Unmarried couples are increasingly entering the housing market, with 18% of all first-time homebuyers being unmarried couples, according to a report by the National Association of Realtors. This is a significant increase from just 4% in 1985. The rise can be attributed to many young, unmarried couples choosing to live together for financial reasons.
While these couples may be eager to own a home, there are several factors they should consider before taking the plunge. Jessica Lautz, the vice president of research at the National Association of Realtors, emphasized the importance of financial considerations for unmarried homebuyers. Unlike married couples, unmarried homebuyers often make financial sacrifices, such as taking on secondary jobs, to finance their purchase due to the struggle of housing affordability.
The typical unmarried couple buying a home for the first time is around 32 years old, belongs to the millennial generation, and has a combined average household income of $72,500. They are also more likely to receive loans or be gifted money from friends and family compared to married couples.
One of the reasons unmarried couples may choose to buy a home together is the strength in numbers when it comes to qualifying for financing. In an era of high real estate prices and interest rates, combining resources can be a strategic move.
However, there are potential risks and challenges to consider. Melissa Cohn, regional vice president of William Raveis Mortgage in New York, highlighted the lack of legal protections for unmarried couples in the event of a breakup. If one person decides to leave, the other can be left with the entire mortgage and may struggle to afford it. Unlike married couples, unmarried couples have no legal obligation to each other. Nonetheless, stopping mortgage payments is not advisable as it can ruin an individual’s credit.
To protect their investments, unmarried couples should carefully consider how the property is titled and discuss their options with an attorney. By using joint tenancy with rights of survivorship or tenancy in common, couples can outline their legal rights and ownership. Creating a property agreement can also establish responsibilities for mortgage payments, down payments, insurance, and home repairs, especially if there is a significant income disparity between partners.
Certified financial planner Cathy Curtis suggested four key considerations for unmarried couples before purchasing property together. Firstly, tapping into retirement accounts for a down payment should be carefully weighed, considering the potential long-term impact on savings. Secondly, reviewing and improving credit reports and scores can help secure the best mortgage rate. Thirdly, keeping credit activity low and avoiding major purchases or opening new lines of credit is prudent. Lastly, saving money in a high-yield savings account instead of the stock market can mitigate potential fluctuations in the market.
In conclusion, the increasing number of unmarried couples entering the housing market highlights the changing dynamics of homeownership. While financial considerations and legal protections should be at the forefront of their decision-making process, these couples have the chance to make their dream of homeownership a reality.