Buying a Home Together Before You Get Married
Whether you are a couple living together or engaged, it might be tempting to buy a home together while interest rates are still historically low. But is it wise?
State law governs what happens if a marriage dissolves before the mortgage is paid off. For unwed, domestic partners who want to jointly own a home together, the law is less clear. This includes same-sex couples, depending on the state where they reside. Again, it all depends on the laws of the state of residence. So, couples are best advised to proceed with some caution and invest in professional advice.
Plan for the future
You’re in love. You foresee a long future together. Hire a lawyer. It’s not being pessimistic to plan for the “what ifs.” You are actually showing how much you care that you want to protect each other’s interests by anticipating potential problems before they arise. A written agreement can be crafted to clearly address potential issues.
Consider discussing these scenarios with your lawyer:
How will you take title to the property?What are your alternatives?
If the house remains unsold after a break up, does the person moving out have a stake in the home as an investment?
Can one partner buy out the other partner, rather than be forced to sell the home?
Does the partner who moves out keep paying their agreed upon share of the mortgage? For how long?
If one partner keeps the house, are they required to refinance the mortgage in their name?
If the home is sold are the proceeds split 50-50?
Applying for a joint home loan
Now that you have a legal agreement, each person will need to make a full financial disclosure. Each person should share a recent credit report with their full credit history, so there’ll be no surprises during the application. Read our Credit Score Tips to learn how to obtain your credit report and the factors that determine your credit score.
While everyone would like to have a happy long-term relationship, it’s better to be prepared for all outcomes, rather than face financial hardship should the relationship end. Engaging an experienced attorney on the front end and understanding the mortgage loan process can help reduce or eliminate complicated ownership issues if the unexpected becomes a reality.