Fewer couples are waiting until their wedding — to buy a house.
About 1 in 4 married couples between the ages of 18 to 34 bought their first house together before getting married, according to a recent survey by Coldwell Banker Real Estate.
While Millennials are more likely to see the Realtor before seeing the preacher, the practice is increasingly common among all age groups — 17 percent of all married couples surveyed purchased a home together before their wedding day.
“What we’re seeing is that young couples are switching up the order and purchasing their first home regardless of whether or not they have set a wedding date,” says psychotherapist Robi Ludwig. “This is a huge movement within the American culture. While younger generations may be focusing more on their career, and in turn waiting longer to get married and have children, they are not delaying their dream of homeownership.”
But buying a house as an unmarried couple has some potential pitfalls, says Tracy Stewart, CPA and financial planner.
“One nightmare is credit rating damage if one of them is unable or unwilling to contribute to shared mortgage payments,” says Stewart, a member of the American Institute of CPAs.
“Before buying the house, have an honest talk about how the two of you will handle financial matters,” adds Stewart, a member of the AICPA’s National CPA Financial Literacy Committee.
“Better yet, have more than one honest talk. Make it a habit to talk monthly about household expenses, repairs, maintenance and goals.”
And, before seeing the real estate agent, go see a lawyer.
“Legal agreements can spell out individual rights and agreed upon methods to resolve issues if they arise,” Stewart says. “Additionally, lawyers experienced in these issues can share stories of past problems clients have gotten into and how they resolved the problems. Couples can then be prepared in case something goes awry.”
When buying a house with your partner, there are three basic choices for taking title:
- one person holds title as sole owner
- both of you hold title as “joint tenants,” or
- both of you hold title as “tenants in common.”
Having one name on the deed can complicate things for the “off-title” owner.
If your name is not on the deed, you may not be able to deduct mortgage interest, for example. You definitely want a separate contract that spells out the actual property interests of both parties.
Taking title as joint tenants means you share equal ownership of the property and each of you has the right to use the entire property. If one joint tenant dies, the other automatically becomes the owner of the deceased person’s share.
Two people can also own a house as “tenants in common.” But know that with tenant in common when one owner dies, his or her share of the jointly owned property is left to whomever is specified in a will or living trust. If there’s no will, the person’s intestate heirs will inherit the share – and that doesn’t include the roommate.
The bottom line: love is not enough. Get a lawyer.