Times have changed, and so has the way couples are buying homes. While some commit to a mortgage before they commit to marriage, others plan to own a home with a domestic partner and forego a legal union altogether. If you’re one of the many unmarried couples contemplating the purchase of a property, be prepared for the home buying process and make sure you and your partner are on the same page.
Home ownership with a partner is a huge step in the relationship because requires in-depth conversations about financial goals and personal credit history. If you’re planning to apply for a mortgage together, the lender is going to be taking a deep dive into your spending habits.
Be upfront with each other about your past experiences with money. Honesty is truly the best policy.
Protect The Partnership
Assuming your credit histories aren’t a problem, the frank discussions shouldn’t stop there. Without a marriage certificate, and the legal obligations that it affords, it’s a good idea to spell out the exact expectations for the arrangement.
A lawyer can help draft a co-ownership contract that details how the expected and unexpected costs should be divided, what happens if the relationship ends, or if one of you needs to relocate for a job. If you currently have individual banking accounts, it may make sense to open a joint banking account for costs related to mortgage, property taxes, insurance, and maintenance. Taking the time to determine the solutions beforehand can save a lot of money and confusion down the road.
Know Your Title Options
An essential part of this conversation will include choosing how to title the property. While it varies by state, there are generally three title options available.
Sole Ownership – Unless one person’s credit history disqualifies them for a loan, this is likely not the best option, as it gives just one person complete ownership over the property.
Joint Tenancy – A joint title gives each party a 50 percent stake and ensures the property completely transfers to the other person in the event of a death. It also prevents the sale of one’s share without the permission of the other.
Tenants in Common – If the purchase arrangement is not being split evenly, this type of title allows partners to have an unequal percentage of ownership. Another distinction is that ownership can transfer to a third party, according to probate law, upon the death of one of those involved.
If your relationship is ready for the plunge into homeownership, contact me about your options.