Buying a home isn’t just for married couples. Whether you’re purchasing with a family member, friend, partner, or someone else, it’s a big step that requires planning and communication. Here’s a quick guide to help you navigate the process:
Define Roles and Responsibilities
Discuss finances, long-term goals, and maintenance plans early on. Get clear about roles and responsibilities from the start to make sure you are all on the same page with who’s taking the lead on what? If multiple contributors to the down payment or monthly mortgage payments, it’s important to have an agreement drawn up by an attorney outlining each person’s contributions. This can prevent any misunderstandings or legal issues down the road.
Talk About Finances
Be upfront about income, credit scores, and debts. Unlike married couples who might benefit from joint tax returns or spousal support benefits, you and your partner will need to navigate the process as individual buyers, including applying for a mortgage separately. Consider working with a financial advisor or mortgage broker to explore your best options.
Pick the Right Ownership Structure
Options like joint tenancy, tenancy in common, or sole ownership offer different benefits. Choose what fits your situation best.
Joint Tenancy with Right of Survivorship: This is the most common option for co-owners. It means that if one of you were to pass away, the other partner automatically inherits the deceased’s share.
Tenancy in Common: This option allows for unequal ownership of the property, so if one partner contributes more to the down payment or the mortgage, they can own a higher percentage of the home. This can be especially useful if one partner is contributing more financially.
Sole Ownership: If only one partner is applying for a mortgage, this might be a simpler route. However, in this case, only one partner will be responsible for the loan, and the other partner won’t have a claim to the property unless agreed upon in writing.
Plan for the Future
It’s easy to get swept up in the excitement of finding the perfect home, but taking the long-term view is key when you’re buying with someone who isn’t a spouse. Consider what will happen if either partner wants to sell or move out down the line. Can you both afford to buy each other out, or would you need to sell the property? Decide what happens if one of you wants to sell, move, or if circumstances change. A co-ownership agreement can outline these details.
Work with an Experienced Realtor
A knowledgeable agent can guide you through the complexities of co-buying and help you find the right property. They’ll help point you in the right direction for financial and legal side of things, as well as offer insight into the housing market trends, property values, and potential pitfalls.
A realtor can also advise you on location. Some neighborhoods are better suited for co-ownership due to their investment potential, or the homes in those areas may have more flexible layouts or resale value in the long run.
Enjoy the Process
Whether merging households or trying to make the monthly budget stretch further and build wealth, buying a home is a big milestone…plan thoughtfully, but don’t forget to have fun along the way!