Should We Buy a House Together?
Buying a home together is the new getting married. The trend of couples owning a home before -- or in lieu of -- saying "I do” has spawned an entire lexicon of pronouns to describe the relationships. What used to be “spouse,” “husband” and “wife” has evolved to “co-habitant,” “co-borrower” and “domestic partner” -- okay, less warm and fuzzy, but more accurately descriptive of the situation. One I hadn’t used outside of helping my kids with their math homework -- lowest common denominator -- was even more appropriate than any of these in a recent transaction.
The Client. My client, a single mom, had been working her own personal homebuying action plan for years -- no exaggeration. She had lived way below her means so she could save up for a down payment, gone to school, gotten a very good job and worked hard to increase her FICO score -- all with the aim of buying a home of her own. And she was on track to make it happen, until she fell in love and they decided to buy a place together.
She’d been house hunting at the entry level. He made a lot more money than she did, so when he first came on board, they thought they’d get a big boost in buying power. What they didn’t know at the time was that the bank would base the rate and terms of a joint loan on the risk factors presented by the riskiest borrower, hence, "lowest common denominator." Even though he earned more, her risk factors were less, uh, risky. So instead of taking her from on-track to the fast-track, he almost derailed the whole deal!
It was a slow, steady derailment. His credit wasn’t bad at all, but it was a couple of rungs below her stellar score, which meant the interest rate, etc. would be higher than what she could get on her own. Then it came out that, as people with higher incomes often do, he had a good bit of debt to service on a monthly basis. That also hiked up the rate, limited the lenders that would do the deal and pretty much wiped out any increase in purchasing power they thought his extra income would represent.
At that point, I was reminded of that severe British blonde on the game show who used to point and declare, “You are the weakest link.” But the true death knell hadn’t tolled yet. He soon revealed that he already owned one property of his own and had just co-signed on a relative’s mortgage, which pretty much disqualified him for any new mortgage with my client until he could have that co-signed mortgage refinanced to remove him from the loan.
The Workaround. While her deal hit a bump in the road when he came into the picture, it was only derailed temporarily. They decided to rent a place to live together while he took a time-out to work on his issues. After all, he hadn’t had the time to plan and prepare for buying that she had! (And frankly, if these were the biggest issues he was bringing to the relationship, that was a good sign, IMHO.)
The Result. In the meantime, she moved forward and bought a low-maintenance, highly rentable townhouse to kill three birds with one stone: fulfill her long-time homebuying dream, take advantage of the down market’s boost in affordability and equip herself with some independent financial assets as she moved into the rest of her life with him -- her current co-habitant and future co-borrower.
