Owning a home — it’s part of the American Dream!
Home ownership gives a sense of freedom, security, and permanence.
Americans dream of growing up, finding a home, and starting a family; they dream of owning their own piece of land and proudly knowing “it’s mine.” Millions of families want a nice home, a white picket fence, a place to rest after a hard day of work, and a place to raise their families.
It’s no wonder that pioneers and settlers came to America to escape the over-crowded rental slums of the Old World and to tame and claim their piece of this vast land. Even today, newcomers to America are attracted here in part because of the opportunities for a better future — which includes owning their own home.
The American Dream Is Changing…
While home ownership continues to be a high priority among many Americans, the American Dream is evolving. There’s still plenty of land and places to live, but it’s evolving for other reasons:
- There’s the growing number of Americans with credit problems — perhaps due to debt or poor choices or difficult circumstances or even just low paying jobs.
- There’s the growing number of banks that reject loan applications because they don’t meet the bank’s tightening loan requirements.
- There’s a trending increase in the number of lower-paying jobs, while higher-paying jobs are vanishing or being outsourced overseas.
- And the economy is on shaky ground, with one recession barely over and another one threatening to strike.
Although these might not be ideal circumstances, they reflect the economic reality that many Milwaukee residents — and Americans in general — face today. With stricter lending criteria, rising housing costs, and credit challenges affecting more people than ever, many families are turning to creative solutions like rent to own. Alternative home buying methods are on the rise across the country. While this can open doors for buyers and sellers alike, it’s important to approach these arrangements with due diligence and the guidance of professionals who understand the complexities involved.
- House buyers are trying to find creative ways to acquire a home to live in, even if their credit isn’t at the level that a bank is looking for.
- House sellers are trying to find creative ways to sell their house because there aren’t as many buyers.
This creativity has led to a new opportunity for people to buy houses even when they may not be able to apply for traditional loans. And that’s how the American Dream is evolving: people still want to own homes (and can!) but there are new ways of buying those homes…
Rent to Own Housing in Milwaukee and Other Areas
In a traditional house purchase: the buyer goes to a bank, pays a down payment, and gets a mortgage loan for the remainder of the amount owed on the house they’re buying.
In a rent to own agreement: a buyer who may not yet qualify for a traditional mortgage works directly with the seller to rent the house for a set period — often 1 to 3 years — with the goal of eventually purchasing it. During this time, the buyer can work on improving their credit and saving for a down payment. But it’s important to know that these agreements are legally binding contracts. Terms vary widely, so it’s essential to understand exactly how your payments apply to the future purchase, what happens if you break the lease, and whether you have exclusive buying rights at the end of the term. Always have a legal professional review your agreement before you sign.
This works well for everyone!
- For the seller, it gives them access to more potential buyers.
- More importantly, for the buyers, it creates a new way to get into a house sooner — a permanent address in the house you’re likely going to buy, a sense of ownership before you even own the house, and an opportunity to work on your credit.
- Banks love it because it means more people can qualify for loans, too!
If you’re someone who dreams of owning a home but can’t qualify for a bank mortgage right now, rent to own might feel like the only path forward. And it can be — in the right circumstances. You could move into a home sooner, gain stability with a fixed address, and begin building toward ownership while working on your credit. However, rent to own isn’t risk-free. You could lose money if you’re unable to complete the purchase, and some agreements contain unfavorable terms. That’s why it’s so important to go in with a clear understanding of your rights, responsibilities, and what happens if your circumstances change..
What are the Costs of Rent to Own Housing in Milwaukee?
In a rent to own agreement, a buyer would move into a home, paying rent, and building credit towards a down payment to ultimately purchase the home. This is a valuable option for families who may not have the necessary credit score to get a traditional mortgage.
The price of a rent to own home can vary widely depending on several factors — including the condition of the house, the neighborhood, the length of the rental term, and how the seller structures the agreement. Each contract is different, and it’s important to understand the terms clearly before signing anything. In fact, we highly recommend that you review the agreement with a real estate attorney or licensed housing counselor so you’re protected and fully aware of your rights and obligations. The structure can work well — but only if all parties are on the same page and the details are clear. In general, this is what you’d be looking at…
First, you’ll pay a regular rental amount (just as you would if you were renting anywhere). This amount goes towards the rent and upkeep of the property, just like a regular rental.
Second, the monthly rent in a rent to own arrangement may be slightly higher than what you’d pay for a comparable rental property. This is often due to added benefits like a portion of your rent going toward a future down payment or the security of locking in your purchase price. However, not every agreement includes these benefits — so be sure to ask the seller specifically what’s included. Some agreements do not apply any portion of the rent to a future purchase, and not all sellers offer fair terms. This is where working with a reputable company and consulting a real estate professional can really protect you and help you make an informed decision.
As well, there’s the lease option portion of the agreement, which allows you to buy the house at the end of the rental term. This is built into the cost of rent and, in some cases, a portion of your monthly rent will be applied to a down payment on the home. (Check with the landlord because this is not always the case).
Example: You rent a house for $1,000 even though other houses in the area rent for $900. This extra $100, though, is applied to your down payment and accumulates month by month for 3 years until you are ready to purchase the house.
Important: these vary from one rent to own seller to the next, so make sure you talk to the seller about how the costs of rent to own housing in Milwaukee when you’re looking to buy.
While it’s possible that in some cases you may pay slightly more to rent to own a home each month, the savings in the long term could be significant. This is because many sellers will set a predetermined price on the house, locking in protection against housing market fluctuations.
Example: Let’s say you agree to a rent to own contract that gives you the option to purchase a home for $200,000 at the end of a three-year rental term. If the local housing market becomes highly competitive during that time and similar homes are selling for $300,000, you could potentially save $100,000 because your purchase price was locked in early.
That said, the market doesn’t always go up — it can fluctuate. If home prices fall instead, you might end up paying more than the market value. That’s why it’s essential to assess the property carefully and understand how the agreement handles market changes.
Rent to own — it’s a great new way that families are getting their own piece of the American Dream even when circumstances have prevented them from doing so in the past.