Though many people warn against it, buying a house with a family member isn’t always a bad idea. In fact, it can be a great way for people who can’t afford to buy a house on their own to get into homeownership. It is, however, an enormous personal and financial commitment, and there are some definite pitfalls that must be avoided. If not done right, buying a house with a family member can turn loving relatives into bitter enemies. So to help you avoid that situation, here’s how to buy a house with a family member in Princeton.
Get and Disclose All the Financial Details
Most of the worst problems that arise when you buy a house with a family member in Princeton revolve around money. So you absolutely must get, disclose, and hammer out all the financial details. These include:
- Liens – Are there any liens against the house that may make selling it later difficult (or even impossible)? Figure out early on how you and your family member will handle such a situation.
- Personal financial details – To buy a house with a family member in Princeton, you must both be honest about your financial situation, especially with respect to credit score, personal debt, and payment history.
- Payment ability – You also have to be upfront about how much you can actually afford to pay each month concerning the mortgage payment. Both of you have to be able to comfortably the monthly mortgage payment obligation – as well as being able to afford all the hidden closing costs and other inevitable costs like maintenance, insurance, and taxes.
Choose the Right Co-ownership Set-up
If you buy a house with a family member in Princeton, that means you and the family member will co-own the house. So you have to choose the best co-ownership arrangement. This should be done early in the process, and it’s best to hire an attorney to help with all the legal issues involved. A couple of the most common co-ownership options are:
- Tenancy in common – With this set-up, you split ownership of the house along the lines that best suit you. If, for example, you pay 65% of the down payment, you might own 65% of the house. You simply set it up in a way that makes the most sense for your particular situation. Just keep in mind that if your family member passes away, you don’t automatically own her portion of the house. Rather, her percentage of ownership passes to her estate and is handled that way.
- Joint tenancy with rights of survivorship – In this arrangement, ownership of the property is split equally. But if one of you passes away, the other person’s ownership does in fact pass to the surviving party. This is a good option for people in some kind of committed relationship or when you buy a house with more than one family member in Princeton.
In any case, all real estate professionals suggest that you get legal assistance in deciding and formalizing the co-ownership set-up. (Discover more by talking to a qualified agent. Call (609) 436-5221.)
Prepare for the Financial Contingencies
You never know what the future holds. So when you buy a house with a family member in Princeton, you need to be prepared for anything that can happen – especially with respect to making mortgage payments. Regardless of your percentage of ownership, if you can make mortgage payments because the other party isn’t ponying up the required amount, the mortgage lender will still come after you for payment. This means that if your family-member partner doesn’t pay her share, you will have to make up the difference – or maybe even sell the house. The best advice here is not to take out too big a mortgage. Rather, keep it in the comfortable range to make sure both of you can always meet your mortgage payment obligation.
Make Arrangements for Selling
When you buy a house with a family member in Princeton, you may want to sell the house at some point. So you need a plan in place for that contingency. Will you sell it together and split the proceeds according to each person’s percentage of ownership? Or will you have the option to buy out your family member’s ownership? With a formal document in place that addresses these issues, you can avoid rancor if this situation arises.
Use an Agent
There are, then, a lot of pieces to have in place before you buy a house with a family member in Princeton. And in order to ensure you are on track for a successful purchase, it’s a good idea to use a qualified local real estate agent.