10 Plus Things First Time Home Buyers Need To Know About Co-ownership

Buyers News

Jun 24

Written By Diana

Hi, we are always so happy that you stop by. Today we are talking a bit about co-ownership and how, as an option, can help you to become a homeowner. Right now a lot of people are feeling priced out of the current real estate market. One solution to that problem maybe co-ownership. While this trend is on the rise, below are some benefits and drawbacks to consider if you’re thinking of exploring this path.

Co-ownership is essentially two or more people, who are not spouses buying a home together and in some case splitting the cost.
All co-owners will be on the title and most likely on the mortgage as well.
As co-owners you will need to decide how to hold the title. A real estate attorney can help you decide on tenancy in common or joint tenancy. Example of joint tenancy title, If you purchase a home with three friends and one friend passes away, that person's share is split equally between the remaining owners. If later on you decide to sell your share in the home and move out, you can do so without permission. An example of tenancy in common: Asking a friend to help with the down payment and be a co-borrower on the loan, for a share of the property. All are responsible for the mortgage, but your friend does not live in the home and you choose to make all the payments by yourself.
Co-ownership does not require special mortgage loan. The lender will be more interested in the borrower’s creditworthiness and if the property will be a primary resident or an investment property.
Interest rate on co-borrowers’ loan will be determined by the lowest credit score on the mortgage application. This means, if you are buying with a friend and your middle score is 740 and you friend middle score is 620, the interest rate you receive will be based on your friend’s 620 middle credit score.
With a 50/50 co-buyer, you get to split all expenses associated with the house. For example, if the mortgage payment is $2,500 a month, your portion will only be $1,250.
When you sell the home, you also get to split the proceeds after all fees are paid.
Committing to a mortgage with a friend, family member, acquaintance, or stranger, can be risky.
Conflicts can occur, as they usually do in all types of relationships.
Risks will vary and may include, one party wanting to sell while the other does not.
Expectation and guidelines must be put in place via a real estate attorney.
Each party should take various measures to protect themself.
Refinance my be an option if one owner wants out but the other want to keep the house.
You can often find someone to co-own a house with among your friends, colleagues, acquaintances, existing roommates, non-immediate family or even websites. Husmates is one such site that matches up compatible co-buyers.
Remember that each party to a mortgage is jointly responsible for the whole thing, so before committing yourself, find a co-owner with strong credit (720-plus credit score), a track record of stable and provable income, modest debt, and some degree of liquid assets in addition to some down payment and closing cost funds.
At all costs, avoid someone with unstable finances.
Hire a real estate attorney. This is really a must, should you choose to exercise co-ownership option.
Ultimately, there’s a way to make co-ownership work with manageable risks. Pooling resources is a legitimate way to get started. If you want to own a home but cannot afford it on your own, this is an option worth exploring. Remember, where there is a will, there is always a way.