Mortgage Loans for Unmarried Couples: A Comprehensive Guide

Getting a mortgage loan with your unmarried partner can be an exciting next step in your relationship. However, it also comes with some unique considerations that married couples don’t need to worry about. In this comprehensive guide, we’ll walk through everything you need to know about getting a mortgage as an unmarried couple, from title and ownership options to strategizing how to qualify.

An Overview of Mortgage Loans for Unmarried Couples

Mortgage lenders will allow unmarried couples to apply for a loan together. However, underwriting standards are typically stricter compared to married applicants. Lenders want to ensure all parties on the loan are equally invested in the home so you may have to jump through some extra hoops.

Here are some key things to know upfront about mortgage loans for unmarried couples:

• You must both be on the loan application. Even if only one person is on the title, both partners need to apply if you want to combine incomes.

• Your debt-to-income ratios will be calculated together. Lenders will look at your combined income and combined debts when determining if you qualify.

• You’ll need a co-borrower agreement, This outlines each person’s rights and obligations under the mortgage

• Poor credit from one applicant can impact you both. The person with the lowest credit score sets the pricing for the mortgage.

• Underwriting is generally tougher. Be prepared to provide lots of documentation on your finances, relationship stability and how you’ll split housing expenses.

Should Both Partners Be on the Title?

One major choice unmarried couples face is whether to put both partners on the property’s title. There are pros and cons to consider with each approach:

One partner on title

• Only person on loan must qualify
• Sole ownership if you split up
• Lower title transfer fees if you later add partner

Both partners on title

• You both own the home from the start
• Lower mortgage rate by combining income
• More options if you split up

You can always add your partner to the title down the road if you initially purchase on your own. However, you’d have to refinance the mortgage into both names. Weigh the options carefully with your partner ahead of time.

Common Ways Unmarried Couples Hold Title

There are a few common ways unmarried couples can hold title to real estate. Each has different implications in the event one partner dies or you break up:

• Joint tenancy – If one partner dies, the other gets their ownership share automatically. You cannot transfer interest in the property independently.

• Tenancy in common – Each partner can leave their interest in the property to an heir. Provides more flexibility if you split.

• Tenancy by entirety – Spousal title ownership that unmarried couples normally cannot get. Offers the most protections.

I recommend unmarried couples start with joint tenancy or tenancy in common. An estate planning attorney can help you choose the right option.

Tips for Qualifying for a Mortgage as an Unmarried Couple

Qualifying for a mortgage as an unmarried couple comes with its own unique hurdles. Here are some tips to improve your chances of approval:

• Highlight relationship stability. Provide evidence you’ve lived together for years, like a prior lease or joint bank account.

• Get pre-approved together. This shows the lender you’re both fully committed to joint homeownership.

• Pick the partner with better credit to apply first. You can always add the second later once initially approved.

• Save up a larger down payment. 20% down or more gives you the best shot at getting approved.

• Reduce individual debts before applying. The lower your combined DTI, the better. Pay down credit cards and auto loans.

• Consider having a co-signer. A parent co-signer can help if you don’t qualify on your own.

Creating a Co-Borrower Agreement

Unmarried couples should create a co-borrower agreement when applying for a mortgage together. This legal document outlines:

• How you’ll split mortgage payments and other homeownership costs
• What happens if you break up or one co-borrower dies
• The process for buying out the other person if one wants to keep the home

I’d recommend having a real estate lawyer draft your co-borrower agreement. This ensures you cover all issues and it will hold up better if disputed down the road.

Getting the Best Mortgage Rates as an Unmarried Couple

As an unmarried couple, the lowest credit score between you sets the mortgage rate. However, here are some tips to still get the best deal:

• Shop around with multiple lenders. Compare both rates and underwriting criteria.

• Ask about “better” co-borrower pricing. Some lenders average credit scores for unmarried joint applicants.

• Boost your scores. Getting into a higher credit tier before applying can significantly lower rates.

• Make a larger down payment. At least 20% down gives access to the very best rates.

• Shorten your loan term. The shorter the term, the lower the interest rate lenders will offer.

• Lower your DTI. Pay down debts before applying to appear less risky to lenders.

Options for Unmarried Couples If One Partner Can’t Qualify

If one partner doesn’t qualify for the mortgage, you have two options:

1. One partner applies and is on the loan solo. This person must qualify on their own income and credit. The other partner can still live there but won’t be on title or mortgage.

2. Add a co-signer. A parent, sibling, or friend with good credit who consents to be on the mortgage can help you both qualify. The co-signer won’t be on title unless they contribute funds.

In either case, I’d still recommend having a co-borrower agreement for living expenses, buyout terms, and other logistics between the couple.

Protecting Your Rights When One Partner Isn’t on Title

If you purchase a home solo and your unmarried partner isn’t on title, consider these steps to protect their interests:

• Create a tenancy in common agreement outlining their ownership percentage based on contributions.

• Have your partner pay part of the mortgage, taxes, and maintenance monthly. Keep records as evidence.

• Put utilities in both your names and make sure you both use the address for bills and ID.

• Draft a living together agreement for property rights and buyout provisions if you split.

Without proactive legal planning, your partner could end up with no property rights later on. Seek guidance from a real estate lawyer.

Key Takeaways on Mortgage Loans for Unmarried Couples

Getting approved for a mortgage with an unmarried partner is very doable, but does require some extra planning and diligence. Here are the key takeaways:

• Discuss title and ownership early – logistics are harder to change later.

• Highlight your stable relationship and financial ties when applying.

• Make sure to create a co-borrower agreement upfront.

• Shop multiple lenders to find the best rates and terms.

• Take steps to protect both partners legally when only one is on title.

With proper preparation, unmarried couples can navigate the mortgage process smoothly and start building home equity together. The most important thing is open communication with your partner throughout.