CHICAGO–Credit unions have worked with countless members to help them save money for a downpayment on a home–now one company has introduced an offering to help renters do just that.
Home Partners of America, a rent-to-own company, has introduced a mortgage product to tenants that applies some of the appreciation in their home’s value during the time they have lived there toward reducing the down payment. In areas with even modest home-price appreciation, that could reduce the downpayment requirement to almost nothing, according to the Wall Street Journal.
To qualify, tenants must have paid their rent on time for two consecutive years and be considered first-time buyers, meaning they haven’t owned a home in the last three years.
While the program may remind some of the no-downpayment loans that contributed to the housing bubble a decade ago, Bill Young, co-founder and chief executive of Home Partners, told the Wall Street Journal a critical distinction with his company’s program is that prospective buyers have been paying their monthly rent on the same home over a long period, demonstrating they can afford it and are committed to staying there.
“Their skin in the game is they’ve proven they can pay their rent on time for 24 months,” Young told the Journal.
Home Partners has purchased nearly 8,000 homes in more than 50 metropolitan areas, and said it plans to offer the product to current tenants and those who sign a lease over the next two years, the duration of the pilot program. The company won’t make the loans itself, but is working with New Penn Financial, a Pennsylvania-based lender, according to the Journal.
The loans will be backed by Fannie Mae.