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Co-Ownership: Your Way into a First Home

As mortgages become harder to come by, with lenders ratcheting up income and down payment requirements, those starting out could get discouraged–or they could get together. Co-ownership of their home is becoming an acceptable way for promising young people to make a housing investment while prices are low. Most of them are in the early stages of careers and they fully expect to make more in the future. So why not make their initial home investment pay big as well?

Pros of Co-Ownership. Co ownership means that two incomes are used for qualifying, so the borrowers may buy a home that neither could afford on his or her own. Pooling assets for a larger down payment also makes them eligible for cheaper financing, lower mortgage insurance premiums, and better rates.

Pitfalls primarily come into play when there is a change in situation. What if one owner loses a job? Or if the co-owners are romantically involved and going their separate ways, things could get messy when business issues become personal. The worst problems can be averted by establishing an account for paying the mortgage, taxes, and insurance. This account should be built up until there are at least three months’ of emergency funds in it. It should be accessible only with the signatures of both owners.

Agree to Disagree by putting eventualities and consequenses in writing. If one party leaves, for example, will the property be put on the market? Rented? Rented to the remaining party? Can either owner sell his / her interest to someone else? Can that someone else move in?

Many people say it takes money to make money. In this case, it might take money to save money–spend a little with a lawyer before becoming a co-owner of a home.

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2 Responses to “Co-Ownership: Your Way into a First Home”

  1. Gordon Says:

    How lucky I am that my father was smart enough to push me into a co-ownership arrangement with the purchase of a house for $26,000 in the early 1970s! He and I made payments together, and we shared the maintenance and property tax expenses too. Several years later I bought his half, before prices really took off skyward! I never would have been able to afford to buy a house otherwise. So…if you are young and would like to buy a house but can’t afford it on your own, go for a co-ownership deal with someone and get your foot in the door. A lawyer can protect you for problems that could occur later. “Just do it.”

  2. redhead Says:

    No kidding! Amazing that you could buy a house during my lifetime for that price. That’s great advice for younger people whose parent’s trust them ;-)

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