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Alternative Loans – Another Crisis?

November 7, 2019 by Nick & Cindy Davis

In a new alternative mortgage plan, a company buys homes for those who have low credit and enables them to start earning equity through rent payments. However, if home prices unexpectedly fall, renters may move on, new owners might face foreclosure and companies could collapse.

Alternative Loans - Bring about Another Crisis

Could New Alternative Loans Bring about Another Crisis?

 

An increasing number of alternative mortgage products help consumers with shoddy credit become homeowners without having a sizable down payment or through lease-to-own contracts. However, mortgage applicants must still have steady incomes.

Divvy Homes, for example, is a startup offering to buy the property on behalf of clients, rent the home back to the clients, and allow them to accumulate equity toward buying the property in the future. Some companies will make an all-cash offer on behalf of a client in hot markets. Thus giving consumers a way to buy the house they want, regardless of whether they donโ€™t have enough money yet.

However, some housing analysts worry that the expansion of alternative mortgages could produce a scenario thatโ€™s much like the one that led to the 2008 housing crisis, when a large number of homeowners could not afford their properties and defaulted on their loans.

According to some alternative mortgage companies, though, new technology can really help prevent such scenarios. The Wall Street Journal reports that these companies use technology to calculate the best price to purchase the homes on behalf of their clients. Their algorithms show what the property will most likely be worth over time, and the systems also weigh the creditworthiness of potential buyers.

Critics are worried about the algorithmsโ€™ long-term accuracy and wonder what would happen if an unforeseen external force pushes the market price of a rent-to-own home lower, even if only for a short time. If successful, these companies may ultimately have a significant number of U.S. properties in their portfolio.

Divvy currently operates in limited markets: Cleveland, Memphis and Atlanta. The company will buy a home with cash on the clientโ€™s behalf. The buyers put 1% to 2% down and will have to undergo credit and financial checks to qualify for the program. If approved, theyโ€™re able to move in with a three-year lease.

Divvy charges monthly rent, however the payment is more than it likely would be for a standard, similar rental property. That extra amount goes toward equity to purchase a home. After 36 months, the consumer will own about 10% of the home and can usually qualify for a mortgage. Divvy targets homes in the $100,000 to $400,000 range.

โ€œWe looked nationwide and saw home-ownership rates declining year over year,โ€ Nicholas Clark, Divvyโ€™s co-founder and chief technology officer, told the Journal. โ€œThis works for married couples with a family looking to buy their first home who donโ€™t have enough saved up to qualify for a mortgage or who have a credit hiccup to repair.โ€

Ready to find your new home here in the Tampa Bay and Surrounding Areas? Nick, Cindy & Nicholas Davis with RE/MAX Premier Group are here to assist you with all your Real Estate Needs. We are always available at 813-300-7116 to answer your questions or you can simplyย click here and we will be in touch with you shortly.

Need to get started with your mortgage process? You can contact Kyle Edwards with Iberia Bank at 813-495-5131, or simply click here to start your online application.

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All Homes For Sale in & Around Tampa

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  • 27653 Mulholland Court, Wesley Chapel, FL
    27653 Mulholland Court
    Wesley Chapel, FL
    $629,900
    • Lot Size
      13,940 sqft

    • Home Size
      3,191 sqft

    • Beds
      4 Beds

    • Baths
      4 Baths

    • Year Built
      2002

    • Days on Market
      1

  • 2303 W Comanche Avenue, Tampa, FL
    2303 W Comanche Avenue
    Tampa, FL
    $395,000
    • Lot Size
      6,099 sqft

    • Home Size
      928 sqft

    • Beds
      2 Beds

    • Baths
      1 Bath

    • Year Built
      1947

    • Days on Market
      1

  • 1805 Springwood Drive, Sarasota, FL
    1805 Springwood Drive
    Sarasota, FL
    $410,000
    • Lot Size
      7,406 sqft

    • Home Size
      1,614 sqft

    • Beds
      3 Beds

    • Baths
      2 Baths

    • Year Built
      1979

    • Days on Market
      1

  • 7105 N 10th Street, Tampa, FL
    7105 N 10th Street
    Tampa, FL
    $319,000
    • Lot Size
      6,099 sqft

    • Home Size
      768 sqft

    • Beds
      2 Beds

    • Baths
      1 Bath

    • Year Built
      1930

    • Days on Market
      1

  • 434 77th Avenue, St Pete Beach, FL
    434 77th Avenue
    St Pete Beach, FL
    $525,000
    • Lot Size
      5,228 sqft

    • Home Size
      1,144 sqft

    • Beds
      3 Beds

    • Baths
      2 Baths

    • Year Built
      1938

    • Days on Market
      1

    View Virtual Tour
  • 6710 36th Avenue E #37, Palmetto, FL
    6710 36th Avenue E #37
    Palmetto, FL
    $152,500
    • Lot Size
      3,921 sqft

    • Home Size
      1,152 sqft

    • Beds
      2 Beds

    • Baths
      2 Baths

    • Year Built
      1978

    • Days on Market
      1

  • 6973 Lake Eaglebrooke Drive, Lakeland, FL
    6973 Lake Eaglebrooke Drive
    Lakeland, FL
    $395,000
    • Lot Size
      5,663 sqft

    • Home Size
      1,716 sqft

    • Beds
      3 Beds

    • Baths
      2 Baths

    • Year Built
      2004

    • Days on Market
      1

  • 211 Rue Des Chateaux, Tarpon Springs, FL
    211 Rue Des Chateaux
    Tarpon Springs, FL
    $2,890,000
    • Lot Size
      1.65 ac

    • Home Size
      7,943 sqft

    • Beds
      5 Beds

    • Baths
      9 Baths

    • Year Built
      1997

    • Days on Market
      1

    View Virtual Tour
  • 4210 E Sandalwood Circle S, Tampa, FL
    4210 E Sandalwood Circle S
    Tampa, FL
    $349,900
    • Lot Size
      6,970 sqft

    • Home Size
      1,025 sqft

    • Beds
      3 Beds

    • Baths
      2 Baths

    • Year Built
      1959

    • Days on Market
      1

    View Virtual Tour
  • 915 E Clay Avenue, Brandon, FL
    915 E Clay Avenue
    Brandon, FL
    $329,900
    • Lot Size
      40,947 sqft

    • Home Size
      2,203 sqft

    • Beds
      4 Beds

    • Baths
      2 Baths

    • Year Built
      1962

    • Days on Market
      1

  • 761 Winslow Park Boulevard, Tarpon Springs, FL
    761 Winslow Park Boulevard
    Tarpon Springs, FL
    $1,150,000
    • Lot Size
      9,584 sqft

    • Home Size
      2,743 sqft

    • Beds
      4 Beds

    • Baths
      3 Baths

    • Year Built
      2011

    • Days on Market
      1

    View Virtual Tour
  • 23398 Papyrus Way, Lutz, FL
    23398 Papyrus Way
    Lutz, FL
    $295,000
    • Lot Size
      3,050 sqft

    • Home Size
      1,541 sqft

    • Beds
      2 Beds

    • Baths
      3 Baths

    • Year Built
      2022

    • Days on Market
      1

  • 109 Bluefield Avenue, Lakeland, FL
    109 Bluefield Avenue
    Lakeland, FL
    $219,000
    • Lot Size
      6,099 sqft

    • Home Size
      962 sqft

    • Beds
      2 Beds

    • Baths
      1 Bath

    • Year Built
      1917

    • Days on Market
      1

  • 705 Caddy Lane, Kissimmee, FL
    705 Caddy Lane
    Kissimmee, FL
    $240,000
    • Lot Size
      9,584 sqft

    • Home Size
      1,435 sqft

    • Beds
      4 Beds

    • Baths
      2 Baths

    • Year Built
      1974

    • Days on Market
      1

  • 821 Greenview Dr, Apollo Beach, FL
    821 Greenview Dr
    Apollo Beach, FL
    $499,900
    • Lot Size
      12,633 sqft

    • Home Size
      2,068 sqft

    • Beds
      4 Beds

    • Baths
      3 Baths

    • Year Built
      1997

    • Days on Market
      1

See all All Homes Around Tampa.
(all data current as of 9/17/2025)

Listing information deemed reliable but not guaranteed. Read full disclaimer.

 
 

Filed Under: 2019, Advice, Buying a home, Buying a home 2018, Florida Housing 2018, Home buyers, Home buying, Home Ownership, Housing Market 2018, Housing Updates 2018, Moving, RE/MAX Agent

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813-300-7116

813-695-6475

 

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