Factors To Consider When Purchasing a Home as an Unmarried Couple

Posted on July 9th, 2022

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. 

Have an Open Discussion About Finances

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 how to improve your 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:.

Decide How the Monthly Mortgage Will Be Split

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.

Explore Homebuying Options

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.

Joint tenancy means that both partners share ownership equally. So in the case of death, the surviving partner will inherit the other's stake and own the entire property.

Tenancy in common says that each partner owns a percentage of the property. In the case of death, the specified percentage of ownership would not go to the surviving partner. Instead, it's transferred to whoever is specified in a living will or trust. Without will or trust, it goes to the next of kin.

Sole ownership means that only one partner owns the home. This makes sense if only one person is on the mortgage. However, be aware that if you're paying towards the mortgage but aren't listed on the title, you won't reap any of the benefits of homeownership.

Consider Your Personal Goals

Where will you be in 3–5 years? Do you 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. 

What Happens If You Split Up?

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.

Specific loan program availability and requirements may vary. Please get in touch with the mortgage advisor for more information.