Buying a Home as an Unmarried Couple? Do These 3 Things

Sixteen percent of all first-time home buyers in 2017 were unmarried couples, an annual National Association of Realtors report found, the highest share the organization has recorded since 1981, says Jessica Lautz, managing director of survey research and communication for NAR.

But many couples dont realize how risky buying a home with an unmarried partner can be. Heres how to overcome these risks with some planning, a good lawyer and a slightly awkward conversation or two.

1. Sign a prenup... for the house

No couple wants to talk about breaking up, but if youre going to be co-homeowners, its a must, says Renee Bergmann, a real estate attorney and owner of Bergmann Law LLC in Westmont, New Jersey. She recommends unmarried couples create a co-ownership contract with the help of a legal professional before closing day.

The agreement should answer basic questions like: What happens to the property if you split? What if one of you becomes disabled or dies? Who pays utility bills or for major repairs?
Dont just wait and see what happens, Bergmann says, because without a written agreement things could get messy very quickly.

2. Choose the right type of title

Turns out theres more than one way to own a house, and taking title the right way is especially important for unmarried couples. Options vary from state to state but generally include:

Sole ownership. Only one name is recorded on the deed, and that person has all the rights and responsibilities of ownership.

• Pros: Sole ownership may yield tax savings if your incomes are drastically different. And, if your partner has bad credit, applying for a home loan in your name only may help with approval. Remember, however, that ownership rights are determined by names on the deed, not the mortgage, Anna Fabian, vice president of product at SoFi, said in an email.

• Con: If the relationship ends and youre not on the title, youll risk walking away with nothing, even if you contributed money to the purchase or mortgage payments.

Joint tenancy. Each person owns 50% of the property. If a tenant dies, their share automatically transfers to the other joint tenant.

• Pro: Joint tenants enjoy right of survivorship, so you wont have to worry about fighting estates or relatives for the house in the event of your partners death.

• Con: An unfriendly breakup could spell trouble, especially if one partner cant or wont buy the other out.

Tenants in common. Allows unequal ownership, so you could own a 75% stake while your partner owns 25%.

• Pro: Ownership shares can be tailored to match financial contributions; if you paid more toward the down payment, for example, you can own a larger percentage.

• Con: If one tenant dies, the other has no automatic rights to that persons share of the property unless named in a will or living trust.

No matter which approach you choose, if you tie the knot after buying, consider revising the deed to reflect your new legal status with something called a quitclaim deed, Bergmann says.

3. Leave your parents at home

Buying a home is a stressful decision, so younger unmarried couples often involve their parents, but sometimes this only makes things more confusing, says Danielle Moy, an agent with Coldwell Banker residential brokerage in Orland Park, Illinois.

I can tell the parents are unsure of the situation, and it causes a bit of an emotional roller coaster when theyre looking at homes, Moy says.

Parents may mean well, but ultimately its your house and your decision, Moy says, so make sure you and your partner agree about what you want -- no matter what Mom and Dad think.