Many people have started to reconsider buying a home on their own with the rising cost of home prices in areas all around the country. This has led to people considering a purchase with multiple owners so they can split the payments and still get the home of their dreams. If you have thought about navigating this tricky situation, then keep reading to find out how to buy a home with multiple owners in Phoenix.
Can I buy a home with multiple owners in Phoenix?
Phoenix actually recognizes a few different ways you can own property under multiple names. If you are married, then your property will likely end up in both of your names when all of the paperwork is finalized unless this has been arranged to be in one person’s name for a specific reason. In the event of a death, the property will be passed onto the other co-owner (the widowed spouse), which is usually an effortless transfer.
For unmarried co-owners (this is commonly called tenants in common), the property will be legally divided between the two people, and in the event of one of their deaths, the other half of the property will likely be passed onto the previous owner’s named heirs instead of the other owner. This is an important thing to consider when it comes to buying a property with another person, and it’s a good idea to check out any other laws in your specific county that pertain to co-ownership.
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What should I know about before I purchase?
It seems like the perfect situation for anyone who wants to afford a nice home or duplex and has some space to themselves, but you should make sure you know what you’re getting into. We mentioned how ownership could change in the blink of an eye, but there are a few other things you need to consider that might make you change your mind about co-ownership.
Figure out who you are buying with
This one seems pretty obvious, but even the closest roommates can have issues you haven’t discovered yet. You need to have a serious discussion about the co-ownership situation with your potential co-buyer before you even consider signing any papers. While they might be trustworthy and fun to be around, their financial history is what the banks will be looking at.
Talk to the person (or people) about their financial history and try to see how transparent they are about their current finances. You don’t need to ask how much is in their wallet, but you should ask if they have had any credit problems, large unpaid loans, or significant financial issues that might come up when it comes to a loan. You should be just as transparent about your status so you both feel comfortable signing a mortgage together.
Get it all in writing
Co-ownership will likely involve plenty of paperwork on both sides to make sure everything is agreed upon before the ownership is turned over. This process can be lengthy, but you can take this time to figure out the rest of the situation that might not be on paper. It might be challenging to sit down and discuss chores with another adult, but many co-ownerships falter due to miscommunication about expectations. Talk to the co-owner about expectations when it comes to making payments and keeping the property maintained.
It might seem like a silly idea, but you should put your agreements in writing as much as you can, especially if it involves money. If your co-owner has a financial emergency and needs you to cover them for a while, you need to get that in writing. It sounds like an awkward conversation, but a simple repayment contract holds up in plenty of courts, and it can save you if the relationship turns sour.
What happens if one person backs out?
Co-ownership has so many great benefits for both parties, but if one of them decides to move out, it can become a bit of a headache. Typically, you can remove one person from the mortgage if the other decides to buy them out, but this will involve refinancing on new income. If the bank doesn’t approve of a lowered income, then they won’t refinance you, and you’ll be stuck without a mortgage.
This will also affect both of your credit scores, and a poor credit score is usually one of the reasons people move in with each other in the first place. That’s why it is so important to work out all of the financial details beforehand and have a backup plan in place in case one of you decides you want out of the mortgage.
Keep in mind that any close relationship can become strained when money gets involved, and this is a long-term commitment that both parties need to fully understand. You need to do thorough research into what the legalities are in your area and talk to a financial advisor about what your plan will be. Co-owning a property can be fantastic for both parties if everyone agrees on what the payment arrangements will be and follows through but a nightmare if you don’t, so make sure you know what you’re getting into before you buy.