Is it a Good Idea to Buy a House Together Before Marriage?
According to a recent study, about one in four married couples between the ages of 18 and 34 purchase their first home together before their wedding date. Homeownership is a milestone that many couples reach together. It can be an incredible bonding experience.
But I raise the question, are young folks (married or unmarried) really ready for the responsibilities of homeownership as a couple? Don’t go into a real estate purchase with your eyes closed. Read below for information and resources before you decide.
Title and Legality
No one goes into a relationship expecting the worst. However, being prepared is smart. Married people depend on specific laws to protect their individual rights if their union dissolves. Unmarried couples face a different and less complicated situation should their relationship end.
In addition to the emotional strain of ending a relationship, tough decisions have to be made: who stays and who goes and who gets what furniture. Furthermore, does a couple have to split the proceeds of the sale should the house sell?
In order to be prepared and avoid further stress and expensive attorney fees, these matters should be discussed before diving into home ownership. Consider having a legally binding agreement that protects each partner financially. In this way, any disputes can be settled without expensive litigation or mediation and further heartbreak.
These legal contracts should specifically state consequences if one partner is unable or unwilling to meet to meet his or her obligations.
Is your relationship solid enough to discuss these matters without causing any discomfort for you or your partner? If so, read on.
Costs and Credit Score Differences
Low-rate mortgages, rising rental costs, and the ability to deduct mortgage interest from income taxes all make being a homeowner now rather than later an attractive option.
You and your partner will have to decide if you’re comfortable sharing and providing each other the details of your income and savings. This all must be shared with lenders as well.
In addition, you also have to provide your credit report to determine your credibility for loans. Your credit scores impact your ability to obtain a mortgage and the interest rate you will receive.
Married couples are viewed by creditors and credit scores evaluated as one. Unmarried couples are assessed as individuals, even if applying for the loan together.
Together, a couple must decide if both or only one will be on the loan. If one of you has a poor score, it could influence how you decide to title the property and who takes responsibility for the loan. You may have to decide to leave off the poor credit score to secure better terms and rates.
On the other hand, the combined income of two applicants is certainly more powerful than a sole income earner. In the case of a 1-person applicant, it leaves the partner with the loan attached to his or her name vulnerable in the event of a breakup.
After taking these points into consideration, it is really up to you and your partner to decide if you are both ready for the homeownership journey. Consulting with a trusted real estate agent, financial adviser or your attorney would all be helpful. If you’d like further advice or have questions about how much house you and your partner can afford, please feel free to contact me.
John Collinge is an Anchorage Realtor