Whether it’s to focus on a career, education or simply themselves, people are getting married later in life these days, however, that doesn’t mean they’ve given up on the prospect of owning a home.
In fact, buying a home with a friend or non-spousal family member is a trend that has been gaining popularity over the last decade. Not only does taking part in a group purchase provide individuals the opportunity to buy something bigger and better than what they would have been able to afford on their own, it also provides each person a real estate investment and takes away the prospect of renting. Additionally, it can even strengthen the friendship.
While the prospect of owning a home with a friend may seem like a great idea, it’s important that the parties involved understand that they are taking a risk when it comes to their friendship surviving the financial and emotional toll that comes with homeownership.
Before any decisions are made, it’s crucial that each party be willing to disclose their financial information, agree upon the type of home and location and make sure each is comfortable living with the other. Getting a lawyer involved isn’t a bad idea either.
In addition, a contract between both parties is vital, as is listing each person’s name on the deed and mortgage papers. The percentage of ownership must be clearly stated in the contract, including details pertaining to each person’s share of the down payment and the way in which mortgage payments will be divided. This information will help set the stage for deciding each person’s share when the house is sold at some point down the road.
Money can also be a problem when trying to purchase a home with a friend. Mortgage companies aren’t always thrilled to be lending to two unmarried or unrelated people. In most instances, you will need to jointly qualify as co-borrowers on a single mortgage in order to purchase a property held in TIC or Joint Tenancy.
Since house options, mortgage rates and contract terms are contingent on each individual’s credit history, financial health and short-term and long-term obligations, it’s a good idea to discuss these issues ahead of time so that you know your options well in advance.
It’s also important to have an exit strategy in place should one or both of you need to move elsewhere unexpectedly. Be sure to take into consideration an unexpected job change or a surprise romance that could lead to marriage and have a plan in place as to what will happen to the house should any of these situations occur.
The process doesn’t get any easier once all of the above details are agreed upon and you have a mortgage commitment in hand. Finding the perfect home is hard enough on its own, but finding the perfect home for two can be even more challenging.
Sitting down together and coming up with a list of must-have features is one way to take the stress out of the home search process as you will most likely each have different ideas when it comes to what you’re looking for.
Most friendships are strong enough to easily deal with housing issues, so don’t be scared off by the notion. Take the time to plan ahead and do your homework, and most importantly, don’t let the friendship cloud your judgment.
For more information about buying a home, contact our office today.