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Home Buyer

Moving in Together? Questions to Ask Before Buying a House

Whether you’re moving in with a significant other or someone else, you might weigh your housing options and then decide that buying a home together is a wise financial move. You can start building equity, plus homeownership can provide a sense of stability. Even so, there are a few questions you need to ask before jumping into a mortgage loan with someone.

1. How much debt does the other person have?

Make sure you have an honest conversation about personal finances before buying a house with someone. This can be a touchy subject if you’re buying a home with a non-spouse, and you might feel uncomfortable divulging personal information. 

Keep in mind, you don’t have to disclose every bit of information related to your finances, but you do need to talk about existing debts. If you’re uncomfortable discussing this with the other person, then you probably shouldn’t buy a home together.

These discussions are essential because your individual debts impact your mortgage options. We lenders take several factors into consideration when determining mortgage eligibility, including your debt-to-income ratio. The more debt you owe, the less money you may receive for a home purchase. Plus, if your house mate has more personal debt than you, this could impact how much they’re able to contribute to the mortgage payment.

 

2. What is the other person’s credit score?

You don’t need a high credit score to qualify for a mortgage loan, but a high score can help you qualify for a better interest rate, which can increase purchasing power and help you get more house for your money. 

Both of your scores are reviewed during the approval process, so you and your co-borrower must discuss each other’s credit scores. It can be problematic when two borrowers have very different credit scores because the lower of the two scores is what determines the mortgage rate. So, if you have a credit score of 780, but your co-borrower has a credit score of 620, your mortgage rate may be higher due to their lower rating.

 

3. How much cash can the person put toward the purchase?

Unless you qualify for a home loan that doesn’t require a down payment, you and your co-borrower will be required to put a down payment on the property. You’ll also be responsible for closing costs and other expenses related to the home purchase, such as the appraisal and the home inspection. 

The actual out-of-pocket expense depends on the property and the mortgage amount, so talk with your co-borrower beforehand to see how much they can put toward the purchase. Knowing the amount of cash available will help you determine how much you can spend on a property, and it will help you narrow down the right mortgage program for your situation as some home loans require a smaller down payment percentage than others. 

 

4. Who will pay for what after buying the house?

Never assume anything when buying a home with someone (especially when the person isn’t your spouse). Have a candid discussion and determine who will pay for what. Will you split the mortgage payment and other household expenses down the middle? Or if one borrower earns considerably more, will this person put more toward the monthly payment? If a non-spouse puts in more money toward the down payment, will this person take more of the equity upon selling the property? These are important questions to consider. Once you come up with the answers, put the agreement in writing.

 

Bottom Line

Buying a home is exciting and fulfilling. But the situation can get complicated when buying with another person. So, don’t be afraid to ask questions and talk finances. The loan experts at Cherry Creek Mortgage are also available to help you each step of the way. Give us a call to learn about your mortgage options.