Now that Gay Marriage is Legal, What Does it Mean for the Mortgage Market?

On June 26, 2015, the U.S. Supreme Court handed down its ruling on the case of Obergefell v. Hodges.  This ruling gave gays and lesbians the right to marry in all states and struck down all current gay marriage bans.  While we may not realize exactly how this ruling affected the country for a few years, experts are already anticipating changes in a number of industries.  Those in the real estate industry have a few predictions for how same-sex marriage will affect the mortgage market.

CoupleMore Same-Sex Couples will be House Hunting

Gay and lesbian real estate agents have been helping LGBT couples find and purchase their dream homes for years.  Now that same-sex marriage is legal, many expect the number of gay and lesbian couples searching for a home to increase.  Newlyweds may want to jettison everything from their single lives, including their individual homes, now that they can legally create a life together.  This means that more houses are going to sell, and the number of mortgages is going to increase.

More Couples May Qualify for Mortgages

Some experts are going back and forth on this, but overall, most agree that married same-sex couples are likely to have a better chance at qualifying for a mortgage, which means lenders will be making more mortgages.  This is because when married couples apply for a mortgage, they’re considered as one unit.  The low income or bad credit of one can be counterbalanced by the higher income or better credit of the other.  When two people apply for a mortgage jointly as individuals, this isn’t always the case.  Of course, bad credit can still hurt a married couple, but it’s not necessarily going to deny them the mortgage.

More Refinancing

The mortgage market can also expect to see a surge in refinancing soon.  There are a couple of reasons that many predict this will happen.  First, now that they’re married, many couples will want to jointly own their property and share the responsibility.  This means putting both spouses on the mortgage, and that requires refinancing.  Second, as mentioned above, as a married couple, they may have a chance of getting better mortgage terms than they would have or did have when applying jointly as individuals.  Savvy newlyweds may be able to take advantage of lower interest rates and other savings by refinancing their home.  What better way to start their married life together than by lowering their house payment?

How Legal Gay Marriage Will Effect Getting VA Loans

When the Supreme Court handed down their landmark decision on June 26, 2015, that reversed the Sixth Circuit Court of Appeals’ decision in Obergefell v. Hodges and effectively made same-sex marriage legal in all states, it affected more than just LGBT couples. It also affected the mortgage market in a number of ways.

images (1)The first is that now same-sex couples can legally marry in any state, and those marriages are recognized throughout the U.S. This means that they now have all of the same rights as opposite-sex couples, including the right to hold property together. It’s now much easier for same-sex couples to apply for mortgages and get financing because lenders have always favored married couples over two single people applying for a mortgage jointly. Many experts expect to see more LGBT couples make the move from renters to homeowners in the very near future. Those who did purchase a home as two single individuals and are now married may also look to refinance their mortgages.

Couples who are married also have a tendency to feel more secure and stable. The results from a number of surveys show that single people, even those in a long-term relationship, feel like purchasing a home is something that’s done only after marriage. The fact that more same-sex couples can now legally married is expected to result in a number of new homeowners.

Another advantage that comes with the Supreme Court decision is the fact that same-sex married couples will be able to make use of the mortgage program offered by the Department of Veterans Affairs. Prior to this, the VA only provided benefits to same-sex couples who lived in states where those marriages were legal. Now veterans across the country will be able to add their spouses to their mortgages no matter what state they live in.

There will also no longer be any question about inheritance or title issues. Prior to this decision, the many different laws across the country regarding same-sex couples and their right to marry created a patchwork of different rules and regulations regarding property ownership and inheritance. Those issues are now gone, and same-sex couples can be treated exactly the same as opposite-sex couples. Spouses no longer have to create extra paperwork or go out of their way to make certain the title to their property is worded in such a way that there can be no challenge to who inherits the property if one of them dies.

 

Consequences of Same Sex Marriage on Real Estate

As of October, 2014, it is legal for same sex couples to marry in 32 states. For those who can legally marry, the calculation of estate taxes when a spouse dies and the amount of capital gain taxes that are exempt from taxes when you sell a home may be affected. Following are some of the ways that marriage can affect you.

imagesTenancy in the Entirety

Tenancy in the entirety is a way of holding title to your home that is only available to married couples. In states that allow this designation, it means that each of you own 100 percent of the home and have equal right to access. The home cannot be sold or transferred to anyone else without both spouses agreement. When one spouse dies, the surviving spouse automatically becomes the sole owner. In that case, there is a federal unlimited deduction for marital couples, meaning that there will be no federal gift tax triggered by the transfer of ownership.

Capital Gains Taxes

If you own a home by tenancy in the entirety and you sell your home, you are entitled to an exclusion from capital gains, even if only one of your names is on the home. Capital gains is the difference between the money you have invested into the home and the amount that it is sold for. Some conditions apply, such as number of years you lived in the home.

It is important to note that, because of the Defense of Marriage Act, DOMA, 2013 ruling that overturned the section that required same sex spouses to be treated as unmarried for federal law purposes, the federal capital gains exemption applies to same sex married couples as well as heterosexual couples. It applies regardless of whether you live in a state that prohibits such marriages if you were married in a state that legally recognizes same sex marriages,

Real Estate Mortgage Deduction

Before DOMA, same sex married couples who jointly owned their home were required to file separate federal tax returns and either split the deduction between them or only one partner take the deduction. In addition, each partner had to qualify separately for the deduction. Since DOMA, same sex spouses can now file jointly for the larger deduction afforded to married couples.

Purchasing or Selling a Home

Since state laws vary and there are different qualifications that must be met under federal law, you should contact a local LGBT attorney regarding any questions that you may have.

If you are in the market to sell or purchase a home or purchase a new one, hiring an LGBT real estate agent at GayRealEstate.com would be in your best interests. He or she will be in a position to know the current laws affecting the LGBT community and can assist you throughout the process.

5 Home Buying Pitfalls for Same Sex Unmarried Couples.

Same sex unmarried couples face a different set of legal issues than married couples. Failing to plan for the future is the number one mistake that partners make. Some of the home buying pitfalls for same sex unmarried couples are outlined below.

images (1)1. Consider putting both of your names on the deed. While it may be tempting to purchase a home with only one of your names on the deed, the partner’s name that is left off will a legal right to the home. This is true even if that partner contributes to the household and helps pay the mortgage. Note that there are other estate planning methods that can be used to protect a partner’s interest if his name is not on the deed. For more information, see our article Gay Couples, Estate Issues and Real Estate.

2. Failing to agree on what percentage each partner will own in the home. Unless you agree on this issue beforehand and either hold title by tenancy in common, where each partner can own the same or a different percentage of the real estate, or create a legal partnership agreement, you will both own the home equally in almost all states according to Nolo Law for All. This pitfall may become an issue if one of you pays a larger percentage towards the purchase or the expenses involved in owning the home. For more information, see our article Top 5 Ways to Protect Yourself When Purchasing a Home With Your Partner.

3. Assuming that each partner will pay half of the mortgage payment, insurance and taxes as well as the utilities and maintenance. If one partner makes substantially more than the other partner, it would fair to come to an agreement as to what percentage each partner will pay that both parties are comfortable with. Discussing this issue and coming to an agreement before purchasing your home can help avoid disputes down the road.

4. Failing to decide what will happen to the real estate should your relationship dissolve. If one of you moves out of the home, how will the real estate be dealt with? For example, will one partner have the right to buy the other partner out, will the home be sold to a third party, and, in that case, who will pay the bills until the home is sold? This issue should be discussed and your decision included in your partnership agreement.

5. Failing to create a will to protect your partner. Unless ownership of the home is held by joint tenancy with right of survivorship or a will is prepared that bequeaths the deceased partner’s ownership in the home to the surviving partner, the deceased partner’s portion will be distributed according to the laws of intestacy of the state of residence. Intestacy laws relate to who directly inherits from a deceased person and generally includes wife, children, parents and then siblings. Unmarried partners, even if they own a home together, cannot inherit according to the intestacy laws in all states.

Taking steps to avoid the home buying pitfalls for same sex unmarried couples will help protect both you and your partner in the event of death or dissolution of the relationship. The above information is not intended as legal advice. Same sex couples who intend to purchase a home together should consult an LGBT real estate agent from seasoned sites like GayRealEstate.com for expert help in the purchasing process.

Gay Real Estate’s Top 10 Tips for Merging LGBT Finances When Buying a Home

Buying a home with your partner is an exciting event. Before combining finances and purchasing your home together, there are some things that you should talk about and consider. Following are the top 10 tips for merging LGBT finances when buying a home.

images1. Have a discussion about your income, debts, spending habits and your credit history.  This conversation will let you both know where you both stand financially and help you decide how much home you can afford.

2. Create a budget that includes the anticipated mortgage payment, utilities, taxes and other related household expenses. This will show you the approximate minimum amount that must be contributed to the household each month.

3. Set up a joint checking account. The account should be used for paying your down payment on the new home and for bills related to living expenses. For example, mortgage, utility and home maintenance payments and household expenses.

4. Set up a joint savings account that can be used for emergency home repairs and for reaching your future goals. For example, maybe you both dream of taking a vacation to Australia, or your objective is to invest in a vacation home. A savings account will help you reach those goals.

5. Decide how much each of you will contribute to the bank accounts each month. Some couples may contribute 50 percent each while others contribute based on their income. For example, if one partner makes more money than the other, the contribution may be 60 percent for one partner and 40 percent for the other.

6. Draft a will naming your partner as the beneficiary of your interest in your new home. You may also consider making him a beneficiary on your retirement and investment accounts and your insurance policies. This may be important in helping your partner afford to keep the home if you die.

7. Consider drafting a durable power of attorney for financial decisions. That document will allow your partner to make financial decisions on your behalf if you become incapacitated due to accident or illness.

8. Obtain a joint credit card for purchasing home furnishings and other items that will be joint property. Decide if all purchases or just purchases over a certain amount must be discussed beforehand. The bill should be paid from the joint checking account. Be sure to adjust your monthly contributions to your joint checking account to cover the credit card payments.

9. Keep separate checking accounts to pay for existing expenses, including car payments and student loans. This will allow each partner to pay their own debts off and maintain some control over their finances.

10. Put it all in writing. Draft a domestic partnership agreement that outlines each partner’s responsibilities in the relationship and what will happen to the home and other assets if the relationship is dissolved.

It is essential that you are both honest about your financial situation before merging your LGBT finances when buying a home. If, for example, you have a judgment against you, that creditor could place a lien against your new home. Lack of honesty could end up destroying your relationship with each other.

Legalities of Gay Marriage and Buying Your First Home Together

The legalities of gay marriage and buying your first home together vary depending on factors including the state that you live in. If you are married and live in a state that recognizes same sex marriages, the procedure for buying a home is the same as it is for heterosexual married couples. Those that do not live in a state that recognizes their marriage will be forced to purchase their home as individuals rather than as a married unit.

imagesOnce you have found a home you would like to purchase and have worked out the details, you will need to complete a legally binding purchase agreement. That document includes the price and the terms of sale that are being agreed upon, specific property information including any known defects, contingencies and the names of all parties involved including buyers, sellers and agents. Contingencies are conditions that must be met before closing and can include a home inspection, financing and other specific actions by either the buyer or the seller.

The seller is legally required to disclose any defects in the home. Defects may include termite damage or plumbing, heating and air conditioning and electrical problems. Although not legally required, it is best to have a home inspection completed before you purchase the home. It is not unusual for sellers to overlook or have no knowledge about a defect of the home that an inspection will uncover. Licensed inspectors are trained to find and disclose current and potential future problems.

As part of the buying process, you will need to purchase title insurance. The title insurance company will conduct a title search on the property to make sure that there are no liens or easement issues against the property that have not been disclosed.

Once those procedures are complete, if you have not already done so, you will need to find a mortgage lender. The mortgage company that you choose will check both of your credit scores and will count both of your incomes in making a decision. It would be best to shop around to find the best terms available based on your personal and financial goals.

According to the Human Rights Campaign, there are no federal laws that prohibit discrimination against same sex spouses, but some states do have expanded laws in place. Knowing the laws in the state where you live will help you avoid discrimination based on your sexual orientation. If you live in a state that recognizes same sex marriages, mortgage lenders should recognize your marriage and, if you qualify, allow you to obtain a loan as a married couple rather than as separate borrowers on the same loan. The lender should also give you comparable interest rates to other couples with similar credit scores and income qualifications.

The legalities of gay marriage and buying your first home together are complex and can be confusing. Hiring a local LGBT friendly real estate professional at GayRealEstate.com will help take the stress out of buying your new home. They have the knowledge and expertise to help you make informed decisions that are in your best interest, negotiate on your behalf and ensure that no legal documentation is overlooked throughout the process.

What Real Estate Rights does a Civil Union Afford an LGBT Couple

The Colorado Civil Union Act, C.R.S. 14-15-101, became effective on May 1, 2013 making it the only remaining state that allows civil unions. Other states that previously recognized those partnerships have adopted same sex marriage laws and converted civil unions, with the exception of Vermont, into marriages as a matter of law. Vermont enacted its same sex marriage law in 2009. All civil unions entered into before that date are still recognized as civil unions.

downloadNote that New Hampshire enacted its same sex marriage law on January 1, 2010. All legal civil unions contracted in another state or jurisdiction have been recognized as marriages in New Hampshire since that date. N.H. Rev. Stat. Ann. Section 457:45.

According to law, same sex couples entering into a civil union obtain the same benefits, protections and responsibilities that are afforded opposite sex married couples. Rights related to real estate include the following:

1. The right to buy, own and sell real estate as a single entity.

2. The right to survivorship of the real estate and property. When one partner dies, the surviving partner will inherit according to the state laws of intestate success if there is no will or other estate planning in place at the time of death.

3. Homestead rights of a spouse. Homestead exemptions protect an amount of equity in the home from creditors and allow the property to be transferred directly to the surviving spouse upon the other’s death. That amount is set by state law. In Colorado, the amount is $60,000 of the home’s equity, or $90,000 if the surviving partner is disabled or 60 years of age or older. In Vermont, the amount is $125,000.

Colorado does not allow partners in a civil union to file joint taxes. Each must file individually and only one of them can take any deductions related to the real estate that they own together. Vermont allows partners in the civil union to file jointly for state tax purposes. Since federal law only recognizes marriages, couples in civil unions cannot file joint federal returns.

If you are in a civil union and are considering purchasing a home together, it would be wise to consult with an LGBT real estate agent at GayRealEstate.com or attorney. Those professionals have the knowledge to advise you on any laws that can affect your purchase.

Top 5 Cities for LGBT Families with Children

GayRealEstate.com reviewed cities throughout the United States to find some of the best cities for LGBT families to raise children.

downloadOur research took into account state laws affecting the LGBT community and the availability of support groups. All of the cities we chose are located in states where same sex marriage is legal and LGBT families have the right to foster and adopt children. Same sex marriage is an important element in child rearing when considering the legal protections that become available to them. For example, both parents may become legal parents of their children resulting in expanded federal and state benefits including health care and inheritance rights.

Based on our research, here are our top five cities to raise children;

1. Seattle, Washington

Seattle as a whole is very tolerant of the LGBT community. Most LGBT families with children live in the child friendly areas of West Seattle and the surrounding suburbs of Lynnwood, Shoreline and Lake Forest Park where housing is more affordable.

Some of the groups in Seattle that support LGBT families include the Gay Fathers Association and the Proud Family Alliance. Camp Ten Trees features a week of camp each year for children from non-traditional families.

2. Minneapolis, Minnesota

LGBT families with children live throughout Minneapolis. The city contains an extensive park and recreation system and many cultural venues for children including the Hennepin Theater Stages that hosts a Kids’ Nights performances.

Schools are very supportive of LGBT families in a variety of ways. For example, in 2011, the Minneapolis School Board passed an anti-LGBT bullying policy and a resolution asking districts to incorporate LGBT themes in its curriculum including addressing LGBT sexual health issues in the sexual health curriculum.

There are many LGBT family support groups in Minneapolis including Rainbow Families, an organization that educates and advocates for the community and organizes activities including a summer camp, and Families Like Mine that provides resources for LGBT families.

3. Chicago, Illinois

Chicago is very open-minded and tolerant and LGBT families live throughout the city. While it is child friendly, many LGBT families with children choose to live in the suburbs of the city including Oak Park and Huntley to take advantage of a more relaxed atmosphere.

There are many LGBT support organizations throughout Chicago and both Oak Park and Huntley have their own LGBT family support groups. The Oak Park Area Lesbian and Gay Association sponsors programs for youth and adults and organize social and cultural events. The Parents, Families and Friends of Lesbian and Gay’s, PFLAG, Oak Park Chapter, conducts meetings for education and socializing, and the Rainbow Pride Diversity Network in Huntley provides a social outlet for families with potlucks and movies.

4. Northampton, Massachusetts

Northampton has a large population of LGBT families with children spread throughout the city. According to the Great Northampton Chamber of Commerce, the community is welcoming and is a great place to raise children.

Support groups include the LGBT Coalition that provides outreach programs and events and referral services to the LGBT community, and Parents, Families and Friends of Lesbians and Gays, PFLAG.

5. Albany, New York

Albany is a very non-judgmental city that welcomes members of the LGBT community. While the city is a good place to raise children, many LGBT families are opting to live in the suburbs of Albany to take advantage of better public schools and lower living expenses.

There are many LGBT support organizations through Albany and New York. The Pride Center of the Capital Region serves Albany and surrounding areas. Others include the Gay, Lesbian & Straight Education Network, and Parents, Families and Friends of Lesbians and Gays, PFLAG.

Author Jeff Hammerberg is the Founding CEO of GayRealEstate.com ~ The Nation’s Oldest and Largest Free Directory of Gay, Lesbian and Gay Friendly Realtors, representing LGBT Home Buyers Free.

Exploring Forms of Home Co-ownership for LGBT Unmarried Couples

The forms of co-ownership available to unmarried LGBT couples include joint tenancy and tenancy in common. Note that while tenancy by the entirety is a common designation, it is only available to married couples. When you put both your names on a deed, you must designate the form of co-ownership that is best for both of you.

Gay Realtors Can HelpJoint tenancy automatically gives ownership of the property to the surviving partner when one of you dies. In some community property states including California, the term ‘with right of survivorship’ must be added to the joint tenancy designation to ensure that the parties intended the other party to inherit. The right of survivorship overrides any attempt to change ownership including a will. When one partner dies, there is no remaining interest to give to anyone else because all interest in the property automatically vests in the surviving partner. Both partners will have an undivided equal ownership, share equal rights to possession of the property and cannot finance or sell the property without both parties consent.

Tenancy in common property can be owned equally or with unequal shares of the home. For example, one partner could own 60 percent and the other partner 40 percent. Each partner will have the right to sell or will all or a percentage of his interest in the property to a third party. If one of the partner’s die without a will, his percentage in the property will be distributed according to intestate laws in the state of his residency.

If you own a home and decide to put your partners name on the deed, it should be kept in mind that by doing so, you are giving a gift of some percentage of the home to your partner. You will have no legal right to remove or force your partner to deed the property back to you. Adding your partner’s name to the deed could also trigger gift taxes, and could trigger the mortgage company to force you to refinance if there is a due on sale or transfer provision in the mortgage contract.

Before signing a co-ownership deed, it would be a good idea to prepare an agreement that details how expenses and ownership will be shared and what will happen to the home if you separate. While this may not seem important, if the relationship deteriorates, an agreement will help avoid major disputes.

Property laws vary between states. Always consult with a gay realtor from GayRealEstate.com or speak with a real estate attorney.

Dear Gay Realtor, My partner and I are getting married, do we need to do anything with the mortgage and home he owns individually?

You are not legally required to do anything with the mortgage and home that your partner owns when you get married. However, if legal arrangements are not made, you may not have a right to inherit the home if your spouse dies.

Dear Gay RealtorIf your name is not on the deed and no will has been made, his home will be inherited according to intestacy laws in the state that you live in. For example, since same sex marriages are not legal in Colorado, the spouse cannot inherit. In New Mexico, where same sex marriages are legal, New Mexico Statutes 45-2-102 dictates that the spouse will inherit his deceased spouse’s separate property if there are no surviving children and one fourth of the estate if there are surviving children.

If your spouse decides to add your name, he will need to file a quitclaim deed adding you as an owner of the property. When filing a quitclaim, you will need to decide how you would like to designate ownership. If you live in a state that has the designation, you could choose tenancy by the entirety. That designation gives equal ownership and transfers the ownership of the home to the surviving spouse when one of you dies.

Joint tenancy, or joint tenancy with right of survivorship in state’s that require that language, works in the same way as tenancy by the entirety. If you live in a state that requires the joint tenancy right of survivorship language and do not add it, you will own the property equally but you will not automatically inherit the home based on the deed.

The last option is tenants in common. That designation does not give right of survivorship. The deceased spouse’s half of the home will go to the person specified in his will or, if he had no will, according to the intestacy laws in the state where you live.

If you add your name to the deed but not the mortgage and your spouse dies, the mortgage holder may foreclose on the property if there are not enough funds in the estate to pay it off. Note that some mortgage holders include language in the mortgage contract that requires you to add your name to the mortgage before it can be added to the deed.

There are no legal requirements that a spouse be added to an existing mortgage other than what may be included in the mortgage contract. If you would like your name added, some mortgage companies may allow it and others may require that you refinance in both your names. If your name is added, you will both be liable for repayment of the mortgage.

The advantages and disadvantages of adding your name to your spouse’s existing house and mortgage should be evaluated before a decision is made. It would be wise to consult a real estate attorney who is experienced in LGBT law to find out what your options are and what would work best for your particular situation.