Can an Unmarried Couple Get a Mortgage Together?

Unmarried couples can obtain a mortgage together. The process for joint applicants is similar regardless of marital status, but unmarried partners face specific considerations. This article outlines financial assessments, legal protections, and procedural steps for securing a home loan.

Financial Qualification Requirements

Lenders assess the financial standing of all co-borrowers, including unmarried couples, to determine loan eligibility and terms. This review includes credit scores, combined income, and the debt-to-income (DTI) ratio.

Credit scores are important, as a higher score generally leads to better interest rates and loan options. Lenders typically consider the lower of the two median credit scores for joint applicants. A lower credit score from one partner can impact the overall interest rate offered.

Lenders evaluate the combined income of both applicants to determine the maximum loan amount. This joint income is weighed against their combined debts to calculate the DTI ratio. The DTI ratio compares monthly debt payments to gross monthly income, with most lenders preferring a DTI of 36% or less. A lower DTI ratio generally increases the chances of approval and can lead to a more favorable interest rate.

Ownership Structures for Shared Property

Unmarried couples purchasing property together must decide how they will legally hold title to the asset. This decision has significant implications for ownership rights, transferability, and inheritance. The two primary options are Joint Tenancy and Tenancy in Common.

Joint Tenancy means both partners jointly own the entire property, each holding an equal share. It includes the “right of survivorship,” meaning if one owner passes away, their share automatically transfers to the surviving owner without needing to go through probate. This simplifies property transfer upon death, as the deceased owner cannot will their share to anyone else.

Tenancy in Common does not include the right of survivorship. Each owner holds a specified share of the property, which can be equal or unequal. If one owner dies, their share does not automatically pass to the co-owner but can be willed to their heirs or beneficiaries. This provides flexibility for owners to designate who inherits their portion.

Important Legal Agreements

Formalizing an agreement between unmarried partners before acquiring property is a prudent step. These agreements clarify expectations and establish a framework for various scenarios, including the potential dissolution of the relationship. A Cohabitation Agreement or Property Agreement serves this purpose.

These agreements typically outline how financial contributions and responsibilities will be managed. They can detail each partner’s share of the down payment, the division of monthly mortgage payments, and the allocation of ongoing property expenses such as taxes, insurance, and maintenance costs. Such an agreement provides a clear understanding of financial obligations during the ownership period.

Furthermore, the agreement addresses how the property would be handled if the relationship ends. This includes provisions for buy-out clauses, procedures for selling the property, and how equity would be divided between the partners. Having these terms in writing can help prevent disputes and potential legal challenges, offering a structured approach to a difficult situation.

Gathering Required Documentation

Before submitting a mortgage application, both individuals in an unmarried couple will need to compile a comprehensive set of documents. Having these materials ready in advance can significantly streamline the application process. Lenders require specific information to verify financial stability and identity.

Common documents include personal identification, such as driver’s licenses and Social Security cards, for both applicants. Proof of income is also essential, typically comprising W-2 forms, recent pay stubs, and tax returns for the past two years. These documents allow lenders to verify consistent income and employment history.

Applicants will also need to provide proof of assets, such as bank statements and investment account statements, to demonstrate available funds for the down payment and closing costs. Information about existing debts, including credit card statements and loan statements, is also necessary for lenders to assess the overall debt burden.

The Mortgage Application and Closing Process

Once all preparatory work is complete, including understanding financial requirements, deciding on ownership structures, drafting legal agreements, and gathering necessary documents, the procedural steps of securing the mortgage begin. The entire process, from application to closing, typically spans 30 to 45 days.

The first procedural step involves submitting the completed mortgage application package. This can often be done online, in person, or via mail, depending on the lender. After submission, the application moves into the underwriting phase, where the lender thoroughly reviews all submitted financial information and documents to assess the risk associated with the loan. Underwriting can take between 10 to 15 days, sometimes longer if additional information is required.

As part of the lender’s due diligence, an appraisal of the property is ordered to confirm its value, along with a home inspection to identify any potential issues. These steps ensure the property itself meets the lender’s criteria. Finally, the closing process involves signing all legal documents, transferring funds for the down payment and closing costs, and ultimately receiving the keys to the new home.