Buying a house with a partner

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Buying a house with a partner sounds amazing, but it’s a huge commitment. Communication is key if you want things to go smoothly. Asking these questions can better prepare the both of you for the next step.

How much debt do you have?

First, ask how much debt they have. Knowing how much money is at your disposal is a huge aspect of buying a house. Getting approved for a mortgage should be the first step in the process. Mortgage lenders look at your debt-to-income ratio. Your DTI ratio is calculated by your combined monthly debt payments divided by your combined monthly income. Essentially you want a low number no higher than 36%, which is the general rule to qualify for a loan.

How much can we both afford to spend?

Whether you are splitting the cost or paying more/less, it is important to determine how much you each can afford. It may be helpful to determine your wants and needs in a home. Looking at average prices of homes in the area you would like to live will help you to know what you are getting into. It will make you more comfortable in your decision and will not leave you disappointed in your decision.

You must figure out your down payment. A 20% down payment is a good start considering you will get the best mortgage rate and terms. Most of the time a lower down payment is just fine. The Federal Housing Administration (FHA) for example, only requires a down payment of 3.5%. If you are a veteran, you qualify for the Veterans Affairs (VA) and could get away with 0% down. Though 0% down would be nice, it may be a better choice to get a solid payment out of the way in the beginning. It is all personal preference, which is why it is important to know your budget officially before providing the down payment.

If you do not qualify for FHA or VA, if you have a good credit score you may still qualify for a conventional mortgage. You will have to pay private mortgage insurance (PMI) which ranges from about 0.3% to 1.15% of your home loan.

You and your partner may also qualify for down payment assistance which is offered by housing finance agencies. This can actually save you thousands of dollars.

Where do we want to live and how long?

Buying a home is only ideal if you are going to stay there long enough to get your moneys worth. Ideally if you were going to sell you would not want to lose any money on it. Moving somewhere you can see yourself for a long period of time is the best thing to do. You must consider your future plans like if you were to build a family, consider your intermediate and extended family, friends, and very importantly your job. Safety is a priority as well.

Checking out the market in the area can be very helpful. See what experts say about the area and what they predict it will be like in 10+ years or however long it will take to pay off your mortgage.

Observe the houses in the area. It may be a little awkward living in a Large new house surrounded by older homes. People tend to like things that are similar to them and have a nice flow to it. The aesthetic of the neighborhood could be a deal breaker for some people. Think about how appealing your house would be in the future if you were to sell it.

 

What happens if we break up?

 

It is super important to have a back up plan. It may be an awkward conversation, but it is certainly realistic and should be done before such a large commitment. Doing so will ensure you know your assets apart and do not end up losing out on money.

Luckily, there are different types of homeownership options. The seven most common ones are sole ownership, joint tenancy, tenancy in common, tenancy in common vs joint tenancy, tenants by the entirety, owning partnership, owning corporation, and owning trust.

The most common one is joint tenancy in which each person holds equal interest in the property. One of the most important parts of the agreement is the right of survivorship. This means if one or multiple tenants die, their ownership is passed on to the surviving tenant.

 

There are many aspects that come along with buying a home. It is important to consider your options before you put in your down payment. Overall, the process sets you up for security and is not very hard. It will be an exciting part of your life.

 

To contact me, call 708-583-8300, e-mail gz@zerillorealty.com or visit www.zerillorealty.com.

 

 

 

About Giuseppe Zerillo

Giuseppe Zerillo is the managing broker and owner of Zerillo Realty Inc. He is active on many boards, serving as village trustee of Harwood Heights and corporate secretary for Casa Italia. In 2011, he received the IANU Foundation's 2011 David Award for outstanding promise in the field of real estate, and in 2012 he was honored by the Illinois State Crime Commission for his community outreach. Constantly seeking opportunities to give back, he donates to several charities and raises money for children with disabilities.

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