These Rent-to-Own Homes Programs Can Help You Get Into That House

Divvy

The Divvy program is best suited for move-in-ready, single-family homes. The company doesn’t purchase fixer-uppers or properties like condos or mobile homes.

Divvy is currently only buying “Divvy Ready homes” from their preset inventory list. You can browse approved homes in select cities in Arizona, Colorado, Texas, Missouri, Minnesota, Tennessee, Ohio, Georgia, and Florida.

“This helps us ensure the homes we buy are move-in-ready while giving our customers the best chance of buying their homes back at the end of their lease,” Divvy Homes co-founder and CEO Adena Hefets told HomeLight.

To get started, prospective participants must get prequalified; a painless process that’s free and doesn’t impact your credit score. (Note: Divvy requires a minimum FICO score of 550.) Next, they’ll need to run a background check on you and get copies of your income documents and photo ID. It typically takes one to two days for the team to let you know if you’ve been approved to go home shopping. If you are, you’ll receive an approved monthly budget and an estimated home budget range.

Next, approved home shoppers can tour qualifying homes in Divvy’s operating markets with their real estate agent (if you don’t have one, you can go with one of Divvy’s partner agents). When searching online, the listings look similar to any other real estate website, but you’ll find important information like the starting rental price, down payment, and home price.

When you find the home that’s right for you, Divvy will submit an offer. If it’s accepted, the company will pay for it in cash and cover all fees, closing costs, taxes, and insurance. You’ll be asked to put down one full month’s rent plus 1% to 2% of the purchase price as an initial home savings contribution, similar to a down payment. (In rent-to-own scenarios, this is known as an “option fee.”)

During the first three years of the lease, about 25% of each monthly payment goes toward the program participant’s home savings, building to between 3% and 10% of the home’s purchase price — enough for a mortgage down payment.

The tenant can buy the home at any point during their lease with no penalty or fee. If the program participant chooses not to buy their home, Divvy will return their home savings, minus a relisting fee (2% of the home’s original purchase price).

Dream America

Dream America accepts applicants with a minimum FICO score of 500, a monthly household income of at least $4,000, 12 months of on-time rent payments, a debt-to-income ratio below 50%, and $8,000 in savings that can be used toward a home purchase.

Dream America operates in Atlanta, Dallas, and the Florida metro areas of Jacksonville, Orlando, Sarasota, and Tampa. Approved participants can pick any single-family home or townhouse for sale in these communities, so long as it’s priced between $150,000 and $400,000 and fits within the applicant’s monthly budget. The home can be new construction or resale but has to have been built or renovated in the past 15 years.

Dream America buys the home in all cash and leases it to the home seeker for 12 months (although you can renew your lease and purchase contract if necessary). An onboarding fee equal to 1% of the home price will be due at the time of closing, and the first month’s rent is due before move-in.

At any time that the participant qualifies for a mortgage, they can cancel the lease with no penalty and buy the home. Dream America will apply 10% of rent paid as a closing credit. It’s important to note that the longer you rent, the more you will pay when you buy the home. For example, if you buy the home within six months, you’ll pay 6% more than Dream America originally paid for it, including closing costs.

If the renter decides not to buy the home, Dream America will sell it. If the company can recoup their costs, your earnest money will be returned after it’s sold, and you will be charged a 2% processing fee.

Landis

Founded in 2018, Landis is a real estate tech startup with the goal of helping renters become homeowners. The company raised $40 million in a Series B to help more Americans become homeowners. Current investors include GV (formerly Google Ventures), Sequoia, and Jay Z’s Roc Nation Arrive.

Landis currently operates in eight states: Alabama, Florida, Georgia, Indiana, Kentucky, North Carolina, Ohio, and Tennessee. Prospective homeowners must first apply to the Landis program, which is 100% free and won’t affect your credit score. After that, their underwriting team reviews your financial documents to determine your approved home budget.

When you join the Landis program, you’ll be assigned a Client Advisor to help you through your homebuying journey. You have the option to choose your own real estate agent, but if you don’t have one in mind, Landis can connect you with one of their partner agents in your area.

When you find a home you like, Landis will make a competitive, all-cash offer on your behalf and pay all closing costs and fees. You’ll need to put down an initial deposit of 2% to 3% of the home’s price, which will contribute to your security deposit and savings for the down payment.

While renting the home from Landis, you’ll work with a Homeownership Coach to boost your credit score and save for a down payment. Your monthly rent is determined by the market value, but it can vary depending on the home’s purchase price and its location. When you’re ready, you can buy the home back, and Landis will assist you with the mortgage process.

Local and regional programs

Williams advises that there may be an array of additional programs available to prospective rent-to-owners in their local areas. She suggests searching online to identify potential local programs — and even keeping your eyes peeled for billboards or other print advertisements.

If you pair up with a national, regional, or local program that suits your needs, you might just find a rent-to-own home that puts you on the path to homeownership!

Header Image Source: (Aubrey Odom / Unsplash)