One of the biggest purchases a couple can make together is a new home. It could also be one of the most exciting. Buying a home with the person you love represents a lasting commitment you both agree to and the future you have together.
However, buying a home, especially for those first time home buyers entering into the process with their significant other, can be a complex process. When you are buying a home with your partner, whether you are married or not, there are several things to keep in mind.
A person’s credit score is a key factor in applying for a mortgage. A high score tells lenders you are creditworthy and are likely to be able to keep up with payments responsibly; a low score may instill some doubt about your money management habits.
The same principle applies to a couple, but both credit scores will be taken into account. Mortgage lenders won’t look at the average of your two scores, but rather at credit reports from both of you. There will be three reports for each person. The lender will look at the middle score for both of you, and will use the lowest of the two to help determine the interest rate.
It’s unlikely that your scores will be exactly the same, which means one person’s will be lower than the other’s. If you both have good credit, or your scores are similar, this factor won’t affect your rate much.
If a low score from one of you is affecting your ability to get a loan, you and your partner have a few options. First, you can settle for a higher interest rate. Second, the person with the better score can apply individually to get a lower cost mortgage. However, the lender will only be able to take that person’s income into account, so you may qualify for a smaller loan. Third, you can wait a few years while you and your partner work to bring up your scores. Finally, you can explore other options that are more flexible toward borrowers with less-than-perfect credit scores, such as FHA loans, or discuss with your lender other programs that they may offer.
“Buying a home is a long-lasting commitment.”
When you buy a home, it’s important you agree on how ownership will work. According to Nolo, there are several options for this:
- Sole ownership
- Joint tenants
- Tenants in common
Sole owner means that, legally, only one of you will own the home. Some people like this method in order to save on taxes or to qualify for a lower interest rate, in the case that one partner has low credit. However, if the legal owner dies or sells the house, his or her partner doesn’t have any legal right to the house or the money that can come from it.
Joint tenants are two people that own the home equally. If one person dies, the other still has rights to it, regardless of what the will says.
Tenants in common can decide how much of the home each person holds – for instance, you can divide it so one person can have 80 percent and the other 20. When one person passes away, the other does not have rights to the deceased partner’s share, unless it is stated in his or her will.
When you and your partner decide it’s time to buy a house together, there are a lot of questions and conversations that are important to get out in the open. It’s a big commitment and one that is long-lasting. Nonetheless, choosing to enter into this commitment can be an exciting time for both you and your partner.
If you are in the market for a new home, talk to the professionals at Lenox/WesLend Financial or call 844-225-3669. As heard on the radio, it’s the biggest no-brainer in the history of mankind.