You and your partner are preparing to begin a life together. You’re thinking about the next steps in life, getting married, buying a home with your spouse, and starting a family. However, these days many are reconsidering the logic behind the traditional order of events. Maybe you’re wondering, “Wouldn’t it make more sense to purchase a home BEFORE we get married so we can begin our lives in a new home with the homebuying process behind us?” For many couples, the answer to this inquiry is YES! Not only is it possible to purchase a home with your partner before you get married, it could be the easier option. But before beginning the home search, the two of you need to have some important, perhaps slightly uncomfortable, conversations, like making decisions on financing, a co-ownership contract for the house, and the type of title to the deed. Let’s take a deeper look into it.
Understand Your Financial Situation
First, you’ll need to look at individual financial situations and decide if it is best to purchase a home using joint financing. If one of you has a higher credit score, more assets, and more stable income, it may be best to put the mortgage in that person’s name, meaning only one of you will have full responsibility for repayment of the loan. That way, you’ll get a better interest rate, which translates into lower monthly payments.
Create a Co-Ownership Contract
This brings up the subject of the home’s ownership. Even if it’s in your best interest to have the mortgage in only one name, a co-ownership contract can help balance the responsibilities. This would address such questions as what happens if your relationship ends? What if one becomes disabled or dies? Who pays the monthly maintenance (i.e. utility bills) and for major repairs (i.e. the roof begins to leak)? An attorney should help you create a co-ownership contract before closing. Discussing these possibilities when neither of you is in a bad mindset makes it much easier to deal with them than if they unexpectedly drop in your lap later when nerves are already stretched.
Determine Who Will Own the Home
There are different ways to buy a house which vary from state to state. The basic options are “sole ownership”, “joint tenancy”, and “tenants in common”. Here’s a quick view of what differentiates one from the other:
- Sole Ownership – only one name is on the deed, giving that one person all the rights and responsibilities; ownership rights are determined by the name on the deed, not on the mortgage; if you split and your name is not on the deed, you are not entitled to any monetary compensation for money you contributed to the mortgage, upkeep, or upgrades.
- Joint Tenancy – You each own 50% of the property. If one dies, ownership automatically transfers to the survivor. If you split, there could be a problem if one of you cannot or will not buy the other out.
- Tenants in Common – This can be a good compromise if one of you will be making a larger financial contribution to the purchase. The one putting up the down payment could be listed as 75% owner and the other as 25%. The drawback is if one of you dies, the remaining ownership does not automatically revert to the survivor.
Regardless of which you choose when you purchase your home, you will want to do a title change when you get married to reflect the new status with a “quitclaim deed”.
The Final Decision is Between You and Your Partner
One last bit of some free advice, don’t bring your parents along to help with the decision. While both of your parents are certainly great people, it’s inevitable that each set of parents is going to be looking out for the best interests of their child instead of what is best for the both of you. Different opinions are unavoidable. Parents are great for advice and guidance as needed, but make sure that this decision is made by you and your partner for your best interests together.
The bottom line in this big step is that it is yours. Make the difficult decisions with a clear head before contacting a real estate agent. Tour as many homes as it takes to find the one that speaks to both of you on an emotional level, works for both of you financially, and meets the criteria of your perfect first home. Whether you choose to purchase a home before marriage, after marriage, or not get married at all, purchasing a home with your partner is a life-changing step. It will surely bring challenges, but will also bring you closer together and allow you to begin a life together.
If you’re ready to take that big step, click here to get in touch with a loan officer that can help you navigate the home buying process at whatever stage in life you’re in!