According to the National Association of REALTORS®, 25% of primary home buyers are single. Some of these non-married buyers, statistics show, buy homes jointly with other non-married buyers such as boyfriends, girlfriends or partners.
If you’re a non-married, joint home buyer, though, before signing at your closing, you’ll want to protect your interests.
Different from married home buyers, non-married buyers get almost no estate-planning protection on the state or federal level which can be, at minimum, an inconvenience and, at worst, result in foreclosure.
Non-Married Buyers Should Seek Professional Advice
The video clip referenced above is from 2007 but remains relevant today. It’s a four-minute breakdown which covers the risks of buying a home with a partner, and the various ways by which joint, non-married buyers can seek protection.
The process starts with an experienced real estate attorney.
The reason you’re seeking an attorney is because, at minimum, the following two documents should be drafted for signatures. They are :
- Cohabitation Agreement
- Property Agreement
The Cohabitation Agreement is a document which describes each person’s financial obligation to the home. It should include details on which party is responsible for payment of the mortgage, real estate taxes and insurance; the down payment made on the mortgage; and necessary repairs.
It will also describe the disposition of the home in the event of a break-up or death of one party which, unfortunately, can happen.
The second document, the Property Agreement, describes the physical property which you may accumulate while living together, and its disposition if one or both parties decide to move out.
A well-drafted Property Agreement will address furniture, appliances, plus other items brought into the joint household, and any items accumulated during the period of co-habitation.
It’s permissible to have a single real estate attorney represent both parties but, for maximum protection, it’s advised that both buyers hire counsel separately. This will add additional costs but will be worth the money paid in the event of catastrophe or break-up.
Also, remember that search engines cannot substitute for a real, live attorney. There are plenty of “cheap legal documents” available online but do-it-yourself lawyering won’t always hold up in court — especially in places where egregious errors or omissions have been made.
It’s preferable to spend a few hundred dollars on adequate legal protection as compared to the costs of fighting a courtroom battle or foreclosure.
Furthermore, a proper agreement will help keep the home out of probate in the event of a death of one or both parties.
Mortgages For First-Time Home Buyers
Many non-married, joint home buyers are also first-time home buyers and, for first-time home buyers, there are a number of low- and no-down payment mortgage options to put home ownership more within reach.
Among the most popular programs are the FHA mortgage and the USDA home loan.
The FHA mortgage is offered by the majority of U.S. lenders and allows for a minimum down payment of just 3.5 percent. Mortgage rates are often as low (or lower) than comparable loans from Fannie Mae or Freddie Mac; and underwriting requirements are among the loosest of all of today’s loan types.
FHA loans can be helpful in other ways, too.
As one example, the FHA offers a construction loan program known as the 203k which allows home buyers to finance construction costs into the purchase of their home. FHA home buyers have financed new garages, new windows, new siding and new floors via the 203k program.
FHA loans are also made with an “assumable” clause. This means that when you sell a home with FHA financing attached to it, the buyer of the home can “assume” the existing mortgage at its existing interest rate.
If mortgage rates move to 8 percent in 2020, you could sell your home to a buyer with an assumable FHA mortgage attached at 4.50%.
USDA loans are also popular among first-time home buyers.
Backed by the U.S. Department of Agriculture, USDA loans are available in many suburban and rural areas nationwide, and can be made as a no-money-down mortgage.
USDA mortgage rates are often lower than even FHA mortgage rates.
Domestic and business partnerships sometimes end unhappily. Engagements end and partnerships sour. Nobody intends for it to happen, but it does. It’s best to expect the best, but prepare for the worst.
All parties should seek equal legal protection in the event of a break-up.