Friends buy house

With rising real estate prices and more stringent lending requirements that often require large down payments, it’s increasingly difficult to buy a home on your own. So what’s a first-time buyer – particularly a young person – supposed to do? It might be time to consider buying a home with a partner, such as your boyfriend or girlfriend, parents, sibling(s) or even a friend.

Not only do you get to split the costs of homeownership (down payment, closing costs, taxes, maintenance, mortgage payments, etc.), you get to split the risk as well. But there’s a lot to consider when you want to buy a house with someone who’s not your spouse.

While the laws are pretty cut and dry when it comes to protecting married couples who co-own property, the same isn’t true for those who aren’t protected by the legalities of marriage.

Buying a home may seem like a smart financial move for some people, but when you need a partner to do it, it’s important to carefully consider the logistics and to make sure your finances – and your partner’s – are secure no matter what the future brings.

Here are a few things you should know before buying a home with someone you’re not married to:

  1. Be open with each other: When buying a house with someone, it’s important to ensure you’re both on the same page financially. Set up a meeting with your potential business partner – yes, this is a business transaction – to go over their finances, including debt. You open yourself up to financial scrutiny when you apply for a home loan, so being open and transparent about your financial history will help avoid major problems down the line.
  2. Have a written agreement: Similar to a prenuptial agreement, when buying a home with someone you’re not married to, a written agreement that spells out the exact ownership percentages and the responsibilities of the owners is crucial. A standard real estate purchase agreement may not be enough to protect you if the relationship fails. This agreement should outline how the mortgage will be paid, who’s responsible for paying what, and what happens in the event that you need to sell the house.
  3. Know your options: Homeownership is great, but it’s also complex. The way in which you and your co-owner’s names appear on the title are extremely important and can have major consequences when it’s time to sell or at tax time. You can put the title in one person’s name, or both parties can hold the title as ‘joint tenants’ or ‘tenants in common.’ Each state has different rules governing a property’s title and it’s important to do your research before continuing. Owning the property as ‘joint tenants’ means you both own an equal share of the property and if one of you were to die, the other would inherit the remaining share. Unmarried owners can also be listed on the title as ‘tenants in common,’ in which you can spell out specific ownership percentages. Under this type of title, upon your death, the property is transferred to your next of kin or whoever is designated in your will; it does not automatically default to your partner.
  4. Keep track of finances: When you buy a house with someone you’re not married to, it’s important to keep track of who pays for what. Assume that you have decided to remodel the kitchen. And since you earn more money, you’re financing the project with the understanding that you’ll get half your money back if you ever sell the home. Your partnership agreement will be useless unless you can prove who paid for what.

No matter what, when purchasing an asset as large as a home, you should always consult with a real estate professional or estate planning attorney to ensure you’re properly protected. It’s also important to make sure to keep your home’s title up to date. You may decide to get married or have kids and that can change things greatly.

If the situation isn’t handled properly from the start, you can find yourself dealing with a pretty significant headache further down the road. 

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