It’s common for unmarried couples to want to buy a home. Married or not, it is possible. Buying a home is one of the most significant financial decisions of your life, so it’s important to understand the details of buying a house as a couple.
Here are four things you should plan for when buying a home as an unmarried couple:
Thoroughly Discuss Your Finances
It’s very beneficial for couples to discuss each other’s financial situations in detail. Before meeting with a lender or realtor, it’s imperative that you review each other’s credit score, income, debts, and financial history. Most differences between your finances can be accommodated, so it’s important to know the details of each other’s finances in case any surprises arise. This step will prevent any conflict during or after the mortgage process.
Determine Your Costs and How to Split Them
It’s essential to have a system in place to split bills and other expenses. This is even more critical when buying a home. First, figure out how to divide the down payment and closing costs when purchasing the home. Then, discuss and decide how to handle the monthly mortgage payments, utilities, and other costs associated with owning a home (emergency repairs, maintenance, taxes, etc.).
You may want to work this out together with a real estate attorney and get the details in writing to keep things on record. If you don’t already have a joint bank account, it may be a good idea to at least create one for funding the home while keeping your other funds separate.
Understand Your Ownership Options
You may not have known that there are options for the purchase of your home. Deciding on which ownership option suits you may be one of the most important decisions in the process. Your home’s title can be configured in a few different ways, depending on which state you live in:
Joint Tenancy: You both equally own the property. Common between husbands and wives, joint tenancy allows one of you to inherit the property if something should happen to the other.
Tenancy in Common: You both own a specific percentage of the property. For example, you may own 40% of the property while your significant other owns the other 60%. If something happens to one of you, the ownership will transfer to whoever is denoted in a living will or trust. If there is no will or trust, ownership goes to the next of kin and not your significant other.
Sole Ownership: Some couples may find that it’s better just one of you to have full ownership of the home. If you have better credit than your significant other or are in a better place financially, this may work for you.
Create a Backup Plan
Sometimes things don’t work out as planned and, legally speaking, there are no protections in place for unmarried couples who co-own a home. We recommend creating a partnership agreement. Similar to a prenuptial agreement this will detail what happens to the home if you two split up. Written contracts are the best way to plan so we recommend you take any chance you get to draw up your agreements in writing.
Do you have questions or would you like to sit down for a complimentary no-obligation consultation? We are your Home Loan Experts, at your services. Give us a call 520-495-0222.