When I bought my land over in Lincoln, I did so with a good friend of mine. Since I was working in real estate and had my “eye on the ball,” I found the property, did my homework, and then proposed the project to him.
In the end, he fronted the down payment and we skewed the monthly payments heavier on my side to make up for it. It worked out perfectly for us both. I was able to use my ownership of the land to get a construction loan to build my house and we subdivided the property into three lots and made back most of our money with the sale of one of them. It was all done “above board” with contracts and signatures. It’s really the only way to fly.
If you are considering purchasing real estate with a friend or “more than friend” (yes, my brain is still in grade school) there are some things to keep in mind to help mitigate future headaches. Future heartaches, I simply can’t help you with.
In my previous relationship, my partner purchased the home outright and I contributed to the mortgage. It kept things super simple. When the relationship ended, I walked away like the incredible hulk at the end of all his episodes. Had we taken the route explained below, it would have been far more complicated. Not worse, per se — just messier. Let’s get rolling.
I think one of the main causes of fights or miscommunications in relationships is rooted in money. When we purchased the land, we kept everything above board and in black and white. You really need to do the same thing with this purchase.
“This is likely one of the biggest investments you will make and putting everything on paper is a great way to keep either side from feeling slighted,” Badger Realty agent Kathleen Sullivan Head said.
While my friend and I were not romantically involved, there was still a friendship on the line. Even in those situations, paperwork and contracts keep the money part out of the relationship.
Most lending institutions will not allow you to apply for a mortgage together if you’re not married. That said, it’s almost 2022 and the definition of “partnered” is a bit more flexible than it used to be. It’s worth shopping around to see what options are out there.
If you have to apply as individuals, it goes without saying that the partner with the strongest financial history should lead the charge. In some cases (like my previous situation) the stronger financial partner could actually be hindered by bringing the weaker side into the application equation.
If you are considering buying a house together, it is very likely that you are well into your relationship and have already had some of these hard conversations. Keep the conversation objective and focused on the prize at the end.
There are a couple of options regarding the title as well. Joint tenancy is where you both own equal shares of the property. This one includes the right of survivorship as well so the surviving partner receives the deceased’s half of the property.
Tenants in common is similar except that you actually hold a title in your name for your half of the property. You can do whatever you want with your half and there is no survivorship clause in place. This one seems a little more scary to me. Though I suppose you could include a “first right of refusal” clause so each partner has the right to purchase the other partner’s half before it goes out to anyone else. There are other ways to handle the title as well. Just be sure and do your homework.
I’ve never really owned any valuable furniture. The most expensive items I own are stereo components and my road bike. My god, I sound like a college student and I’m over a half-century old.
I didn’t need any sort of “cohabitation agreement” in my last living situation, but you may want to consider that if you’re serious about this partnership. This can ensure (once again) that all the money stuff stays on the table and in writing. It can include valuable items in the home, items you purchase together for the home as well as the equity being built as you continue to make payments.
Buying a home with a partner is a much more financially palatable option if you can’t swing it on your own. If your confidence in marriage is as wispy as mine, you know that a financial contract between the two of you is a much more concrete entity than some societally created piece of paper.
Heck, even if you ARE married, all of the above topics should be covered before either of you sign on the dotted line. At the end of the day, if all of the financial and “ownership” topics have been discussed and agreed upon, the chances of hurt feelings and resentments (if the relationship goes south) are significantly mitigated.