Did you know that less than 10% of home buyers are unmarried couples? While it’s not very common for unmarried couples to buy together, it can be a great way to make homeownership more affordable.
However, unmarried couples face some challenges that married couples do not when it comes to homeownership. For example, your state may not give you the same property rights that a married couple would have.
As a former HUD-certified housing counselor and homebuyer educator, I highly recommend taking a few extra steps before purchasing a home with your partner. That includes discussing some key financial issues with each other and consulting with a real estate attorney to make sure you both have the rights you deserve.
As an unmarried couple, you can apply for a mortgage together as co-borrowers, meaning both names will be on the loan.
Like married homebuyers, unmarried couples should qualify for a mortgage based on their combined information. Here are some things you should know about qualifying for a mortgage with your partner:
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Income: Your combined income must be enough to cover your mortgage payments.
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Credit: The lender will use the lowest credit scores between the two of you to determine what loan terms you qualify for.
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Payments: Both will be 100% responsible for the loan payments. If one doesn’t pay their share, both will experience the same negative consequences, which can include late fees, credit damage, and possible foreclosure.
It is natural to assume that having a mortgage gives you full ownership of a property. But in reality that is not the case. While the mortgage establishes who is responsible for repaying the loan, the title establishes who the legal owner is.
So if you only have the mortgage and not the title, you could end up facing big problems down the road. For example, your partner may be able to sell the house without your permission and without returning your contribution.
Here are some ways you can approach the title as a couple:
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Exclusive property: A person has full ownership and responsibility.
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joint tenancy: Both have equal rights of ownership and survivorship, meaning one becomes the sole owner if the other dies.
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tenancy in common: It has unequal actions. If one of you dies, the other will not inherit the entire property unless specified in a will.
To avoid negative outcomes for one or both of you, I typically recommend choosing joint tenancy. However, each couple is unique in how they want to divide financial responsibilities and ownership of their property.
Buying a home will likely be the biggest financial commitment you make together; Don’t assume the details will work themselves out naturally. Instead, take some time to discuss what you both want.
Here are some key questions to discuss with your partner before purchasing a home:
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What are your credit scores? If one of you has bad credit, the other may want to apply alone.
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Do you have any unpaid debts? If so, it could result in a lien against the home.
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How will you divide up the startup costs, including the down payment, closing costs, moving expenses, and home furnishings?
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How much will each of you contribute to the mortgage payment? What will you do if one of you can’t pay?
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How will you divide the costs of home maintenance and repair? Who will do the work?
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What are your long-term plans for the property? Do they include renewals, sale at a later date, or other specific details?
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What will you do with the property if you separate?
In addition to your preferences, you should also consider your state’s laws regarding property rights for unmarried couples. Consulting with an attorney can help you understand and protect your rights. But I recommend going a step further and having a lawyer draft your agreements into a contract.
A cohabitation agreement is a legal agreement that allows unmarried couples to define how they will share the responsibilities and benefits of living together. You might think of it as similar to a prenuptial agreement.
Here’s what cohabitation agreements typically include when it comes to homeownership:
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Costs: How you will divide mortgage payments, utilities, home repairs, and other household expenses.
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Benefits: Your rights to home equity and shared property, such as furniture, and whether you need to reimburse each other for purchases.
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Dissolution: What will happen to the house and other shared assets if you separate or if one of you dies?
These agreements are essential because they guide your decisions as owners, help prevent disagreements, and can reduce your chances of having a lengthy and costly legal battle if you separate.
Note: Cohabitation agreements may not be enforceable in certain states, such as Mississippi, where cohabitation is technically illegal.
| PROS | CONS |
|---|---|
| Buying a house on your own may not be affordable | Your Partner’s Bad Credit Can Negatively Affect Loan Approval |
| Buying May Be Better for a Couple’s Long-Term Financial Stability Than Renting | One of you may qualify for a better mortgage if you apply alone |
| Your marital status does not affect your ability to qualify for a mortgage | You may be fully responsible for the mortgage if your partner doesn’t pay |
| State laws may not give you the same legal protections as married couples. |
It may be wise for an unmarried couple to buy a home together, as long as they agree in advance how they will divide their financial responsibilities and take the time to have an attorney outline the details of their agreement.
Read more: Should unmarried couples have joint bank accounts?
Can a common-law couple buy a home together and both be approved?
Yes. Just like a married couple, an unmarried couple can get approved for a joint mortgage and purchase a property as a couple.
It is not more difficult for an unmarried couple to buy a home, but the couple must take additional steps that married couples do not have to take. This includes researching the relevant property laws in your state and hiring an attorney to draft a cohabitation agreement.