Let’s face it; paying rent sucks. It’s usually just money that’s going to nothing. However, while the thought of owning a home might be appealing, the fact is you just might not be able to afford it on your own. But what if you have a friend you were splitting costs with…
Nowadays, more and more friends have been pooling their money together to buy a home. You might hear the term “mingles” being used to describe them. And it seems banks are even catching onto the trend, as more and more lenders are tailoring specific loans to friends looking to make a home purchase together.
And while there are many positives to such a relationship (your rent might be exactly the same, but now you’re both building equity with those monthly payments), there are definitely some other factors that you need to consider.
1.) How well do you know your friend? If you’ve known this person since childhood and are personally aware of the fact that they have never paid a bill late in their entire lives, then that’s a pretty good sign. Keep in mind though, if you guys are planning on living together in this house, are you ready to have them as a roommate? Just because you get along well doesn’t mean you can live together. Everyone has a few little quirks that might be deal-breakers to a roommate.
2.) Discuss finances after the fact. Your credit score and putting in for a home loan aren’t the only things you need to consider. After you own the home, how much do each of you have for an emergency fund? Do both of you have enough money saved to pay for burst pipes or a failed roof? Homeownership between two people leaves no room for financial secrecy.
3.) Have you hired the right people? It’s not only important to hire an experienced real estate agent, but also an experienced real estate attorney. Since the paperwork will be different than that of a single buyer or a married couple, it’s very, very important that every, single detail be reviewed by an attorney. This will not only force you both to review each document in detail so you are both well prepared for the commitment, but it will clear things up should anything happen that would need to be settled in the future.
4.) Have you drawn up a lease? Even though you both own the home, a lease is an absolute must should things ever go downhilllater. A lease should specify cohabitation terms. People change, and you want to make sure the person you are planning on living with does not change into a terror of a roommate. Then your hands are tied. A lease will ensure a comfortable and expected living space for both of you. Don’t be too nervous though, a lease can always be changed or adjusted in the future.
5.) Have you looked into insurance? Many couples both buy insurance separately, naming the other party as the beneficiary. This way, if one of you meets an untimely death, the other won’t be left in hot water.