Mortgage Before Marriage?
Ten Points to Ponder for Unmarried Couples Looking to Buy a Home Together
Thinking about buying a home with your significant other but haven’t tied the knot? You are not alone. Nearly 40% of unmarried couples between the ages of 18 and 34 report prioritizing homeownership over marriage. The high cost of weddings and evolving cultural norms are driving more unmarried couples than ever to buy homes together. Whether you buy before or after your big day may seem like a detail, but it’s important to consider the implications of a joint purchase. Unmarried couples do not benefit from the protections afforded to married couples under the law. With a little foresight and planning, however, the experience can be rewarding both socially and financially.
Mortgage before marriage? This isn’t your typical home purchase.
1. Try before you buy
Forever is a long time. If you’re already living together or planning to do so and both of you want to own a home, buying a place together may be a logical step in the progression of your relationship. Some unmarried couples find that co-buying a home provides an opportunity to experience what it would be like to share a home of their own and deal with things like co-mingled finances. If you do decide to pursue a mortgage together, understand that complete transparency will be important. The lending process requires disclosing financial history, employment, and certain other matters of one’s history that are likely to surface on a credit check.
It’s generally better to be the one divulging any past misdeeds as opposed to having them surface during a loan application.
2. Lowest common denominator
Mortgages are priced such that the borrower with the lowest credit score is the one whose credit determines the pricing. Therefore, it is important that both parties optimize their credit scores before seeking a mortgage.
Again, 100% transparency is key. Both parties should be prepared to share their income, their debts and their payment histories. If there happen to be financial obligations such as child support or alimony in your past, those will come to light during a credit check. Approach this with an investment view and not solely a romantic one. Discuss who brings what to the table. Decide whether ownership percentages will be equal or not. Also, decide who will pay how much each month. Anything left to chance is an opportunity for conflict.
3. What about other properties owned?
If you’re fortunate enough that one or both of you owned a home or condo prior to deciding to buy a place together, you have another decision to make. Depending on the joint finances of the union, keeping the other property or properties may make sense.
The macro market and the local real estate markets are often quite different. This means that your sweetie’s 1970’s era condo located in a suburb way outside of the local jobs market area, may not attract a great price in the current market. Rents, however, may cover the mortgage and allow you to continue to build equity until it makes sense to sell. Keeping your prior place may also be a backup plan should you discover that this is not “the one.”
4. Share your “pet peeves” BEFORE you buy together
Everyone has idiosyncrasies. It is ideal if you are aware of those before you decide to commit financially to a purchase. That does not mean that you should not move forward. It is helpful to know what you are dealing with and that proposed solutions for coping can be considered.
For instance, what if one of you is a more lenient when it comes to organization and the other is a neat freak? So long as you have a plan for how to deal with differences, all is well. You may decide on a cleaning regimen or elect to hire a cleaner. Many aspects of the day-to-day operations of your household can be dealt with in an agreement. If you aren’t so keen on a Sheldon Cooper-style agreement, you still ought to have a discussion about roles and responsibilities. Understanding each other’s preferences and limits in advance can avert heartache and save you both frustration down the line.
5. Discuss maintenance and repairs as well as any improvements
Think whether, how and when. What condition property are you each expecting? Is that property in alignment with your budget? If not, how will you deal with this? Answering these questions up front helps minimize the possibility of a disgruntled partner down the road. Are you the kind of person who will pay to protect the life and health of your investment before working on the aesthetics or vice versa? Depending on your intention for the property as a long term hold or not, there may not be one best answer. What is important is that you are on the same page. If your roof has another five good years and one of you decides that replacing it prior to remodeling a bathroom is most prudent, this could become a bone of contention.
6. What about guests, visitors, especially family members or that favorite college buddy?
Define parameters around how you’ll handle the expected or unexpected guest. Remember the old adage that “Fish and house guests smell after three days”? You don’t want your relationship to be the thing that goes foul due to a lack of communication on this vital consideration.
“Fish and house guests smell after three days.”
7. Start with the end in mind
Agree how long you anticipate holding this property and why. Document the exit strategy. Are you both looking to trade up in several years time? Do you want to hold on to the property when you leave and rent it out? How will you value the property if you do decide to sell? Regardless of whether or not you stay together (let’s assume you will), your goals and plans for the property warrant discussion. In the unfortunate event that you decide to part ways, having an exit strategy becomes all the more important. Hopefully, the sailing is smooth, but why risk it? Take a couple life jackets.
8. Your job may affect your timeline
An increasingly global economy can mean less job stability and an increased likelihood of relocation. Align your job expectations with your timeline for holding a property to ensure that you can exit according to your plan.
9. A co-ownership agreement is highly recommended
A co-ownership agreement that indicates your thinking about many of the points in this post is crucial. Committing decisions to paper in an agreement is a transparent way to get on the same page and increases the likelihood that the consensus you’ve reached is respected. Of course, the act of codifying these decisions requires that you actually do have discussions.
10. Wedding expectations?
If there are wedding expectations, it may help to discuss how the purchase impacts the timing, the management of the expense and what happens afterward. Again, this is an exercise in making sure that both parties’ needs are being met. At a minimum, if meeting one another’s needs is not feasible, it is good to have the understanding up front. In many ways, negotiating a joint property purchase is good practice for a consensus building in a successful union.
For more information on co-buying a home, head to gocobuy.com. CoBuy is a platform designed to make it easier to buy a home together from start to finish and to do it intelligently. Determine eligibility, decide on key aspects of the arrangement, get connected to qualified lenders and agents who are experienced in co-buy transactions, and generate a personalized CoBuy Agreement. For a limited number of co-buyers in and around Greater Seattle, we are waiving our fee of $100 per co-buyer. If you have questions, feel free to contact us.
Curious about co-buying?
We're here to help, seven days a week.