Are you considering buying a home with a friend? Well, buying a house with a friend can have a great many benefits, especially for people who couldn’t otherwise qualify for a mortgage or afford homeownership.
Buying a house with a friend makes it easier to get a home loan because the lender will look at the combined income, and you can share the monthly expenses of homeownership, things such as your mortgage payment, property taxes, insurance, and maintenance.
But done wrong, it can be an unmitigated disaster. To help you out, then, here are some tips for buying a house with a friend in Boston.
Determine Whether It’s Right for You
Your first task in buying a house with a friend in Boston is to figure out whether it is really right for you (and your friend), whether it is the best way to buy a house considering all the many personal and financial factors.
The thing to keep in mind is that you are entering into a binding legal contract – much like getting married – and you can’t just walk away when it doesn’t suit you anymore. Friendships will be tested, and you need to prepare yourself emotionally for when that happens. Both of you need to enter the process with your eyes wide open and understand that should things go wrong, it will not be easy to walk away – at least not without suffering some financial consequences.
You must make sure that you are truly ready to take this step with your friend and that you are compatible with respect to financial outlook, lifestyles, goals, and how long you intend to live there.
Get Clear on Financials
The next step is to hammer out and get clear on all the financial details, because it’s time for a financial reality check. You will need to know your credit scores and how much debt each of you has. Additionally:
- Do both of all have a solid record of paying bills on time and of not letting debt get out of hand thereby adversely impacting your credit?
- Do you and your friends have steady employment?
- Do you make enough to afford this big financial step?
Also, before ever beginning to shop for a house, you need to know exactly how much home you can afford in light of your combined incomes. You should get a pre-approval letter from your lender to understand your price range and to give you more leverage when you get into the thick of negotiations because buying a home is one of the biggest financial commitments you might make in your lifetime.
It’s a good idea to consult a local real estate agent at this point to make sure you’re on the right track. Find out more by calling (617) 657-9811.
Create a Co-Ownership Agreement
This is an even more important step in buying a house with a friend in Boston because it can head off disaster and make sure you remain friends.
The idea is to draw up a co-ownership agreement (signed, witnessed, and notarized) that will address all contingencies and any issues that may arise. You never know what the future holds – one of you could even die, and you need to be prepared for that.
So here’s the minimum of what your agreement should cover:
- What happens when one party wants out
- What happens when one party suffers a loss of income
- What you will do to prepare for such an event
- What happens in the case of refinancing
- How you will split expenses and bills
- How you will handle the sale of the home
Apply for Mortgage Jointly
Once you’ve determined that buying a house with a friend is right for both of you, you’ve hammered out all the financial details, and you’ve drawn up a co-ownership agreement. It’s time to apply for a mortgage. You will apply jointly, of course, but there are several things to be aware of.
Although you will be co-borrowers, you will each fill out your own mortgage application. You will each provide your own income and debt information. It’s only after underwriting that the two applications will be merged.
Now what this means is that the lender will look at your credit scores individually. And if one of you has a low score, that will pull down the combined score so that your qualifying ability will be weakened. In addition, the more money you can pool for a down payment, the better off you will be in qualifying for a mortgage.
Use an Experienced Local Agent
Maybe the most important tip we can provide for buying a house with a friend in Boston is to use an experienced local real estate agent like NextHome Titletown Real Estate. Your agent can be a wealth of advice in setting up such a ticklish endeavor and keep you from making costly mistakes.
To find out exactly how our agents can assist you when buying a house with a friend in Boston, contact us today. (617) 657-9811
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