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Tips for unmarried home buyers

By: Kari McCoy
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Question:

Dear Kari;

My boyfriend and I have been dating for three years now and we just told our parents we are not getting married, but we are going to buy a house together. The response from all our parents was less than favorable, yet we are determined to go forward with our plans. We would like to know if you could offer any good advice for our situation?

 

Answer:

Thanks for the popular question. With the current low-interest rates, high rents, which are still climbing, along with the ability to deduct the mortgage interest off your income taxes, makes buying a home, a popular choice. 

Most folks know a home purchase is one of the largest transactions they will ever make in their life, so it is important that they go into the transaction with their eyes wide open. Usually, buyers will need a mortgage loan to aid in the purchase of a home. The lender will be verifying all income, debts, and credit scores. This information will determine their ability to qualify for a loan, what type of loan program they will be eligible for, and what interest rate they qualify for. It is good to know if you, or your partner, have a credit score that is lower than ideal. This low credit score will negatively influence the loan parameters above. If one person's credit score is too low, this issue could be solved by having the person with the better credit score on the loan and deed only. After the home is purchased and closed, the other partner could be added and put on the title. If the partner with the lower credit score has liens and judgments, they would need to be resolved first, because they could become attached to the new home.

Several money decisions between the couple should be made prior to the purchase, on how to share the costs of the purchase. These include, but are not limited to; the down payment, lender fees and closing costs, inspection fees, title/escrow fees, taxes, insurance, utilities, ongoing maintenance or future repair bills, and the monthly mortgage payment. These costs should be worked out between the buyers, prior to completing the transaction. Having a joint checking account could be the simple answer along with keeping good records. 

Another important decision to be made will be, what percentage of ownership each partner will receive of the property. This answer does not necessarily have to be a 50/50 equal division, however, the percentage division must be agreed upon. This decision will help them decide how to hold title to the property.

Here are some examples;

·     Joint tenancy: in the event one person dies, the other person automatically inherits the other's full portion of the property there for then owning the entire property. 

·    Tenants in common: In this situation, if one person dies, ownership will not automatically transfer to the other homeowner unless that person is named in the will. Instead, the deceased owner's heirs will inherit those shares. This can be a good choice if one or both partners have kids or family from a previous marriage to whom they want to pass on the property if they die. 

It is good to know that Realtors can help couples navigate and negotiate the home buying process, however, they are not allowed to offer legal advice, tax advice, or give advice on how to hold title on a property.

A good suggestion would be that once you have figured out all of your "what ifs" to have a good real estate attorney draw up legal binding documents on how you will share the profits and costs of your new home. This may not sound fun, but you will be glad you went through all these steps in the future. Better safe than sorry. When you have all this accomplished, you both will be free to experience the exciting adventure of buying your very own home. Happy house hunting!

This is an attempt to answer a question, not intended as legal, loan, or tax information.

Kari McCoy owns the Kari McCoy Group, residential real estate at Lyon Real Estate.  She can be reached at 916-933-5274 or e-mail her at sold@karimccoygroup.com  #00841588