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By Leslie Cook
March 3, 2021
A couple is picking a house from the dessert trolley
Kiersten Essenpreis for Money

Buying a house with your partner is truly exciting. You have your whole future to consider as you make a home together. But don’t let love blind you to some cold hard facts: homeownership comes with a lot of responsibility and serious financial consequences — especially if you’re not married.

As mortgage rates dropped last year because of the economic impact of the COVID-19 pandemic, buying a home became more affordable and attractive to a lot of couples. Between July 2019 and April 2020, the percentage of all homebuyers who were unmarried was 9%. After the pandemic was declared in March, that number increased to 11%, according to the National Association of Realtors.

Joint ownership has been on the rise for decades. In 1981, 72% of first-time homebuyers were married. By 2020, that percentage was down to 52%. By contrast, unmarried couples buying their first home together grew from less than 3% to over 16%.

The trend isn’t age-specific either. “It’s a good mix of all ages, even older couples that are just starting over versus the young ones who haven’t even left mom and dad’s house yet,” says Keri Rizzi, a licensed real estate agent in the Hudson Valley area of New York. “They want to embark on this journey together, so it really runs the gamut.”

Buying a home can be complicated enough for a married couple whose finances are legally joint. For an unmarried couple, there are extra factors to consider before even beginning to search for a home.

Rizzi, who’s noted an uptick in unmarried couples enlisting her to help them find a home since the pandemic began, says that the first thing she recommends is to get advice from both mortgage lenders and legal professionals.

“Talk to the professionals, talk to the local attorney, talk to the mortgage lenders and just do the research,” she advises. “Make sure you’re clear on all your options.”

So, if you’re considering buying a home with your significant other, be ready to have some serious talks about money and long term goals, not just about the style of home, school districts, or the neighborhood you want to live in (although these are important conversations too). After all, you’re about to make the biggest financial decision of your lives together.

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Preparing to buy a home together

Your first order of business is to discuss your finances with your partner. You should cover topics like how much you each earn, how much debt you have, how much you have saved and your retirement goals, etc.

“Buying a home is such a big purchase, a couple needs to redefine intimacy to do it right,” says Howard Dvorkin, CPA and chairman of Debt.com. “They need to talk about every aspect of their financial lives. Not just what they earn and what they spend, but how they think about money.”

Consider things like how much each of you will contribute to the down payment and monthly mortgage payments. While many couples decide to split the costs 50-50, if one partner is in a better financial position than the other they may decide to contribute a larger amount.

Remember to discuss each other’s credit scores as well. Mortgage lenders view couples applying for a mortgage together as individuals. If one has bad credit or a significantly lower score than the other, the lender will use that lower score when you apply for the loan, which can lead to your being approved for a smaller mortgage or offered a higher interest rate.

You may decide that the partner with the highest credit score should apply for the mortgage instead of applying jointly. Beware that this also means qualifying for a mortgage on just one income, so it may mean buying a less expensive home or financing a smaller portion of the purchase.

It’s happily ever after, until it isn’t

We don’t want to burst your love bubble, but you should also consider other legal protections in case the unthinkable happens.

We’re not necessarily referring to a break-up, although you should know that’s a possibility. But what happens if your partner were to become incapacitated due to an illness or accident? Can you each carry the mortgage and other home costs if one partner can no longer contribute financially? Rebecca Wallenfelsz, a trust and estate partner at Chapman & Cutler law firm in Chicago, says that these are situations you should prepare for ahead of time to protect your home.

With married couples, the spouse usually has the legal right to make decisions for their partner. With unmarried couples, decisions concerning medical care, finances, and, yes, your home, will fall to your partner’s family. Designating a power of attorney for each other can give a partner rights in case of incapacity.

It also helps if you spell out what you want to happen with the home in case one partner passes away, then share it with family members. You can prevent a lot of unwanted pressure and misunderstanding if your wishes are made clear to all beneficiaries and heirs beforehand.

For married couples, there are also laws that can protect a primary residence from being targeted by creditors that don’t exist for unmarried couples.

For example, some states offer what is known as a homestead exemption, which typically protects a portion of the equity in a primary residence from creditors. Some states will increase the amount of homestead exemption for married couples, sometimes even offering a full exemption.

There is so much variance in the amount of exemptions available that talking to a financial advisor or a real estate lawyer about the options available to you in your state, married or not, is a must if you want to protect your home.

Swap a marriage certificate for a property agreement

Once you’ve ironed out the financial aspect of the home buying process, put it all in writing. Although contacting a lawyer to set everything up for you isn’t very romantic (ok, not romantic at all), it can save you a lot of money and grief later on.

For Wallenfelsz, it’s important for unmarried couples to have a property agreement in place where it’s clearly established how ownership is being divided. This isn’t a major issue for married couples because there’s a whole body of law establishing how property should be divided in the event of a divorce.

For unmarried couples, however, there is no such framework unless you live in a state where common-law marriages are recognized. Otherwise, you’ll be treated as individuals who co-own property together.

A common law marriage exists if you’ve been living together for a period of time determined by the state you live in and represent yourselves as being a married couple even though you have not gotten a marriage license. However, only eight states and the District of Columbia fully recognize common-law marriages.

In fact, the most common mistake unmarried couples make when purchasing a home together, according to Wallenfelsz, is not spelling out how they’ll establish ownership . This is known as “taking title.”

“Most people, they just default to however the deed is set up and written and don’t ever pay any more attention to it than that,” says Wallenfelsz.

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Three ways to set up your property title

You’ll have three main options to choose from when deciding how to establish the home’s title. A home’s title isn’t an actual document but a concept that gives you the right to use the property and is the legal term for establishing ownership. The actual document where ownership is detailed is called a deed.

Consider all ownership scenarios carefully and speak with a real estate lawyer about which is the best option for you and your partner.

Sole ownership

This is where only one person is on the deed, making them the sole owner of the property. It also makes them legally responsible for the mortgage payments and any other costs associated with owning the home.

Couples will sometimes choose this option if one partner has a much better chance of qualifying for a mortgage or if one partner wants to own the house outright. The downside? In this case, one partner has no legal right to the property. If there’s a break-up, the non-owner member of the couple is out of home and hearth.

There is the possibility of adding a name to the deed afterward, but that can change the terms of the loan and incur additional fees. Check with your lawyer before adding someone to the home’s title.

Joint tenancy with rights of survivorship

This option is common when both partners own the home in equal shares. The advantage of joint tenancy is that if one of the owners were to pass away, the surviving partner automatically inherits the other’s share of the home.

If there’s a break-up, both partners need to agree to sell the home or one partner agrees to buy the other out. However, there could be a situation where one partner sells their share of the home, meaning the other partner may find themselves co-owning a home with a complete stranger.

Tenancy in common

This allows for partners to own an unequal share of the home. This option would be used if one partner contributes more toward the purchase. They would then own a larger share of the property.

What you need to be aware of with this option is that if one of the partners passes away, their share of the home doesn’t automatically go to the survivor. It can be bequeathed to whomever that partner chooses, which can create problems if an heir wants to sell and the surviving partner does not.

A property agreement with a buy-out clause giving a surviving partner the right to buy the property outright can help prevent a sticky situation like this.

More from Money:

5 Ways Your Finances Instantly Change When You Buy a House
Finding a Home Is so Hard Right Now That Buyers Are Scouring Obituaries and Divorce Notices
Thinking of Tapping Your 401(k) for a Down Payment on a House? Read This First