Through December 31, 2022, Experian, TransUnion and Equifax will offer all U.S. consumers free weekly credit reports through AnnualCreditReport.com to help you protect your financial health during the sudden and unprecedented hardship caused by COVID-19.
In this article:
- Applying for a Mortgage When You’re Not Married
- Going Solo on the Mortgage
- Think Carefully About the Title
- Draw Up an Agreement
- Three Things to Consider Before Moving Forward
- Get on the Same Financial Page
So you're thinking about buying a home with your beau (or your brother, or your buddy—basically, anybody you're not married to). Doing so might have been taboo decades ago, but married couples accounted for just 61% of recent homebuyers in 2019, according to The National Association of Realtors. Single people, unmarried couples and buyers paired otherwise comprised the rest. Because unmarried people don't have the same legal status that married couples do, however, purchasing property together can be a little more complicated without a ring involved.
Here's a rundown of how to buy a house with someone you're not married to, from getting the mortgage to making the payments to planning for a potential falling out.
Applying for a Mortgage When You're Not Married
Aside from VA loans, most mortgage products are available to co-borrowers whether or not they're married. So, with most lenders, applying for a mortgage when you're not married doesn't look much different than it would if you've said "I do." That's true whether you're a couple, friends or siblings; in the eyes of the lender, it's the numbers that count.
You and your buying buddy will apply as co-borrowers, and the lender will review each of your assets, debts, incomes and credit scores. Generally, the lender will pull three scores—one from each credit bureau—for both you and your co-borrower, and use the lower of your collective median scores.
Let's say your scores are 680, 700 and 720. Your co-borrower's scores are 650, 660 and 670. The lender will take both of your middle scores (700 and 660), and then base your application on the lower one (660). This table might help illustrate (the bolded score is the one a lender would use):
|Your credit scores||Your co-borrower's credit scores|
In general, the FICO® Score☉ your lender considers will need to be at least 620 for you to qualify for a conventional mortgage, though other loans are available to buyers with scores as low as 500. You should also aim for a front-end debt-to-income ratio below 28 percent.
If you or your co-borrower aren't sure where your credit stands, get your credit score and report for free from Experian to find out. You can get a copy of all three of your credit reports (from Experian, TransUnion and Equifax) for free through AnnualCreditReport.com. Review your reports and scores, and take action if necessary to make sure your credit is mortgage-ready before you apply.
Going Solo on the Mortgage
If one of you has much higher credit scores or a much lower debt-to-income ratio, that person might want to consider applying for the mortgage on their own. You can usually ask your lender to look at what rates and loans you would qualify for individually and together.
If you're not sure how long the relationship will last, going solo can also keep things simple in the event of a breakup. (Of course, if you live in a high-cost area, it might not be possible to qualify for the mortgage on one income.)
If you do end up applying for the mortgage on your own, remember that the entire burden of paying the debt will legally be on your shoulders—no matter what your co-borrower promises. And, if their name is on the title, they will have rights to the home even if they're not contributing financially.
On the flip side, if it's your partner who is applying for the mortgage on their own, and they want to keep you off the title, you should speak to a real estate lawyer to outline your rights regarding living in the home and getting reimbursed for payments should the relationship end.
Think Carefully About the Title
One of the most important decisions you'll make when purchasing a home with another person is how you'll "hold title," or how you'll split ownership of the house. Just like the mortgage shows who is responsible for paying off the loan, the title shows who owns the property.
Whereas laws dictate what happens to shared property when a married person gets a divorce or loses their spouse, unmarried people will need to forge their own path, with the title playing a crucial role.
Though different states have different rules, you will generally have three options when it comes to titling your new house:
- Sole ownership: This means that one person is the legal owner. If that's the other person, you should be aware that you won't have legal rights to the home—and if the relationship goes sour, you could lose both your place to live and any money you put toward mortgage payments.
- Joint tenancy with right of survivorship: With joint tenancy, you each have an equal share. You can't sell the property without getting the other owner's permission. If one of you dies, the surviving partner will automatically inherit the other's share—no probate court required.
- Tenancy in common: This allows for unequal ownership, meaning you could own 75% of the home while your partner owns the other 25%. This might come in handy if one of you forked over the majority of the money for the down payment. If you go this route, note that one owner can sell their share of the property without informing the other. And, in the case of one owner's death, the surviving owner will share ownership with the other owner's heirs, unless otherwise specified in a will.
Draw Up an Agreement
Once you've determined how you will title the home, you should put everything about your purchase into writing. This is sometimes called a cohabitation agreement or a "no-nup" (as opposed to a prenup).
Your agreement should outline who's covering which expenses (taxes, insurance, mortgage payments, utilities, etc.) during your tenancy, as well as what will occur in a variety of unforeseen circumstances, including a death, breakup or loss of income. Additionally, if one person is funding the down payment, they might want to include a schedule for repayment from the other party.
Some questions your agreement should address: What happens if one of you loses your job? What if you break up and one or both of you want to remain in the house? Can one party buy the other out, and if yes, how long do they have to do so? Who will get the furniture and other items within the home?
If you want the agreement to stand up in court, it might be wise to have a real estate attorney draft or review it. No matter what, it's better to run through these scenarios now, when you're both feeling conciliatory and generous—because if you can't agree later, you'll have to let a court decide for you, which could result in a mountain of legal fees.
Three Things to Consider Before Moving Forward
Regardless of how solid your relationship is, there are always potential pitfalls that could occur when you're buying a house with someone you're not married to. Here are three things you should be thinking about.
- Your credit (and shelter) is at risk. If your name's on the mortgage, and your partner can't or won't contribute to the payments anymore, that doesn't mean you're off the hook. You are both equally liable for the payments; if you're unable to afford to make payments in full without their help, you could face foreclosure, which will cost you your home and severely damage your credit scores.
- You will need to refinance to take one person's name off a joint loan. Even if you move out, your name will remain on the mortgage. The loan will still appear on your credit reports—and, if the other owner falls behind on payments, it will damage your scores. In your cohabitation agreement, you might want to stipulate that the house will be refinanced in the event of a breakup. (Though keep in mind the other owner will then need to qualify for the entire loan on their own.)
- Only one person is eligible for the mortgage interest tax deduction. Since unmarried people file their taxes separately, only one of you will be able to deduct the mortgage interest from your return. This only matters, however, if you plan to itemize.
Get on the Same Financial Page
A mortgage on a home might be the biggest (not to mention longest-lasting) financial commitment you'll ever make. So before taking this major step, make sure you and your co-borrower have a deep understanding of each other's financial situations.
If you're buying a home with a partner and you haven't had the money talk yet, then you need to remedy that—and stat. Before even starting to browse Zillow or Redfin, you should have a good grip on each other's debts, incomes and credit scores.
Hopefully your financial habits jibe too. Once you make such a major purchase with another person, both of your spending patterns are going to be under a microscope. What if you want to get the roof replaced, but your partner says they don't have the money (despite the fact they go on vacation every other month)? How will you handle that? Getting on the same page financially is an essential first step.
Although buying a house with someone you're not married to isn't all that different from buying a house with someone you are married to—this is the 21st century, after all—it can certainly add a layer of complexity to an already complex process.
To keep things as painless as possible, be sure to communicate openly, think carefully about who's going on the mortgage and title, and make contingency plans (in writing!) before moving forward.