All lovebirds need a nest, and nowadays you and your significant other don’t need to wait to tie the knot before you purchase a place to roost together. About one in four married couples between the ages of 18 and 34 purchase their first home together before their wedding date. Yet, not all couples are suited to joining the pre-wedding, home-purchasing flock. Here are four tips to help you and your partner decide whether signing on the dotted line before or after you sign your marriage certificate is in your best interest.
1. Consider Credit Scores
If you are committed to purchasing a home with your partner, the decision to do it before or after you are married could hinge on finances. Banks generally view married couples as one unit. Unmarried couples are assessed as individual applicants even if they are applying for a loan together.
If you are not married and both you and your significant other have good credit histories, your chances of qualifying for a mortgage loan increase when you apply as a couple.
If you apply jointly for a mortgage and one of you has bad credit, it can affect your ability to secure a loan, or to secure the loan amount needed to buy your desired home. In that case, having only the individual with good credit apply for a loan on his or her own before the marriage might be a good option. With only one person applying for the loan, however, their individual income may lower the loan amount from what your two incomes could otherwise qualify for.
Another option is to wait to purchase a home until after you have been married for a few years and the person with bad credit has time to boost his or her financial score.
2. Add Up Savings
In addition to securing a mortgage, a home purchase will require a down payment and payment of closing costs. Combining income and savings may help you qualify for a bigger loan and allow you to put down a larger down payment to reduce the amount of your monthly loan payments.
Many couples, whether married or not, try to contribute equally to the home purchase. If you are making unequal cash contributions and are not married, you would be wise to note the details in writing, just in case you part ways before your nuptials and need to divvy up equity in the property.
3. Title Matters
Whether you are married when you purchase a home affects how you take title of the property, because it determines legal ownership and how courts will transfer property ownership in the event of death.
Some states only allow married couples to hold title as community property. If a spouse dies, then only half of the property can be transferred to the decedent’s heirs. If only the deceased person was on the title, the surviving spouse still can acquire a community interest in the property. Some states require married couples who want to own real estate separately to sign a quitclaim deed from one spouse to the other.
If you are unmarried and sign the title as tenants in common, both of you have ownership in the property. If one person dies, the decedent’s ownership does not automatically transfer to the other owner, unless that person is named in the will. Joint tenants, however, will automatically pass their interest in the property to the other person in the event of death.
If you intend to buy a house with your partner before marriage, experts advise that you both sign a legal agreement to avoid altercations down the road. Should any snags occur in your relationship when you are not married, you and your partner do not have the same legal protections as married couples, and breaking up co-ownership of a house can be a messy ordeal. A legal contract between an unmarried couple should fill in the blanks as to who is responsible for expenses, the mortgage, taxes, capital gains, property title and more.
4. Prepare for Commitment
Eighty percent of all married couples who bought a home together said the purchase strengthened their bond more than any other purchase they made. That makes sense, according to Robi Ludwig, a psychotherapist and Coldwell Banker Real Estate LLC lifestyle correspondent, because couples who purchase a home together must be frank about their finances, career aspirations and future family plans as they affect the location, size and price of the home they buy,
“Even the closest couples are still two separate people with two separate ideas and agendas,” but searching for a home together can bring up a couple’s different priorities and ideas about life, Ludwig said. “They learn how to be practical with each other and compromise … it bonds two people together and makes them family.”
This article has been updated from an earlier version by Deena Weinberg.
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