With the current high inflation rates and the increasing cost of living, many individuals are exploring ways to save money on housing expenses. Some are opting to move in with parents, family members, or roommates, while others are considering buying a house with a significant other before tying the knot. In this article, we’ll delve into the unique considerations that unmarried couples should keep in mind before embarking on the journey of homeownership together.

Key Takeaways

1. Cohabiting before marriage is becoming more common, but there are specific factors to weigh when unmarried couples purchase a home together.
2. Unmarried partners should approach the mortgage application process with care, consider various home title options, and plan for potential property division if they separate.
3. Purchasing a home before marriage typically offers fewer tax benefits compared to buying one after marriage.

2023 Cohabitation Statistics

– U.S. Census data reveals that over 20 million American adults, or 8 percent, live with an unmarried partner.
– Singles spend an average of $17,899 annually on housing, while couples spend $24,811, according to the U.S. Bureau of Labor Statistics.
– The average age of a first-time homebuyer in 2022 was 36, up from 33 in 2021, as per data from the National Association of Realtors.
– A Pew Research Center report shows that more adults between the ages of 18 to 44 have cohabitated (59 percent) than have been married (50 percent).
– Among cohabiting couples desiring engagement, financial readiness is the biggest barrier, with 29 percent citing their partner’s readiness and 27 percent their own, according to the same report.

5 Essential Steps for Unmarried Couples Buying a Home

1. Openly Discuss Finances: Given the joint financial commitment, it’s crucial to have transparent conversations about income, credit scores, and debts (including student loans, credit card debt, and car loans). Ensure that both partners can afford the home purchase.

2. Draft a Cohabitation Agreement: Create a comprehensive agreement that outlines financial responsibilities and addresses what will happen to the property in case of a breakup. A written agreement can prevent future disputes.

3. Strategize Your Mortgage Application: If one partner has a lower credit score, it could impact the mortgage application process and interest rates. Consider whether it makes sense for the partner with better credit to apply for the mortgage alone, although this decision comes with added legal responsibilities.

4. Choose the Right Ownership Structure: The title of the home, not the mortgage, determines legal ownership. Unmarried couples have various options, such as joint tenancy, tenancy in common, or tenancy by entirety. Select the one that best suits your situation.

5. Consult a Knowledgeable Lawyer: Work with an experienced real estate attorney to navigate the complexities that may arise when buying a home as an unmarried couple. They can clarify legal and financial implications, draft the cohabitation agreement, and explain ownership structures.

5 Pitfalls to Avoid When Buying a Home as Unmarried Partners

1. Avoid Overstretching: Regardless of your relationship status, it’s unwise to purchase a home beyond your financial means. This is especially crucial if only one partner is on the mortgage, as they may become solely responsible for the loan if issues arise.

2. Don’t Dodge Important Discussions: Converse openly about financial matters, including down payments, monthly expenses, bill sharing, property taxes, insurance, and upkeep. Honesty now can prevent regrets later.

3. Don’t Neglect the Cohabitation Agreement: While no one wants to plan for a breakup, it’s essential to have a detailed agreement in place outlining the fate of the property if separation occurs.

4. Understand Tax Implications: Unlike married couples, only one person in an unmarried couple can typically claim the mortgage interest tax deduction. Discuss how this deduction will be utilized.

5. Avoid Rushing Into the Purchase: If you or your partner is not entirely comfortable with the chosen home, its affordability, or the overall process, consider taking a step back. Homeownership is a significant, long-term commitment that should be entered into with confidence and enthusiasm.

**Buying a Home: Married vs. Unmarried**

One of the primary distinctions between co-owning a home before or after marriage lies in the mortgage application process. Married couples often apply for a home loan together, combining their income and assets. In contrast, unmarried individuals typically apply individually, considering the credit score, income, and debt of the more financially qualified partner.

Additionally, unmarried partners need to pay extra attention to protecting themselves through a legal cohabitation agreement, a step not necessary for married couples. They should also carefully determine how they’ll title their shared home.

FAQs

– Is it legal to discriminate against unmarried couples when buying a home?
– No, federal law, specifically the Fair Housing Act, prohibits housing-related discrimination based on factors like marital status.

– What should I prioritize when buying a home as an unmarried couple?
– Focus on your budget, mortgage rates, neighborhood, commute, amenities, and property size. Make sure the purchase aligns with your financial capabilities.

– How common is cohabitation among adults in the United States?
– Cohabitation has doubled in the last 30 years, with 59 percent of U.S. adults aged 18 to 44 having cohabitated, exceeding the percentage of those who have been married.