More often than in years past, couples are moving in together prior to marriage. In some cases, they're even buying a home together before they tie the knot. While it is good news that two people feel confident enough to make such a large joint financial investment, there are many factors to consider before an unmarried couple purchases a home:
Breakups are possible
Not that this situation is solely tied to unwed couples, but it is still something to consider. Whether they fall out of love in a few months or a few years, the settlement process for a home can be tough if one person wants to stay in the home.
Both individuals have to consider their commitment to the relationship. If either believes that marriage is necessary before such a big endeavor, then it may be a good idea to hold off on a home purchase until after the nuptials.
Finances need to be disclosed
Before a couple can purchase a home, they need to be open about their finances. This may not be as typical for people who have not been together as long, and total disclosure should occur before jointly applying for a loan.
This means sharing information regarding all assets, outstanding debts and lines of credit. Additionally, partners should tell each other about their individual credit scores, a particularly important piece of information. When mortgage providers receive a joint home loan, they usually consider the lower of the two scores. If one partner has a significantly lower FICO score, the couple can discuss ways to raise that score and better plan a timeline for when they can purchase a home.
The title may not be able to be shared
In some states, unmarried couples are not allowed to share the title to a home. Often, it is not advised that only one person is on the title, as this can lead to more problems with one partner getting full ownership of the home if the other dies.
Unwed couples have two options to share the title: signing as tenants in common and joint tenancy. Under the former, each partner owns a share of the home's assets, which goes to next of kin or beneficiaries upon their death. With joint tenancy, each person owns the home equally, and the surviving spouse gets full ownership after the death of the first.
Legal protection is helpful
With the possibility of the relationship dissolving, each partner should consider legal protection via a signed contract. While this isn't the most appealing conversation to have, it is important that a couple considers the future and the possibility that their feelings can change. These agreements can determine what is to happen to the home if the relationship dissolves, including how the mortgage should be paid and how long it should stay on the market when selling.
Prepare to compromise
A home inspection can tell buyers whether a home's inner workings are free of any issues, but only the couple can decide whether a home fits both their needs. For some, coming to a mutual decision about something as significant as a home purchase can be difficult, further highlighting the importance of understanding between both partners.
Each relationship is built on a different foundation, but when it comes to making any joint investment, whether with a future spouse, friend or business partner, all expectations have to be on the table to ensure everyone is getting what they want.
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