What Are the Requirements for Rent to Own?

Rent to Own homes don't have to be small.

This is a 7,500 Sq foot Rent to Own home we've represented.

We're often asked what the requirements are for Rent to Own. Every situation is different, every home is different, and of course, everything is negotiable -- but here are some basic criteria:

Challenged Credit is OK

Many people who would like to own a home feel that they can't because their credit score is not high enough. But with Rent to Own, you have the opportunity to begin earning equity or paying down the purchase price of a home while you're renting -- even before your credit score is high enough for you to qualify for a mortgage. Rent to Own is the perfect option for someone who is rebuilding their credit.

Income Three Times the Monthly Payment

Typically you'll need income at least three times the monthly rent payment to qualify. This is true whether you're doing Rent to Own, or just a straight rental. Most landlords will not accept an applicant who does not have income of at least three times the monthly rent or mortgage payment. The same goes for banks and mortgage lenders -- they will only lend you money at approximately this same multiplier of three times your income.

As experienced landlords and property managers, we know there is a very good reason for this. In general, when the rent or mortgage payment is more than one-third the household income, and things come up in life, you start falling behind in payments -- credit cards, car loans, utility bills, rent... Believe it: One-third is the limit for your housing expenses or you'll soon end up in financial trouble.

The Option Fee

This Rent to Own home in Bolingbrook was purchased
through our program.

The option fee is the money you pay to lock in the option to purchase the home, and usually you're locking in an agreed upon price right from the start. Usually, you're also earning the right to build up rent credit toward the purchase price of the home. Are you getting rent credit toward the purchase where you're renting now?

Option fees give you the sole right to either purchase the home, or not, during the option period, which usually lasts one or two years. Option periods can often be extended if necessary. During the option period, the homeowner cannot sell the home to anyone else -- you are controlling the destiny of that piece of property -- you have paid for the exclusive right to purchase the home during that period. For this reason, option fees are non-refundable.

Typical option fees are in the 3 to 5 percent range (of the purchase price of the home). So for a $100,000 home, you should expect to pay approximately $5,000 in option fee, in addition to your first month's rent, before moving in. For a home in the $150,000 range, budget approximately $7,500 for option fee. For a $200,000 home, plan on approximately $10,000. You get the idea.

Of course every home is different, and every situation is different. If you're going to do a Rent to Own on a home, you should expect to make a fair and reasonable offer of option money. If you've only got the first month's rent, and an equal amount in addition to that (as in, one month's security deposit), you're probably not ready to move toward home ownership just yet.

These Are The Basics

These are the basic requirements of Rent to Own, although some other criteria can come into play. Most sellers will not enter into a Rent to Own contract -- or any rental contract -- if you've had an eviction, or if a landlord has a judgement against you. This will show up on your credit report.

Also, if you've just started a new job and don't have a track history of solid employment, you might need to wait until you are more "seasoned" at your job.

Again, every home is different, every situation is different, and everything is negotiable.

If You're Ready to Rent to Own

We always have Rent to Own homes available.

If you're ready to Rent to Own, call or text Adam at 630-697-4500 or email Adam@MyHappyHomeSolutions.com.

Homes for Rent in Woodridge, Downers Grove, Bolingbrook Area

Rentals come and go fairly quickly in nice Chicago suburbs such as Woodridge, Downers Grove, or Bolingbrook.

We can show you any of these homes and help you sign a lease to rent them. Call Adam at 630-697-4500 or email Adam@MyHappyHomeSolutions.com 

Here are a few available properties right now, as of 12/4/2015

Woodridge

There are 19 homes for rent through the MLS in Woodridge, including condos from $950 to executive homes in the $3,500 range.

Downers Grove

There are 29 homes for rent through the MLS in Downers Grove, including a one-bedroom apartment for $790 to homes of 5,000+ square feet in the $6,000 range.

Bolingbrook

There are 42 homes for rent through the MLS in Bolingbrook, from condos from $995 to 4 bedroom homes in the $2,800 range.

How Rent to Own Homes Work

A Rent to Own home in Woodridge, IL

Risks and Benefits to Buyers

For many people, a home will be the biggest purchase they ever make. Both buyers and sellers should carefully weigh their options before agreeing to any binding contract. Let's look at some advantages and disadvantages of a Rent to Own agreement for buyers:

• Buyers can move toward home ownership and exit the rental “Rat Trap” even before they can qualify to buy a home in a traditional sale.
• Buyers can lock in the price of the home a year or more ahead of their actual purchase. If the market goes up, the buyer earns instant equity in the home, sometimes significant amounts of equity.
• Buyers have time to build income and repair their credit history as they rent the house.
• Depending on the agreement, renters can walk away if they find something seriously wrong with the house. Although the renter will lose the option fee and the rent credit they earned toward the purchase price, that amount will be much less than if the renter had bought the house outright and tried to leave it later.
• Buyers still have to pay the upfront option fee. It's usually a percentage of the agreed-upon selling price of the home and is often thousands of dollars. Although this money will go to the down payment should the renter decide to buy the house, it can still be difficult to accumulate that much money before renting.
• The buyer can earn "Rent Credit" toward the purchase price while they're renting the home. This credit can substantially reduce the amount they eventually borrow when they finalize the purchase of the home. 
• At the end of the rental period, the buyer still may not be able to buy the home for the same reasons they couldn't buy at the start of the lease: bad credit, insufficient down payment, not enough income. Usually, a Rent to Own contract can be extended to give the buyer more time to get qualified for a mortgage so that they can complete the purchase of the home, but it is the buyer's responsibility to take steps toward that goal. This is why many Rent to Own agreements include clauses about working with a credit repair specialist or mortgage broker chosen by the seller.
• Minor repairs that were handled by the landlord in a rented apartment often become the responsibility of the new buyer, even during the rental period. Typically the landlord will still be responsible for major repairs -- such as a leaky roof or installing a new furnace -- but the tenant-buyer will often be responsible for taking care of minor repairs. Whether it means climbing on a ladder to unclog the gutters or having to pay for a new washing machine when the original washer breaks, the renter has to take care of it.



Many Rent to Own homes are newly rehabbed

• Buyers can experience “Pride of Ownership.” This is not just another rental for you. You are on your way to owning your own home!

We have Rent to Own homes available now throughout the Chicago area. Call Adam at 630-697-4500 or email AdamRE2014@Gmail.com to find out more. You can see pictures, videos, and more information about the homes we have available for Rent, Rent to Own, or for Sale on our website at www.MyHappyHomeSolutions.com. Subscribe to our list to find out about Rent to Own homes before the general public even knows they’re available!

                                                                                     -- from http://home.howstuffworks.com/real-estate

llinois home prices climbed in October; Sales lower amid tighter inventory

SPRINGFIELD, Ill. — The Illinois statewide median price experienced a 6.3 percent annual gain in October. Sales declined slightly as available housing inventory tightened, according to the Illinois Association of REALTORS®.

Statewide home sales (including single-family homes and condominiums) in October 2015 totaled 12,881 homes sold, down 2.8 percent from October 2014 when 13,253 homes sold.

The statewide median price in October 2015 rose to $168,000, a 6.3 percent gain over October 2014’s statewide median price of $158,000. The median is a typical market price where half the homes sold for more and half sold for less.

"A substantial decrease in the number of homes on the market is having an impact on sales," said Mike Drews, GRI, president of the Illinois Association of REALTORS® and a broker-associate with Charles B. Doss & Co. in Aurora. "While there typically is a drop-off in inventory this time of year as potential sellers become immersed in holiday activities, the decline this month was particularly steep. The result is strong median price gains and a decrease in the number of days to sell a home."

The time it took to sell a home in October averaged 68 days statewide, down from 74 days a year ago. Available housing inventory remained tight with 68,302 homes for sale, a 10.4 percent decline from October 2014 when there were 76,205 homes.

The monthly average commitment rate for a 30-year, fixed-rate mortgage for the North Central Region was 3.78 percent in October 2015, down from 3.90 percent the previous month, according to the Federal Home Loan Mortgage Corp. In October 2014 it averaged 4.03 percent.

In the nine-county Chicago Primary Metropolitan Statistical Area, home sales (single family and condominiums) in October 2015 totaled 9,155, a decrease of 2.0 percent from the 9,344 sales in October 2014. The median price in October in the Chicago PMSA was $200,000, up 8.1 percent from $185,000 in October 2014.

“The housing market appears to have returned to its longer-run annual pattern,” said Geoffrey J.D. Hewings, director of the Regional Economics Applications Laboratory at the University of Illinois.  “Distressed housing sales have declined to levels last seen in 2009 as prices continue to move upwards at modest rates.  The consumer sentiment indices are once again moving in opposite directions suggesting that there is uncertainty in the way consumers view future prospects.”

According to the data, thirty-seven (37) Illinois counties reported sales gains for October 2015 over previous-year numbers, including Rock Island County, up 18.3 percent with 142 units sold; Madison County, up 10.6 percent with 302 units sold; Sangamon County, up 7.1 percent with 257 units sold; Will County, up 3.1 percent with 925 units sold; and DuPage County, up 1.5 percent with 1,134 units sold.

Fifty-five (55) counties recorded median price gains in October 2015 over previous-year numbers, including Lake County, up 20.3 percent to $216,500; Peoria County, up 14.9 percent to $134,450; and Cook County, up 5.4 percent to $200,350.

The city of Chicago saw sales of 2,109 homes in October 2015, down 0.9 percent from last year when 2,128 homes were sold. The median price of a home in Chicago was $240,000, up 1.7 percent over October 2014 when the median price was $236,000.

"The start of the final quarter of the year was marked by plunging inventories, and that's having a corresponding impact on sales and prices," said Dan Wagner, president of the Chicago Association of REALTORS® and senior vice president for government relations for the Inland Real Estate Group. "What's crystal clear is there is still very keen interest in buying this late in the selling season, and there's no indication that the zeal to own a home is diminishing."

Sales and price information is generated by Multiple Listing Service closed sales reported by 29 participating Illinois REALTOR® local boards and associations including Midwest Real Estate Data LLC as of Nov. 7, 2015 for the period of Oct. 1 through Oct. 31. The Chicago PMSA, as defined by the U.S. Census Bureau, includes the counties of Cook, DeKalb, DuPage, Grundy, Kane, Kendall, Lake, McHenry and Will. (Note: Due to a technical difficulty with the multiple listing service upload, data for the Mid Valley Association of REALTORS® is not included in the October report.)

The Illinois Association of REALTORS® is a voluntary trade association whose 43,000 members are engaged in all facets of the real estate industry. In addition to serving the professional needs of its members, the Illinois Association of REALTORS® works to protect the rights of private property owners in the state by recommending and promoting legislation to safeguard and advance the interest of real property ownership.

Find Illinois housing stats, data and the University of Illinois REAL forecast at www.illinoisrealtor.org/marketstats.

The Housing Market – Forecast and Future Condition

The Housing Market – Forecast and Future Condition

The median price forecast indicates moderate annual growth in both Illinois and the Chicago PMSA for November, December and January. In Illinois, the median price is forecast to rise by 5.8% in November, 7.4% in December and 4.3% in January. For the Chicago PMSA, the comparable figures are 7.7% in November, 9.5% in December and 8.3% in January. (Reference: Forecast for November 2015 report table.)

As a complement to the median housing price index (HPI), the REAL HPI (4) also forecasts moderate growth for Illinois and the Chicago PMSA. In Illinois, the REAL HPI (Jan 2008=1) is forecast to rise by 6.8% in November, 9.0% in December and 3.2% in January. The comparable figures for the Chicago PMSA are 5.8% in November, 8.1% in December and 3.4% in January. REAL HPI takes housing characteristics into account and constructs comparable “baskets” of homes for each month. (Reference: Housing Price Index)

The sales forecast for November, December, 2015 and January 2016 suggests negative and positive growth respectively on the monthly and yearly basis. Annually for Illinois, the three-month average forecasts point to a change between 4.1% and 4.8%; for the Chicago PMSA, the change will range from 5.4% to 6.3%. On a monthly basis, the three-month average sales are forecast to decrease by 12.0%-14.0% for Illinois and 11.6%-13.6% for the Chicago PMSA. (Reference: Forecast for November 2015 report table)

The pending home sales index (5) is a leading indicator based on contract signings. This October, homes put under contract were more than last year but less than last month. The pending home sales index is 135.5 (2008=100) in Illinois, down 12.7% from last month and up 1.1% from a year ago. In the Chicago PMSA, the comparable figure is 159.1, down 9.6% from a month ago and 7.1% from a year ago. (Reference: Illinois and Chicago PMSA Pending Home Sales Index figure)

In October 2015, 2,189 houses were newly filed for foreclosure in the Chicago PMSA (down 37.7% and up 29.6% respectively from a year and a month ago). 1,476 foreclosures were completed (6) (down 52.9% and 7.0% respectively from a year and a month ago). As of October 2015, there are 36,079 homes at some stage of foreclosure — the foreclosure inventory. The average inventory change rates (7) were 1.3% in the past 6 months, 0.9% in the last 12 months and -2.0% in the last 24 months. Given the 24-month rate of change, the foreclosure inventory would return to the pre-bubble levels (8) by November 2020.

According to the positive 6-month rate and almost unchanged 12-month rate, the inventory would increase (Reference: Chicago PMSA Foreclosure Activity and Inventory figures).

4 REAL HPI was developed by Esteban Lopez and Minshu Du. Contact us for further details.
5 The base level (100) of pending home sales is the average pending home sales of year 2008. 
6 Including estimated foreclosure completions that are missing in the data. 
7 The range of months used for calculating the average change rates are modified from the 6/12/24 months’ scenarios to 3/6/9 months’ scenarios since Aug 2014. 
8 Average foreclosure inventory from 1997-2005 Housing Forecast October 2015 5 

How To Repair Your Credit and Improve Your FICO Scores

How to repair my credit and improve my FICO Scores

It's important to note that repairing bad credit is a bit like losing weight: It takes time and there is no quick way to fix a credit score. In fact, out of all of the ways to improve a credit score, quick-fix efforts are the most likely to backfire, so beware of any advice that claims to improve your credit score fast. The best advice for rebuilding credit is to manage it responsibly over time. If you haven't done that, then you need to repair your credit history before you see credit score improvement. The tips below will help you do that. They are divided up into categories based on the data used to calculate your credit score.

3 Important Things You Can Do Right Now

Check Your Credit Report – Credit score repair begins with your credit report. If you haven't already, request a free copy of your credit report and check it for errors. Your credit report contains the data used to calculate your score and it may contain errors. In particular, check to make sure that there are no late payments incorrectly listed for any of your accounts and that the amounts owed for each of your open accounts is correct. If you find errors on any of your reports, dispute them with the credit bureau.

Read more about Disputing Errors on Your Credit Report

Setup Payment Reminders – Making your credit payments on time is one of the biggest contributing factors to your credit scores. Some banks offer payment reminders through their online banking portals that can send you an email or text message reminding you when a payment is due. You could also consider enrolling in automatic payments through your credit card and loan providers to have payments automatically debited from your bank account, but this only makes the minimum payment on your credit cards and does not help instill a sense of money management.

Reduce the Amount of Debt You Owe – This is easier said than done, but reducing the amount that you owe is going to be a far more satisfying achievement than improving your credit score. The first thing you need to do is stop using your credit cards. Use your credit report to make a list of all of your accounts and then go online or check recent statements to determine how much you owe on each account and what interest rate they are charging you. Come up with a payment plan that puts most of your available budget for debt payments towards the highest interest cards first, while maintaining minimum payments on your other accounts.

More Tips on How to Fix a Credit Score & Maintain Good Credit

Payment History Tips

Contributing 35% to a FICO Score calculation, this category has the greatest effect on improving your scores, but past problems like missed or late payments are not easily fixed.

1. Pay your bills on time.

Delinquent payments, even if only a few days late, and collections can have a major negative impact on your FICO Scores.

2. If you have missed payments, get current and stay current.

The longer you pay your bills on time after being late, the more your FICO Scores should increase. Older credit problems count for less, so poor credit performance won't haunt you forever. The impact of past credit problems on your FICO Scores fades as time passes and as recent good payment patterns show up on your credit report. And good FICO Scores weigh any credit problems against the positive information that says you're managing your credit well.

3. Be aware that paying off a collection account will not remove it from your credit report.

It will stay on your report for seven years.

4. If you are having trouble making ends meet, contact your creditors or see a legitimate credit counselor.

This won't rebuild your credit score immediately, but if you can begin to manage your credit and pay on time, your score should increase over time. And seeking assistance from a credit counseling service will not hurt your FICO Scores.

Amounts Owed Tips

This category contributes 30% to a FICO Score's calculation and can be easier to clean up than payment history, but that requires financial discipline and understanding the tips below.

1. Keep balances low on credit cards and other "revolving credit".

High outstanding debt can affect a credit score.

2. Pay off debt rather than moving it around.

The most effective way to improve your credit scores in this area is by paying down your revolving (credit cards) debt. In fact, owing the same amount but having fewer open accounts may lower your scores.

3. Don't close unused credit cards as a short-term strategy to raise your scores.

4. Don't open a number of new credit cards that you don't need, just to increase your available credit.

This approach could backfire and actually lower your credit scores.

Length of Credit History Tips

If you have been managing credit for a short time, don't open a lot of new accounts too rapidly.

New accounts will lower your average account age, which will have a larger effect on your scores if you don't have a lot of other credit information. Also, rapid account buildup can look risky if you are a new credit user.

New Credit Tips

1. Do your rate shopping for a given loan within a focused period of time.

FICO Scores distinguish between a search for a single loan and a search for many new credit lines, in part by the length of time over which inquiries occur.

2. Re-establish your credit history if you have had problems.

Opening new accounts responsibly and paying them off on time will raise your credit score in the long term.

3. Note that it's OK to request and check your own credit report.

This won't affect a score, as long as you order your credit report directly from the credit reporting agency or through an organization authorized to provide credit reports to consumers. One of the best places to get a free credit report is www.AnnualCreditReport.com, the site authorized by the U.S. government.

Types of Credit Use Tips

1. Apply for and open new credit accounts only as needed.

Don't open accounts just to have a better credit mix – it probably won't raise your credit score.

2. Have credit cards – but manage them responsibly.

In general, having credit cards and installment loans (and paying timely payments) will rebuild your credit scores. Someone with no credit cards, for example, tends to be higher risk than someone who has managed credit cards responsibly.

3. Note that closing an account doesn't make it go away.

A closed account will still show up on your credit report, and may be considered by a score.

Where Do You Go From Here?

To summarize, "fixing" a credit score is more about fixing errors in your credit history (if they exist) and then following the guidelines above to maintain consistent, good credit history. Raising your scores after a poor mark on your report or building credit for the first time will take patience and discipline.

-- from www.MyFICO.com

Millennials, Gen-Xers Choosing to Remain Renters

From Yahoo Main Street
By Ellen Chang May 29, 2015 11:57 PM

Although James Crosby is getting married later this year to his college sweetheart, the financial analyst said they do not have plans to buy a home in Atlanta in the next few years.

While Crosby, who is 25, said he loathes paying rent and not building up equity in a home, renting has its benefits. Right now, it’s easy for him to budget for rent in an apartment, because the amount he pays each month is static and he will not be faced with any costly surprises such as repairing an air conditioner.

Like Crosby, fewer Americans are drawn to owning a home and more plan to keep renting as wages remain stagnant and home prices have risen. A recent Gallup poll found that many people are content to be renters with 41% of non-homeowners who said they do not plan to purchase a home in "the foreseeable future." The gap is widening since only one of three people agreed with this sentiment two years ago. The percentage of people who own homes has dropped to 61%, which is the lowest figure in almost 15 years, the poll revealed.

Tepid Economy Plays a Role

Both the desire and ability to buy a house is waning among some individuals, because “the economy has kept young people from forming their own households as quickly as they had before the financial crisis,” said David Reiss, a law professor at Brooklyn Law School.

Some Gen X-ers and Millennials are also living at home longer than previous generations and wind up deferring home ownership. The weak and soft job markets have impacted Millennials who are also faced with carrying a heavy debt load from having to finance their undergraduate degrees.

“I would predict that if the economy warms up for a reasonable time, expectations about home ownership are likely to change quickly,” Reiss said.

Until wages increase substantially, many people will not be able to buy their first home. As the prices of houses have increased, income levels have “not kept up with the changes, particularly in the last two years,” said Ron Throupe, an associate professor in the Daniels College of Business at the University of Denver.

“As buyers see a gap in equity needed versus what they’ve saved to buy, their expectation to buy wanes," he said.

Yet there is hope that the current trend will reverse itself, said Throupe.

“There are young adults choosing urban apartment living, but that is likely a delay and not a ‘never’ for home ownership,” he said.

While Crosby said he faces pressure to buy a home in order to fulfill the great American dream, he said owning a home “is not as easy as people think it is” and comes with many other costs such as insurance and property taxes. The couple, with both members eager to advance in their current positions, plans to live in a rented apartment for a few years so that the two can be mobile if their career paths demand it. Once they have reached a certain goal and will be residing in a city for at least seven years, the Atlanta native said then he and his wife-to-be will be ready to commit to paying for a mortgage.

The perils of having a mortgage are more apparent to Americans now, especially for people who “do not feel secure about their employment prospects,” said Don Lawby, the president of Real Property Management, a Salt Lake City-based property management company. As the number of people searching for jobs declines, the trend could shift, he said.

In the aftermath of the recession, many people witnessed the severe impact on home prices, which demonstrated how even though values can rise for many years, the likelihood that they could also decline was not minuscule. Other people decided that owning a home “no longer makes sense to them,” said Lawby.

“The fact that housing prices can drop became real,” he said. “The realization that one could lose money on a house scarred and scared many people.”

Rent-Vs.-Mortgage Gap Widens

In many metropolitan areas, renting is still more affordable than owning a home, especially for people who lack savings for a down payment, said Philip Martin, vice president of market research at Chicago-based Waterton Associates, whose portfolio comprises of 18,000 rental units.

When the cost of buying a home exceeds the cost of renting one, people will gravitate toward waiting on making a purchase, said Lawby. The rental rates for single-family homes have jumped 5.5% over last year, according to Real Property Management’s report.

“Owning a home is again more expensive than renting,” Lawby said. “As rents increase and housing prices stall, the costs differential will eventually merge once again. At that point, home ownership will begin to increase.”

Even when people are ready to purchase a house, many cities and neighborhoods lack enough affordable housing. Many of the houses are either “too costly and more targeted to the ‘move-up’ buyer” and cannot compete with apartments which are less expensive, in better locations and offer many amenities, Martin said. The fact that fewer new homes are being built in moderate price ranges are also a deterrent.

Low Mortgage Rates Are a Benefit

Despite low mortgage rates, many people still are not interested in purchasing a home even though “now is a great time to be in the market” because the prices of homes are predicted to continue their upward climb, said Josh Moffitt, president of Atlanta-based Silverton Mortgage Specialists.

The perception that it is difficult to get approved for a mortgage without a great credit score is not true, he said.

[ Click to compare mortgage interest rates from multiple lenders now.]

“Potential buyers still feel like they must have perfect credit histories and be able to put 20% down,” Moffitt said. “Now there are more programs that are really geared toward lower credit scores,especially from the FHA, which only require a 3.5% down payment. People who have rebuilt their credit have a lot of options.”

Over the next few years, Crosby also wants to build his credit score so he can obtain a good interest rate for his mortgage. Although he doesn’t have any debt, Crosby also cannot show a lender that he has a history of consistently paying bills on time such as a car payment. By then he also hopes that the housing market has stabilized.

“It’s about trying to find the best value and the cost of a home has shot up over the past few years,” he said. “I don’t want to buy at the highest price.”