Should I Get Married Before Buying a House?

Buying a home is a significant financial and emotional commitment, often coinciding with important life milestones like marriage. Deciding whether to purchase before or after tying the knot involves distinct financial and legal considerations. This article explores these aspects based on marital status at the time of purchase.

Loan and Financial Aspects

Marital status influences the mortgage application process and how finances are managed for a down payment. Lenders assess applicants based on income, debt, and credit scores, whether applying individually or jointly. For a joint application, combining incomes can increase borrowing power, potentially allowing for a larger loan. Conversely, a stronger individual credit score might be negatively affected if a partner has a lower score, as lenders often consider the lower of the two.

Debt-to-income (DTI) ratio is an important factor in mortgage qualification. This ratio compares monthly debt payments to gross monthly income; a lower DTI signals less risk. Joint applications combine both individuals’ debt and income, which can improve or worsen the ratio. A DTI ratio needs to be below 43% for conventional loans, though some programs allow higher.

The down payment source presents different considerations. Individual savings used before marriage remain separate property, relevant if the relationship ends. Gift funds from family have tax implications; in 2024, an individual can gift up to $18,000 per recipient annually without tax implications, and married couples can combine this to $36,000. Gifts exceeding these limits must be reported to the IRS by the donor, reducing their lifetime gift tax exemption ($13.61 million per individual in 2024).

Property Ownership and Legal Structures

Property ownership structure varies by marital status, impacting inheritance and division upon separation or death. Unmarried couples often choose “Tenants in Common” (TIC), allowing unequal ownership shares reflecting differing financial contributions. Under TIC, if one co-owner dies, their share passes according to their will or state intestacy laws, often requiring probate. This structure offers flexibility but requires clear estate planning.

Married couples often choose “Joint Tenancy with Right of Survivorship” (JTWROS) or “Tenancy by the Entirety” (TBE), where available. JTWROS means equal interest, with a deceased owner’s share automatically passing to the survivor without probate. TBE, for married couples in about half of U.S. states, treats spouses as a single legal entity. Neither spouse can sell or lien the property without the other’s consent, and it offers creditor protection against individual debts.

Property acquired before marriage remains “separate property,” but its classification can become complex if marital funds are used for mortgage payments or improvements. Property acquired during marriage is considered “marital property” or “community property,” depending on the state. In community property states, assets acquired during marriage are owned equally. How contributions are made and how the property is titled directly influences its legal classification, important if the relationship ends.

Tax Considerations

Homeownership offers various tax benefits, with marital status influencing deductions and exclusions. The mortgage interest deduction allows homeowners to deduct interest paid on eligible mortgage debt. The deduction limit is $750,000 for joint, single, or qualifying widower filers, and $375,000 for married individuals filing separately. Taxpayers must itemize deductions to claim this.

Property tax deductions allow homeowners to deduct state and local property taxes paid. The Tax Cuts and Jobs Act of 2017 (TCJA) capped the total deduction for state and local taxes (SALT), including property taxes, at $10,000 per household ($5,000 for married individuals filing separately). This limit can affect whether itemizing deductions is more beneficial than taking the standard deduction ($29,200 for married couples filing jointly in 2024).

Upon selling a primary residence, homeowners may qualify for a capital gains exclusion, allowing a certain profit amount to be excluded from taxable income. Single filers can exclude up to $250,000 of gain, while married couples filing jointly can exclude up to $500,000. To qualify, the homeowner must have owned and used the home as their primary residence for at least two of the five years preceding the sale. This exclusion can be claimed once every two years.

Protecting Individual Interests

Formal agreements clarify financial arrangements and property ownership, providing important protections regardless of marital status. Cohabitation agreements are useful for unmarried couples buying a home. These documents define each partner’s contributions to the down payment, mortgage payments, and other expenses. They also outline ownership shares and property division if the relationship ends, avoiding disputes.

For those considering marriage, prenuptial agreements offer similar protections. A prenuptial agreement can designate the home as separate or marital property, especially if one partner owned it prior to marriage or made a larger financial contribution. It can also specify responsibilities for mortgage payments, property taxes, and maintenance during the marriage. This agreement clarifies division terms in divorce, safeguarding individual interests and financial investments.