# Understanding Your Divvy Home Budget

One of the most common questions we’re asked at Divvy is “Can I get a larger home budget?”. This question is tricky because it depends on many factors. What are you comfortable paying? Can you add a co-buyer? In what cities are you looking for a home?

Here you’ll find a short article (<5 min read) on how to understand your Divvy budget.

First, understand how Divvy calculates your maximum monthly payment.

Our first step in estimating your home budget is to calculate your maximum monthly payment. Divvy calculates this by taking your monthly income, multiplying it by 50%, and subtracting out your monthly debt payments. This is known as a debt-to-income, or DTI calculation. For example, let’s say:

Your Monthly Income = \$5,000 and Your Monthly Debt Payments = \$500

First, we’ll multiply your income by 50%. [ex: \$5,000 * 50% = \$2,500 income]

Then we’ll subtract your debt [ex: \$2,500 – \$500 = \$2,000]

1/2 Income – Debt = Max Monthly Payment -or- \$2500 – \$500 = \$2000

Second, think about what you are comfortable paying.

It is important to think through whether your maximum monthly payment feels comfortable for you to pay every month. In the above example, does \$2,000 feel like too much? Or are you comfortable with it? If you only want to pay \$1,500 per month and your Divvy maximum monthly payment is \$2,000, it doesn’t make sense to attempt to increase your home budget. The more a home costs, the more your monthly payment will be.

Third, translate your maximum monthly payment into a home value.

Divvy takes a home for sale and offers it to you as a rental. To do this, we calculate fair rent prices for every home listed for sale.

We start by looking at similar homes for rent in your desired area, taking into account things like the number of rooms, home size, age, and condition. Rent prices vary a lot across a city, and that means Divvy payments do as well. Two homes, both listed for sale at \$200,000, may still have very different Divvy payments depending on their neighborhoods. Once we calculate the fair market rent, we then add home savings on top of your monthly rent payment.

For example, if you are looking at the average rent for a \$250,000 / 3-bedroom home in Decatur, Georgia, you’ll see that most homes will rent for about \$2,500 per month. That means with Divvy, you’ll be paying about \$2,500 of rent + \$300 of home savings every month, or \$2,800 total.

We suggest a quick rule of thumb: take your Divvy monthly payment budget, multiply by 100, and subtract \$30,000 to get a home price. For example, if your monthly payment budget is \$2,000, then the home price you should be shopping for would be \$2,000 x 100 – \$30,000 = \$170,000 home price.

Lastly, understand how Divvy’s pricing compares to other options.

Now you might be thinking, why is Divvy more expensive than a mortgage? This is a great question. Divvy is closer to renting than to a mortgage. Mortgages are often owned by the government and therefore are heavily subsidized – meaning a mortgage will always be your cheapest option. With Divvy, you pay a similar amount to renting but get several important benefits: you select the home, share in appreciation, and have an exclusive buyout right on the property.

A few things to remember:

1. Focus on your monthly payment budget. This is what will determine the home price you can afford.
2. If you’d like to increase your monthly payment budget, then add a co-buyer or pay down some debt.
3. Our pricing is comparable to rent, and not a mortgage.

We hope this article clarifies your Divvy budget. We understand this can be confusing, so feel free to reach out to us anytime at support@divvyhomes.com with questions.

Happy home shopping!

## 2 thoughts on “Understanding Your Divvy Home Budget”

1. ᴡᴀssᴜᴘシ says:

I’m presently in a 2 family rental; I wish to purchase it..The landlord don’t want to sale to me because of the pass problems with his management partners stealing VOA payments to him. Now I refuse to 68.000 for a home that caught fire; he didnt agree to sale and I must leave by Jan 25th. What kind of home you might have?

1. divvyhomes says:

Hello and thanks for reaching out! With our program, you’ll get approved for a specific home budget based on your current income and financial history. You can then choose almost any move-in ready home available for sale, and Divvy will purchase it for you! If you have any other questions, feel free to reach out to our support team at support@divvyhomes.com