There’s a lot of work involved in buying a home. People need to research properties, neighborhoods and local amenities. They have to get their finances in order, work with a realtor and attend open house showings. Buyers will work with lenders, realtors, home inspectors, title agents and other individuals along the way.
Some couples choose to purchase a house before they walk down the aisle together. There are various reasons why this happens. Opting to buy a home before saying “I do” can have certain advantages and drawbacks.
Buying a home in Florida isn’t always easy. You need to pay attention to current economic trends and market conditions. It may take a little while to find the ideal home, but the time and energy spent are almost always very well worth it in the end. Planning, determination and persistence can help you succeed. Here are a few things to know about buying a home before getting married.
Purchasing a house as a couple usually results in a joint mortgage application. If a couple buys a house before marriage, one party usually applies as an individual. The approval process and requirements are usually the same for both situations.
Some benefits of filing a single application are:
1. Your debt to income ratio will be the only one considered if they are better than your partner’s ratio.
2. Your credit history will also be the only one evaluated if your partner’s credit history is less than satisfactory.
3. Having a higher credit score than your partner is another reason why some couples file a single application. That way, the other partner’s lower credit score won’t hamper their chances of being approved.
If your partner has a better debt to income ratio than you do, that won’t be taken into account if you’re making a single application.
Credit scores, credit and employment history, and debt to income ratios are the primary components that are reviewed by lenders. That’s why it’s important to evaluate your current income, spending and credit before applying for a home loan.
A few reasons why couples choose to file a joint application are:
1. They may be able to borrow more money since their joint income is being evaluated.
2. Having a lower overall debt-to-income ratio as a couple can also improve the chances of being approved for a mortgage.
3. If both parties have the same or similar credit scores, it won’t negatively impact the loan decision.
On a joint application, lenders will focus on the lower of the two credit scores. This could make it more difficult for a couple to be eligible for a home loan if one of their credit scores needs improvement. If both persons have clean credit histories, the loan determination shouldn’t be affected in that aspect.
1. Get preapproved for a mortgage.
One of the very first things that you should do once you decide to become a homeowner is to apply for a home loan. If the lender approves your request, they will then provide you with a preapproval letter. This document will include the dollar amount and terms that they are willing to offer to you.
The letter doesn’t guarantee that you’ll be able to buy the house that you want. However, it can make you more of a priority to sellers than other interested parties who haven’t secured their financing.
2. Decide who will be on the property deed.
Homeownership is based on who is listed on the property deed. It isn’t determined by marital status. That information will be used when the title is transferred and recorded. Homeownership can be listed in different ways:
- Tenants in common.
Both parties have an ownership share under-tenants in common. This share doesn’t have to be equal. One person could have a 60 percent ownership share, and the other person could have a 40 percent ownership share, for example.
Each person can borrow against their ownership share if they so choose. When one partner passes away, their ownership share is then passed down to their heirs. That share is not transferred to the surviving partner.
- Joint tenancy.
In joint tenancy, both partners have the same equal share in the ownership of the home. They can choose to borrow against their shares or sell the property. However, that decision has to be unanimous by both parties. One person can’t choose to sell or borrow against the home if the other person doesn’t want to.
- Sole ownership.
One party will own the home in sole ownership. They are the only one who can sell the house, but are also the only person that is responsible for paying the mortgage, utility bills and upkeep and maintenance of the property. The other person has no say in those matters.
3. Figure out your living arrangements.
Living arrangements before marriage can be complicated sometimes. Even if you’re buying a house together, it may be difficult for one person or the other to give up their former residence. Things can be especially frustrating if buying a house together puts hardship on one or both parties.
Drawing up a cohabitation agreement may make things easier. You can create this document yourself or enlist the assistance of a real estate attorney to do the work for you. Important items such as identifying what happens to the house if you decide to break up, how the proceeds will be divided if you opt to sell the home, who will be paying what bills and other essential attributes should be in the agreement. Make sure that you review the contract carefully before signing it.
4. Realize your tax liabilities.
Your marital status can also affect your tax liabilities for the home. Your deductions and exemptions will vary according to your tax filing status. It can also impact your decision to either take the standard deduction or itemize your deductions. Talk to your tax preparer or tax attorney if you have questions or concerns about buying a home before marriage and its correlation with your taxes.
Home buying is a major decision. It’s one of the most expensive investments that many people will ever make, so take all the time you need to determine your course of action. Once your offer has been accepted and the purchase agreement has been signed, it won’t be long until the house that you’ve had your eyes set on will finally be yours. You can start looking forward to enjoying the next phase of your busy life in a great place that you’ll be very proud to call home.
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