Are you thinking of buying a home with someone you aren’t married to yet? Maybe you are taking things slow or you just don’t have plans to get married. Whatever the case may be, there are ways to make homeownership possible together even if nuptials aren’t in your near future.
Keep reading for helpful tips on how to make the process as easy as possible.
Learn About Each Other’s Credit
You might be head over heels in love with your partner, but that doesn’t mean you know about their finances. If you are thinking about buying a home together, it’s time to get honest with one another. Talk about your credit history. Make sure that you disclose any issues you’ve had, such as bankruptcies, foreclosures, or judgments. You’ll also want to disclose what you have in your bank account. Have you been saving up to buy a home or do you need down payment assistance?
Once you have a general idea about how your credit histories and bank accounts align, you can decide together who will apply for the mortgage. In an ideal situation, you’ll both go on the loan and therefore, the title. But, it depends on what each of you brings to the table.
Come to an Agreement
Once you disclose your financial habits to one another, you have to have an agreement between the two of you. This doesn’t mean a verbal agreement either. You’ll need a signed legal document that shows the rights of both buyers. This way if you do break up in the future, there isn’t any question about what will happen with the home.
The agreement should cover the following:
- What will happen to the home if you break up?
- How will you split the mortgage payment?
- How will you split the cost of utilities?
These questions can get you started on topics to cover in your homeownership agreement. The most important topic is what will happen to the home if you break up. Will one of you take possession of the home? If so, that person will need to be able to refinance the home into their own name, taking the other co-owner off the mortgage and title. Of course, there will probably need to be some type of financial compensation for the owner that is leaving the home, which should also be covered in the agreement.
Figure Out How to Hold Title
When you buy a home, you will hold title to the home. There are different ways that you can hold the title, which is usually self-explanatory when you are married. If you aren’t married, you have some choices:
- Sole ownership – If one person will hold the mortgage because the other doesn’t qualify, sole ownership could be an option. It’s not recommended, though, because if you split up, the partner that wasn’t on the title has no legal recourse regarding ownership in the home. In other words, he/she could walk away empty handed.
- Joint ownership – This is the typical type of ownership for married couples. If one partner dies, their 50% of the home is directly given to their spouse. The spouse now owns 100% of the home. Nothing automatically goes to any heirs. Issues may arise if you break up, though. Legally, the person that stays must buy the other partner out. This could result in legal battles, especially if the spouse that is staying refuses to buy their ex-partner’s share of the home.
- Tenants in common – This is a common way for non-married couples to own a home. It allows two owners to have unequal ownership in a home, which is good if you want to customize ownership. The issue with this method is the way the home is passed on should you pass away. Your partner doesn’t automatically receive your part of ownership unless it’s stated in a will.
It’s important that you talk to a real estate lawyer about how to hold title to make sure you protect everyone involved in the process.
Make a List of Features
Once you get all of the ‘stressful’ details out of the way, it’s time to focus on the home. Before you start shopping, it’s a good idea to make a list of desired features.
We like to make a list of needs and wants. This way you can compare lists and come up with a master list of what you need on a home and which features may be a little more negotiable. This step can really help sidestep ugly arguments while you shop for a home. Shopping for a home is stressful enough, being on the same page is important to make it go as seamless as possible.
It is possible to buy a home with someone you aren’t married to, but you have to make sure you have the right protections. We recommend that you work with a real estate agent and real estate attorney to make sure you cover all of your bases.