Buying a Home While Unmarried? The Struggle Is Real

Some call it the single tax for homeownership. Not actually collected by a tax agency, but yes. The single buyer is strangely disadvantaged.

Pause for a moment to consider that the median house price is well over $400K. Once prices rise to that level, paying close to $3,000 in monthly housing costs becomes normal in many places. How is a solo buyer on today’s average income (which is under $70K) going to handle that?

No wonder so many deed holders are married people. And no wonder Gen Z is being described as a co-buying generation.

For a single home seeker…

It’s Just Plain Harder to Save in the First Place.

Married people accumulate much more wealth together than they would as the sum of their parts. Married couples can pool finances and serve as buffers for each other’s rough periods. They can file taxes as one unit. They can inherit without having to deal with the time and costs of probate.

And then there’s the fact that salaries haven’t kept up with inflation for the current generation of home buyers. Can a full-time worker save enough to become a single deed holder?  

That said, single women do remarkably well in this real estate market. They’re the majority of solo home hunters. We say that’s remarkable because the gender pay gap is one more hurdle for a woman who needs a mortgage.

Some look off the beaten path for financing strategies. They do their research into state and federal down payment grants. These programs can make a purchase happen for a solo buyer. 

In any case, rents are so high in most desirable areas that not buying creates a strain on many singles as well.

But if you are unmarried and do decide to buy, there’s a difference between buying solo and buying with an unmarried partner. Let’s take a look.

Buying a Home With an Unmarried Partner Has Particular Risks.

The divorce process helps ensure at least some semblance of fairness. One spouse may be able to keep the home, while the other receives a fair settlement for their time, efforts, and investments.

But for unmarried co-owners who separate and can’t agree, a court would typically have the deed holders sell the home. The only way for unmarried co-owners to reliably protect their equity interests is to have a written, signed cohabitation agreement in place before closing day. Here are the issues the agreement would address:

• A written agreement for co-buying the home would state the source of the down payment. Gifts from one family or the other could be treated expressly as separate contributions rather than blended investments.

• If the buyers vest the co-ownership as a tenancy in common with specified percentages, each person’s ownership share will belong to that person individually.  

• The agreement should state what happens if the buyers’ partnership as co-owners is ever dissolved. The co-owners should have a written buyout plan. They should hammer out how much equity each individual would keep if they separate in future years.  

So, if you’re co-buying with a partner and are not in a legal marriage or civil union, have a lawyer in your state draft a co-buyers’ agreement. Or at the very least, be sure to have a lawyer review it well before closing day.

If You’ve Got to Go It Alone…

Younger buyers are looking to southern states or heartland cities like Pittsburgh or Toledo and finding relative affordability. Look beyond big coastal cities.  

Of course, not everyone is in a position to make a long-distance move. If you find employment in a field that’s conducive to remote work, you’ll have more options. And if you’re staying around town, consider a townhome, duplex, fourplex, or condo. For many singles, these are today’s starter homes. Compact living is in!

Consider looking into an FHA loan for a condo unit, a duplex unit, etc. Some solo buyers are looking at homes with finished basements, converted garages, or properties with detached cottages to share. Then, you can get support with the mortgage, property taxes, insurance, and upkeep costs. Deed holders can pool costs for outdoor maintenance. Utilities are (relatively) easy to pay for in compact spaces, especially those with shared walls.

Yes, condo associations do charge at least a few hundred dollars in fees each month. But condo owners do get benefits in return, including professional maintenance and upkeep for the common areas.

Some buyers decide to go the “house hacking” route. That means buying a house with an appropriate space to rent out and paying the mortgage bills with that income. But having renters or housemates isn’t for everyone. If a freestanding house is a must-have, a buyer on a solo income may need to consider living 20 miles or so outside the city limits, perhaps learning some repair skills, and taking on a home that needs some TLC.  

When upfront funding is a challenge, a buyer might look into “piggyback loans” or wraparound loans, which create an extra mortgage covering the down payment. These loans present extra risks and are not available everywhere.  

One More Thing. Don’t Overlook Construction Loans.

If you’re willing to take on a project, keep in mind the option of a construction or rehab loan. Big banks have loan officers who focus on renovation loans. They know how to make these loans fit into the underwriting standards for Freddie Mac or Fannie Mae. Help is available! Banks offering these loans work with experienced contractors who oversee these renovations. 

Here’s a sample of what’s out there: a home construction loan from Columbia Bank. “From quick fixes to fixer uppers to brand-new construction, we do it all…” So, a borrower could apply for a renovation loan for a primary home, an addition or extra cottage, a condo, a duplex, a manufactured home, and so on.

Also, note that HUD has duplexes, townhomes, etc., to auction off after foreclosures. Some of these are in good shape structurally.

While you’d be investing a lot in a renovation project, each monthly mortgage payment will add to the equity you build. And that equity will become a future asset and safety net.

Yes, today’s interest rates, on top of inflated home prices, make solo buying a challenge for most. But waiting until rates go down could sideline a hopeful buyer for years. At least now, buyers in most areas don’t have to deal with bidding wars.

Small mercies.