Big banks have unlocked an untouched source of income by offering consumers with bad credit a chance to rent a home, improve their credit, and then buy the home. This method was popular in the 1990’s, but when mortgage accessibility increased, the need to rent before owning was rendered unnecessary. Both investors and consumers benefit. Investors profit from the recovering housing market, while consumers are able to save money for a down payment while renting.
Home Partners of America, one of the fastest-growing rent-to-own companies, gives families without access to mortgages an opportunity to own a home. Co-founder William Young saw potential in the market, and also wanted to help families live in a home, even in a struggling economy. “What really frustrates me personally is that a lot of people I grew up with would have trouble getting access to mortgage credit today.” Given the current state of the housing market and little access to credit, Home Partners is both feasible and sustainable.
The Home Partners program is simple. First, the company teams with real estate agents in approved communities to buy homes. After they purchase a home, they lease it to a consumer that does not have access to a mortgage. The tenant then attempts to improve their credit over the next few years, and in most neighborhoods, the consumer has the option to buy the house within 5 years. The only catch is that rent and the price of the home increase over the 5 year period. However, the tenant has the option of renting or buying another home if they do not like the price of the home. So far, Home Partners is in 30 metropolitan areas in 15 states. By the beginning of next year, Home Partners hopes to expand into 5 more states.