 2020, he wrote about real estate and the economy for the Palm Beach Post and the South Florida Business Journal.
Edited by
Senior mortgage editor
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