6 Steps Every Unmarried Couple Should Take When Buying A House

Buying a home with your partner when you’re not married isn’t as uncommon as it once was. In fact, according to the National Association of REALTORS^® (NAR), 9% of home buyers in 2021 were unmarried couples. There’s no rule that says in order to buy a home you have to be married to your co-borrower – and in recent years, this method of buying a house has seen an increase in popularity.

Buying a house with someone you’re not married to does come with its own unique set of challenges, however. Unlike buying a home with a spouse, when you buy a house with a partner you’re not married to, there’s no legal framework in place to determine what happens to the house or your individual assets, should you break up. There are also things to consider in terms of holding title and other responsibilities that you and your partner will need to address.

Thinking about buying a home with someone you’re not legally married to? Let’s go over some of the most important things you need to know.

Can An Unmarried Couple Buy A House Together?

Yes, an unmarried couple can buy a house together. Any two (or more) parties can technically be co-borrowers on a mortgage, whether they’re in a relationship or not.

Buying a house is a huge step that can greatly impact you and your finances for many years, so you should be sure not to take this decision lightly. If you’re going to buy a house with another person, be sure you completely trust them, and you’re prepared to take precautions together to deal with any scenario that may come up.

Buying A House: Unmarried Couples Vs. Married Couples

The application process of buying a house is not really any different for married and unmarried couples. Whether you’re married to your partner or not, when you apply, you’ll have the option to do so jointly or by yourself. Your marital status has no bearing on your ability to qualify for a loan, thanks to the Equal Credit Opportunity Act. That means mortgage lenders treat all applicants equitably regardless of sex or marital status.

While the application process will be more or less the same whether you’re married or not, there will be more things to consider and plan for if you’re buying a house as an unmarried couple. Whose name(s) will actually be on the mortgage, how you both want to hold title and what happens if things don’t work out between you are all things you will need to have plans for.

Keep in mind that married couples also have some advantages when it comes to mortgage related tax benefits, since they can file jointly and may both be able to benefit from mortgage interest deductions. If you’re buying a home with an unmarried partner, you’ll also have to decide which one of you gets to claim interest deductions and other tax benefits, since in this case only one person can.

Step 1: Evaluate Your Finances – And Your Partner’s

If you want to buy a house with your partner and the two of you are not married, the first step you should take is to get familiar with your finances and the finances of your significant other. When you apply for a mortgage, your credit, income, debt-to-income ratio (DTI) and other financial history will all be examined in order to qualify you for a loan. Since your interest rate and loan size depends on the strength of your finances, you will want to make sure everything is in order before applying.

Before starting your application, you should also have a fully transparent conversation with your partner about both of your finances as well. You’ll both need to be fully aware of each other’s debts, credit scores and other relevant information that could impact your loan. You should also consider each other’s spending habits. How much are you both comfortable taking on in terms of debt? It’s important to make sure you’re both on the same page before making any big decisions.

Step 2: Decide Who’s Applying For the Mortgage

Once you and your significant other have discussed finances, you’ll need to decide who is applying for the mortgage. If you apply for a loan together, your lender will generally use the financial information of the partner who has the lower credit score to qualify you both for the mortgage. This means that sometimes, it may be more beneficial to leave one party off the application in order to secure a lower rate.

Just like married applicants, you can choose to apply jointly or with a single name on the loan. Let’s talk about both of these options and which one might work better for you.

Single Application

If only one person applies for the mortgage, their name will be the only one on the loan and they will be the sole party technically responsible for making payments, even if the other partner is actually splitting the bill. This person’s credit, DTI, income and other factors will be the only ones assessed when qualifying for the loan. If your partner has a better credit score than you but you are the sole applicant for the mortgage, their score cannot be considered, only yours can.

While this option does leave one person off the mortgage, it can be a great option for couples where one party has poor credit or more debt than the other.

• Pros of a single borrower: The partner with better credit and less debt can apply for the loan, hopefully securing a better rate and more favorable loan terms than if the two partners had applied together.
• Cons of a single borrower: The single borrower is now legally responsible for repaying the entire loan themselves, so if their partner flakes, the entire bill is now the borrower’s sole responsibility. If you live in a high-cost area, another problem you could run into is an inability to qualify for a mortgage with a single income. 

Joint Application 

If your lender allows it, you and your significant other can also apply for the loan as co-borrowers. As co-borrowers, you would both be equally responsible for repaying the loan. Both your and your partner’s financial information will be examined to qualify you for the joint loan. Your combined income may allow you to qualify for a larger loan than you could on your own – but be aware that if one partner has a lower credit score or a lot of debt, it could harm both of your chances at securing the mortgage.

• Pros of co-borrowers: Both partners are responsible for payments. Together, you may both be able to qualify for a better/bigger loan than either of you could on your own.
• Cons of co-borrowers: If one borrower has bad credit, regardless of how good their partner’s is, it could hurt the whole application. You may face higher costs or even more difficulty qualifying.

Step 3: Choose A Way To Hold Title That Works For You And Your Partner

“Title” is how the legal ownership of your home is determined. If you hold title, you hold legal ownership of the home and are free to do as you wish with it. When a house is purchased, the sale and transfer of title is recorded on the deed. Even if only one person in your relationship is on the mortgage, you can still both hold title, regardless of whether or not both partners are financially contributing toward loan payments.

Homeownership comes in different forms and it’s important for you and your partner to hold title in the way that makes the most sense for your relationship and financial situation. That might mean both of you hold title and are on the mortgage together or maybe just one of you is on the mortgage while you both hold title. It’s important to remember that if things don’t work out and you both hold title, one person may hold ownership of the home even if they aren’t paying a penny toward the mortgage payment.

Below, we’ll go over a few common ways to hold title. If you’re unsure what the best way to hold title would be, consider consulting a real estate attorney.

Sole Ownership

Sole ownership is when a single person holds the title to a property. This means that person is the only party who owns the piece of real estate in question and is the only person who needs to be contacted for deals and issues regarding the property’s ownership. If the sole owner dies, their ownership may be passed to an heir through a will or trust – but if there is no instruction in a will or trust, it can be very difficult to determine who the title is transferred to.

• Pros: As the sole owner, you won’t have to worry about another person having a claim to your property should the relationship not work out.
• Cons: Should the sole owner pass away suddenly, their partner who is not on the title may not get to stay in the house or may have to go through a lot of trouble to do so. 

Joint Tenancy 

Joint tenancy is when two parties have equal shares of a property’s title. Since both partners have equal ownership of the property, no one can sell the home or make any other major change or encumbrance without the permission of the other co-owner. Sometimes joint tenants also have what’s known as “right of survivorship,” which means if one tenant passes away, their share of the property is immediately transferred to their surviving partner without having to go through probate court – and the ownership cannot be willed to an heir.

• Pros: Joint tenants have equal ownership of their home and the guarantee that their partner can stay in the home, should they pass away suddenly.
• Cons: If you break up with a joint tenant, they still own half of your house and it may be a struggle to determine what happens to the home – plus, neither of you can leave the home to an heir if you share title under joint tenancy with right of survivorship. 

Tenancy In Common

Tenancy in common is another type of co-ownership similar to joint tenancy. Tenants in common each own equal shares of the property, just like joint tenants. Each partner is free to do whatever they wish with their share of the property, however, and doesn’t need the approval of the other tenant to sell their share of the property or will it to an heir.

• Pros: Tenants in common both own the property – and don’t have to worry about needing the other party’s permission to sell their share of the property/etc. should the need arise.
• Cons: Tenants in common reserve the right to sell or will their property away to anyone. That means, should you break up, your partner could sell their share of the house to a total stranger if they wanted to, regardless of what you want to do with the house.

Step 4: Create A Plan For Splitting Costs

When you buy a house with a partner, married or not, you should also create a plan for splitting costs to avoid future confusion or arguments. Discuss exactly how much each of you will contribute to a down payment, closing costs, the monthly mortgage payments, utilities, bills, taxes and any other fees that may crop up.

A good way to help budget for some of your expenses is to open a joint bank account that both you and your partner can contribute to. The funds in this account can go toward paying your mortgage, taxes, etc. to help lessen the confusion over who needs to pay for what.

The plan you create for splitting costs doesn’t need to be completely 50/50 – partners may be in different financial situations and should follow a budgeting plan that makes sense for them and their relationship.

Step 5: Agree To A Cohabitation Property Agreement

Since you and your partner aren’t married, it may be a good idea to think about signing a cohabitation property agreement as well. Sometimes called a “no-nup,” this agreement is a legal document created by you and your partner outlining who will be financially responsible for what and how your shared assets will be distributed should the two of you break up.

You should also consider outlining an exit strategy in the agreement, should the relationship end. Will one of you buy out the other’s share or will you both sell the house and move? Although it’s unpleasant to think about, these are things you should definitely plan for – and make sure your decisions can be enforced. Once you’ve drafted up a cohabitation agreement, you should take it to a real estate attorney to make sure everything is in writing.

Step 6: Plan For Any Scenario

While it’s not fun to think about worst case scenarios, especially when you’re going through the exciting new chapter of moving into a home with your significant other – but it is important to plan for anything so you won’t have to later, should anything happen. Here are a few questions you should have answers for before the two of you start the home buying process.

What Happens If You Split Up?

If you and your partner break up, what happens? You should come up with a specific answer for this, because it isn’t something you’ll want to settle later on. Think about how you both want to hold title and how that will impact whether one of you moves out in the case of a breakup. If you’re joint tenants, one of you may have to buy out the other’s share. If one of you is going to be the sole owner, is the other person alright with moving out in the event of a breakup?

What Happens If Your Partner Dies?

Death is something that no one wants to think about, but something you definitely need to plan for if you’re taking the big step of buying a home with someone. In the event of tragic circumstances, will the surviving partner stay in the house? Joint tenancy with right of survivorship can help you make sure this happens, should the situation ever arise. You can also assure your assets are distributed the way you want them to be in your will.

The Bottom Line

Buying a house with anyone, whether they’re your spouse or not, is a big step that requires a lot of planning. Before you take the leap, the most important first step you can take is talking to your partner and making sure you’re both on the same page and in agreement about how you want to proceed together.

Whether you’re married or unmarried, a good place to start your homeownership journey is knowing how much home you can afford. Let the Rocket Homes^SM Affordability Calculator help you determine the most sensible price range according to your budget, credit score and income. You can even search tailored listings of affordable homes in your local real estate market.