Most couples used to get married before making any major financial decisions together. But today, one in four unmarried couples between 18 and 34 buy a house together, according to a survey by Coldwell Banker Real Estate.
There are plenty of good reasons for unmarried people to buy a house today, but buying a house outside of marriage can come with big risks. Unless you know how to avoid the potential pitfalls, locking in on a home with your unwed partner could be a costly mistake.
Check your home buying eligibility here (Apr 19th, 2024)
Getting your finances in order with your partner
Before you and your partner begin househunting, exchange personal finance information, including salaries, debt, and credit scores.
Not only will this information help you estimate how much house you can afford, but it will help to determine how much money each person can contribute to the down payment, closing costs, and monthly mortgage payments.
You also need to know upfront if your boyfriend or girlfriend has a low credit score.
If one applicant has a bad credit score, it may reduce the amount banks will lend and will also lead to less favorable rates and terms.
Also keep in mind that if your partner ever stops contributing to the mortgage, you’ll be liable as a co-signer to pay for the whole thing.
So not only is it good to know your significant other’s financial status to gauge how much home you can buy, it also makes sense to get a mortgage that you could pay off yourself if it comes to that.
Check your home buying eligibility here (Apr 19th, 2024)
Deciding how to “take title”
Once you and your partner create a budget and decide how to split the costs of buying and maintaining the house, consider how you will own the home, or “take title.”
Here are the three basic options:
- One person can hold the title as sole owner
- Both people can hold title as “joint tenants”
- Both of you can share title as “tenants in common”
You might be tempted to pay scant attention to this issue, but that could be a very expensive blunder.
Even if your relationship stands the test of time and you never break up, consider what would happen if one of you died. What would happen to the house and your investment?
The answers to those questions hinge on the ownership arrangement. If you aren’t careful, you could find yourself losing your home – even if you contributed thousands of dollars to the mortgage and other expenses.
Sole ownership
On its face, this seems like a bad option for unmarried couples — and it usually is.
If your partner’s name is the only one on the deed, he or she is the only legal owner. This means that your partner can sell the house (or bequeath it to someone else), and there’s nothing you can do about it.
Why take this route?
Often, it’s done when one partner’s credit is so bad that the couple would never qualify for a mortgage. Sometimes, a higher-income partner simply wants all the house-related tax deductions.
Fortunately, one person can take the title as sole owner and later add the other partner’s name to the deed. But before you do this, consult an experienced real estate lawyer. Officially adding the other partner’s name to the deed might allow your mortgage lender to call in the loan, and in some areas, you may have to pay transfer taxes and fees to add a name to the deed.
Joint tenancy
This arrangement is suitable when partners own equal shares of the house. (If the partners own unequal shares — 60/40 or 70/30, for example — you’ll want to be tenants in common.)
The biggest benefit of joint tenancy is that neither owner can sell the house without the other’s permission.
Also, if one joint tenant dies, the other automatically inherits that person’s share, even if the deceased left a will stating otherwise. This is known as “right of survivorship,” and some states even require that you add the phrase “with right of survivorship” to the agreement.
If one partner decides to sell their share in the house, however, the joint tenancy ends, and the new shareholder and you become tenants in common.
Tenants in common
This is the most common way for unmarried couples to take title. There are two reasons for this:
- The arrangement allows the partners to own an unequal share of the home.
- When one person dies, that partner’s share can be left to whomever the person wishes. In other words, the share doesn’t automatically go to the other tenant in common.
If you own unequal shares, though, be sure to “memorialize” the percentages in writing — in a property agreement, partnership document or cohabitation agreement.
Otherwise, the law will usually presume that you have a 50/50 ownership arrangement with your co-owner.
Keep in mind that not all relationships last forever. An ownership arrangement can help you be prepared, in case the relationship ends.
It’s also a great idea to consult with a real estate attorney before signing anything.
Check your home buying eligibility here (Apr 19th, 2024)
Questions to ask before buying a house with your boyfriend or girlfriend
If you want to buy a house with your partner before marriage, there are some questions to ask first. A few important ones include:
- What are the laws? Each state treats this situation differently. Look into the laws for your state to make sure you are comfortable before buying a home with your boyfriend or girlfriend.
- What documents should you have in place? You’ll likely need to draw up a cohabitation agreement that includes details about who owns what and an exit strategy if it becomes necessary.
- Who should be on the mortgage? In some cases, it makes sense for one partner to obtain the mortgage due to a better credit score or higher income. If you cannot qualify for a joint mortgage, consider how this would impact your homebuying plans.
- What happens in a breakup? No one wants to think about this. But it’s important to talk this possibility through.
- What happens if someone dies? Again, not a pleasant subject. But consider what should happen in this worst-case scenario.
- How should we split costs? Homeownership comes with plenty of expenses, such as maintenance and property tax. Talk about these costs before the bills start arriving. It might be helpful to set up a joint bank account specifically to cover home-related expenses.
Credit considerations when buying a house with a boyfriend or girlfriend
If you want to buy a home with your boyfriend or girlfriend, it is important to consider the realities of different credit scores. In some cases, partners with vastly different credit scores could benefit from just one partner applying for the mortgage. A borrower with a good credit score can unlock better mortgage rates and lower the overall expenses for the household.
If you have similar credit scores, then applying together for the mortgage is an option. But remember that both of your credit scores will be on the line.
What could go wrong if you buy a house with a boyfriend or girlfriend
Unfortunately, not all relationships last forever. The biggest risk of buying a house with an unmarried partner is the possibility of a breakup — without all of the legal protections that would come into play during a divorce.
Of course, there are horror stories out there. But there are also unmarried couples happily buying homes together that enjoy the experience for the long term.
What is a cohabitation agreement?
A cohabitation agreement is a contract between two parties that live together but aren’t married. The goal of this kind of agreement is to map out a legal plan for any issues that may come up. With a good cohabitation agreement in place, everyone knows exactly where they stand in terms of financial and legal rights.
What is typically included in a cohabitation agreement?
A cohabitation agreement often includes details about property division, inheritance, and other estate planning issues.
As you build this document, it should also consider the financial expectations for each party. For example, it can include which household expenses will be covered by who.
Of course, it should outline what would happen in the event of a breakup.
Finally, if buying a home together the cohabitation agreement should consider the type of ownership each partner has. And if you’ve divided up the home’s equity, make sure it is clearly documented who owns which share of the property.
In many cases, it is worth enlisting the services of a real estate attorney to map out this document.
Check your home buying eligibility here (Apr 19th, 2024)
Buying a house with a boyfriend or girlfriend FAQ
Should I buy a house with my boyfriend before marriage?
Whether or not you should buy a house with your boyfriend, or buy a house with your girlfriend, varies based on your unique situation. Of course, you’ll both need to be in this partnership for the long term.
But beyond that, you both need to be willing to work together to navigate the complex home buying process. As a first-time homebuyer, there is a bit of a learning curve to master.
It could be a good idea if you are both ready to jump into this challenge. But if either partner is on the fence about it, then the financial and emotional stress that comes with buying a house might not be worth it.
What are the risks of buying a house with your significant other before marriage?
The reason that many couples wait until marriage to pursue homeownership is the legal risks tied to buying a house without that marriage certificate in hand. When married, there are certain legal protections in place to keep both of your interests safe if a breakup were to happen. Without a marriage certificate, there are many loopholes for an ex to exploit when deciding what to do with the house.
In addition to the legal risks, there are emotional risks. Buying a home is a big financial step, but it is also a major life marker. If a breakup happens, the emotional fallout of dividing up the house would be traumatic.
Can an unmarried couple buy a house together?
Yes, an unmarried couple can buy a house together. But it is important to weigh the risks and rewards before moving forward.
Can I buy a house with my boyfriend?
Yes, you can absolutely buy a house with your boyfriend. It’s completely legal to buy a home with someone other than a spouse.
Is it smart to buy a house with a boyfriend or girlfriend?
Whether or not it is smart to buy a house with a boyfriend or girlfriend depends on your unique situation. The reality is that tying up your financial assets with someone else before marriage can make things complicated quickly. If you and your partner are ready for that big step, then it can be a smart idea. But if either of you isn’t quite ready for this major step, then it is probably smart to hold off on this major purchase for now.
How do I protect myself when buying a house with a partner?
If you want to protect yourself financially when buying a house with a partner, the first step is to decide how the title will be held. The options include sole ownership, joint tenancy, tenants in common, or a living trust.
In most cases, a joint tenancy or tenants in common agreement will protect your interests. But it is a good idea to speak to a real estate attorney to ensure that everything is above board.
Is it better to buy a house alone or with a partner?
Buying a house with a partner can improve your approval chances for a mortgage. That’s because two incomes often lead to more buying power. But if you are unsure about the future of your relationship, then buying a house alone is likely the better option.
Can you get a joint mortgage without being married?
Yes, you can get a joint mortgage without being married. Any manner of co-borrowers can choose to apply for a mortgage together.
Can I get a joint mortgage with my girlfriend or boyfriend?
Yes, you can get a joint mortgage with your girlfriend or boyfriend. When applying together, it is possible that the combined incomes will improve your approval chances.
What happens if one of us is not on the mortgage?
If your name is not on the mortgage or the title to the home, then you are not the legal owner. Although you may be contributing to the homeownership expenses, the titleholder is the official owner of the home.
With that, the mortgage holder will keep the home if things go south.
Can I add my partner’s name to the mortgage after buying the house?
Most lenders will require a refinance if you want to add your partner’s name to the home loan after buying a house. However, you can generally add a partner’s name to the title itself through a QuitClaim deed.
How will buying a house together before marriage impact your taxes?
As a homeowner, you can deduct mortgage interest from your taxes on up to $750,000 in mortgage debt. If you buy a home before marriage, only one of the homeowners can claim this expense.
With that, one of you will not be able to take advantage of this tax break offered to homeowners.
How do I buy a house with my boyfriend or girlfriend if they have worse credit?
If your partner has bad credit, it might be a smart move to apply for the mortgage on your own. A good credit score can unlock better mortgage rates which could lead to thousands saved over the life of your loan.
But if your boyfriend or girlfriend has a higher income with worse credit, it may be worth applying together anyways. Although the interest rates you get as a couple could be a bit higher, the increased income can help to increase your buying power.
Check your home buying eligibility here (Apr 19th, 2024)
