3 smart ways to protect yourself and your partner

Buying a home is an exciting step in a relationship. Whether you are just starting out or have been together for years, it’s an opportunity to build upon your dreams and invest in your future. Although marriage is not for everyone, society was set up with spouses in mind. Without a marriage certificate, the law treats couples as separate individuals, which can pose extras risks and costs. Take some time to understand these risks, so you can get ahead of them. Use these tips to set yourselves up for success.

1. Get real about your finances

In order to qualify you and your partner for a mortgage, lenders do a deep dive into your income and debt. If discussing money is not a regular part of your relationship, now is the time to make it a habit.

Set aside an evening to figure out where you stand financially. Be sure to include:

• Your salary or annual wages
• Any outstanding loans, credit cards, and other debt
• Credit score and history
• Savings accounts and investments
• Anything else that might raise a red flag

Once you have a clear picture of your finances, do what you can to make it easy for lenders to qualify you for a loan. Two key areas to focus on are paying off outstanding debt and saving up money for a down payment on your new house.

2. Talk about the “what ifs”

It’s a tough conversation to have – but it’s important to have it. Discuss what would happen to the house and the mortgage if you split up or if something happens to one of you. Work with an attorney to draft a partnership agreement documenting each person’s rights and responsibilities, such as:

• Who pays the mortgage and how much
• Who owns what percentage of the property
• Who pays for major repairs or upgrades
• What happens if the house is sold, if you separate, if one party dies
• How the dispute process will work

The document can be a straight 50-50 across the board, but it’s important to have it in writing to protect yourself and your partner if something happens.

3. Choosing the right title for your situation

Title is your right to ownership, and there are different types of title available to accommodate specific situations. It’s especially important for unmarried couples to choose the right type of title once you’ve set your sights on the property you want to purchase.

The laws are different in each state, so check with an attorney or real estate professional before you close on your new home. Here are three common ways to take title:

• Joint Tenancy – You and your partner each own 50% of the property. If one partner passes way, title automatically goes to the surviving partner.
• Tenants in Common – This option allows you to assign a percentage of the property to each person based on financial contributions or other factors.
• Sole Ownership – Here, only one person’s name is listed on the deed, and they have all the rights that come with ownership. This can help if one partner has credit issues, but the person who is not on the deed could be left empty-handed if the relationship ends.

Work with professionals who know what to expect

Much of the homebuying process is the same for married and unmarried couples, but it’s important to pay attention to the differences. Surround yourself with a team of professionals who know what you should plan for, like a tax advisor, attorney, and mortgage lender. Our loan advisors take the time to listen to your story so we can build a loan that works for your unique situation. Contact a loan advisor today to get started.