Buying With Friends Isn’t Like Renting

You’ve been living with your best friend since freshman year of college, and it’s been a blast. So why not pool your money and go in on a house together? After all, it’s easier to buy when you have two incomes. 

It’s true that co-buying a home with friends or family can make it easier to own a home. And it can reduce your upfront costs. 

But there are a few unique differences to co-buying. Here are three you should consider and discuss before you jump into the process.

1. What type of ownership will you have? 
Don’t assume that splitting the mortgage determines the ownership. 

If one person will be paying a larger portion, you might want to be tenants in common. This also allows you to transfer or sell your share of the property at any time. But if you want to divide the ownership equally, you can choose to be joint tenants.

2. How are your credit scores looking? 
When two buyers are on a mortgage app, lenders use the lowest credit score to determine the interest rate. 

Do you both have excellent credit? If not, you could have only one person on the mortgage loan, but you’ll only be able to count one income to determine the loan size. 

3. How will you pay your bills each month?
This sounds like a minor detail, but it’s important to be on the same page about finances before the bills come in.
Will you pay bills out of a joint household account? Or will one person pay the full bill and have the other pay them back?

Once you’ve discussed your plans for the finances and ownership, your best bet is to have a legal agreement prepared ahead of time.  

Have more questions about co-buying a home? Reach out today to discuss your needs and get the process started. 

This content is not the product of the National Association of REALTORS®, and may not reflect NAR's viewpoint or position on these topics and NAR does not verify the accuracy of the content.