These days, there’s no such thing as cheap real estate. On top of that, lenders everywhere are more conservative than they were in the past. These two factors can make it challenging for single people to purchase a home on their own. That’s why it’s becoming increasingly popular for singles to co-purchase a home with a boyfriend or girlfriend, family member, or friend.
On the plus side, this type of arrangement can help buyers afford the down payment, closing costs, real estate taxes, mortgage payments, and other costs associated with buying a home. But since there aren’t clear-cut laws established to protect those who purchase real estate with someone other than a spouse, it is important to take the following precautions when doing so.
Make sure you and your co-buyer are financially compatible.
Buying a home is likely the largest investment you’ll ever make, and it comes with a significant amount of risk. You and the individual you’re considering partnering with owe it to one another to fully disclose your finances. During your meeting, go over all of your monthly income, expenses, and outstanding debt – and provide the paperwork to support this information. Do not hide anything, as it will undoubtedly come to light as the process moves forward.
Put everything in writing.
You will need to have a document clearly outlining the agreed upon ownership percentages and ownership responsibilities – including mortgage and maintenance payment obligations and how to proceed if either party wishes to sell the home. It may be beneficial to have a lawyer draw up this agreement so that nothing is overlooked.
Choose the property ownership terms that best suit both of you.
Do your research. Title options vary from state to state, so consult a lawyer or other real estate professional to find out what ownership terms are applicable where you live. The way in which you and your co-buyer hold title will determine your tax benefits as well as your rights when you sell the home. For instance, joint tenancy means you both own an equal share of the property and if one of you were to die, the other would inherit the remaining share. Tenancy in common, on the other hand, would allow you to specify ownership percentages and designate an heir to your share of the property in the event of your death.
Keep comprehensive and accurate maintenance records.
During the course of your co-ownership, it is likely that you will make repairs or renovations to the home. You must keep all of these receipts and proof of the amounts each party paid for any services performed or permanent fixtures installed in the home. If you do not keep a full record of these expenses, you will not be able to prove which party is eligible to reap the financial benefits of these investments when you sell the property.
If you are considering co-purchasing a home, one of our home loan experts would be happy to help you get started. Call Cliffco Mortgage Bankers at (516) 408-7300 or contact us by filling out the form here.