Buying a home on a single income can be a struggle, especially as home prices continue to rise. So unmarried people are now joining forces with (not legally bound) romantic partners, friends, extended family and even roommates to purchase homes.
This unconventional partnership arrangement has been gaining popularity in recent years — a new Realtor.com survey found that 31% of Americans — and 41% of Americans ages 18 to 34 — have bought a home with someone they aren’t married to. And 55% of Americans — and 68% of 18- to 34-year-olds — would consider it.
If you fall into the latter camp, here’s everything you need to know about buying property with someone who isn’t your spouse.
What To Discuss With Your Co-Buying Partner
“If you’re considering buying a home with a friend, family member or significant other, you’re going to want to have some serious conversations with your buying partner first,” said Rachel Stults, managing editor at Realtor.com and co-host of the “House Party” podcast. “After all, this is likely the biggest financial decision of your life, and you want to make sure you’re not getting in over your head — and that you’ve protected yourself and your investment if you do.”
Topics you should discuss include your finances, your tolerance for risk, how long you plan to stay in the home, and who will be responsible for upkeep and maintenance. You also need to discuss how much you’re each comfortable spending.
“This will affect what type of homes you look at, and how aggressive you feel you can be when it comes time to submit an offer,” Stults said. “And, of course, you’ll want to consider the fact that you might not live together forever — what happens if you break up, or someone gets a job in another state and needs to move?”
You also should discuss your priorities for the home you will buy. Stults recommends asking the following questions: “Do you want a fixer-upper or something turnkey? How much do you care about a backyard space or having a pool? And where do you want to live? Do you need to live somewhere close to a city for an easy commute, or can you search for a home farther out of town?”
How Homebuying With a Co-Buyer Is Different Than Buying With a Spouse (or Solo)
The homebuying process can be complex, and doing it with a non-spouse can make things a bit more complicated.
“The biggest difference comes down to the legalities of it all,” Stults said. “If you’re in a long-term relationship, you may have already discussed your financial histories. But if not, it’s time to talk about your credit history, debt and budgeting style. That’s because even if you’re applying for a mortgage together, you’re going to be evaluated by the lender as individuals.”
Banks will use the lower credit score of the two individuals, and that will impact your mortgage rate and how much you’re approved to borrow, she explained.
“If one of you has a low credit score, you might want to consider having only the person with better credit apply for the loan,” Stults continued. “But know that in doing so, you’ll have to forfeit including your partner’s salary in your assets, which might weaken your mortgage application. And two incomes are typically better than one when it comes to applying for a loan. You’ll also want to set up firm rules around who pays for what, and what happens if the relationship goes south.”
How To Legally Protect Yourself
Your co-buying situation may not be a permanent one, so it’s important to protect yourself in the event you break up with your partner or want to move out for another reason. Stults recommends consulting with a real estate lawyer before you even start house hunting.
“Contracts aren’t very sexy, but you’ll definitely want one to help avoid potential disagreements that could drain your energy and your wallet,” Stults said. “Connect with a real estate lawyer and draw up a legally binding contract that spells out things like what each person contributes to the down payment, and what each of you will pay toward the mortgage, taxes, utilities and maintenance. And, most importantly, make sure the agreement covers what happens if you break up. Can one of you buy the other one out?”
You’ll also want to discuss how to best approach the home’s title, which lays out each partner’s legal rights and ownership, and determines what happens to the home if one partner dies, she said.
“The only time you’d want to put just one person on the title is if that person will retain 100% equity of the property — which might make sense if that person is exclusively shouldering the mortgage and other costs of owning the home,” Stults said. “A ‘joint tenant’ agreement makes sense if you’re going in 50-50. If one person dies, the other automatically inherits the other’s stake and owns the entire property. There’s also an option called ‘tenants in common’ — this stipulates that if one person dies, ownership will not automatically transfer to the other homeowner unless that person is named in the will. Instead, the deceased owner’s heirs will inherit those shares. This can be a good choice if one or both partners have kids or family from a previous marriage to whom they want to pass on the property if they die.”
Other Co-Buying Tips
Stults recommends utilizing tools that make it easy to search for properties with a co-buyer, such as Realtor.com’s “Collaborate & Share” feature.
“Co-buyers can keep track of homes they’re interested in and their preferences with the new feature, which helps streamline and simplify the process of finding the perfect home with help from a partner, family or friends,” she said. “It allows buyers to organize their home search and get feedback from people they trust.”
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