If you dream of owning your own home but aren’t quite ready for a mortgage, Divvy Homes could be an ideal option. The company’s rent-to-own business model aims to make homeownership more accessible to individuals with past financial challenges or minimal down payment savings. Here’s a breakdown of everything to know about the company.

What does Divvy do?

Divvy leverages the rent-to-own model to assist future homebuyers get into a home sooner. Instead of coming up with a hefty down payment to buy a house, Divvy will make the purchase for you and help you save up for a down payment over the course of three years. During this time you rent the home from them, with some of each rent payment being set aside for the future down payment. This also gives you time to fix your credit score if needed, so you can get approved for a home loan in the future.

If you choose, you can purchase the home from Divvy at a preset price anytime during the three-year lease period. But you can also decide not to move forward with the purchase when the lease ends, or even terminate the lease early — for a fee.

Divvy for future homebuyers

How does it work?

With Divvy’s rent-to-own program, the company will buy the house you want now and lease it back to you for three years. You can move in right away, and during those three years, you’ll make monthly rent payments that include built-in savings to be put toward a future down payment.

Here’s a step-by-step breakdown of how the process works:

  • Submit an application: This is done online and does not affect your credit score. Divvy requires a minimum credit score of 550 to qualify.
  • Start house-hunting: If you qualify, Divvy will provide you with an approved home-shopping budget. You can work with one of their agents, or with any real estate agent of your choosing — but the home you select must be in an area where Divvy operates and meet the company’s eligibility criteria. (Heads up: Divvy does not buy condominiums.)
  • Acquire the home: Divvy will make a cash offer on the home you select and move forward with the transaction if their offer is accepted. The home must pass an in-person evaluation, like the home inspection that any buyer would perform. The company covers closing costs and any additional homebuying expenses. But you’ll need to pay some money upfront: an offer deposit of $500, an initial payment of between 1 and 2 percent of the home’s purchase price and one full monthly payment.
  • Move in and pay rent: Once Divvy closes on the house, you’ll be able to move in and begin making monthly lease payments. A portion of each monthly payment will be set aside for use toward your future down payment.
  • Buy the home for yourself: Once your lease agreement ends, you can buy the home or walk away. If you walk away, you keep your initial payment and built-in savings but must pay a 2 percent fee and any outstanding amounts due, such as delinquent rent payments. You can terminate your lease early if you choose, but you must give 60 days of notice to do so, and you’ll be on the hook for a relisting fee.

How do I qualify?

Before applying with Divvy, you’ll need to pass a background check and meet their income and credit requirements. An Experian FICO score of at least 550 is required to qualify, and your monthly household income must be at least $2,500 and verifiable for the past three months. Applicants must also present a valid government-issued photo ID.

How does Divvy make money?

Divvy generates earnings from monthly rent payments and equity that grows over time in the homes they purchase. But they also charge fees: For example, if you decide not to buy at the end of your three-year lease, they collect 2 percent of the purchase price plus additional fees. (On a $300,000 home, that adds up to $6,000.) You’ll also owe 2 percent of the purchase price, plus other fees, if you walk away before the three-year lease is up. In addition, the company runs other related business: It has dedicated brokerages, lenders and home-quality evaluators, and it owns its own title and maintenance companies.

Where does Divvy operate?

As of January 2023, Divvy operates in the following markets:

State Cities
Arizona Phoenix
Colorado Denver/Colorado Springs, Pueblo
Florida Fort Lauderdale, Fort Myers, Jacksonville, Miami, Orlando, Tampa
Georgia Atlanta, Macon/Warner Robins
Minnesota Minneapolis
Missouri St. Louis
Ohio Cincinnati, Cleveland
Tennessee Memphis
Texas Dallas, Houston, San Antonio

Divvy pros and cons

Pros

There are several reasons why aspiring homeowners might find Divvy attractive:

  • More relaxed criteria: Divvy’s eligibility and qualification criteria are relatively flexible compared to what you’d find with most traditional mortgage products.
  • Time to save up: The rent-to-own model allows you extra time to save up for an eventual down payment, as well as time to strengthen your credit and increase your credit score.
  • Less upfront cost: With a traditional mortgage, you’ll generally need a down payment of at least 3 percent and often up to 20 percent of the home’s purchase price, plus closing costs. Divvy requires just 1 to 2 percent of the purchase price, along with an earnest money deposit and one month of rent upfront.

Cons

Of course, there are also drawbacks to consider:

  • Lengthy process: You must enter into a three-year lease agreement to participate in Divvy’s program. The market — and your life — can change a lot in three years, and though you’re free to walk away early, you’ll be subject to a hefty fee.
  • Monthly rent payments: Even though you’re paying rent with a goal of ownership, you’re still paying rent. If you bought a home outright, those monthly payments would be going toward building home equity rather than a landlord.
  • Limited availability: Divvy is only available in nine states, and even in the areas where it operates, it has strict requirements about which homes are eligible.

Competitors and alternatives

Depending on where you’re looking to buy, Divvy may not be the only rent-to-own option available to you. Companies like Home Partners of America, Landis, ThinkTrio and Verbhouse all offer similar programs.

If you’re serious about buying a home and don’t want to wait, you can also look into government-backed home loan programs with low down payment and credit requirements, such as FHA or USDA loans. In addition, many state and federal programs offer down payment assistance programs to make that initial payout less painful.

Finally, it’s smart to consult with a local real estate agent in your market. Professional agents are trained and licensed experts who can help you find homes that fit your budget, no matter what it is.

Bottom line

Divvy could be ideal if you aren’t quite mortgage-ready but are interested in buying a particular property soon. It’s also useful if you want to test drive homeownership before you make a big financial commitment. But if you qualify for a low down payment mortgage program, purchasing now may be possible. And if you simply set aside funds in a high-yield savings account until you have enough for a down payment, you can avoid entering into a lengthy rent-to-own contract and, eventually, buy on your own terms.

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