There are a lot of reasons why a couple isn’t planning to get married yet, but they do wish to own a home together. Perhaps the rents have skyrocketed and the purchase will more than pay off. Maybe you simply do not believe in marriage and do not want to officially tie the knot. Whichever the reason(s), your potential lender is not going to be intrigued either way – all they care about is the paperwork and whether you can afford to pay them back. So, let’s see what you need to do to play your cards right and buy a home together.
How much can you get?
It’s time to compare your saving and spending skills, aka see what your credits scores are like. Then, start applying some credit score increasing techniques. For instance, both parties should minimize their debts and stop creating new ones in order to appear presentable to the potential lender.
There are several ways to go around whose name will be appearing on the ownership documents:
- Sole ownership – this could be beneficial for lower taxes, which is not negligible. On the other hand, should you ever split up, the party whose name isn’t mentioned regarding the ownership can end up losing the house completely.
- Joint tenancy – this is quite transparent as each partner has 50% ownership of the house. In case of death, the other partner inherits the remainder. Still, deciding to split up can cause great problems if one party declines to sell their share.
- Tenants in common – in this case, we have uneven shares. You could own 60%, and your partner 40%. However, in the case of death, the right to property isn’t automatically transferred to the living partner.
Make sure you have everything spelled out right, or you can lose big. A mortgage is to be paid even when a relationship falls apart – that’s one thing you can be absolutely certain of. If you’ve co-signed the loan, the mortgage is your responsibility, too.
Put this in writing
Of course, you aren’t going to sign the wedding contract or a prenup, but some kind of document is mandatory to verify your union in property purchasing. The document is vital in cases when one of the partners dies, becomes disabled, or the relationship comes to an end. Things that should be considered are – the type of ownership on the deed (joint tenancy with rights of survivorship or tenants in common), the percentage of the house each party owns, payment responsibilities, buyout agreement, dispute process etc… The more defined the contract is at the outset, the easier things will be in the long run, should complications arise.
Do the research
When it comes to home loans you need to evaluate all your possible options when choosing the right lender. Married or not, living in Sydney or New York, when it comes to the biggest investment of a lifetime, the universal constant is that you still have to learn how to do home loan research just like any other loan applicant. When applying for a loan, you want to make sure that you have addressed the following: the amount you want to borrow, your income and employment history along with information regarding your monthly expenses, assets etc. Then there is the loan itself. Do you want a fixed or a variable rate loan? How much deposit (if any) do you have ready for the purchase? Make sure to have all the necessary documents ready and up to date, as the quality of the information will ultimately play a major part in whether you are successful in your application.
Create a joint bank account
This is simply a must if you wish to simplify the process as much as possible. You could use this account to pay off the mortgage instalments or any other expenses regarding your home. However, do agree in advance on how much each of you is going to contribute to it, to avoid any issues later on.
Mind your account
You are going to have a joint account, but that still isn’t the reason to lose track of your own finances. Sometimes it is too easy to concentrate on just the joint bank account and whether the bills are being paid on time. No matter what happens, you must always keep records of how much you alone are contributing to your mutual home. Otherwise, you may have problems proving your financial involvement.
You may have sworn to each other to be together forever, but purchasing a home is a true relationship test. You have to be completely honest about your credit score, name every single expense you make, declare how comfortable you are about borrowing a certain amount, and perhaps even be faced with doubts concerning the duration of your union.
To sum up, you are bound to have some extra steps compared to the married couples. However, with good organization and sound agreements, you can get a home loan approved in no time.