Should You Buy a House with a Friend?
If you're looking for a new luxury home but are on a tight budget, you may be considering co-buying a home with a friend. While it will surely be easier to afford a large mortgage payment with two of you contributing, buying a house with a friend does not always work out well. Here's a look at the pros and cons you should consider before making such a purchase.
Pro: You'll have an easier time qualifying for a loan.
Not only will you have an easier time scraping up the money for a mortgage payment each month, but you'll have an easier time getting approved for the mortgage, too. The bank will be more confident in your ability to pay with two incomes, so you'll have your choice of lenders and can go with the one who offers you the best deal. You may not be able to be so picky if you were to apply for a mortgage with just your income.
Pro: You'll get to live with someone you care about.
If you were to buy a house on your own and rent to a random roommate, you might not like the person. And living alone is not always fun, either. When you share the home purchase with a friend, you know you'll get along with your living partner, and both of you get to benefit equally from building equity in a home, rather than one of you having to fork over money you'll never see again as a rent payment.
Con: If one of you needs to move, the decision to sell can be a hard one.
You might both think your jobs are secure and that you'd never leave the area. But surprises and tragedies happen every day. What if your company closes and you need to move to a new city? What if a relative across the country needs you to move in and care for them? If one of you needs to move and the other does not, deciding whether or not to sell the home may be a burden on your friendship.
Con: If your friend does not pay responsibly, you'll have to pay.
If your friend does not give up their half of the mortgage payment one month, you'll be responsible for paying it. You cannot just send half the amount to the mortgage company and look the other way – unless you want your credit score to take a hit and your home to slide slowly towards foreclosure.
If you're absolutely certain neither of you are moving and that both of you will pay, then co-buying a home with a friend may work out well. However, you'll be wise to talk to a real estate lawyer to figure out more of the specifics of your arrangement before diving in.