Who Owns the Home: Buying as an Unmarried Couple

Buying a home is a big step financially and for some people, it’s the largest investment they’ll ever make. If you’re an unmarried couple buying a home together, you’ll still need to go through the usual mortgage process. But there are some unique considerations to keep in mind that may affect your decision to buy. If you’re buying a home as an unmarried couple, a financial advisor could help you create a financial plan for your needs and goals.

Can an Unmarried Couple Buy a Home?

There’s no rule barring unmarried couples from buying a home together. Lenders will make mortgage loans to people who are engaged or those who plan to live together without getting married officially. It’s even possible to buy a home with someone that you’re not romantically involved with, such as a friend, sibling or another relative.

Should an unmarried couple buy a home together? The answer is different for everyone. Buying a home with someone else that you’re not married to can raise certain questions, like:

• How stable is the relationship?

• What would happen to the home if the relationship were to end or one partner were to pass away?

• Are we on the same page with regard to what we want from a home?

• How much can we afford to pay for a home?

• What happens if we outgrow the home?

Even if you’ve rented a place together previously, home ownership can add bring new financial responsibilities and pressures. So it’s important to thoroughly discuss whether home ownership is the right move in general before you start shopping for houses.

How Does Buying a House Work If You Aren’t Married?

The typical process for buying a home goes something like this:

• Find the right house and make an offer

• If your offer is accepted, apply for a mortgage

• Pay the down payment and closing costs

• Sign off on the mortgage paperwork

That’s a very simplified version of what goes into buying a home. The process isn’t much different for an unmarried couple buying a house but there are some special considerations.

First, you’ll need to decide who is going to apply for the mortgage. Mortgage lenders prefer to make loans to borrowers with strong credit scores, stable incomes and low debt-to-income (DTI) ratios. If one partner has a poor credit score or substantial debt, it could make sense for the other partner to apply for a mortgage in their name alone. That might give you the greatest odds for approval.

Relying on the partner with the stronger credit scores could also save you money over the life of the loan if they’re able to get approved for a lower interest rate. The lower your rate, the lower your monthly payment and the less you’ll pay in interest overall. If you both have good credit scores and strong incomes, then it could make sense to apply for the mortgage in both your names. Keep in mind, however, that you’ll both be equally liable for the resulting mortgage debt.

Next, you’ll need to discuss who’s going to pay what toward the down payment and closing costs. This is where it can be crucial to choose the right type of mortgage. VA and USDA loans, for instance, have no down payment requirements. With an FHA loan, you can put down as little as 3.5% if you have a 580 credit score. Conventional loans can also have low down payment requirements but you’ll pay private mortgage insurance (PMI) if you put down less than 20%.

Closing costs are paid separately and typically run between 2% and 5% of the home’s purchase price. You may decide to split both equally or have one partner pay the down payment while the other handles closing costs. Or you may choose a different arrangement, based on what each of you can pay. It’s important to work out the details beforehand so you’re not scrambling to come up with the necessary funds at closing.

Who Owns the Home: Buying as an Unmarried Couple

Once you settle the issue of who’s applying for the mortgage and how much you’ll each contribute to the down payment and closing costs, the next question is how you’ll own the home together. There are three different ownership options you might consider as an unmarried couple buying a home:

• Sole ownership. In a sole ownership arrangement, only one person’s name is listed on the title of the property. This would typically be the same person whose name is listed on the mortgage.

• Joint tenancy. In a joint tenancy arrangement, both partners have equal ownership of the property. When a home is owned as joint tenancy with the right of survivorship, the surviving partner automatically receives the deceased partner’s share of the property when they pass away.

• Tenants in common. Tenants in common have an equal ownership interest in the home during both of their lifetimes. But there’s no automatic right of survivorship granted when one partner passes away. If you’d like your partner to receive your share of the home after you die (or vice versa), you’d need to set up a will specifying that.

Note that it’s possible for someone to be added to the deed or title of a home, even if they’re not on the mortgage. If you’re not sure which ownership arrangement will work best for you as a couple, you may want to talk to your financial advisor or an estate planning attorney. They may be able to pinpoint any issues that might arise with sole or shared ownership and offer solutions on how to manage them.

How to Protect Yourself: Buying a House With a Partner

If you’re an unmarried couple buying a house, it’s important to have everything in writing so you understand who is responsible for what and who owns what. Having a cohabitation agreement can come in handy for outlining specific details of your home buying situation and what will happen to the home if one of you passes away or the relationship ends.

For example, a typical cohabitation agreement might include:

• Details on who owns the home and who’s listed on the title or deed

• Who is responsible for the mortgage associated with the home

• How mortgage costs and other expenses are shared

• Who will own any assets you acquire together after buying the home

• Contingency plans for a breakup or the death of one partner

• Contingency plans if one of you has to move for a job or to go to school

• How a buyout would work if one partner decides to leave the home but the other wants to retain it

An estate planning attorney or family law attorney may be able to help you draft a cohabitation agreement that covers all possible scenarios and outcomes. Having this document in place can save you stress and headaches later if the relationship doesn’t work out or one partner passes away and ownership of the home falls into dispute.

Bottom Line

Buying a house as an unmarried couple can add a few extra wrinkles to the process but that’s no reason not to consider it. Proper planning and open communication can ensure that the home buying process goes as smoothly as possible and that you both have realistic expectations going in.

Mortgage Planning Tips

• Consider talking to a financial advisor about the pros and cons of an unmarried couple buying a house together. If you don’t have a financial advisor yet, finding one doesn’t have to be complicated. SmartAsset’s free tool matches you with up to three financial advisors who serve your area, and you can interview your advisor matches at no cost to decide which one is right for you. If you’re ready to find an advisor who can help you achieve your financial goals, get started now.

• Before you get too far in the home buying process, take time to do the math together as a couple to figure out how much home you can afford. You can use a simple home affordability calculator to plan your budget. From there, you can start shopping around for different mortgage options to see what kind of terms you might qualify for.

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