While exciting, real estate purchases can present challenges for unmarried couples. And since buying a home is a significant financial investment, it's best to prepare for those challenges before committing to the purchase.
Even if you're a couple that has lived in a rented apartment together already and are reasonably familiar with your partner's spending and saving habits, it's crucial to have a formal dialogue about finances.
Go over everything from credit card debt and school loans to car payments and other obligations. Do you still owe your folks for that personal loan? Make sure you mention that too.
FICO scores, income, and savings are other items you should cover during your financial discussion.
Remember, when you begin the home loan application, everything will be revealed anyway, so you might as well be honest from the get-go.
This would also be a good time to work out to improve finances before applying. For example, if it turns out one or both have low credit scores, discuss how to raise the scores before applying for a home loan. Likewise, if one has low savings, work together to increase it to have a more substantial down payment.
Here are other items you should discuss when buying a home as an unmarried couple...
If you've already lived together in a rented apartment, you may have already worked out who pays what. But a mortgage can change that. The first way it changes things is that you have to determine how to split the down payment and closing costs.
There's also the question of emergency house repairs and ongoing maintenance. How will those costs be split?
Some find it helpful to have a joint bank account for home-related expenses while keeping their other funds in a separate account.
Some couples also enlist the help of a real estate attorney to keep things in order and ensure each partner holds up to their homeownership responsibility.
Be aware that a mortgage and title are two different things! Sharing the home loan does not automatically mean that each partner is also on the title --remember, the title indicates ownership. Laws vary by state, but typically there are three options regarding the title.
Where will you be in 3-5 years? Think you'll move for a job opportunity? Do you see yourself having kids soon? Big changes like these can alter everything about your life, so they should be part of your decision-making when buying a home.
Unfortunately, sometimes things don't work out as a couple, and owning a home together presents some challenges.
Again, you may want to work with a real estate attorney to help draw up a partnership agreement that details what happens to the home should you break up.
Remember, there are no legal protections for unmarried couples regarding real estate.
We look forward to serving your home buying needs! Whether a married or unmarried couple, the home buying process begins with pre-approval. Apply securely and quickly using our online application, and contact our office for live assistance.
Jeff Lazerson - Mortgage Columnist since 2011