Elisa Spence's Blog
Unmarried couples often find themselves surprised at the additional steps it takes to buy a home compared to their wedded friends.
This guide will help you prepare for buying a home together as an unmarried couple:
Banks will assess you differently than they would a married couple.
Whereas they look at a married couple as a single financial unit, you and your partner will be assessed individually. This certainly has its pro’s and con’s. Know that if one partner has a significantly lower credit score it can affect your eligibility for a loan as a couple.
Legal ownership of the title will be different.
Unmarried couples have three options when it comes to title ownership: sole ownership, joint tenants and tenants in common.
Tenants in common is the most popular. The difference between tenants in common and joint tenants is this:
In a joint tenancy ownership is 50/50. If one partner were to become deceased, ownership of their half of the property would carry over to the other partner.
Tenants in common ownership can be disproportionate to reflect each partners level of investment. If one partner were to become deceased, their living trust would inherit ownership of their portion of the property if another option is not otherwise specified in their will.
Sole ownership is just that. One partner owns full legal ownership of the property. This option can have tax benefits and increase your financing eligibility if one partner has a higher income or better credit score than the other.
It’s highly recommended for unmarried couples to sign a property, partnership or cohabitation agreement when buying a home together. This is a legal precaution to safeguard both partners in the future should anything happen.
If your finances are separate it is ideal to at the very least create a joint checking account from which to draw the down payment and mortgage installments. This is especially true if both partners are contributing to these payments. It create a clean, clearcut payment process each month.
Know each other's finances.
Discuss your credit scores, debt burden, savings, investments and financial goals. Get clear on where you each stand and how these factors will influence your buying process. Create a budget together as a couple to ensure you can take on not just the responsibility of a mortgage payment but also closing costs, homeowners insurance, property taxes and maintenance costs. Plan for savings like retirement, nest egg, family planning, future vacations, and emergency funds.
Buying a home together as an unmarried couple is a different process than that of married couples. However, that doesn’t mean it has to be harder. With an understanding of what to expect ahead of time and a plan in place, the process can be a smooth one.
Searching for the ideal home is an exciting adventure, but it can also be fraught with setbacks, delays, and disappointments. With a little preparation, however, you can avoid many of the potential pitfalls that could happen along the way.
One of the secrets of successful house hunters is to adopt a positive attitude, but temper it with a dose of realism.
Flexibility is also important, but it pays to be steadfast about your absolute requirements, also known as your "must have" list.
To help ensure a successful house hunting experience, here are a few of the key attitudes and qualities that are worth taking inventory of and cultivating.
Persistence: Although it does happen, it's unlikely that the house of your dreams is going to show up at the beginning of your search. As seasoned house hunters know, it's not unusual to have to look at dozens of houses for sale before finding just the right one. But even when you've reached that turning point, there still may be obstacles, hurdles, and challenges to deal with. The perfect example is a bidding war. What if you're all ready to make an offer on the ideal house, but it turns out that one or more other buyers have their sights set on that same house? That can not only be stressful, but it can stretch your housing budget to its outer limits (and beyond)! On one hand, you have to be willing to walk away from a property that would leave you "house poor", but on the other hand, you may want to consider pursuing a real estate deal that's on the high end of your budget, but financially doable. Working with a knowledgeable real estate agent who's a skilled negotiator can help give you an edge when you're confronted with a so-called "bidding war."
Optimism: If you view house hunting as a process which will eventually produce your desired outcome, then you'll be a lot more motivated to go the distance, rather than lower your standards or give up entirely. A positive attitude will help you overcome setbacks, identify workable solutions, and recognize opportunities when they present themselves.
Organization: Whether you prefer the idiom "The devil is in the details" or "God is in the details," the lesson is still the same: Small details can have a big impact. Staying goal-oriented and organized can help propel you forward and avoid frustrations. Knowing your credit score, establishing a realistic housing budget, and scheduling meetings with mortgage lenders will help you stay on course, be prepared, and steer clear of unnecessary delays. It also helps to take notes, create lists, and follow a daily or weekly action plan.
Buying a house is an important priority which can affect the quality of your life in many ways. By staying organized, focused, and positive about your search, your chances of success will be enhanced many times over.