Mortgages for Unmarried Couples – What You Need to Know

Mortgages for Singles and Unmarried Couples - What You Need to Know-150x150A 2009 statistic shows that 8 percent of all home owners in the United States were unmarried couples. You don’t have to be married in order to purchase a home as a couple, but there are a few things that you should be aware of. Buying a home as an unmarried couple can lead to some serious problems in the future if the two parties haven’t taken the necessary steps to protect themselves. Many couples believe that they don’t need a document to prove their love, but the truth is that it’s harder, and probably more expensive, to get out of co-ownership of a home than it is to get out of a marriage.

When you and your partner are borrowing and spending tens, even hundreds of thousands of dollars, it would be a great idea to draw up a contract that would protect both your interests. Marriage is a legal contract, and without that contract, an unmarried couple will have to come up with a way of protecting themselves the same way a marriage contract does.

Writing up the Contract

Life is full of unforeseen events, so having a contract between two unmarried people who are buying a home together is a wise choice, which will prevent unpleasant issues in the future. Most arrangements in a couple’s life can be made through agreements, but buying a home together is a serious matter and both partners should protect themselves through a contract. Here are a few things that the contract between two unmarried people who buy a home together should contain:

  • Each partner’s share. An even, 50/50 split might not be a great idea if the two parties are not making equal contributions to the purchase of the home. One person may come up with the down payment, which is a large portion of the purchase price, so the contract could say that this person owns a larger part of the home. If one of the partners adds value to the home by fixing it or improving it, the contract could also give this person a larger portion of the home.
  • What happens in case of a break up. Splitting up takes its toll emotionally, but it would be even harder to go through if a home is involved. Nobody wants to think or talk about break ups when planning on buying a home together, but covering every possibility now is better than regretting it later. If the two partners have made different contributions towards the home, then they should plan on how they will get their money back in case of a break up.
  • The option of keeping the home. When a couple breaks up, one of the partners may want to keep the home, so the contract should say how much the other person will receive. A more difficult scenario is one in which both individuals want to keep the home, so the contract should address this issue as well.

Taking Out a Mortgage Loan

After writing up the contract, the unmarried couple will most likely have to take out a mortgage loan. Unfortunately, it is at the lender’s discretion if they want to give out a loan to an unmarried couple.

Both partners will have to apply individually for the mortgage loan, and some lenders will require both of them to qualify before they give out the loan. Married couples are regarded as a unit, and are satisfied with only one of the partners to qualify for the loan. Both unmarried home buyers are required to be on the loan, so one person’s credit history may jeopardize the whole process.

Another possibility is to apply for the mortgage loan in just one partner’s name. If one person’s credit history prevents the couple from taking out a loan, the other can apply for the mortgage solely in his or her name. This can prove to be very risky, because the one person who applies for the loan will have full responsibility. In case of an unforeseen event, such as a break up, that person will find themselves stuck with having to pay the mortgage alone, or risk going into foreclosure and take a large hit on their credit score.

Buying a home as an unmarried couple is possible, but you will most likely encounter more difficulties than you would if you were a married couple. The most important thing to remember is that you have to think ahead and protect yourself from any unpleasant situation, however improbable it may seem. If you decide to get a mortgage loan as a single person, because your partner can’t qualify, then keep in mind that there is always the possibility of ending up having to pay off your mortgage loan alone.

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