Buying a house with your significant other while unmarried can be tricky, but it’s entirely doable. The process, risks, and requirements may be different from those for married couples, but with the right preparation and knowledge, you and your partner can confidently share ownership of a beautiful home in a luxury community like Ibis West Palm Beach.
Before looking at homes for sale, consider these useful tips on how to buy a house together as an unmarried couple.
Evaluate your relationship and discuss finances
Purchasing a house is a big move for unmarried couples. To understand if you’re ready for such a major undertaking, have a serious discussion with your partner and be ready to ask the hard questions. Some of the things you need to talk about include your individual spending habits and personal debts. Weigh the pros and cons to help you decide if buying a house together is the right step and if now is the right time.
Come to an agreement on mortgage application
Married couples typically obtain a mortgage together, but unmarried partners may have to apply for a loan as individuals. With that in mind, you have to decide who is more financially qualified to obtain a loan with the most favorable terms. Look closely into the following criteria:
- Credit Score
Banks typically require a minimum credit score of 620 for a standard mortgage application. To be granted better mortgage rates and terms, a higher credit score is often recommended. Coordinate with your respective credit card companies or use a credit score website to obtain and compare your and your partner’s credit scores.
- Employment Status and History
Consider who has a more stable financial history, as lenders will look closely into this. Stable employment and a history of paying debts on time assure lenders of the borrower’s creditworthiness and ability to pay back the loan. If one of you receives a monthly paycheck and the other is a freelancer, the partner with the regular income will most likely get the nod of lenders.
The partner with the higher income would typically be the preferred person to apply for a mortgage. As the borrower, your housing expenses should not be more than 28% of your income.
If the lending company allows, you and your partner can act as co-borrowers. Consolidating your incomes can increase your chances of getting a higher loan and more favorable terms.
- Debt-to-income ratio
Look individually into the amount of debt you have to pay versus your monthly income. The ideal debt-to-income range is from 36% to 43%. Assess your finances, including which debts (existing student loans, car loans, house loans, etc.) you are currently paying and for how long you still have to pay them.
Choose the ownership type
If you finance the home with a mortgage, the lender becomes the property’s title holder until the mortgage has been fully paid. The deed however will be transferred to you. Even if only one person’s name is on the mortgage, one or both partners’ names may be registered on the deed.
As an unmarried couple, you have several options on the type of ownership of the home, including:
- Sole ownership
Under a sole ownership, only one person’s name is listed on the deed. This person has the rights to the property including all its corresponding responsibilities. Even if your name is not on the mortgage, it can still be registered on the deed. If you and your partner break up, only the person whose name appears on the deed can claim ownership of the property and be liable for all outstanding loans on it.
- Joint tenancy
A joint tenancy is a 50/50 ownership between both parties. This means that your and your partner’s names will both appear on the deed. In case of an untoward incident, such as the death of a partner, the title will be transferred to the other partner. In case of a break up, you and your partner need to come to an agreement regarding the ownership of the property.
- Tenancy in common
In a tenancy in common, an uneven split of ownership (such as 75%/25%) is allowed. The partner who is paying more for the home may have a bigger share of the property’s ownership. However, in case one partner dies, their share is not automatically transferred to their partner. Instead, it goes to their heirs.
Have a co-habitation agreement
A co-habitation agreement is a binding legal contract that details how an unmarried couple’s assets, including a home or real property, will be divided in case of a break up. You may include such details as the type of ownership, any buyout terms, and a selling strategy in case one or both of you want to sell the property. You can also include a section on how disputes can be resolved.
Looking to have your very own home in The Club at Ibis with your partner? Let a leading Palm Beach Gardens real estate agent guide you. The Telchin Group has the experience, knowhow, and network to help you land the home of your dreams in this prestigious community. Contact them at 561.301.029 or send an email at eric(at)thetelchingroup(dotted)com.