You have not made it official yet, but it might as well be. You have a partnership with someone special, and you are looking to solidify that relationship with a proper living arrangement: your own house together. Here are 10 steps to buying a home as an unmarried couple.
1. Have I checked both credit reports?
As a couple with trust, you may be able to use each other’s financial records to reduce your risk profile; however, you need to know exactly how your credit looks together. Depending on the health of your credit, you may be able to combine records under a guarantor relationship for lower interest rates. There are other relationships that will lower your combined risk profile in the eyes of the lender, but you need to correct your credit first.
2. What do our finances look like?
After checking both credit reports, a financial vetting is in order for both partners. The financing will determine who leads on the loan agreement, and it will also give you an indication of the kind of house that you can afford together. Take stock of liquid assets only; do not count retirement accounts or long term investments that are not immediately available to you as indicators of your financial health. Many people pad their financial health in their own minds using these long term retirement accounts, but bankers will not care about your IRAs or 401k plans when assessing you for a loan.
3. Where do we want to live?
The location of your new home is one of the most important aspects of your negotiation, both with your partner and with your lender. Location affects price and culture, and you should pick this as one of your first criteria for a new property. You will need to determine the locale by preferred weather conditions, allergies of both partners, local activities, and other things that change due to the seasons of the area.
4. How big of a house do we want?
You and your partner must decide how big of a home you want. This will be determined by your future family plans as well as your personal preferences. If you are expecting an addition to the family soon, then you would do well to choose a house for three or four instead of two. You may also appreciate your own personal areas in the house as well; however, you must balance the square footage that you are looking for with the budget that you have.
5. Are there people in the families who may be able to help us?
You now have two families that can help your risk profile. Your families may be able to help your house buying efforts by putting up properties as security to lower your interest rate. You also have potential choices for guarantors when you combine forces. All in all, there is no reason that you cannot get the best interest rate and the best terms on any loan that you have to take out on your new home when you have family.
6. Do we want a homeowner’s association property (HOA) or not?
If both partners work, you may want to invest in an HOA property to minimize the outside maintenance that you have to perform. An HOA also ensures you a beautiful community and plenty of like minded residents that will likely be in the same stage of life as you are.
7. How do we pick a real estate agent?
You and your partner will need to pick a good real estate agent for the type of property that you want. Once you have determined the type of property that you want, you will be able to pick an agent who reflects your needs. You need an agent who specializes so that you get the best negotiator on your side as well as a person who will not throw your account to the side for a bigger one on a whim.
8. Have we checked for eligibility with the government?
The government backs around 97 percent of all loans that are on the market in the United States, and you or your partner may be eligible for some of their help. It never hurts to check with the various agencies that have these programs available, especially if you are a first time home buyer. These agencies include the Federal Housing Administration (FHA), the United States Department of Veterans Affairs (VA), and Fannie Mae, among many others.
9. Is the neighborhood culture what I am looking for?
Certain neighborhoods are quiet while others are more like residential outlets for the adjoining nightlife district. Still other neighborhood developments may invest in a location next to a park, a forest, and bike trails to cultivate an outdoorsy culture of activity. This will make a huge difference in your quality of life, and it should be an important part of your selection process. Neighborhoods with websites are a great place to start, because you automatically know that the neighborhood is technically proficient.
10. What are the ongoing costs going to look like?
The mortgage is only the first cost of owning a home. When you are selecting a location, you must also pay attention to the property tax rates, the homeowner’s insurance rates, and the utility costs that you will pay for the area. If you are considering an HOA property, then you must also consider this additional cost.
2 Point Highlight
Many people pad their financial health in their own minds using these long term retirement accounts, but bankers will not care about your IRAs or 401k plans when assessing you for a loan.
You may also appreciate your own personal areas in the house as well; however, you must balance the square footage that you are looking for with the budget that you have.
