Buying With Friends
You’ve been living with your best friend since freshman year of college, and it’s been a blast. So, why not pool your money and buy a house together? After all, it’s easier to purchase when you have two incomes.
It’s true that co-buying a home with friends, or family members, can make it easier to own a home, and reduce upfront costs.
But, there are a few unique differences to co-buying. Here are three you should consider and discuss before you jump into the process.
1. Type of Ownership
Don’t assume that splitting the mortgage determines the ownership. If one person will be paying a larger portion, you might want to be tenants-in-common. This also allows you to transfer or sell your share of the property at any time. But if you want to divide the ownership equally, you can choose to be joint-tenants.
2. Credit Scores
When two Buyers are on a mortgage app, lenders use the lowest credit score to determine the interest rate. Do you both have excellent credit? If not, you could have one person on the mortgage loan, but you’ll only be able to count one income to determine the loan size.
3. Monthly Bills
This sounds like a minor detail, but it’s important to be on the same page about finances before the bills come in. Will you pay bills out of a joint household account? Or will one person pay the full bill and have the other pay them back?
Once you’ve discussed your plans for the finances and ownership, your best bet is to have a legal agreement prepared ahead of time.
