In previous generations, buying a home was a life milestone that often came after a couple married and combined households. But with interest rates at near-record lows, and COVID precautions delaying weddings, more couples are buying homes before marriage than ever. So, we tapped the expertise of Cincinnati-based Ron Erdmann at Guaranteed Rate for some advice when saying “I do” to a home first.
Erdmann says calling a mortgage professional is often the first step, but he suggests contacting a financial planner and real estate attorney too. “It just helps to take a look at your whole financial picture to plan things out,” he says, “and an attorney will help define all the details that are sometimes more inherent for married couples.”
Erdmann says these are the three main questions unmarried couples should consider when buying a house.
1. Who’s Applying for the Mortgage?
Buying a house together is a big commitment. So, even before searching for a home, Erdmann says you should contact an experienced mortgage professional to compare options and get pre-approved. “I always encourage both to apply together so we can determine if it’s best to buy in both of their names or just one of their names,” he says. “The more I know, the more I understand how to best set up the purchase.”
2. What Type of Ownership is Best?
When you buy a house with your partner, you must decide how you will own the property, or “take title.” Erdmann says you should consult with an experienced real estate attorney to decide what’s best for you, but generally speaking, there are three basic choices:
• one person holds title as sole owner
• both of you hold title as “joint tenants,” or
• both of you hold title as “tenants in common.”
“The partner with the stronger financials and credit score may want to purchase the home to get better mortgage terms and interest rates,” Erdmann says. “But both names can be on the deed even if one didn’t sign the mortgage, provided the lender agrees. What’s on the deed doesn’t have to match what’s on the mortgage.”
3. Get a Cohabitation Property Agreement?
When couples live together, married or not, they will most likely accumulate equity. Unlike married couples, though, unmarried couples may not have the same property protections. So, they can create a cohabitation property agreement to outline who owns what, and what will happen in the event the couple chooses to separate or if a partner passes away. “It’s completely optional and not at all common,” Erdmann says, “but an attorney can look at your unique situation and tell you if they’d recommend it to be safe.”
While it’s far from romantic, Erdmann says, talking through these basics of home buying and gathering the appropriate paperwork for a mortgage application is a good starting point for examining whether or not a home purchase is right for your relationship, married or not.