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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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  • 9418 Azalea Ridge Circle, Tampa, FL
    9418 Azalea Ridge Circle
    Tampa, FL
    Photo of 9418 Azalea Ridge Circle, Tampa, FL 33647 (MLS # TB8406527)
    $600,000
    • Lot Size
      7,406 sqft

    • Home Size
      2,392 sqft

    • Beds
      5 Beds

    • Baths
      3 Baths

    • Year Built
      1997

    • Days on Market
      1

  • 9401 Greenpointe Drive, Tampa, FL
    9401 Greenpointe Drive
    Tampa, FL
    Photo of 9401 Greenpointe Drive, Tampa, FL 33626 (MLS # TB8406547)
    $1,199,900
    • Lot Size
      7,841 sqft

    • Home Size
      3,720 sqft

    • Beds
      5 Beds

    • Baths
      5 Baths

    • Year Built
      2000

    • Days on Market
      1

    View Virtual Tour
  • 3101 55th Avenue N, St Petersburg, FL
    3101 55th Avenue N
    St Petersburg, FL
    Photo of 3101 55th Avenue N, St Petersburg, FL 33714 (MLS # TB8406535)
    $344,450
    • Lot Size
      6,534 sqft

    • Home Size
      1,048 sqft

    • Beds
      2 Beds

    • Baths
      1 Bath

    • Year Built
      1948

    • Days on Market
      1

  • 4009 Ernest Drive, Wesley Chapel, FL
    4009 Ernest Drive
    Wesley Chapel, FL
    Photo of 4009 Ernest Drive, Wesley Chapel, FL 33543 (MLS # TB8394030)
    $765,000
    • Lot Size
      1.21 ac

    • Home Size
      2,452 sqft

    • Beds
      4 Beds

    • Baths
      3 Baths

    • Year Built
      2024

    • Days on Market
      1

  • 3630 Verna Road, Myakka City, FL
    3630 Verna Road
    Myakka City, FL
    Photo of 3630 Verna Road, Myakka City, FL 34251 (MLS # A4654501)
    $2,675,000
    • Lot Size
      25.72 ac

    • Home Size
      3,862 sqft

    • Beds
      4 Beds

    • Baths
      3 Baths

    • Year Built
      1992

    • Days on Market
      1

  • 8313 Old Town Drive, Tampa, FL
    8313 Old Town Drive
    Tampa, FL
    Photo of 8313 Old Town Drive, Tampa, FL 33647 (MLS # TB8406146)
    $749,000
    • Lot Size
      8,277 sqft

    • Home Size
      3,124 sqft

    • Beds
      4 Beds

    • Baths
      4 Baths

    • Year Built
      2005

    • Days on Market
      1

    View Virtual Tour
  • 37443 Blueberry Court, Zephyrhills, FL
    37443 Blueberry Court
    Zephyrhills, FL
    Photo of 37443 Blueberry Court, Zephyrhills, FL 33542 (MLS # TB8406159)
    $297,000
    • Lot Size
      5,663 sqft

    • Home Size
      1,661 sqft

    • Beds
      2 Beds

    • Baths
      2 Baths

    • Year Built
      1995

    • Days on Market
      1

  • 7400 Mako Drive, Hudson, FL
    7400 Mako Drive
    Hudson, FL
    Photo of 7400 Mako Drive, Hudson, FL 34667 (MLS # TB8406300)
    $170,000
    • Lot Size
      6,099 sqft

    • Home Size
      1,120 sqft

    • Beds
      2 Beds

    • Baths
      2 Baths

    • Year Built
      1979

    • Days on Market
      1

  • 16219 Pine Mist Drive, Bradenton, FL
    16219 Pine Mist Drive
    Bradenton, FL
    Photo of 16219 Pine Mist Drive, Bradenton, FL 34211 (MLS # A4658102)
    $615,000
    • Lot Size
      6,099 sqft

    • Home Size
      2,638 sqft

    • Beds
      5 Beds

    • Baths
      3 Baths

    • Year Built
      2023

    • Days on Market
      1

  • 816 Sandringham Lane, Lutz, FL
    816 Sandringham Lane
    Lutz, FL
    Photo of 816 Sandringham Lane, Lutz, FL 33549 (MLS # TB8406224)
    $730,000
    • Lot Size
      13,504 sqft

    • Home Size
      2,854 sqft

    • Beds
      5 Beds

    • Baths
      3 Baths

    • Year Built
      1990

    • Days on Market
      1

  • 9822 Brownstone Drive, Tampa, FL
    9822 Brownstone Drive
    Tampa, FL
    Photo of 9822 Brownstone Drive, Tampa, FL 33612 (MLS # TB8406255)
    $300,000
    • Lot Size
      2,178 sqft

    • Home Size
      1,888 sqft

    • Beds
      3 Beds

    • Baths
      3 Baths

    • Year Built
      1986

    • Days on Market
      1

    View Virtual Tour
  • 840 The Esplanade N #805, Venice, FL
    840 The Esplanade N #805
    Venice, FL
    Photo of 840 The Esplanade N #805, Venice, FL 34285 (MLS # A4658059)
    $1,295,000
    • Lot Size
      2.59 ac

    • Home Size
      1,247 sqft

    • Beds
      2 Beds

    • Baths
      2 Baths

    • Year Built
      1974

    • Days on Market
      1

    View Virtual Tour
  • 3021 Countryside Boulevard #28A, Clearwater, FL
    3021 Countryside Boulevard #28A
    Clearwater, FL
    Photo of 3021 Countryside Boulevard #28A, Clearwater, FL 33761 (MLS # TB8406449)
    $299,900
    • Lot Size

    • Home Size
      1,765 sqft

    • Beds
      3 Beds

    • Baths
      2 Baths

    • Year Built
      1975

    • Days on Market
      1

  • 2686 Yacht Place, Wesley Chapel, FL
    2686 Yacht Place
    Wesley Chapel, FL
    Photo of 2686 Yacht Place, Wesley Chapel, FL 33543 (MLS # TB8406517)
    $1,025,000
    • Lot Size
      13,068 sqft

    • Home Size
      3,686 sqft

    • Beds
      5 Beds

    • Baths
      4 Baths

    • Year Built
      2023

    • Days on Market
      1

    View Virtual Tour
  • 2710 Huntington Hills Drive, Lakeland, FL
    2710 Huntington Hills Drive
    Lakeland, FL
    Photo of 2710 Huntington Hills Drive, Lakeland, FL 33810 (MLS # L4954177)
    $575,000
    • Lot Size
      16,553 sqft

    • Home Size
      3,096 sqft

    • Beds
      4 Beds

    • Baths
      3 Baths

    • Year Built
      2000

    • Days on Market
      1

    View Virtual Tour

See all All Homes Around Tampa.
(all data current as of 7/12/2025)

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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