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Buying a home as an unmarried couple

Do low interest rates have you wondering if now is the right time to buy? From building home equity to the predictability of a fixed-rate mortgage payment, buying a home has many benefits. Joint homeownership, whether between significant others, roommates, friends or relatives, also has its advantages. For example, splitting a mortgage payment and other household expenses can make owning a home easier to afford.

Can unmarried couples buy a home?

If you’re buying a home as an unmarried couple, you’re not alone. 20% of younger homebuyers are unmarried couples. Regardless of your relationship status, everyone has the same opportunity to buy a home. However, if you’re unmarried, there are a few items to discuss with your partner before calling a realtor.

Who applies for the mortgage?

One benefit of buying a home with your partner is choosing to apply for a loan together. With both of you on the mortgage application, approval will be based on your combined income and assets, and typically the lower middle score from each of the applicants’ credit scores pulled from all three credit bureaus. Applying for a joint mortgage boosts your chances of getting approved. Although there’s no guarantee, it also may help you obtain a better loan rate. With a combined income, you may also be approved for a higher mortgage amount. On the other hand, if one of you has a lower credit score or a high debt-to-income ratio (DTI), it may be best to apply for an individual mortgage. When deciding who should apply, consider these three factors:

  • Healthy credit score

    The higher your score, the better your interest rate and loan options will be. The lower your rate, the lower your monthly payment. A score in the 700s is ideal.

  • Low debt-to-income ratio

    Your debt-to-income ratio is important because it reflects your ability to manage monthly mortgage payments and repay debts. The lower your DTI, the better.

  • Steady employment and income

    Strong employment history is a key consideration because it means a stable income and the ability to make monthly loan payments.

Who will be on the title?

When you’re on the title of a home, you have the legal rights of ownership. Before closing day, you’ll want to decide which ownership option is best for you and your partner. Here are three common choices of taking a title to a home:

  • Tenants in common

    Also known as co-tenancy, each co-owner is on the title and owns a specific percentage of the home. The percentage doesn’t have to be an equal share. Tenants in common can be related or unrelated.

  • Joint tenancy

    In this arrangement, each person has an equal share of the home. Spouses often use this option because it involves a right of survivorship.

  • Sole ownership

    When one person holds the title as the sole owner, they’re on the deed and are the only legal owner.

Do we need a cohabitation property agreement?

Buying a home together is a significant investment. A cohabitation property agreement can help determine how to commingle assets, divide household expenses and pay debts. Also called a “no-nup,” these contractual agreements can also provide protection if you choose to separate. Before signing anything related to homeownership, consult with a real estate attorney.

Buying a home together while engaged

Does your wedding planning include shopping for a new home to start your lives together? Deciding whether or not to purchase a home while engaged is a personal choice; being engaged doesn’t impact your ability to qualify for a mortgage. Again, you’ll want to take a close look at both of your credit scores and levels of debt before deciding if you’re going to apply alone or jointly with your fiancée.

Are there mortgages for unmarried couples?

The loan approval criteria are the same if you’re single or married. Regardless of your marital status, you can choose from a wide variety of loan products. To help narrow your options and find the best loan to fit your situation, consult an experienced loan officer.

The above information is for educational purposes only. All information, loan programs and interest rates are subject to change without notice. All loans subject to underwriter approval. Terms and conditions apply. Always consult an accountant or tax advisor for full eligibility requirements on tax deduction.

By |Published On: October 14th, 2021|Categories: Mortgage 101|Tags: , , |

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About the Author: Guild Mortgage

Founded in 1960 when the modern U.S. mortgage industry was just forming, Guild Mortgage Company is a nationally recognized independent mortgage lender providing residential mortgage products and local in-house origination and servicing. Guild’s collaborative culture and commitment to diversity and inclusion enable it to deliver a personalized experience for each customer. With more than 4,000 employees and over 250 retail branches, Guild has relationships with credit unions, community banks, and other financial institutions and services loans in 49 states and the District of Columbia. Guild’s highly trained loan professionals are experienced in government-sponsored programs such as FHA, VA, USDA, down payment assistance programs and other specialized loan programs. Guild Mortgage Company is a wholly owned subsidiary of Guild Holdings Company, whose shares of Class A common stock trade on the New York Stock Exchange under the symbol GHLD.