You’ve found the one, now it’s time to take the next big step in your commitment: buying a home together. If you are curious about the process of purchasing a home before you are married, continue reading so you can make the best decision as you start your life together.
Things to Consider Before You Begin
When it comes to purchasing a home, there are many decisions you will make as a couple. But before you start picking out paint colors, you will want to take a few steps to prepare as much as possible for the journey to homeownership.
Start by getting your finances in order. It’s time to start sharing specifics like credit scores, debt-to-income ratios, and personal income.
If one of you has a lower credit score, lenders will typically use the lower score, which can impact your mortgage rate. This is something to keep in mind, and perhaps consider taking steps towards improving the lower score before starting the mortgage application process.
Don’t Be Shy–Have the Money Talk
You may be ready to spend the rest of your lives together, but have you talked about money?
Before making a joint purchase like a home, it's important to discuss each party's long-term financial goals, current financial situation, and what to do with the property should the worst happen to the relationship.
It may seem uncomfortable to be so open with your personal finances, but transparency up front can pave a path to success when both parties are aware of the expectations and potential pitfalls of a financial partnership.
Best practice when entering into any commitment is to seek good advice. It is no different when it comes to buying a home with a loved one. Hiring separate lawyers to draft and review any documents will prevent missteps and ensure legal protection should the deal fall through.
Washington State Community Property Considerations
If you’re buying a home in Washington, it’s important to understand how community property law may affect you down the road. Washington is one of nine community property states. That means once you are legally married, most property acquired during the marriage is generally considered jointly owned by both spouses, regardless of whose name is on the title or who made the payments.
If you purchase a home together before marriage, the way title is held and how contributions are documented can significantly impact how that property is treated after you marry. For example, separate funds used for a down payment may remain separate property only if they are clearly documented and not commingled. Without proper planning and written agreements, ownership interests can become complicated in the event of marriage, separation, or death. This is why working with a Washington real estate attorney to structure title and draft clear agreements is especially important in a community property state.
Love May Conquer All, But Sign a Contract Anyway
Another important detail not to overlook is arranging a cohabitation agreement. A cohabitation agreement–sometimes called a property agreement–is a legally binding contract that specifies who will pay for the mortgage, utilities, repairs, and other property-related expenses. These contracts can be arranged by a family law attorney or other legal professional.
Contracts like these also state what would happen to the property should the cohabitors split or one party dies. By establishing a fair agreement before one is needed, each homeowner can feel safe and assured on their investment–both in their relationship and their property.
Mortgage options to consider:
Tenant in Common: This type of mortgage is used if one person will be making a larger cash investment in the property. In this model, either party can will their portion of the property to anyone else in the event of their death, rather than it passing directly to the other owner.
Joint Tenancy with Right of Survivorship: if both parties are making an equal cash investment into the property, this may be the best mortgage option. Different from the “Tenant in Common” mortgage, this arrangement allows all shares to pass to the other owner in the event of one party's death.
Final Steps
Once you have found the home of your dreams, it’s time to secure the proper title for your property. A lawyer can help determine the best fit for your unique situation, so find someone you trust to help outline your paperwork.
It’s also important to keep detailed notes and records of all payments and contracts signed during the home buying process. Any down payments, renovations, or other agreements regarding the home should be documented and saved for future reference.
Taking precautions at the beginning of this process and keeping records along the way help to offer security for both investors should the worst happen.
Happily Ever After
Many who have blazed the trail to home ownership before marriage know that it can be a test of the relationship. But when your values align, and your dream of owning a home becomes a reality, your relationship can be stronger on the other side.
Everyone deserves a happy ending in the home of their dreams with the love of their life. And getting there is a little easier when you’ve set yourself up for success.
If you have more questions to your home buying purchase, please don't hesitate to reach out! We'd love to go over everything with your and help you make an informed decision.