If you are thinking about moving in with your significant other, there are issues that you should think about before doing so. The most important issue to consider is who is responsible for the mortgage if the relationship were to end for any reason. Let’s talk about what you need to know if you are going to buy a home to live in with your significant other.
Are You a First-Time Homebuyer?
The Federal Housing Administration (FHA) says that you can be a first-time homebuyer if you have not held a mortgage in your name within three years. If you are moving in with a boyfriend or girlfriend, it may be easier to try to buy a home in your name only. This is because you solely determine what happens to it if the relationship doesn’t work out. Additionally, you may be able to qualify for first-time homebuyer status in the future if you decide to buy a home jointly in the future when the relationship’s future is more secure.
The nice thing about a real estate loan is that rental income may be considered part of your income when lenders determine your ability to repay the loan. If you are not married to your partner, it may be possible to charge rent and have up to 75 percent of that money added to your income if you use a FHA loan. This is a commonsense way to classify your partner’s contribution to your housing payment if you are going to split the payment equally.
The Benefits to a Joint Application
If both you and your partner have good credit and a low debt-to-income ratio, you may want to apply to buy a home jointly. This is because the combined income that both parties are making is applied toward determining whether the two of you are a good credit risk. Additionally, it may make it easier to get lower mortgage rates when buying your home.
What Happens If the Relationship Ends?
What happens to the loan if the relationship ends? If you buy the home on your own, you get to decide whether to stay in the house, sell it or rent to someone else to defray your home loan costs. If you have a joint loan, both names are on the loan unless both the lender and the other person agree to have the name removed. In some states, a judge may award the house to one party or the other in a divorce settlement. Whoever gets the house is required to take care of any portion of the loan that still remains to be paid.
You shouldn’t rush into a joint loan with someone if you don’t think that they will be around to help make the payments in the future. However, it may be easier to apply for a joint loan if one party has much better credit or one party makes enough money to help get the loan application approved. When making the decision, think about how strongly you feel about the relationship and whether or not you could make the entire monthly loan payment if you had to.