Homebuying tips for unmarried couples

With inflation high and the cost of living on the rise, more people are considering how to save money on housing expenses. For some, that means moving in with parents, family members or roommates. For others, it might mean buying a house with a significant other before marriage.

In addition to today’s high mortgage rates and lack of housing inventory, there are a few unique things to remember before purchasing a home with your partner. Keep reading to learn more.

2023 cohabitation statistics

• According to U.S. Census data, 8 percent of American adults — more than 20 million people — live with an unmarried partner.
• Singles spend an average of $17,899 on housing each year, while couples spend $24,811, according to the U.S. Bureau of Labor Statistics.
• The average age of a first-time homebuyer in 2022 was 36, according to National Association of Realtors data.
• That’s up from an average first-time homebuyer age of 33 in 2021.
• A report from the Pew Research Center showed that more adults ages 18 to 44 have cohabitated (59 percent) than have been married (50 percent).
• The same data shows that 38 percent of unmarried couples who moved in together did so because it made financial sense.
• Among cohabitating couples who aren’t engaged but would like to be, the largest barrier is a lack of financial readiness — either their partner’s (29 percent) or their own (27 percent), the report found.

5 things to do when buying a house while unmarried

When you’re partnered up, buying a house can be a savvy financial decision – as long as you’re careful about how you go about it. Here are the most important things to do when purchasing a home before marriage.

1. Talk openly about your finances

Since you’re entering into a joint financial commitment, now is the time to talk about each partner’s income, credit score and debt obligations (including student loans, credit card debt, and car loans). Before anything else, you must make sure that you can both afford a home purchase right now.

2. Create a cohabitation agreement

You’ll also want to draft a cohabitation agreement that spells out key details about your arrangement, including who pays for what and what happens to the house if you split up. “Having a written cohabitation agreement that outlines how the property will be divided can help avoid potential disputes in the future,” says Erin Kemp, a consumer advocate at Ownerly.

3. Consider your mortgage application strategy

If one partner has bad credit, it could hurt your chances of qualifying for a mortgage as a couple, or getting a competitive interest rate from a lender. (Even if the other partner’s credit is stellar.) In these cases, it may make more sense for the person with better credit to apply for the mortgage alone. However, having just one person on the mortgage puts all of the legal burden on their shoulders when it comes to repaying the loan, so this is a decision that shouldn’t be made lightly.

4. Figure out the right ownership structure

Relatedly, it’s not your mortgage that determines legal ownership of the property — it’s your house title. As an unmarried couple, there are several ways to title your home. One of the most common methods for couples is joint tenancy, which gives each party 50-50 ownership rights. Other common title options include tenancy in common (where each party owns a certain percentage of the home) or tenancy by entirety (where both parties have full ownership).

5. Hire a knowledgeable lawyer

Buying a house as an unmarried couple can create some complicated scenarios that single and married homebuyers don’t face. Protect yourself and your partner by working with an experienced real estate attorney, who can explain the legal and financial implications of your purchase, draft your cohabitation agreement and outline the pros and cons of various ownership structures.

5 things NOT to do when buying a house while unmarried

Just as importantly, there are several things you should avoid as an unmarried couple buying a house together.

1. Don’t buy more house than you can afford

Regardless of marital status, no one should ever buy a house that’s beyond their means. This holds especially true especially if you’re buying as a couple but you’re the only person on the mortgage. If you separate or your partner stops making payments, you could become responsible for the entire home loan on your own.

2. Don’t avoid difficult discussions

Even if you feel uncomfortable talking about financial matters with your significant other, it must be done before buying a house together. Not only will you need to come up with a plan for a down payment and monthly mortgage payments, but you also need to consider how you’ll split things like bills, property taxes, insurance and upkeep. Be honest and forthcoming now, and you won’t be sorry later.

3. Don’t overlook the cohabitation agreement

Nobody wants to imagine splitting from their partner, but unfortunately, it does happen. Make it a priority to create a detailed cohabitation agreement that explicitly states what will happen with your property if you break up.

4. Don’t ignore the tax implications

As a homeowner, you may be able to use the mortgage interest tax deduction to lessen your tax liability. But unfortunately, unlike married couples, only one person in an unmarried couple may claim this deduction on their taxes. “Make sure you have discussed how the interest deduction will be used,” says Denise McManus, a mortgage loan originator in the Phoenix area. “Only one person can take the deduction, and one person will miss out.”

5. Don’t rush into a home purchase

If your partner really wants to purchase a home that you either don’t love or can’t afford (or is simply pressuring you to buy a home at all), it may be time to take a step back from the process. Investing in a home together is a serious, long-term commitment, and you should feel comfortable (and excited!) throughout the experience.

Buying a house while married vs. unmarried

What are the main differences in co-owning a house before or after marriage? One of the biggest ones is the mortgage application process. Most married couples apply for a home loan together, which gives them the benefit of combining their income and assets. In contrast, unmarried people typically do not have shared savings or assets and apply as individuals, using the credit score, income and debt-to-income ratio (DTI) of the more financially qualified partner.

In addition, unmarried partners need to put extra thought into protecting themselves with a legal cohabitation agreement, which would not be necessary for married couples. They should also think very carefully about how their shared home will be titled.

FAQs

• Can a home seller legally discriminate against a potential buyer?

  Definitely not. Federal law — specifically, the Fair Housing Act, which was enacted in 1968 — prohibits housing-related discrimination. Under Fair Housing laws, it is illegal to discriminate against a potential buyer (or renter) based on protected statuses such as race, religion, national origin, sex and familial or marital status.
  

• What is the most important thing to keep in mind when looking for a house?

  Buying a home is a huge financial commitment, and the purchase price is the most important thing of all — use Bankrate’s new-home calculator to crunch your numbers and figure out how much house you can afford. Shop around for the best mortgage rate you can qualify for as well. Other important factors to consider include neighborhood, commute time, amenities and size. Look for a home that meets your needs, or comes as close as possible, while still staying within your budget.
  

• How has the rate of cohabitation changed over the past 30 years?

  According to the Pew Research Center, cohabitation has more than doubled in the last 30 years. Today, 59 percent of U.S. adults (aged 18 to 44) have cohabitated with an unmarried partner — that’s 9 percent higher than the percentage of people who have ever been married.