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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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  • 3024 Williamsburg Street, Sarasota, FL
    3024 Williamsburg Street
    Sarasota, FL
    Photo of 3024 Williamsburg Street, Sarasota, FL 34231 (MLS # A4664216)
    $250,000
    • Lot Size
      9,148 sqft

    • Home Size
      837 sqft

    • Beds
      2 Beds

    • Baths
      1 Bath

    • Year Built
      1965

    • Days on Market
      0

  • 13704 Buchanan Drive, Palmetto, FL
    13704 Buchanan Drive
    Palmetto, FL
    Photo of 13704 Buchanan Drive, Palmetto, FL 34221 (MLS # TB8425478)
    $725,999
    • Lot Size
      9,584 sqft

    • Home Size
      2,823 sqft

    • Beds
      3 Beds

    • Baths
      4 Baths

    • Year Built
      2025

    • Days on Market
      0

    View Virtual Tour
  • 8443 Chatsworth Street, Spring Hill, FL
    8443 Chatsworth Street
    Spring Hill, FL
    Photo of 8443 Chatsworth Street, Spring Hill, FL 34608 (MLS # W7878582)
    $337,000
    • Lot Size
      10,455 sqft

    • Home Size
      1,746 sqft

    • Beds
      3 Beds

    • Baths
      2 Baths

    • Year Built
      1978

    • Days on Market
      0

  • 3539 Allandale Drive, Holiday, FL
    3539 Allandale Drive
    Holiday, FL
    Photo of 3539 Allandale Drive, Holiday, FL 34691 (MLS # TB8424747)
    $275,000
    • Lot Size
      5,228 sqft

    • Home Size
      1,368 sqft

    • Beds
      3 Beds

    • Baths
      2 Baths

    • Year Built
      1973

    • Days on Market
      0

    View Virtual Tour
  • 610 Crane Drive, Kissimmee, FL
    610 Crane Drive
    Kissimmee, FL
    Photo of 610 Crane Drive, Kissimmee, FL 34759 (MLS # O6341888)
    $243,000
    • Lot Size
      6,970 sqft

    • Home Size
      1,353 sqft

    • Beds
      3 Beds

    • Baths
      2 Baths

    • Year Built
      2002

    • Days on Market
      0

  • 4420 46th Avenue W #101, Bradenton, FL
    4420 46th Avenue W #101
    Bradenton, FL
    Photo of 4420 46th Avenue W #101, Bradenton, FL 34210 (MLS # A4664406)
    $282,500
    • Lot Size
      39,640 sqft

    • Home Size
      1,174 sqft

    • Beds
      2 Beds

    • Baths
      2 Baths

    • Year Built
      1989

    • Days on Market
      0

    View Virtual Tour
  • 1545 Love Grass Terrace E, Parrish, FL
    1545 Love Grass Terrace E
    Parrish, FL
    Photo of 1545 Love Grass Terrace E, Parrish, FL 34219 (MLS # A4664407)
    $417,990
    • Lot Size
      8,712 sqft

    • Home Size
      1,844 sqft

    • Beds
      3 Beds

    • Baths
      2 Baths

    • Year Built
      2025

    • Days on Market
      0

    View Virtual Tour
  • 6345 Old Main Street, New Port Richey, FL
    6345 Old Main Street
    New Port Richey, FL
    Photo of 6345 Old Main Street, New Port Richey, FL 34653 (MLS # TB8425423)
    $399,000
    • Lot Size
      11,326 sqft

    • Home Size
      1,941 sqft

    • Beds
      3 Beds

    • Baths
      2 Baths

    • Year Built
      1950

    • Days on Market
      0

  • 6930 Towering Spruce Drive, Riverview, FL
    6930 Towering Spruce Drive
    Riverview, FL
    Photo of 6930 Towering Spruce Drive, Riverview, FL 33578 (MLS # TB8424824)
    $219,000
    • Lot Size
      1,307 sqft

    • Home Size
      1,176 sqft

    • Beds
      2 Beds

    • Baths
      3 Baths

    • Year Built
      2008

    • Days on Market
      0

  • 802 Woodhill Court, Palm Harbor, FL
    802 Woodhill Court
    Palm Harbor, FL
    Photo of 802 Woodhill Court, Palm Harbor, FL 34683 (MLS # O6339391)
    $499,500
    • Lot Size
      9,584 sqft

    • Home Size
      1,428 sqft

    • Beds
      3 Beds

    • Baths
      2 Baths

    • Year Built
      1984

    • Days on Market
      0

  • 1800 Englewood Road #137, Englewood, FL
    1800 Englewood Road #137
    Englewood, FL
    Photo of 1800 Englewood Road #137, Englewood, FL 34223 (MLS # C7514559)
    $129,000
    • Lot Size
      3,485 sqft

    • Home Size
      672 sqft

    • Beds
      2 Beds

    • Baths
      1 Bath

    • Year Built
      1973

    • Days on Market
      0

    View Virtual Tour
  • 13807 Iona Avenue, Palmetto, FL
    13807 Iona Avenue
    Palmetto, FL
    Photo of 13807 Iona Avenue, Palmetto, FL 34221 (MLS # TB8425464)
    $640,999
    • Lot Size
      9,584 sqft

    • Home Size
      2,306 sqft

    • Beds
      3 Beds

    • Baths
      4 Baths

    • Year Built
      2025

    • Days on Market
      0

    View Virtual Tour
  • 12507 Glendale Court, Hudson, FL
    12507 Glendale Court
    Hudson, FL
    Photo of 12507 Glendale Court, Hudson, FL 34669 (MLS # O6342448)
    $178,000
    • Lot Size
      2,614 sqft

    • Home Size
      888 sqft

    • Beds
      2 Beds

    • Baths
      2 Baths

    • Year Built
      1986

    • Days on Market
      0

  • 8204 Waterview Boulevard, Lakewood Ranch, FL
    8204 Waterview Boulevard
    Lakewood Ranch, FL
    Photo of 8204 Waterview Boulevard, Lakewood Ranch, FL 34202 (MLS # A4664261)
    $820,000
    • Lot Size
      10,890 sqft

    • Home Size
      2,546 sqft

    • Beds
      3 Beds

    • Baths
      3 Baths

    • Year Built
      1998

    • Days on Market
      0

    View Virtual Tour
  • 2205 Sunset Drive #E6, Bradenton, FL
    2205 Sunset Drive #E6
    Bradenton, FL
    Photo of 2205 Sunset Drive #E6, Bradenton, FL 34207 (MLS # TB8425413)
    $115,000
    • Lot Size
      11.92 ac

    • Home Size
      576 sqft

    • Beds
      1 Bed

    • Baths
      1 Bath

    • Year Built
      1972

    • Days on Market
      0

See all All Homes Around Tampa.
(all data current as of 9/8/2025)

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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