Not married: Home loan in both our names or just one?

[Emerald]

why wait 10 years, suck it up in a small 1 bedroom apartment when for the same price i could get a house with more space and a yard. We are lucky enough now to qualify for a usda 100% financing loan. OR i could wait 10 years... be miserable stuck in my little apartment, have ZERO money cus every penny i have left over is going to savings to save up for this insanely expensive down payment... then in 10 years i pay 30k more because the market went up and i could end up with a nice and high interest rate. Oh you're right thats SO much smarter. Like i get it ur supposed to be able to sell and make a profit and you don't want to be under water but we already got the house for less then it was appraised for and less then what the sellers owe on it.

I'm not really as stupid as i look. We are fortunate enough to live in an area where homes are actually affordable. We aren't buying anywhere near what we qualify for.... mortgage, property tax and homeowners insurance add up to equal our cost for our small 1 bedroom apartment. Financially it makes sense to buy.

We have secure jobs, we are happy with the area we live in, we have what i would consider a secure relationship. yes even though its not a legal marital status. I thought we were ready until I came here and now i just want to walk away from everything because my relationship is just automatically gonna fail.

I came here looking for advice on whether or not to have both names on a mortgage. is there a reason to do it, or not to do it? Yet no one has an opinion on that because its just automatically a no because i'm not married. I hear married couples sometimes do home loans in only one name... is that a good thing or a bad thing? Thats what i was trying to ask but i guess i'm just the stupid kid that buys a house with her boyfriend. i'll just put my life on hold. or head to vegas for that legal status.

First and foremost, it is incorrect to compare your monthly rent to the mortgage payment (including insurance, etc.). As homeowners you will be 100% responsible for maintenance, upkeep, repairs, etc., for as long as you own the home. And these expenses will run you into the thousands, and could happen at any time.

You can get a rough estimate of these expenses by adding 50% to the mortgage payment. This is a truer comparison of actual costs. You will want to start saving immediately for these expenses, preferably before you buy the home. If you think you will be broke saving for a down payment, wait till you are homeowners trying to buy a new furnace and roof in the same year.

In addition to maintenance, houses tend to be larger and have higher energy costs. I'd be willing to bet your utilities will be higher, especially if you are upgrading in size.

And don't get me started on property taxes. Mine have gone up every year I have owned my house, despite my property values declining.

And make no mistake, housing prices could just as easily drop as go up. So, with 100% financing, expect that once you buy the house you could be underwater and unable to sell it, just like a good many folks already are.

If you think you will be broke saving for a house, you will surely be broke owning one.

[riverwed070707]

All other red flags aside (like the fact that the PITI isn't the only cost associated with owning a house and if you can't save now, you're definitely not going to be able to save once you own), here are some numbers for you to consider.

I'm not sure what "affordable" in your area is, but lets pretend you're buying a house for $100k. With 100% financing, I'd be shocked if you're getting an interest rate lower than 5.5%
Since you have no money down, I presume you're going to have a 30 year term.

With these numbers, you're going to pay a total of $98,862.37 in interest over the life of your loan plus an extra probably $6k in PMI. Your interest alone will total MORE THAN THE COST OF YOUR HOUSE.

Now lets say you take a few years, save up a decent downpayment. With just 20% down, you'll pay nearly $20K less for your house. That's no chump change, and its money you could have been saving all this time. Your payment will also be about $100 cheaper a month so for the same paymnt (actually a little less) you could finance for 20 years instead of 30 and only pay $52k in interest -- HALF what you would be looking at if you buy now. What else in your life can you do thats going to save you $50,000?

Lenders market it like anyone can buy, and even if someone is willing to loan you the money it doesn't necessarily mean its the best decision.

[skydivingchic]

Kate - My now fiance and I bought a condo together about 8 years ago now with both our names on both the mortgage and deed. What you need to protect yourself legally in this situation is called a Tenants in Common Agreement and for now you need to be listed as Tenants in Common on the deed. The Agreement is a legal document which outlines what happens to the house in the event of a breakup or death, etc. Get a lawyer for this - don't cheap out. Regarding the mortgage interest and tax deductions - we split the mortgage and all associated housing costs 50/50, so we take a 50/50 split of the interest and property taxes - I claim half on my tax return, he claims half on his. I'm not a CPA, but I believe if your name is not on the mortgage, you will not be able to claim any interest deductions on your taxes. Ask a CPA.

The other board posters have good reasons to be against the idea of mingling finances like this before you are married. The arrangements my fiance and I have have worked out for us. We've been together over 15 years and are now planning our wedding. But the risks the other posters raised can't be ignored and should absolutely be considered. Go into this with your eyes wide open and truly understanding the risks.

[MonkeyMama]

I bought a property with my spouse before getting married. I agree it is ill-advised, BUT, in our case there was no doubt we were eventually getting married. 12 years later, we've been married for 11 years.

Though I understand where everyone else is coming from, I think the advice is a little extreme. There are certainly instances and circumstances where you can buy a home with someone you are not married to. I agree with skydivingchic - you would want to probably draw up a legal agreement. (I personally didn't, BUT we were married within one year of buying our property. Owning for YEARS without marriage would be another story. I'd want more legal protection. & it's the kind of thing we had been practically been married for YEARS before we bought the property. It just made more financial sense to buy at that time - and we wanted a little more time and space to plan the wedding - we probably should have put in more legal remedies *just in case.*).

I am infinitely more disturbed by the "You have to be a millionaire to put 20% down" comment. I know hundreds of people who think like you, and they have all lost their house to foreclosure. (I maybe don't personally know every single one of them, but the foreclosure rate in my neighborhood is easily 90% - and the things coming out of your mouth is what I heard most of the last decade from people rushing into homes they simply couldn't afford). I'd say it is prudent to save 20% down. If you can't save up the money, I wouldn't buy. It probably won't take 10 years, but if it does, so be it. (If you believed you could save the money, really, it wouldn't take so long). We both saved up our down payment while making $10k-$30k per year. & this was in an insane expensive city ($50k+ down payment for a mere condo). It took quite a few years to save 20%, yes. Now we are one of the only ones we know who can afford to keep their house. It was definitely worth it. I've got friends in their mid-40s moving back into little apartments - they have nothing to their names after losing their homes. Rushing doesn't really pay off.

[disneysteve]

Okay. Since skydivingchic and MonkeyMama have weighed in about buying with a non-spouse, let's continue along this conversation - if you're willing OP. Now that you know it is possible to do (though ill-advised), how about discussing if you actually can afford to do it?

How much do each of you earn?
How much is the property in question?
How much other debt do you each have?

[Redraidernurse]

Okay. Since skydivingchic and MonkeyMama have weighed in about buying with a non-spouse, let's continue along this conversation - if you're willing OP. Now that you know it is possible to do (though ill-advised), how about discussing if you actually can afford to do it?

How much do each of you earn?
How much is the property in question?
How much other debt do you each have?

I would be shocked if she actually has the guts to respond to these questions with honesty given the demeanor she has presented thus far on this board. It would be greatly to her benefit to receive financial advice on whether they can actually afford the home, but that doesn't seem to be her concern at all since she is completely convinced that they can afford it.

[photo]

From Post #1

We've been together for 3 years and we live together now and plan on getting married...

From Post #7

i mean i am half expecting to be engaged before we close

But you already said you were planning on getting married, which is the definition of engagement.

I originally thought my name was going to be put on the mortgage but when we signed the offer paperwork it was just his name.

Your name being omitted is a huge detail to miss.

When purchasing a house, details can make or break you. If for no other reason, you should refrain from buying a house until you and your boyfriend both agree and understand exactly what the details are in all respects of your life.

[snafu]

If BF has his name on the documents, without a 'Tenant-in-common agreement in place, your status is nil. It wouldn't matter if you paid 1% or 100% of costs, your status is nil. With the divorce rate exceeding 50% what do you think break-up rate must be for those of other status like cohabitating, significant other, engaged or boyfriend?

How much have you & BF saved living in the hated apartment? When a window seal gives way in an apartment, you call the super, agency or landlord. In an owner occupied house you research what and who can change/fix most cost efficiently. You pay in addition to mortgage, mortgage insurance, homeowner insurance so you need a large home maintenance/repair emergency fund. Forget about design, furnishings, window treatments, lawnmower, snow shovel, and so much more. Best place to start is to list 'How To' programs at all the big hardware chains like Home Depot and spend every Saturday at their free 'clinics.' You both will need brand new skill sets to fix toilets, clogged plumbing and the longest list you can imagine

[feh]

Don't have much to add to other advice in this thread, re:

1. it sounds like you can't afford the house right now (should have 20% down payment)
2. don't co-mingle finances if you aren't married

But, here's another idea - go get married now. At the courthouse. You can have your wedding at a later date.

[disneysteve]

But, here's another idea - go get married now. At the courthouse. You can have your wedding at a later date.

I made that comment 25 posts ago but she ignored it.

Obviously, she isn't looking for advice - at least not good advice. She was looking for someone to justify her bad behavior. I suspect she won't be back.

[bjl584]

Is it fairly safe to assume that the wedding will be big and expensive, and that there is no real plan to pay for it?

[Redraidernurse]

Is it fairly safe to assume that the wedding will be big and expensive, and that there is no real plan to pay for it?

Or maybe she's hoping that since her parents are saddled with part of her student loan debt that they'll take on the wedding debt as well?

[thefrugallery]

I feel like I need to stick up for this poor girl! My now husband and I bought our home before we were married. We wanted both of our names on the home so that we both had legal rights and responsibilities for it. I know this was not the smartest thing to do, but it worked fine for us.

She seems pretty set on having both names on the home. If they're going to do it anyway I would just make sure that she can handle the mortgage on her own so that if he bails her credit is not screwed. I would also recommend having full access to each other's finances so they know where the household's money is going. If both names are on the mortgage than both people need to know that the other person is being financially responsible enough to contribute.

[disneysteve]

She seems pretty set on having both names on the home. If they're going to do it anyway I would just make sure that she can handle the mortgage on her own so that if he bails her credit is not screwed.

I agree, which is why I (and others) asked questions about her finances - which she didn't answer. I think her comments, particularly her thought about a 20% down payment, made it pretty clear that there was no way they could actually afford this house together so she certainly couldn't afford it by herself.

[Xtreme Thunder]

I figure I will chime in as to I was once in a situation similar, just last year.

After renting an apartment for a year (600 SF@ 1,100/mo heat and hot water included), 9/2010 my girlfriend and I decided to purchase a house together. We were originally going with a Rural USDA loan for 100% financing on a 140K home @ 5.5%. We decided against that, being the home was ~15 miles from both our jobs and I did not like the fact that going into the loan there was no equity, and the interest rate was 0.5-0.75% higher than a FHA loan. There was a weird cost to the USA loan which just to get the loan cost an additional 3K on top of the normal closing costs. USDA loan also required us to pay out of pocket for home inspection and lawyer totaling $1,150, so it is never really 100% financing. The home also had to appraise at or above the total amount financed (Purchase price, USDA Loan Fee, Closing Costs PMI, etc.) IIRC the loan payment including PITI and PMI was $1,250. So, we decided on an FHA loan, for a home, that was nicer, had more of what we wanted and was much closer to my job. Her job was the same distance away, at about ~15miles, but mine is less than 2 miles away. The bank pre-approved us at 230K. I said, yeah right, so we were looking at homes in the 170K price range for a FHA loan that required 3.5% down (as well as lawyer fee, home inspection and appraisal) @ 4.75%. We ended up with a $177,805 loan @ 4.75% for 30yrs paying $1297.xx including PITI and PMI. The house is about 950 SF. The taxes were about 2K cheaper/ yr, sanitation pick-up is included in the City tax, and has municipal water and sewer hook-up. Another large plus (for me at least) was the natural gas forced air heat. Also, the lot is split between City and Town, so we can choose the better Town schools when we decide to have children. So also be sure it is the house you really like that meets your needs. The mortgage payment is 26.8% our monthly take home pay.

I did propose 2 months after we closed on the house and were married 9/2011. Was it risky for both of us? Absolutely! I will have to check on what the deed stated, but I believe is stated “purchasing jointly, with right to survivorship”.

If you are worried about death, get life insurance and set each other as beneficiaries, and/or get a will set-up. Speak to a lawyer.

Some costs that we ran into through-out the year: Not saying you would run into these, but having cash on hand after closing is a smart move.

1. 11/2010 - During contract, the washer broke in the house, upon move-in, we needed to replace. So we purchased a new front load washer and dryer set. Cost = $1,500. Paid Cash.

2. 1/2011 - Engagement ring. = $2,600. Paid cash.

3. 2/2011 – Remove carpets in room and redo hardwood floors to match existing - $800. Paid Cash.

4. 1/2011 – Present – Paint, molding, light fixtures = $3,000. Paid Cash.

5. 8/2011 – Her parents only paid 10K toward the wedding, any overage was our expense. $4,000. Paid Cash.

6. 4/2011 – Lawn Equipment! Lawn mower, weed wacker, leaf blower, rake, grass seed, mulch, fertilizer, fertilizer spreader. $800. Paid Cash.

7. 10/2011 – Hurricane Irene and Tropical Storm Lee, found 2 windows leaking. House had all original 1960 wood windows with aluminum storm windows, replaced the two priority windows with what I wanted. Cheapest? No. $1,800. Paid Cash.

8. 11/2011 – Car Loan. Paid off the remaining on a car loan I had because I was tired of paying it. $5,000. Paid Cash. Car was new in 2007 Honda Civic Si Sedan, paid off 5 year note in 4 years.

9. 11/2011 – Paid my wife’s small student loan off before we needed to pay regular principal and interest payments. $2,200. Paid Cash.

10. 11/2011 – Electrical work done. Could not use dishwasher and microwave simultaneously or the circuit would be tripped. Materials and labor, $350. Paid cash.

11. 12/2011 – Wife’s car bit the dust unexpectedly. Not worth the cost to fix it. Purchased a 2010 Honda Civic LX Sedan with 22,000 miles for $14,000. Financing $14,000 for 4 years @ 3.75%. Already have a pre-payment plan in place to pay it off between 18-24months. Paid cash for titles, taxes, licensing fees. $1,400.

Again, not saying that you would run into the same issues or expenses, but I figured I would list to show you how quick it adds up and how screwed we would be if we did not have cash (EF) in place after closing and put all that on a CC with 10-18% interest! ~$23,450 was spent this year, with cash. We did all that while maintaining a $2,000+ EF/ mo.

It also helps to be able to save $1,000+/mo. on top of an additional $300 principle to the car loan and $600 to the mortgage principle ($2,100 total saved/ mo. without pre-paying anything). Budget wisely.

We also have a plan in place to replace the remaining windows totaling about $9,200 for 2012.

Do I wish we had 20% down? Yes, my mortgage payment would be under $1,000 including PITI and I would not be paying an additional $80/mo. for PMI. We also would have more equity in the home, obviously.

If I were to do it all over again I would have 20% down. Do I regret purchasing out of wedlock, no. If something happened to the relationship, well, yes! Be very careful.