A Guide To Buying A Home Together Before Marriage

A homebuyer's plan for navigating buying a house as an unmarried couple.

People who are not married buy homes together all the time. And while this may not be a startling revelation, there are some potential homeownership land mines that you would do well to consider before signing all of that paperwork at the closing table.

Unmarried home buyers can be any combination of two or more people. Couples, friends, formal partnerships, siblings, employers & employees, roommates, high school sweethearts, pen pals and everybody else not bound by a piece of paper on file somewhere in a county courthouse can be unmarried home buyers.

Buying anything with someone you are not legally attached to can get dicey when you decide for whatever reason to unattach from that someone. Buying something as valuable as real estate with someone you are not legally attached to is best done with prudence, frank conversations and, most importantly, all agreements in writing with acknowledged signatures.

The age old adage for buying real estate may be location, location, location, but the adage for buying real estate with someone you are not legally attached to should be; agreements in writing, agreements in writing, agreements in writing.

There are two important things to consider when homebuying with someone you are not married to; one is financial, the other is legal.

The Financial Thing

The financial thing for unmarried home buyers to consider is the mortgage getting process. The good news is that the process itself is not much different than it is for married people. Mortgage approval is based on the credit, assets, employment and income wherewithal of all of the applicants. Lenders examine the individual borrower profiles of each home buyer and combine them into a single mortgage application.

For married borrowers, lenders get joint credit reports for unmarried borrowers lenders get individual credit reports. Other than that, as long as you have enough money for the down payment and closing costs and your employment and income comports with underwriting guidelines, homeownership is within your grasp!

The mortgage approval process for unmarried home buyers is not rocket science. For that matter, the legal considerations for home buyers that are not married is not rocket science either, but it is a little further down the continuum.

The Legal Thing

There are two aspects to the legal thing for unmarried buyers to consider; first and foremost you should have a formal written agreement about everything. The second is to decide how you will hold the ownership title to the property you are buying.

Did I mention agreements in writing?

Buying real estate is a financial transaction, an investment if you will, and has nothing to do with the relationship dynamics you enjoy with whomever your buying compadre might be. History has proven time and again that relationships of every sort can be vulnerable to money based issues. It’s like kryptonite.

Think in terms of a prenuptial agreement to protect your relationship or your interest in the property you are buying together in the event that one or both goes bad. There could be lots of post-honeymoon considerations that are best handled upfront just in case your real estate buying plans turn adversarial!

How, what, who, and when everything, because the why can sour in even the best of circumstances.

Here are just a few items that must be decided and put into writing by all parties:

  • What percentage ownership will each party hold?
  • How much, if any, is each person contributing to the purchase, or the down payment amount?
  • How will mortgage payments and expenses be paid?
  • How will expenses or income be treated for income tax purposes?
  • How will the need for improvements and repairs be determined?
  • How will the quality of improvements and repairs be determined?
  • Who will occupy the property?
  • Who will pay for improvements or repairs?
  • Who gets the property in the event of a breakup?
  • How will ownership pass from one party to the other in the event of a breakup?
  • How will the value be determined in the event of a buyout?
  • How will the property be treated for estate planning purposes?
  • How will it be decided if one person wants to sell and the other does not?
  • In what form will title to the property be held?

There is one consideration that warrants a closer look and that is what form will you hold title to the property?

The three (3) most popular ways for unmarried home buyers to hold title to real state are Joint Tenancy, Joint Tenancy with Right of Survivorship (JTWROS) and Tenants In Common. If somebody dies, the manner in which title is held will determine how title is passed to the surviving homeowner. Or not.

With Joint Tenancy, everybody owns an equal share of the property but there is no clear passing of title to the surviving homeowner. Joint Tenancy with Right of Survivorship (JTWROS) gives equal shares to all parties and adds that right of survivorship feature. In the unfortunate event of the death of one party, title will pass to the surviving homeowners without probate.

Tenants In Common allows for ownership to be held in unequal shares (60/40, 70/30, etc.), and is often used when one party has more invested in the asset than another. There is no right of survivorship feature with Tenants In Common, ownership passes based on pre-existing wills and estate planning.

So first and foremost, get a lawyer, agree on who is going to pay for that lawyer and have that lawyer create a formal written agreement that protects everybody’s best interest. Then sign that agreement in front of witnesses.

Be legal, be smart, be grown-ups.

Now go ahead on out there and buy some real estate together!

Article written by
Melinda Opperman
Melinda Opperman is an exceptional educator who lives and breathes the creation and implementation of innovative ways to motivate and educate community members and students about financial literacy. Melinda joined credit.org in 2003 and has over two decades of experience in the industry.

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