Purchasing a home with your significant other can be an exciting time. But there are a few things you should consider when buying a home together.

The Credit Check

How does your credit score compare to your partner’s? If one of you has a much lower score, you could consider having the partner with the higher score apply for a mortgage alone. If the person has sufficient income and assets, it might improve your chances of getting approved and could mean a lower interest rate.

Your Ownership Options

Will the new home be yours, mine or ours? How you define the ownership may not seem immediately important, but it can matter more down the road.

These are the types of ownership you might consider:

  • Joint tenancy grants both partners co-ownership and the right to use the whole property. It also includes the right of survivorship, which means when one owner dies, his or her share goes to the co-owner—not to heirs. Joint tenancy saves on costs and avoids the necessity of going through probate (the process of authenticating a will). One potential downside? Joint tenancy allows either owner the right to transfer their interest in the property without the other owner’s permission. That means that if either owner files bankruptcy or is sued, creditors may be able to force a sale to pay off the debt.

  • Tenancy-in-common also allows both partners the right to the undivided use of the whole property. But this form of ownership usually doesn’t include the right of survivorship. It’s governed by a contract. When one partner dies, the ownership interest will become part of their estate or can be transferred to anyone they name in the contract as a beneficiary. Some people in second marriages choose this option so the children from a first marriage can have an ownership interest in the home.

With a tenancy-in-common, the partners don’t necessarily own equal portions of the home. One owner could own 60 percent while the other owns 40 percent, or there could be more than two owners of the home with unequal shares.

  • Tenancy by the entirety allows each spouse the undivided use of the property, coupled with the right of survivorship. The difference here is that one spouse’s interest can’t be transferred without the consent of the other, which can come in handy in the event of a lawsuit that would otherwise put your home ownership in jeopardy.

  • Sole ownership means only one person holds the title to the home and is the only one who can sell the property or leave it to heirs. If you’re married and pursue this option, the spouse who isn’t named an owner will typically be asked to sign a quitclaim deed that gives up any ownership interest. If you live in a community property state, all assets and debt must belong to both spouses. If you’re in one of these states, you’ll also want to check if legal separation is recognized, or you may unintentionally share ownership of your home with your ex.

For more legal information, check out the homeownership guide from the American Bar Association.

The Bottom Line

The process of home buying can be a smoother, easier experience when you know your options and make these decisions ahead of time. From mortgages to closing and other essentials you’ll need to know, Navy Federal can help you through the home-buying process.

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