Regional News

Divvy innovates in the American realm of rent-to-own housing

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In Bedford, Ohio - just outside of Cleveland - Gabby Jacobs and her husband, Erin Bullock, were going toe to toe with their landlord following the decay of their home. Their daughter's room had no heating, the stove was broken, and the landlord outright refused to replace or repair.

So the couple decided it was time to become homeowners.

“It was a big jump for us, but we always knew homeownership was a big plus, because it would be ours,” Jacobs said.

The couple had a lot going for them, including good, stable jobs. She’s an administrative assistant for a waterproofing company; he’s a plumber. Even with three young kids, they’d saved enough for a decent down payment. But their credit scores, around 600, were too low to qualify for a mortgage. Many lenders require at least a 620.

“So very close, but not close enough,” Jacobs said. Bullock, 31, had defaulted on a student loan.

For Jacobs, 29, it was a matter of inexperience.

“I have no established credit,” she said. She told her real estate agent to hold off, “and she was like, ‘Let me mention this program to you guys. I think you would qualify.’”

The program is offered by Divvy Homes, one of several tech startups trying to disrupt the way we buy homes. Here’s how it works: You pick the house you want to buy — not just any house, but we’ll get to that in a minute. Divvy buys it. You pay Divvy a down payment of as little as 2 percent. The company then leases the house to you with an option to buy within three years, and around 20 percent of your monthly rent goes toward what Divvy calls “equity credits.” After three years, renters own 10 percent, typically enough to qualify for a mortgage and buy Divvy out.

“We see it as a new way to own a home and provide access to home ownership for everyone,” said Adena Hefets, one of Divvy’s founders. Like many startups, the company grew out of the founders’ own problems. Hefets’ parents had had trouble getting a mortgage and had used seller financing. Her co-founder, a serial entrepreneur, also couldn’t get a home loan.

Read more here.

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