Below are important considerations for unmarried couples to discuss before purchasing a home together.
1. Have open financial discussions
Transparency is crucial. Discuss income, debts, credit scores and financial goals upfront to prevent surprises during the home-buying process.
2. Create a cohabitation agreement
A real estate attorney can draft a legally binding agreement outlining:
Ownership percentages.
Expense responsibilities.
Contingency plans in case of breakups.
3. Determine how the property will be titled
The way a home is titled impacts ownership rights:
Joint tenancy: Equal ownership with the right of survivorship, meaning the home automatically transfers to the surviving joint tenant.
Tenants in common: Allows for unequal ownership shares, useful when partners contribute different amounts toward the down payment or mortgage.
Sole ownership: Only one person is listed on the deed.
4. Plan for 'what ifs'
Consider various situations, such as:
A partner relocating
Variations in income
Breakups and how they could affect the jointly owned property.
5. Understand mortgage options
Develop a mortgage application strategy that considers each partner’s credit score, employment status, and income. Generally, the partner with the stronger credit score will qualify for the best mortgage rate.
Information provided by: Brendel Hightower who about real estate and other topics for the Detroit Free Press.