Buying a home unmarried? What to know before signing the deed

On Nov 5, 2021

nd3000 | iStock | Getty Images

There’s a growing number of unmarried couples buying homes together, and without proper planning the move may create future problems.

Indeed, 9% of home buyers were unmarried in 2020, according to the National Association of Realtors. While younger millennials, ages 22 to 30 years old, represent 20% of unmarried purchasers, acquiring property as partners is a cross-generational trend.

“It’s happening across the board, and everybody needs to be careful,” said Sheryl Dennis, estate planning attorney at law firm Fields and Dennis LLP in Wellesley, Massachusetts.

That’s because co-buyers have fewer protections and may face legal issues if the relationship sours or one partner dies unexpectedly, experts say.

Applying for a mortgage

For most buyers, financing is the cornerstone of purchasing a home, and the process is more complicated for unmarried couples.

“For anyone buying a home, the first step is always pre-approval,” said Melissa Cohn, regional vice president at William Raveis Mortgage in New York, explaining how the step prompts couples to discuss applying for a joint mortgage, property titling and other critical decisions.

While combining high incomes, excellent credit and low debt may boost the chances of mortgage approval, a less creditworthy borrower can hurt the application, she said.

“Banks will always take the lower of the middle [credit] scores for the unmarried couple.”

Melissa Cohn

Regional vice president at William Raveis Mortgage

“Banks will always take the lower of the middle [credit] scores for the unmarried couple,” Cohn said. “So if one has a score below the optimal number required for the loan they are seeking, it could impact the rate and how much they can borrow.”

Property title

Another big decision is how to title the property, which stipulates each partner’s legal rights and ownership, and determines what happens to the home if one partner dies.

“The first question I ask is, ‘what happens when everything falls apart?'” said Matthew Erskine, a Worcester, Massachusetts-based estate-planning attorney at Erskine & Erskine.

While sole ownership grants rights to one person, joint tenancy with rights of survivorship is equal ownership, automatically passing to the other owner when one partner dies.

The third choice, tenancy in common, may be appealing when one partner contributes more because it represents an unequal interest in the property, Dennis said.

However, partners won’t inherit each other’s portion of the property by default, and they may need to specify preferences in a will to determine who receives their share.

Other solutions for additional control may be putting the home into a trust or creating a business, such as a limited liability corporation, Erskine said.

Of course, property laws vary by state, so…