First comes love, then comes a mortgage? Tradition would probably squeeze marriage in there before homeownership. But considering that couples today are getting married later in life, they may not be willing to delay the benefits of becoming homeowners just because they haven’t said, “I do.”
If you and your partner are contemplating a home purchase, fear not. It’s perfectly legal to buy a home with someone even if you’re not married — or even a couple. People buy homes together in business transactions all the time.
Of course, in this case, it’s not a business transaction. Buying a home together is a serious emotional and financial commitment. While buying a house with your boyfriend or girlfriend can mark a major relationship milestone, there are a lot of considerations to make before you jointly sign on the dotted line.
Is buying a house with your boyfriend/girlfriend a good idea?
Honestly? It depends.
If you’re committed to working with each other throughout the process and you share similar goals and values, it can be a good idea. Buying a house with a partner can be a bonding experience as you start a new chapter of your life.
It’s also a great opportunity to strengthen your negotiation and communication skills as you decide what you’re comfortable paying for a house, where you want to live, and which home you want to buy. Importantly, if you plan to be together long-term, buying a house can start you on the path to joint wealth creation as you build equity in the home.
But buying a house with a boyfriend or girlfriend isn’t something to take lightly. The homebuying process can be mentally and emotionally taxing, and it lays your finances bare.
Your lender will ask you both for tax returns, pay stubs, bank statements, and other financial documents. They’ll also check your credit score and credit history, and they’ll examine all of your monthly debts. That means credit card payments, student loans, car payments — everything.
Related reading: How To Buy a House in 11 Steps | 2021 Guide
Discuss your finances and goals
Ideally, you and your partner will have discussed your finances already, so nothing your lender sees should come as a surprise to you. But if you haven’t been together very long, or you haven’t had serious conversations about your debts, savings, and money habits and philosophies, it’s critical that you do that first.
You don’t want to make a decision as significant as buying a house with someone unless you share the same goals and plans for your future. That doesn’t mean you shouldn’t move forward if your money habits don’t align perfectly. But financial stress is a leading cause of divorce. While you may not be married, buying a home with someone commits you for the long haul.
Getting on the same page about your finances — including your debts, spending and saving habits, and your homebuying budget — will help you figure out whether owning a home with your partner is the right move right now.
There are several reasons why buying a house with a girlfriend or boyfriend can be a great move, and the potential benefits are both financial and emotional.
For one, buying a house with a partner may be “easier” than buying on your own because two incomes are better than one (not that the homebuying process is ever really easy). When it comes to your mortgage application, having a higher income increases your chances of getting approved, and for a larger loan.
“In a lender’s eyes, you’ll have two separate incomes to put toward a down payment, as well as monthly mortgage and utility costs,” said Mark Washburn, a Realtor® working in the Fort Myers, Fla. area. “You’ll also have a second person with whom you can share the upkeep and maintenance.”
Another great reason to buy a home with a partner is so that you can start building your financial future together. Creating a savings plan for your down payment and establishing a shared budget for your new home can help you strengthen good financial habits and put you on the path to wealth and stability together.
Thinking through your financial goals for your home lays the groundwork for other big money decisions, such as getting engaged and planning a wedding.
“Let’s say a couple buys a home, gets engaged, and then decides to get married over a three year time span,” said Katie Messenger, director of sales for the Bello Dimora Group of Keller Williams. “In that time, they have built equity in their home through their payments, potentially improved it, and through natural appreciation, added even more equity, building wealth for their future.”
Once you’ve established your financial values and priorities, it will be easier to navigate those big events. You may decide that you’d rather put more money into a home than a wedding or that you’d prefer a more modest engagement ring so you can pad your savings for your future.
That’s not to say that you should skip the wedding altogether or that you should forego a ring solely because you want to buy a house. Rather, consider all of your goals in the context of your finances. What can you afford? What is your top priority? Which decision offers the greatest long-term impacts — both emotional and financial?
Being in a committed relationship — married or not — is tough enough with adding the role of homeowner into the equation. But knowing that you two can work together to achieve financial security can bring you closer and give you more confidence in your union.
There are two sides to every coin. When it comes to buying a house with a boyfriend or girlfriend, there are some risks, no matter how much you love or are committed to one another.
The biggest risk is that the relationship ends and you have to figure out what to do with the house. Does one person keep it and buy out the other’s interest? Does one person just walk away and lose their equity?
“Depending on the states, there’ll be different rules as to how ownership interest is determined,” Messenger said. “If only one person is on the loan, you break up, and aren’t a married couple, one partner could potentially sell the house and keep all the equity and the other would have no say in the matter.”
What’s more, if you break up and you’re not officially listed on the title, you could find that you’ll have to scramble to find a place to live. All the while, you could be fighting to get reimbursed for your share of the mortgage payments you made.
Sure, you could mitigate some of the risk by having both of your names on the loan. But that’s not foolproof, either. For instance, Washburn said, if one person stops paying the mortgage, the other’s credit could be negatively affected.
“Your finances could also be at risk especially if you’re taking legal actions to ensure the other person is held accountable for their fair share of the mortgage payments,” he said. Legal action is costly, and it may be very difficult to manage the full mortgage payment on your own plus legal bills and court fees.
Make a breakup plan
Even if a potential breakup is amicable, continuing to pay a mortgage on your own could be a struggle. Unless you sell the home and divide up the proceeds fairly, taking a former partner’s name off a joint loan means you’ll need to refinance the home. That means qualifying for the new mortgage based on your own financial strength, which may be more difficult to do.
Plus, refinances aren’t free. You’ll owe closing costs on the new loan, this time without someone else’s help. And if interest rates have increased significantly since you took out the initial mortgage, you may end up paying higher monthly payments. (On the other hand, if rates drop, you may get a break and pay less in monthly payments.)
All this to say, you and your partner will want to talk through what will happen if you break up — and put that in writing — to ensure you’re both protected. It’s not exactly romantic, but anticipating what might go wrong in the relationship and homebuying venture can be one of the kindest gestures you make for one another.
We get it — drawing up an agreement might feel awkward because it feels like it’s turning a relationship milestone into a business proposition.
However, having a signed agreement in place ensures both of you are on the same page about things like the percentage of ownership, who will make payments and how much, and even who will pay for repairs. Plus, it ensures that in a post-breakup scenario, both of you will receive what’s fair when it comes to the house (we’re hoping you won’t break up, though!).
David Reischer, Esq., an attorney with Reischer & Reischer LLP, said that it’s critical that an unmarried person have an agreement in writing. That’s because the law (the specifics depend on your state) will treat an unmarried couple’s disposition differently than someone who is married.
“Making an agreement ensures you put expectations of both parties in writing in case there is a dispute or the need for an exit strategy,” he said.
One type of agreement, called a cohabitation agreement, is a common type of document unmarried couples draft when they are buying a home together. Reischer says this legal agreement is for people who have chosen to live together so that they may be treated like a married couple and typically includes how property will be divided in the event of a separation.
Typically included in a cohabitation agreement
- Property accumulated during the relationship (such as your home)
- Property accumulated before the relationship
- How expenses will be paid
- What happens when the relationship ends, whether it’s a breakup or due to death
- Property that has been gifted or received through inheritance
- How to resolve disputes (through mediation, for example)
Since a cohabitation agreement is a legally binding document, it’s a good idea to consult a real estate attorney to understand your rights and obligations, as well as any state laws that could affect you and your partner.
Credit considerations for buying a house with a boyfriend or girlfriend
When you apply for a home loan with a co-borrower, your mortgage lender will look at both of your finances, including your credit scores from all three credit bureaus (Equifax, Experian, and TransUnion). They’ll take the lower middle score of the two borrowers.
Your partner’s scores
Your middle score is 758, and theirs is 700. Your lender will use 700 as the score on which they base your loan application and interest rate.
Interest rates, and loan approvals, are based on a number of factors. But credit score is an important one, so if there’s a significant difference between your credit and your partner’s, you’ll have to decide whether to move forward with both of you on the loan.
If one of you has great credit, low debts, and earns enough income to qualify for the mortgage on your own, you might decide to put the loan in that person’s name only. In that case, only that person would be on the title to the home. You could then add the non-borrowing partner to the title after closing.
But if one of you has great credit but the other earns a higher salary, you may want to apply together after all.
Two things to know in that scenario.:
One, get quotes from several different lenders to make sure you’re getting the best rate. It’s always a good idea to get multiple quotes, but it’s especially important if your credit or borrower profile is less than perfect. Different lenders cater to different types of borrowers, and one may have a more competitive loan product for you.
Two, if you’re not thrilled with the interest rate you receive now, you can refinance down the road. As we mentioned above, refinancing isn’t cheap — you’ll pay closing costs all over again. But if your credit score improves substantially, you could qualify for a better rate in a few years and the long-term savings could offset your refinance costs.
When it comes to homeownership, there are a few ways to take the title to the home. How you choose to do so can have implications later on.
This means only one of you will be on the deed, aka the legal owner of the home. Whoever is on the deed can legally sell the home or pass it onto whomever they wish, even without the other partner’s consent. You can have one person take the title as the sole owner and then add someone else onto the deed later.
Going this route may be a good idea when one partner’s credit is too low or limited for you to qualify together. However, this puts you both at risk. The person who is not on the title may not have legal rights to the home. The person who is on the title could be stuck with the responsibility for the full mortgage payment if they break up and the non-title holder moves out and abruptly stops paying on the mortgage.
Joint tenancy is when the both of you own the house equally. The main benefit is that both of you will be on the deed and you’ll need each other’s permission to sell the home. Plus, if one joint tenant passes away, the other person will inherit their share of the home automatically. This is known as right of survivorship.
Joint tenancy can be the right move if both of you want to hold equal responsibility for the home. But it could have complications when it comes to dividing up property in the event of a breakup, since you’ll have to agree on whether to sell the home and split any proceeds after the mortgage is paid, or whether one of you will buy the other out.
Tenants in Common
Under a tenants in common agreement, you and your partner will each own a share of the home, though these can be unequal shares if you choose to structure it that way. When one person passes away, the share of the home will go to that person’s designated heir rather than automatically to the other partner. In this case, the heir will be the new tenant in common.
Tax considerations for buying a house with a boyfriend or girlfriend
Owning a home comes with a tax break, but you may not be able to claim the mortgage interest deduction if you itemize deductions.
If both of you are the legal owners of the home and pay the mortgage equally, your lender may only send out one tax form, or your local tax office may give out a receipt in one person’s name. That’s not to say both of you can’t deduct this expense. Instead, you’ll both need to figure out your share based on how you took title, and you’ll need to document it so you can both claim the deduction.
For example, if you split the mortgage interest payments 50/50, your respective tax returns should reflect this amount. You may need to attach a statement explaining why you’re dividing up the mortgage interest deductions. Because taxes can get complicated, it’s a good idea to consult a tax professional to ensure you’re filing your taxes correctly and taking advantage of any deductions available to you. (None of this should be taken as tax advice. Consult a licensed tax professional before filing.)
Buying a house with a boyfriend FAQs
That answer depends on if you’ve fully communicated with your partner about the financial and legal implications of your decision. If you’re buying a house with a boyfriend or girlfriend, it’s important to have a signed legal agreement outlining each person’s responsibilities and what you’ll do with the home if you break up.
The biggest risk of buying a house with a significant other when you’re not married is not knowing how you’ll handle the property if you break up. If one person is the legal owner, and the other is not listed on the title, the non-owner has no recourse if their partner decides to sell the home.
Additionally, if one person stops paying their share of the mortgage, utilities, and taxes, the other will need to pay the full amount or their credit will suffer. If the lender forecloses due to non-payment, that appears on both people’s credit histories if they are both borrowers, regardless of whether the foreclosure was only one person’s fault.
If your boyfriend has bad credit and you can qualify for a loan without him, you may want to apply as the sole borrower.
When borrowers apply together, lenders look at the lower middle score of the two borrowers. That means that they look at both your scores from TransUnion, Equifax, and Experian, the three credit bureaus. They rank your individual scores from lowest to highest, and then they compare the middle two scores and use the lowest of those on your application.
If your scores are 720, 748, and 760, your middle score is 748. If your partner’s scores are 640, 660, and 680, their middle score is 660. Their middle score is substantially lower than yours, but that is the one your lender will use to evaluate your application and determine your interest rate.
So, if you earn enough income and have strong enough credit to qualify without him, you may want to apply solo. That means you’ll be the only person listed on the deed to the house, though you can add him after you close on the home.
Ask yourself, though, why doesn’t he have good credit? And, do you want him as part owner of the house when he hasn’t been responsible with obligations in the past?
Buying a house with your boyfriend or girlfriend can be a big step to showing how committed you are to each other. Give yourselves the best possible chance at happiness and homeownership by discussing your finances and expectations before you start looking at properties.
Then get preapproved with a lender to find out how much you can afford together so you can start your happily ever after in your new home.