Smart Moves by Ellen James Martin

Good Home-Buying Habits For Cohabitants

A couple in their late 20s located in a city where rents were spiraling upward decided that homeownership would be a good financial bet. They selected a modest townhouse for a good price and were lucky to acquire the place with significant down payment help from their parents.

But what about marriage? Though in love, the couple in this true story is delaying any decision as to whether to make such a binding legal commitment.

Relationship experts don't oppose the idea of cohabiting couples buying a home. But they urge couples to sort through the financial and emotional implications of joint ownership before taking that step.

"Even if you can afford to buy a house together right now, don't rush into that decision. Also, don't make the mistake of thinking that buying a house is a surrogate for a full commitment," says Bryn Collins, a therapist and the author of such books as "How to Recognize Emotional Unavailability and Make Healthier Relationship Choices."

Collins encourages couples who are serious about homeownership to develop a financial plan that addresses how they'll divide their mortgage and utility payments and what they'll do about the property if their relationship falls apart.

"Remember, this is a business transaction as well as a personal one," she says.

Here are a few pointers for cohabiting couples considering a purchase:

-- Try to avoid maxing out on your house payments.

Mark Nash, a long-time real estate broker and author of "1001 Tips For Buying and Selling a Home," encourages all home-buying couples, whether married or not, to cap their mortgage payments at no more than a quarter of their income, so as to protect their relationship from budgetary stresses.

Setting limits on how large a mortgage you'll take is an especially good idea in an uncertain economy like the current one, given that unemployment is always a possibility.

"Ideally, if one person loses a job, you can still keep your payments current on a single income. That's a big plus for your financial security and peace of mind," Nash says.

-- Ensure that both you and your partner weigh in on the choice of a home.

Nash stresses the need for both partners to have an equal say in property selection. This is especially key for cohabiting couples, whose ties are more easily severed than are those of married people.

"If one person is shut out when the house is chosen, this can easily backfire later as resentments develop," Nash says.

He suggests that any couple planning a home purchase go through a simple written exercise. Each partner draws up a list of his or her five top priorities for the property. Then they compare the two lists to look for overlaps.

"If at least three of the five items on each partner's lists don't match, then you need to get together and come up with a combined list that reflects the compromises both of you are willing to make," Nash says.

-- Discuss how your mortgage payments will be apportioned.

"When couples who are in love go together to make a house purchase, the 'elephant in the room' is usually money. Because it seems unromantic to talk about money, neither partner mentions financial issues before they move in," Nash says.

But Nash says it's far better to discuss these issues prior to your purchase. That way the couple could decide, for example, that each person will contribute to mortgage outlays in proportion to his or her income.

You'll also want to pre-determine who will be responsible for covering routine utility costs, along with upkeep and repair costs.

Then, too, it's wise to agree on how you'd handle things should one of you lose your job or become disabled.

"You need a game plan. You don't want one person feeling ambushed by the other, should an unexpected situation arise," Nash says.

-- Don't rule out using a mediator to help you develop your agreement.

When it comes to relationships, many people assume that mediators deal primarily with couples heading for divorce. But they can also help couples establish the groundwork for a strong live-in relationship, whether or not that involves marriage.

"The idea is to discuss the issues with a skilled third party so they don't become problems later," says Stephen Erickson, a professional mediator affiliated with the Association for Conflict Resolution, which represents trained mediators.

Mediators can help couples develop a mutually acceptable arrangement for handling financial issues that might otherwise become landmines.

A skilled mediator can also help you formalize a smooth exit plan, should you and your partner break up while living in the home you own together. This agreement should spell out the terms by which one partner could buy out the other's stake, assuming that's feasible, or how any proceeds will be divided if the place is sold to a third party.

"For cohabiting couples with property, a breakup can sometimes be even more messy than a divorce. That's because there's usually no divorce court to intervene and divide up the property. So it's wise to plan ahead for this scenario," Nash says.

(To contact Ellen James Martin, email her at ellenjamesmartin@gmail.com.)