Some couples decide to live together without getting married. As more and more people go in that direction, the question of buying a home inevitably pops up. Unmarried couples who want to buy a home face no legal bars, but they should only take this step after they've spoken with an attorney and thought things out in full. Read on for two major issues to consider as you make a move and become a homeowner with your partner.
Think carefully about the way you handle your lending. Lenders will approve joint loans for unmarried couples, but success is more likely if both of you meet the criteria equally. When one of you has a lower score, the lender will place greater weight on the lower score. In other words, the lower score will prompt more scrutiny by the lender. A joint loan with one score being lower might result in:
- A denial of the loan
- An approval with a higher interest rate
- Lower loan limits
Some couples deal with this issue by using only the credit information of the party with the higher score. If one party is able to qualify for the loan on their own, the issue of who pays the mortgage might arise. In some cases, only one party is listed on the mortgage, but both parties financially contribute to paying the bill. Unfortunately, only the party listed on the mortgage can use the mortgage to take the interest deduction off their taxes. This issue doesn't affect married couples filing jointly.
Title Deed Considerations
More decisions must be made about the way the deed is titled. Both parties may be listed on the deed regardless of the name on the mortgage. Listing both names on the deed can protect the party in the event of a death or a relationship break-up. If the property ends up being sold as a result of a death or breakup, having both names can provide the survivor or the other party with some financial gain.
Deeds that contain more than a single name are known as joint tenancy deeds. To have the home automatically go to the surviving party, the deed is titled "joint tenancy with right of survivorship". As a bonus, titling deeds using the right of survivorship status means avoiding probate.
Be sure to explore all of your options before you apply for a mortgage or decide on how to title the deed. Consult with a real estate attorney to learn more.