Should We Buy a Home Before Marriage or Wait?
Question: Should We Buy a Home Before Marriage or Wait to Buy a Home After the Wedding?
A reader asks: My boyfriend and I are getting married in July, but we would like to buy a home before our wedding. Are we crazy to buy a home before marriage? Friends say it's too much stress, but I think it makes sense to have our new home already bought and ready to move into before we go on our honeymoon. Can you think of any reason we shouldn't buy a home before getting married?
Answer: Best wishes on your upcoming nuptials. I believe that every engaged couple wants to choose a home to buy as carefully as they had selected each other. Many couples buy a home today before marriage because they find it's more convenient. You've probably got enough stress as it is with planning the wedding and your future.
However, my advice to you is the same as I would give to any committed couple, whether they are tying the knot, prevented from getting married due to archaic marriage laws or prefer not to marry at all.
Steps to the Home Buying Plunge Before Marriage
Come to an agreement on essential home buying points before engaging the services of a real estate agent. If you both share common tastes, this should not be difficult. However, I have witnessed couples at odds with each other, which generally results in one party, against better judgment, agreeing to satisfy the desires of the other.
So, iron out your differences first.
- Types of homes
Some couples can't agree on style. One may enjoy the classic details in older homes over newer, while the other may insist on buying new construction. A compromise might be buying a home on an infill project.
Narrow down your top three choices for neighborhoods and drive through in the morning, afternoon and evening. Talk to the neighbors who live on streets where you might consider buying. Consider cruising the area on the weekends as well as during the week to get an idea of traffic and neighborhood activities.
- Price Range
Picking a price range is easier if you talk to a mortgage lender to find out how much home you can afford. Some couples prefer to choose a home price based on one income, just in case one person ends up unemployed, becomes ill or for some other reason loses a monthly income.
Ways to Hold Title Before Marriage
The manner in which you acquire title has a bearing on legal ownership and on transfer in the event of death. Some types of title carry tax consequences. You should talk with a lawyer to find out your state laws and how holding title will affect you. Some states restrict the ways to hold title; for example, only married couples can hold title as community property.
The most common are:
Financial Contributions to the Home Purchase
Apart from making a down payment, you will also incur closing costs. Total those sums and decide how much each will contribute to the purchase. Most people split the finances 50/50, but sometimes one person has more money than the other.
In the event of unequal cash contributions, couples might assign a percentage number and base ownership on that percentage. For example, say a couple has joint income of $160,000 per year.
If Judy makes $90,000 and her partner, Sharon, earns $70,000, Sharon's income makes up 43.75% of the household income.
So, Sharon and Judy may agree that Sharon's financial contribution to the down payment and closing costs should be 43.75% of the total, leaving Judy to pick up the remaining 56.25%. Couples who apply proportionate shares to the acquisition often use that same percentage to figure out who pays how much toward the mortgage payment.
Home Buying Mortgage Decisions
You'll quickly find out if your partner or soon-to-be spouse is a risk taker, depending on the type of mortgage he or she desires. Fixed-rate mortgages carry little risk but sometimes carry higher interest rates than adjustables.
These are the popular types of mortgages:
- Interest-only hybrids.
Reasons for a Home Buying Partnership Agreement Prior to the Wedding
Although marriages, unions and partnerships start out amicable, sometimes couples lose their focus and wander off in separate directions. For that reason, it's a good idea to put all financial agreements into writing. Contact a real estate lawyer.
Decide in advance what will happen if one or both of you decide to part company. Will you sell the home or let one party buy out the other party? If you sell, For example:
- How will you determine the price?
- Who will choose the listing agent?
- How will the net proceeds be divided?
- What will you do if you end up having to pay to sell because after deducting costs to sell, you have no equity? Or worse, you need to try a short sale?
- What happens if your home doesn't sell?
At the time of writing, Elizabeth Weintraub, CalBRE #00697006, is a Broker-Associate at Lyon Real Estate in Sacramento, California.