Home Buying for Unmarried Couples

Today we are excited to have Mark Scheets return as our guest blogger.  Mark is a writer for Total Mortgage Services, and often writes about home buying and refinancing.

Throughout the home buying process there can be various hurdles to jump over to make sure everything goes smoothly.  In today’s culture, we are finding more often unmarried couples are purchasing their first homes together.  Although this sounds like a great plan, there are precautions that need to be taken in order to make sure the process is done right.  Doing your research beforehand can alleviate any headaches. From a financial sense it is more difficult to break the co-ownership of a house, than it is to get a divorce, if things turn sour.

When making the decision to purchase a home with your significant other, you and partner must know that just like with marriage, a property agreement is a legal contract. One of the more important aspects of purchasing a home together is knowing how the investment will be split.  In many cases, one partner may initially invest more money into the home than the other.  This may cause issues in the future if things don’t work out due to the fact that legally one person may end up owning more of the house than the other.

Plan Now

If the relationship were to end, a dividing of the assets needs to take place.  Although everyone in a relationship hopes for the best, preparing for the worst-case scenario will alleviate any hassle in the future. The best way to protect yourself is to come to an agreement as soon as possible while you both are still happy.  If there were to be any future issues, it could get real ugly resolving things if steps were not taken care of from the start.

Credit Scores

As an unmarried couple looking to purchase a home together, there are a few concerns you need to be aware of.  When the time comes to apply for a mortgage, the lender needs to run both of your credit scores.  This can backfire if one of you has a great credit score and one has a terrible score.  If this is the case, then you may not get the loan.

Legality

You will also want to check your individual state’s laws regarding an unmarried couple purchasing a home together, as some states don’t allow it.  You as the homebuyer need to know this because if you are planning on going through with the purchase and can’t legally, you will be extremely disappointed.

Protect Yourself

Having the right paperwork filed is another important step to take, because without it you could find yourself in trouble in the future.  One thing to do early in the home buying process is to file for a Joint Tenancy With Rights Of Survivorship (JTWROS).  A JTWROS allows for the home and assets to be passed to the surviving partner if the other were to pass away.  This lets the partner avoid inheritance taxes, as the home won’t go through an estate.  Married couples are automatically granted JTWROS whereas unmarried couples are not.  By doing this you can save yourself a great deal of potential stress in the future.

If you had filed for JTWROS with your partner and something went wrong with the relationship, you would need to fix your agreement. If you don’t adjust past agreements, then your soon to be ex is still entitled to the house and potentially your assets if you were to die. On paper if you had left everything all to your partner but intended to change that and never did, they are still legally getting everything.  This also goes for if one partner were to pass away and if you didn’t file for JTWROS, the family of the deceased partner may try to sell the house.  If the partner had made a will to leave everything to their family, it would not matter if the surviving partner wished to remain in the home.

What to Adjust After Getting Married

If down the line you and your partner decide to get married, there will be more papers that would need to be altered.  The biggest adjustment would need to be the title to the house.   After the title is adjusted, creditors cannot single out one of you for bad credit.  This is good due to the fact that they cannot add extra interest to that partners share.  If you and your soon to be married partner both have good credit, this can work out great if you were looking to refinance once everything is fixed.

As stated, there are precautions that need to be taken when purchasing a home as an unmarried couple.  As we all know, getting married is one of the biggest decisions we will make. Planning to buy a home together is a great decision as long as you are cautious about how you go about it.