Together… that may be a new word for you and now your SO (Significant Other)… but if you’ve decided that “together” is what you’re going to be you might also be wondering if buying a house together is a good idea or not.
Together means so many things to different people these days; married, engaged, dating, living together, whatever. So it’s not just that old adage of we are married now so buying a house is the next logical step. Because it might not be the next step, or the first step, or any step in between.
Buying a house is a serious commitment, but so it a lot of other commitments like marriage. Even though you probably won’t have your house until you die, it is an important investment and one in which you should know all the details and be ready for just in case.
Statistics show that 1 in 4 couples between the ages of 18 and 34 bought a house together before they were married. MONEY magazine conducted a poll out of 500 millennials and 40% thought it was a good idea to buy a home together before marriage while 37% think the purchase should take place propr to the wedding.
People are planning ahead and setting themselves up before jumping into marriage and the old “traditional” steps of love and marriage, yadda, yadda, may not work for today’s couples. So how do you know you’re ready? Take this short quiz to find out.
#1. I’m ready to have a solid investment with my partner and build equity.
Yes – Move on to question 2
No – Stick to renting
#2. Our credit scores are both above 680.
Yes – Go to question #4
No – Go to question #3
#3. If one of you has a higher credit score than the other, you may be able to use just one of you’re financial situations but then you may not be able to use both incomes as eligibility for the loan. If both of you have lower credit scores than 650, work on paying bills on time and paying down debt for the next 6-8 months before applying again.
#4. How much debt do you both have?
More than 45% of our income – Go to #5
Less than 45% of our income – Go to #6
#5. Pay down debt and get your monthly outgo of debt for student loans, credit card debt and any other debt lower than 40% before applying for a loan. If only one person has lower debt to income ratio, check with a lender to see if you can qualify with only one income.
#6. Is rent in your area similar to a mortgage payment for the type of house you want?
I don’t know – Think about the type of house you want. Do you want a condo or townhouse? These are great options to get you started in the real estate world. Low maintenance and you own part of the home instead of the whole thing. Take a look at the type of house you want compared to what you have now. Will your income support that type of payment?
I don’t pay rent – If you live with your parents or another living situation where you don’t pay rent, paying a mortgage will be a big adjustment. Going from not paying anything to a $2000 mortgage may be a huge hit. It might be better to rent a while so you get used to paying monthly housing costs.
Yes or No – Regardless, you are at least aware of the housing industry in your area and we can adjust the type of housing to your budget.
#7. Do you have an exit strategy?
A what? Go to #8
Yes – Go to #8
#8 Whether you have an exit strategy or not, it’s important to go over it again and make sure all parties are crystal clear with the procedure.
Are you married? You probably are not thinking about an exit strategy yet but you should! Not from the marriage, mind you, but from the house. What you plan on selling in a few years? Will the home build enough equity to get you where you want to be in 5-10 years? Is the home resellable?
If you’re not married, you need to be thinking about both situations. If you both will be on the title and deed what will happen if you choose to break up? No one likes to talk about these things but adults discuss these issues because it shows maturity. “Look, I know we don’t like to talk about this but in the event of us breaking up, what happens to the property?” Talk about it now, and hope it never comes up again. Write it down, sign it, then tuck it away and hope for the best.
#9. Do you know how you will manage costs?
Yes – Great! Have it in writing so everyone knows their duty and responsibility.
No – Get it in writing. Will you be splitting the mortgage fee down the middle? What about utility costs, HOA fees, property tax, homeowner’s insurance and any other housing fees? It may be awkward but it will save you so many headaches down the road.
#10. Have you been together for less than a year?
Yes – Wait.
No – If you’ve been together a while, at least a year, and you feel this is the next move you want to make, talk to your partner about why you want to buy a house together. Do you both have the same intentions and goals in mind? Have you saved for a down payment? Will one person be putting in more than the other? Do you both have steady jobs and have been consistent in paying bills and saving money? If you feel all these factors point to a positive outcome, buying a house together might be the right idea for now.
Read More: Tips for Single Women Home Buyers
Buying a home is exciting but you also want to make sure you’re ready. IF you have any more questions give me a call! I’d love to answer anything about buying, credit, loans and such for you. Throughout Lake Forest California, you have a friend in the mortgage business.