5 Questions Unmarried Couples Should Ask Before Buying A House
Ashley Kilroy6-Minute Read
July 12, 2023
Whether they’re renting apartments or buying homes, many couples decide to live together without tying the knot. While unmarried couples can get a mortgage together, there are a few key factors to consider first.
If you’re well prepared, you can increase your chances of cohabitation bliss in your new dream home.
Here are a few questions unmarried partners should consider before buying a house:
1. Who Is Applying For The Mortgage?
Buying a house is a major commitment. Before you begin searching for a home, you should compare mortgage options and determine who is applying for the mortgage. Because unmarried couples would apply for a mortgage as individuals, the partner with the stronger financials and credit score may want to purchase the home to get better mortgage terms and interest rates.
Before applying for the mortgage, review each other’s credit score, debt-to-income ratio (DTI), income, employment status and any additional assets. For instance, most mortgage lenders require a credit score of at least 580 to qualify for a home loan, but a credit score of at least 620 may give you better options. If one partner has a credit score higher than 620, they may qualify for better terms and interest rates. By qualifying for the best rates and terms, you can save money on interest throughout your loan repayment term.
You can get an idea of how much you’ll pay every month using our mortgage calculator. Enter the estimated amount of your loan and interest rate to see what your monthly mortgage payment could be.
Some lenders allow both partners to apply for a mortgage together. This may help you and your partner qualify for a larger mortgage because your incomes are combined. If one partner has a weak credit score, the lender may base their lending decision on the lower credit score. In this case, it might be best for one partner to apply for the mortgage.
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2. What’s The Best Way To Hold The Title?
Your title provides proof of ownership and a physical description of the property. It may also include liens on your property that allow others to have a claim on the property in certain situations. For instance, your lender will have a lien on your title until the mortgage is repaid in full.
There are several ways to hold the title of your new home. The way the title is worded can impact the way ownership is transferred as well as your rights to transfer ownership. Here are some options:
- Sole ownership: If one partner wants to own the property outright, they may select sole ownership.
- Joint tenancy: If you and your partner want equal shares of the property, you may want joint tenancy created under a single instrument with the right of survivorship. This means that upon the death of a partner, the surviving partner will receive the deceased partner’s share (half) of the property.
- Tenants in common: Under tenancy in common, the co-owners enjoy undivided interest or equal rights to the entire Tenancy in common differs from joint tenancy because tenants in common hold individual titles for their share of the property and can dispose of it or have an heir inherit their ownership share.
- Trust: A living trust of real property holds legal and equitable title to the real estate. The trustee holds the title for the trustor (aka beneficiary) who retains all management rights and responsibilities.
How you title your property will impact the outcome of its sale. It can also impact the taxes and fees associated with selling your home. So, to determine the best way to hold the title for your unique situation, contact a real estate attorney or tax advisor.
3. Should You Get A Cohabitation Property Agreement?
When couples live together, married or not, they will most likely accumulate equity. But, unlike married couples, unmarried couples may not have the same property protections. Because of this, it’s wise for a couple to draw up a cohabitation property agreement with their attorney. The agreement will outline who owns what and what happens if a couple separates.
You could experience time-consuming and expensive legal battles without a cohabitation property agreement. Many agreements include:
- The type of ownership on the title and deed
- How income and expenses are shared
- How newly acquired assets are divided
- A buyout agreement
- An action plan for a job transfer
- A dispute resolution process
- An exit strategy
Since purchasing a home with your partner is a huge financial undertaking, it’s important to protect your rights and assets. Creating a cohabitation agreement with an attorney can help avoid future emotional and financial distress.
4. How Will You Split Costs?
In your cohabitation property agreement, you should lay out how you and your partner will pay for additional home expenses. How you split the expenses will depend on what you both are comfortable with and what works for your respective financial circumstances.
You may decide to open a joint bank account, and each of you contributes an equal amount every month. Another option may be to divide your expenses and have one partner pay for utilities and maintenance expenses while the other partner may pay for lawn care services and cable. If one partner makes significantly more than the other, you may decide the higher-earning partner should pay a greater share of the property costs.
There is no right way to divide homeownership costs. You’ll have to talk with your partner and determine what’s fair and what you can each reasonably afford. Keep in mind you’ll also need to factor in additional homeowner expenses, such as property taxes, homeowners insurance and homeowners association (HOA) fees if applicable.
5. What Happens If One Person Wants To Move Out Or Dies?
Whether it’s a breakup or a partner getting a job in another state, having a plan in place for these types of situations is essential. The house can be sold, or one partner can buy out the other partner, assuming both partners are on the home’s title.
It’s possible that if you decide to break up, the bank may force the sale of the property. If the partner keeping the property can’t buy out the partner who’s leaving, the best option would be to sell.
Depending on your agreement, any party who owns a portion of the property can force a sale. If you own 70% of the home and your partner wants to move out, you may need to pay them 30% of ownership. If you’re both on the mortgage, you may need to consider refinancing.
In the unfortunate event of a partner’s death, the title will determine what happens to the home. If the title states joint tenancy, the surviving partner will receive the deceased partner’s share of the property. If the title is joint tenancy in common, the percentage of the home owned by the deceased partner will transfer to their heir(s).
With tenancy in common, the deceased’s share of the property is distributed according to their wishes. That said, you may need to buy out the deceased party’s share of the home or sell the home, depending on what the heirs decide.
FAQs: Buying A House With Someone You’re Not Married To
Here are a few common questions home buyers have when thinking about purchasing a house with their partner:
What happens if one of us is not on the mortgage?
Ultimately, the person whose name is on the property’s title is the owner of the property. They have full control over the home and can sell it with or without their partner’s permission. The partner whose name isn’t on the title will have no ownership stake in the property.
What needs to change if we get married after buying a house?
If you and your partner get married after buying a house together, you’ll need to update a few documents. This will include the deed, title, homeowners insurance policy and applicable utility accounts.
Can I add my partner’s name to the mortgage after buying the house?
Whether you’re getting married or simply want to split ownership of the home, the only way to add your partner’s name to the mortgage is to refinance into a new loan.
How will buying a house together before marriage impact our taxes?
Buying a house can help you save money on your taxes through the mortgage interest deduction. However, most lenders only send one partner a copy of Form 1098, which shows how much mortgage interest you paid over the year. This means both partners will need to itemize their taxes and calculate the amount of interest each one paid throughout the year.
Do we need to speak to an attorney?
While it’s not required, it’s always a good idea to work with an attorney when buying a house as an unmarried couple. The attorney can make sure any rights of survivorship are put in writing and can be upheld.
The Bottom Line: Unmarried Couples Can Buy A House Together
Buying a house while unmarried can be a complex situation, especially since there isn't a prenup in place to indicate how the property will be divided in case you break up. It’s important to have full transparency with your partner. Make sure to discuss important topics such as your finances and your wishes for the property if you break up or a partner dies.
Once you’re on the same page and are ready to look for a home, get started on the mortgage process today.
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