Questions to Ask Before Buying A Home with a Friend
1. What is your Vision of Home?
Ask anyone you're considering teaming up with for a house purchase to write a Vision of Home and fill out the Wants & Needs Checklist. Discuss the differences and similarities between theirs and yours. Especially discuss what you want your living space to be like, physically speaking -- everything from location, to the type of building, to the architectural style, to cute/old/charming vs. cool/new/modern. EVERYTHING. And make sure you know each other's must-haves and deal-breakers.
2. Will you be sharing a single family home or buying a multi-family home? Said differently, will you be living together or will you each get your own unit?
Are you really committed to making a roommate-type relationship work over a long-term period of time, or do you each want your own private residence (complete with your own kitchens, bathrooms, and front doors - which you can close and lock if you need to be alone!).
3. Do you prefer to make decisions slowly and deliberately after lots of investigation or do you prefer to trust your intuition and act when you "feel" it is right?
Nothing is more frustrating than for one person to be ready to buy the third or fourth property they see, when the other person has no intentions of buying anything until they've seen at least 40 or 50 properties. Get clear up front on how you both envision your house hunting process, so you are not unpleasantly surprised when you find the place of your dreams and your pal is not ready to buy, or when your buddy pressures you to buy a place way before you are ready. If you are a more intuitive buyer and your co-buyer is more deliberate, then you might want to have them do a lot of Open House looky-loo-ing before you go out and get serious about looking with your Realtor and vice versa. If you are a significantly slower decision maker than your friend, consider going out to lots of Open Houses to build up your comfort level with the commitment involved in actually buying before you, your co-buyer and your Realtor begin the formal house hunt.
4. Do you have a Realtor or mortgage lender?
If either of you has a Realtor or lender, you should calendar a meeting with all buyers and all professionals to give every buyer a chance to meet and question the professionals, and choose with whom they would like to work.
5. Have you been pre-approved for a mortgage? If so, for what purchase price were you pre-approved and on what terms?
The good faith estimate will show all this information. At the beginning stages of your discussion, you can roughly combine your approval amounts to get a general sense for (a) how much you can spend on your home together, and (b) what the monthly payment on that amount will be. Nine times out of ten, though, you will need to jointly qualify as co-borrowers on a single mortgage in order to purchase a property held in TIC or Joint Tenancy. You should do so as soon as possible to uncover and iron out any potential glitches before you get too deep into the house hunting process.
6. What is your career situation (i.e., stability, earnings, future plans, etc.)?
I know this seems strange, but you really do need and want to know where the money for your friend's share of the mortgage payments is going to come from, and how stable that source of funds is. You actually should find out how much she (or they) makes. I've literally had best friends get deep into the homebuying process prior to realizing that they each assumed the other made way more money than she actually did! This information empowers you to do a reality check on the amount for which you collectively have been pre-approved. It is impossible to plan to spend almost every cent of your income on a mortgage -- and it might raise a red (read: preventive) flag if you realize that your friend is planning to do so.