Engaged couples are often bombarded with choices — from color schemes to seating arrangements to cake flavors. One choice, perhaps the most daunting one is whether to buy a house before or after the marriage.
Marital status is not the most important factor couples should consider when deciding when they should buy a home. Instead, couples should focus on their partner’s financial history, creating a realistic budget, considering worst-case scenarios regarding their relationship, the pros and cons of renting versus buying, the state of the housing market and whether it’s a good time to buy. and perhaps even your religious / parents’ rules on moving in together before marriage.
Deciding whether to buy before or after marriage
When considering when to purchase the martial home, you need to consider whether you are mentally prepared. Buying a home is a stressful process. Planning a wedding, working and buying home (all at the same time) adds major stress to your life.
According to TD Bank’s annual Mortgage Service index, the majority of home buyers — 74% — purchased their home after they were married. Ray Rodriguez, the regional mortgage sales manager for the greater New York City area at TD Bank, acknowledged that planning a wedding is often an incredibly stressful event for most couples. If you add the process of buying a house on top of that, the pressure can be overwhelming.
While you’re probably aware that buying a home is a smart financial move (especially if you’re currently renting) as home ownership builds wealth through the forced savings of paying down a mortgage, appreciation of the asset and the tax benefits a home provides. You need to consider where you stand from a financial perspective. While a key factor will be whether or not you have the money for the down payment, it’s also important that you have the financial reserves in place to assure that after covering the down payment you’ll have sufficient funds to cover your other expenses as well as reserves for emergencies.
FHA has a Bridal Registry Program for buyers who are planning a wedding and plan on getting married before purchasing their new home which allows the money you receive as wedding gifts to be used towards your down payment. Just like registering at a specialty or department store, the FHA Bridal Registry program allows you to register with a lender by setting up an account, your friends and family are then able to make gift payments into an interest bearing account on your behalf! It’s a great program! Not only can your gifts earn interest, but they can be used as a down payment towards an FHA Loan and a new home!
** TIP: See Sources for Your Down Payment
The key benefit of buying a home before marriage, it can help you to get to know your partner better before the two of you say”I do.”
Marriage status doesn’t affect mortgage rates
So, when is the smartest time to buy a home? Before or after marriage? There isn’t one right answer and every situation is different. Whether or not the 2 people buying a home together are legally wed doesn’t make a difference when determining the loan amount they would qualify for and the interest rate. Banks typically underwrite each individual on the application, whether or not the applicants are married. Banks look at each person individually and from a credit score standpoint, it doesn’t matter whether you are married or not.
While it might not affect your ability to buy a home, whether you have a ring on or not, your spouse’s credit score will. A lender typically takes both credit scores into consideration when determining the loan value and interest rate, so it’s important to understand your partner’s financial situation when deciding whether to purchase a home together. If two people are on the loan — the bank will typically pull all three credit scores for each borrower — the bank will then use the middle score for each borrowers. Out of those 2 scores, they use the lower score.
If the lower of the two middle credit scores is below the standard guideline, that’s going to kill the loan. Mortgage Rates are typically tied to credit scores, and higher credit scores are awarded a lower interest rate.
A major hurdle in purchasing a home that many couples, especially younger couples, may experience is student loan debt.
One of the elements that determines your credit score is debt and if your spouse has a lot of student loan debt, it could affect their credit score, which could affect your interest rate and how much you can ultimately borrow.
If your spouse has a poor credit score, and/or a significant amount of student debt and you have a strong credit score and a good paying job, one way to simplify the process is to put the mortgage into just your name (the house can be deeded to both of you but the mortgage would only be in the name of the spouse with the high score and low debt). You would still split the mortgage and the bills including the down payment on the house but only one of you would be on the mortgage.
A tough decision takes time
Be sure to take your time when making this major life decision. If you get divorced and are both on the mortgage, things could get messy. It might not be romantic to think about the real-life consequences of what might happen if things take a turn for the worse while newly engaged, but it’s realistic and necessary. If you get divorced while both on the mortgage, what exactly happens next varies from state to state.
If you both are on the mortgage and have to make mortgage payments, one person would have to buy the other person out, which would be a large financial obligation. While it may be uncomfortable, you have to consider worst-case scenarios.
** TIP: See Options for Dividing the House When Getting a Divorce
Before purchasing a home together, you need to sit down with your partner and make a budget, including your combined household income, combined monthly expenses and total existing debt as well as any you might take on in association with the wedding, expenses that would be incurred in addition to the mortgage, such as closing costs and your down payment. Buying a home takes time, planning and budgeting and you’ll want to establish a housing plan that best fits your combined financial situation.
If you’re considering Buying a Home in Columbus, Ohio please contact The Opland Group. We offer professional real estate advice and look forward to helping you achieve your real estate goals!
The Opland Group Specializes in Real Estate Sales, Luxury Home Sales, Short Sales in; Bexley 43209 Columbus 43201 43206 43214 43215 Delaware 43015 Dublin 43016 43017 Gahanna 43219 43230 Grandview Heights 43212 Hilliard 43026 Lewis Center 43035 New Albany 43054 Pickerington Powell 43065 Upper Arlington 43220 43221 Westerville 43081 43082 Worthington 43235
