Buying a home with your partner is a big deal. Until very recently, same-sex couples had to think of mortgages in a completely different way than heterosexual couples. Today, much of the process is similar regardless of sexual orientation. However, there are still details that heterosexual couples don’t have to consider like the LGBT community.
How the process is the same
The process of getting a mortgage or securing refinancings is largely same, no matter who is inquiring about it. In short, you need to:
- Research your desired area. How does the market look for a buyer or seller? If you’re refinancing, does your home match the others in your neighborhood?
- Make your calculations. How much house can you afford, if you’re on the market to buy a new one? Do you have enough funds to pay for the fees, down payments and other ancillary costs that come with refinancing or securing a purchase mortgage? If you’re looking to refinance, how much do you want to save each month?
- Check your qualifications. In order to qualify (or prequalify) for a loan, you’ll need to get some documentation in order. Usually, you’ll need to prepare tax returns, pay stubs and bank account balances to prove your income meets your loan inquiry. You will also need to submit a credit report.
Once you’ve gone through the offer and appraisal phase, you’ll start selecting the best loan (or refinance). Every lender will offer slightly different terms. Use a mortgage calculator or work with a broker to find a product that suits your needs best. The last step is the best: Close the deal.
Buying a property as a married couple versus a cohabitant
The differences in securing a mortgage or refinance begin if you’re considering homeownership as cohabitants rather than a married couple. If you’re not married, it’s important to get an agreement in writing.
If something happens in your relationship, and you wind up calling it quits, dividing a house can get messy. It’s important to secure a plan before from the get-go, just in case things go awry.
If you’re married and get a mortgage with your partner
You will automatically be declared Joint Owners with the Right of Survivorship, or in layman’s terms, the right to a property if one partner dies.
If you’re cohabitating and get mortgage with your partner
You need to file for a Tenants in Common declaration. This allows for the co-owner to be recognized as holding equal shares in a property and will become the “heir” to a property upon the death of a co-owner.
- If you’re buying a home together both buying parties will get their credit score run. If one partner has a better credit score than the other, you may consider adjusting how the title is held.
- There aren’t many tax advantages for buying a home as a married couple over buying a home as co-habitants unless you want to secure a VA loan and only one person is a veteran.
Tax implications from LGBT couples can be different than heterosexual couples
We also know that tax laws haven’t progressed as rapidly as society. In many cases, the tax laws will vary between LGBT couples and heterosexual couples – these laws can pertain directly to mortgages. Consider the following:
- Who gets mortgage tax deduction?
- How will you hold the title?
These details can be granular, and vary greatly from state to state. It’s important to consult with a lawyer to understand tax implications in your area.
Can the current law change?
If you enter into a mortgage now, as a married couple, are you at risk of your state not recognizing your marriage in the future?
It’s not likely the laws supporting gay marriage will change in the future, thanks to an outpouring of public support, but asking this hard question, and seeing which pieces of legislation could change is important.
Most notably, the Clinton-era “Defense of Marriage Act” -which was declared unconstitutional by the US Supreme Court – would have a major impact on the LGBT community should it ever come back into effect.
When this act was overturned it meant that legally married same-sex couples could begin to receive federal protections:
- Social Security
- Veterans’ benefits
- Health insurance
- Retirement savings
This also affects the way couples handle the title to their mortgage, and what paperwork needs to be filed – before acquiring a mortgage.
It is technically possible for Trump to reverse federal benefit rulings, though he hasn’t suggested that he would.
Same-sex couples and housing discrimination
It was only recently that the Federal Fair Housing Act began to protect LGBT people from discrimination in the sale, rental or financing of homes. This means it is now illegal for someone to refuse to sell or rent a home because of a potential buyer or renter’s sexual orientation.
In these tumultuous times, regardless of what the federal or state law says, discrimination still exists. If you feel like you’re being discriminated against, there are places to turn for advice, legal counsel and general personal finance tips catered specifically to the LGBT community.
How to find the perfect location for your new home
If you’re looking for a purchase mortgage, as opposed to refinancing your home, there are tools that can help you identify areas you may want to move. CNN actually developed an LGBT rights calculator that allows you to find states that align closes with your values. Essentially the calculator asks you to select which issues are most important to you, and gives an output answer of which state will make you feel the most at home, and protected.
A final note on same-sex mortgages
If you’re buying, find the appropriate real estate agent. Find a realtor that is in the LGBT community. Not only will you be putting your money toward an LGBT friendly business, you’ll also be working with someone who understands the unique challenges same-sex couples may face when considering a home purchase.