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Tips for Buying a House as an Unmarried Couple in Arlington Heights, IL

Tips for Buying a House as an Unmarried Couple in Arlington Heights, IL

Buying a house as an unmarried couple in Arlington Heights, IL, comes with a few extra nuances. The members of an unmarried couple are typically legally separate and should take steps to protect their interests in case of a breakup or death. For example, there are several ways to own the house together. If you decide on joint tenancy, you own the property 50/50 (what they call an undivided one-half interest), and if one partner dies, the surviving partner takes over the deceased’s half.

Legal Protections for Unmarried Couples

Illinois does not recognize common-law marriage, but there are ways to protect yourself if you want to buy a house with a partner.

What Are the Legal Differences Between Married and Unmarried Couples Buying Real Estate?

A main difference is that spouses have the right of survivorship with tenancy by the entirety, which is available only to married couples. If one spouse dies, the other usually automatically inherits his or her share of the property. Tenancy by the entirety keeps the property out of probate and offers several other benefits, including the protection of the property from the creditors of one spouse.

When buying a house as an unmarried couple, each person can own the house as joint tenants or tenants-in-common. Joint tenants typically have 50/50 ownership with the right of survivorship. More than two people can own a house this way. Married couples can choose this route, too, and probate for real estate is not necessary. With this arrangement, the surviving partner automatically takes over the deceased’s share.

With tenants-in-common, each owner has a certain share, and the couple decides on that between themselves. It could be, for example, 25/75 if one person contributes 25% to the purchase, while the other contributes 75%. If one person dies, his or her share becomes part of his or her estate. What happens to the share depends on the deceased’s will or the intestacy laws of Illinois.

How Can a Cohabitation Agreement or a Domestic Partnership Agreement Help?

A cohabitation agreement can protect the rights of both individuals with unmarried couples. It is similar to a prenuptial agreement and should cover areas such as these:

  • How the property will be divided in case of breakup or death (for example, one buying out the other’s share)
  • The process the partners will use to resolve any ownership disputes that emerge
  • The percentage of the real estate each person owns
  • The type of ownership, such as joint tenancy or tenants-in-common
  • How each party is financing the home

When a couple breaks up, one party could keep the house and refinance the loan in his or her name only. This person would need sufficient credit for this or access to a qualified co-signer.

Alternatively, the parties could sell the home and divide the proceeds. In a third scenario, one could keep the property and continue making payments until it is paid off. It is also possible to let the bank repossess the home, but this avenue requires careful consideration since it can hurt both partners’ credit scores.

Financial Considerations for Unmarried Couples in Arlington Heights, IL

Buying a house as an unmarried couple comes with a few options.

Ways Unmarried Couples Can Finance Their Home Purchase

Unmarried couples can look into first-time homebuyer programs and talk with mortgage professionals about their situation. The partners must be transparent with each other about their finances, debts, credit scores, and ability to pay for a home. They should have an emergency fund and savings first before buying a home. Couples often make mistakes such as misrepresenting their income to each other for a variety of reasons, and it is necessary to avoid these mistakes when investing in Illinois real estate.

How to Handle Down Payments, Closing Costs, and Ongoing Mortgage Payments Together

You can apply for a joint mortgage when buying a house as an unmarried couple. A joint mortgage lists both partners and holds them jointly responsible for making payments. Lenders consider factors such as income, credit scores, and debts when weighing eligibility.

A co-borrower arrangement might make more sense for some couples than a joint mortgage. The partner with better credit or higher income is the primary borrower, while the other partner is listed as a co-borrower so they can get a larger loan amount or better terms.

It is important for the partners to talk about down payment contributions. Will it be 50/50, proportional to income, or some other arrangement? Will the proportion be similar for closing costs, or will they be rolled into mortgage payments?

How a Lawyer Can Help in Navigating the Mortgage Process in Illinois

A real estate lawyer can help with mortgage loans for unmarried couples and other issues in several ways. Common areas are preparing cohabitation agreements, advising on ownership structure, and helping with estate planning.

During this stage, review questions to ask when hiring a real estate lawyer. Make sure your lawyer has experience with unmarried couples buying houses.

The Mortgage Application Process for Unmarried Couples

The process in Arlington Heights, IL, is similar to that for married couples but may involve additional steps. The partners should get preapproved and choose a mortgage or loan type such as fixed-rate, adjustable, or VA.

Compare at least three lenders, and consider interest rates, fees, and other variables. Gather required paperwork such as pay stubs and bank statements, and apply for the mortgage. You may need to show your cohabitation agreement before you are approved.

Some Potential Benefits of Having One Partner Solely on the Mortgage

Having only one partner on the mortgage can result in benefits, such as a simpler mortgage process and higher loan approval odds, if one partner has good financials and the other’s are subpar.

The loan amount could be higher as well, depending on the applicant’s income and creditworthiness. One name on the mortgage can also protect that partner’s credit score if he or she has much better credit than the other. The resolution in case of a breakup or death may be clearer, too.

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