Unmarried couples Purchasing Homes
What You Need to Know About Buying a Home as an Unmarried Couple
Buying a home with a loved one is an exciting next step. However, home purchases between unmarried couples come with a few challenges. And since buying a home presents a significant financial investment and personal commitment, it’s important to know the challenges you may face before you sign on the dotted line.
HERE ARE FIVE THINGS TO PLAN FOR WHEN BUYING A HOME AS AN UNMARRIED COUPLE.
Have an Honest Talk About Finances
Even if you have already rented an apartment together and think you’re fairly familiar with your partner’s finances, it’s important to have a formal discussion about it. Make sure you talk about financial history, debt from credit cards, personal loans, school loans, or any other obligations.
FICO scores and income are other important details to know. Of course, if there are any financial factors that you kept private, this would be the time to share it. Once you begin the home loan application, all will come to light anyway –might as well be honest about it all now and start your home buying dreams on the right foot.
If it turns out that one of you has poor credit, as a couple, you may decide to work on repairing the credit before applying for a home loan. Likewise, as a couple, you might decide that the partner with good credit will apply on their own.
Decide How the House Payments will be Split
You may already have a system in place for deciding who pays which bill. However, a mortgage payment may change that. Besides, the mortgage payment, you also need to decide how to split the down-payment and closing costs. There’s also emergency house repairs and ongoing maintenance to consider.
After deciding, you may want to consider writing a plan with a real estate attorney. This will help to keep things in order as well as and help make sure that each partner holds up to their homeownership commitment.
Some couples find it helpful to have a joint bank account dedicated to home-related expenses while keeping their other funds separate.
Know Your Homeownership Options
Sharing the mortgage of the home does not automatically mean that each partner is on the title as well. Laws vary according to state but generally speaking, you’ll have three options when it comes to the title of the house.
- Joint Tenancy – Both partners own the property equally. In the case of death, the other partner inherits the other’s stake and owns the entire property.
- Tenancy In Common – Each own a specified percentage of the property. However, if something happens to one, the ownership interest transfer to whoever is specified in a living will or trust. If there is no will or trust, then goes to the next of kin — not the significant other.
- Sole Owner – It might make more sense for a single person to be on the title, especially if only one is on the mortgage. However, know that if you ’re paying for the home but aren’t listed on the title, it’s unlikely that you’ll able to deduct the mortgage interest on your taxes.
Consider the Future
Where do you see yourself in 3-5 years? Think you’ll move for a job opportunity? What about starting a family –do you see yourself having kids soon? These changes can change everything and should be part of your decision-making process when buying a home. Typically, it takes about 5 years to build equity so you’ll want to discuss plans with your partner before deciding on a specific house.
Have a Plan B
Unfortunately, sometimes things don’t turn out as you hope, and owning a home as a couple when you’re not a couple any longer can present some challenges We recommend drawing up a partnership agreement, similar to a prenup, to detail what happens to the home in the event of a split.
Remember, there are no legal protections between home purchases between unmarried couples. Avoid or at least minimize risk to each of you as a couple by going into the home purchase with a written agreement.
Despite the additional challenges, buying a home as a couple is an excellent investment for both of your futures! With some preparation and honest discussion, you and your partner will be prepared to take this next exciting step.
Whether married or unmarried, the home buying process begins the same way –getting pre-approved! Apply securely and quickly using our online application, and contact our office for more live assistance in buying a home as a couple.
Information provided by Victor Bals Team of Huron Valley Financial