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More unmarried couples are buying homes together in recent years than ever before. It only makes financial sense considering inflation and the rising cost of living. However, before you decide to take the plunge and buy a home with your significant other, make sure you’re knowledgeable about the nuances specifically for unmarried couples.

 

Homebuying Married vs. Unmarried

One of the most common misconceptions about buying a home while married versus unmarried is that it is easier to qualify for a mortgage as a married couple. However, marital status alone doesn’t influence whether you qualify for a mortgage or not. In fact, lenders are not allowed to treat applicants differently in determining eligibility solely because of their marital status.  

However, one advantage married couples do have in homebuying is that they generally have more legal protections than unmarried couples in the event they separate. So, it is especially important for unmarried couples to research and decide how to best protect themselves before applying for a mortgage loan. Unmarried couples will generally want to decide how they want their home titled and think about creating a cohabitation agreement, which we’ll further detail later on. 

Additionally, unmarried couples will generally want to decide how they want their home titled and think about creating a cohabitation agreement, which we’ll further detail later on.

 

What to Consider Before Buying

Before thinking about the actual homebuying process, you may want to sit down with your partner and have a serious talk about your future together. This can include the following:

Your Relationship

Is your relationship ready for this next step? Buying a home together ultimately ties your finances together, and it can be challenging to separate if you were to break up. Consider how you both handle hardship, if you’re ready to commit to this investment for a long time, if you can live together well and if you can take on new responsibilities and make new decisions together.  

It’s important to be honest with each other and with yourself during this step. Buying a home is one of the biggest decisions you can make in your lifetime, and it comes with real consequences if things go south.

Your Finances

Take some time to discuss each of your financial situations. Understand each other’s spending habits, savings, outstanding debts, credit history and scores and more. Your expectations should be aligned, and you should both be ready to take on this new debt. Being completely clear about each other’s finances and responsibilities is crucial while you’re buying a home.

Your Plans and Goals

This likely goes without saying but ensuring you’re on the same page about your future together is essential. That includes knowing your must-haves in a home, planning for how long you’ll spend in the home you buy, if you’ll want to have children or create space for aging relatives, what neighborhood you want to buy in and more.

 

How to Prepare for Homebuying

If you’re set on buying a home together, there are some details you should discuss with each other or a professional.

Consider Getting a Cohabitation Agreement

A cohabitation agreement is a contract that lays out the details of homeownership, including: 

  • The type of ownership on the title and deed 
  • What finances each person is responsible for  
  • How assets will be split in the event of a breakup 
  • What happens if one person passes away 
  • Other details of homeownership as an unmarried couple 

This agreement will help you understand each other’s responsibilities and have a plan in place in case a life-altering event occurs. You will likely want to seek an attorney and a tax advisor to help guide you in creating the agreement.

Decide Who’s on the Mortgage

After comparing your finances and credit, you’ll likely want the individual in better financial standing to apply for the mortgage. This could help you qualify for more favorable terms and interest rates. 

Even a slight difference in interest rate could help you save some money over the life of your loan.

Choose the Type of Ownership That Works for You

One detail you’ll want to determine is the type of ownership in the title and deed. Generally there are three different types you can choose from, but the types can vary by state: 

  • Joint Tenancy: Each individual shares equal ownership of the property. 
  • Tenancy in Common: Each individual owns a specific percentage of the property. 
  • Sole Ownership: One individual has sole ownership of the property. 

The “right” type of ownership really depends on you and your dynamics as a couple. Discuss the details with an attorney and tax advisor, as well as your lender, to determine what could work for you.

Splitting Homeownership Costs

Think about how you’ll divide financial obligations such as your mortgage payments, property taxes, homeowners insurance, utilities, groceries, internet and more.  

This will depend on what you’re comfortable with and what will work for you. For example, you could set up a joint bank account and contribute to it every month or split expenses based on each of your incomes.

Plan for Relationship Changes

While you may not want to think about it, many relationships can change. In the event of a death, a breakup or if one person wants to move out, you must have a plan for every possible scenario (which could then be outlined in your cohabitation agreement). You might want to sell the home or buy out the other person, but it’s important to have this written down in your agreement to ensure everything goes smoothly if anything were to happen.

Hire a Lawyer

While it’s not required, hiring a lawyer can help significantly when it’s time to create your cohabitation agreement and put it into effect. They can also help explain any legal implications of buying a home and outline scenarios that could work for you during your homeownership.

 

Ready to Become Homeowners?

It can be intimidating to buy a home as an unmarried couple. You may think there are more hurdles as an unmarried couple or don’t know if married couples have advantages you don’t. However, it just takes some research and the right people to work with to help ensure you feel empowered throughout the homebuying process. 

 

Additional Disclaimer: 

This article is intended for general informational and education purposes only and should not be construed as financial or tax advice. For more information on financial planning or investment advice, consult a registered investment advisor or financial planner.

This information is intended for educational purposes only. Products and interest rates subject to change without notice. Loan products are subject to credit approval and include terms and conditions, fees and other costs. Terms and conditions may apply. Property insurance is required on all loans secured by property. VA loan products are subject to VA eligibility requirements. Adjustable Rate Mortgage (ARM) interest rates and monthly payment are subject to adjustment. Upon submission of a full application, a mortgage banker will review and provide you with the terms, conditions, disclosures, and additional details on the interest rates that apply to your individual situation.

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