A home is often the largest purchase people make in their lifetime, and it can be tough to decide whether to go it alone or with a partner. It’s not always easy to find someone who understands your priorities and lifestyle as well as you do, so choosing the right co-purchaser can really make things easier if you don’t want to buy the house solo. However, there are some important things to know before making that decision, such as these seven tips for buying a house with a partner.
1) Agree On Financing & Applying For A Mortgage
Before taking out a mortgage, it’s important to communicate with your partner about the parameters of your finances and what you’re comfortable financing. One important step of this process is for each of you to review your credit scores, monthly debt service, and any other factors that might affect your ability to cover housing expenses. After that, figure out how house you can afford.
With most lenders, most mortgages are available to people who aren’t married or partnered to the person getting the mortgage, which means that the process of applying for a mortgage without being married or partnered doesn’t look much different than when you are. For instance, as long as you’re part of a couple, as friends, or as siblings, the process of applying for a mortgage as a non-married or partnered person should look and feel the same as when you are. From the perspective of the lender, it’s the numbers that count.
Both of you will apply as borrowers and the lender will get your three credit scores from each credit bureau and go with the lower median.
To qualify for a conventional mortgage, you’ll need to have a FICO score of at least 620, though other types of loans are available to buyers with lower scores. You may also want to aim for a front-end debt-to-income ratio below 25%.
2) Make Sure You’re On The Same Page About Splitting Costs & Finances
Although splitting expenses evenly at 50/50 might seem like a straightforward way to share responsibilities, you can’t always trust people to understand their fair share. Take care of details like who will pay property taxes, homeowner’s association fees, insurance premiums, and upkeep costs before you purchase a home. In addition, think about how you’ll divide utilities, internet, cable, and other shared household costs.
Jointly pooling your costs could be easier if you open a joint bank account specifically for those expenses and maintain one account for mortgage payments and other regular costs. Not only is it a great way to simplify paying bills, but you can also set up an automatic payment option so your bills are never late.
Before taking out a mortgage on a home, it’s important to make sure that you and your co-borrower are fully understanding each other’s financial situation.
If you’re in the process of buying a home with a partner and you haven’t discussed money yet, this needs to be remedied as soon as possible (ASAP). You shouldn’t even start browsing Zillow or Redfin until you’re aware of each other’s debts, incomes, and credit scores.
To avoid any future arguments and headaches, it would be a good idea to check whether or not your spending habits align. Once you make such a big purchase with someone else, the behavior of both parties will be analyzed in depth.
How will you deal with the conflict if you want to replace the roof but your partner doesn’t have the money? Getting on the same page about finances is an essential first step.
Purchasing a house with someone you’re not married to can be just as difficult as with someone you are married to in the modern age.
The only way to do things painlessly is to keep talking, have a meeting with the mortgage company, and write things down.
3) Understand The Different Types Of Ownership Interest & Title
A deed is a formal written document that certifies that a property has been transferred to a new owner. When the buyer is the only one buying, the buyer’s name will be on the deed as the sole owner. Purchasing property with more than one person means that they must split ownership.
Typically, a title consists of property details, which tell you who owns it, and the document of transfer, a deed. Regardless of who has ownership and possession of the property, as long as the loan is being paid off, the lender will retain title to it. There are a variety of ways for an individual or multiple owners to have a stake in a property.
These include:
4) Draft A Contract
To ensure fairness, be sure to put everything you purchase into writing, a document often called a cohabitation agreement or a no-nup (as opposed to a prenup).
Your agreement should detail what expenses you’re each responsible for and what will happen in the event of unexpected life circumstances, such as death, breakup, or loss of income. Additionally, if one person is providing the down payment, the contract should specify how he or she should be reimbursed.
Below are some important questions to address: What would happen if one of you loses his or her job? What should you do if you break up and one or both of you wants to stay in the house? Can one party buy the other out and if so, how long should they do so? How should we go about dividing up all the furnishings within the home?
If you want the agreement to be legally enforceable, it may be wise to consult a real estate attorney. Whatever you do, try to work through this situation before you end up arguing. If you end up going to court, you might incur a pile of legal fees.
5) What To Consider Before Buying A Home With A Partner
Regardless of how solid your relationship is, there are always potential problems to take into consideration when you’re buying a house with someone you’re not married to.
Protect your credit (and shelter) by ensuring that you are not the only one on the mortgage if your partner is unable or unwilling to contribute to payments. Neither of you is more liable than the other; if you’re unable to afford payments without their help, you could risk foreclosure, which would cost you your home and have significant consequences for your credit scores.
In order to remove a person’s name from a joint loan, you will need to refinance. Even if you move out, your name will remain on the mortgage. Even if the mortgage still appears on your credit reports, your credit scores may not be affected because if the other owner of the house fails to make payments, the delinquency may affect your cohabitation agreement. In that case, it might be a good idea to specify that the house will be refinanced in the event of a breakup. it’s worth remembering that the other co-owner will need to qualify for the entire loan on their own.
Because only one person is eligible for the mortgage interest tax deduction, it will either be the homeowner or the spouse filing taxes jointly that can deduct the mortgage interest from their tax return. This does not apply to those who plan to itemize, but only to those who will not.
6) What Happens If You & Your Partner Split
Generally, if you don’t have a marriage contract and have split from your housemate, then it really just depends on what is specified in the property title and whether there are any other agreements, like a cohabitation agreement.
For example, if you and your former partner jointly own the property as joint tenants, either of you may force the sale of the property without the consent of the other. If, however, only one of you is on the deed, the other partner may not have any legal rights.
In order to avoid any confusion or conflict after a breakup, it’s best to include details about what will happen to the house in your pre-purchase cohabitation agreement. Although it’s never easy to consider the end of a relationship, it will give you peace of mind and save you money in the long run.
Different states will handle an ownership dispute between unmarried partners differently, either ordering the co-owners to sell the property, awarding a right of ownership to one of the partners, or dividing the property among the partners.
7) Get Legal Advice From A Professional When Buying A House With A Partner
Joint ownership of a home presents many challenges. In particular, when a lot of money is tied up in a property purchase, it is worth consulting with an attorney.
Your attorney will be able to help you draw up contracts that specify what the rights and responsibilities are for each person when it comes to living there or selling the property. It’s also a good idea to have these conversations as soon as possible – not after one party has made all the decisions without input from others.
Final Remarks: 7 Tips For Buying A Home With A Partner
Buying a home with a partner can be incredibly exciting. However, it is also very important to be sure that both of you are aware of what you are getting into—and be ready to deal with the challenges of co-owning a home. If you’re thinking about buying a home with someone else, here are some things to consider: Talk about your goals and priorities. It’s important to discuss every detail and consult with a lawyer if you don’t understand the legalities of purchasing a house with a partner.
