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.

Top 3 Ways for Same Sex Couples to finance a Home Purchase

There are several ways that same sex couples can finance a home purchase including traditional mortgage lenders and possible other options. Following are the top 3 ways for same sex couples to finance a home.

images1. The U.S. Finance and Administration, FHA, is a division of the U.S. Department of Housing and Urban Development, HUD. Because discrimination based on marital status is prohibited, it makes no difference if you are married or not when applying for a loan. Federal law also prohibits FHA from considering sexual orientation or gender identity of loan applicants.

FHA insures loans so that qualified lenders can offer you easy qualifying and low closing costs on your new home. FHA requires a down payment of 3.5 percent of the purchase price, well below the percentage that must be paid with most traditional mortgages.

FHA does not actually make loans; it is an insurance fund that guarantees loans so lenders can offer good terms to home buyers. Since each FHA approved lender sets its own interest rates and costs, it would be wise to check with several lenders to find the best rates possible.

For more information on FHA loans, you should contact your gay realtor for a referral to a gay friendly FHA qualifying lender.

2. The Veteran’s Administration, VA, offers guaranteed loans to veterans. The VA does not make loans. Like the FHA, the VA insures loans made by approved lenders. If you or your partner is a veteran, you could qualify for a lower interest rate loan.

Unmarried same sex partners may apply for a joint loan, but the VA will only guarantee approximately 40 percent of the total loan if only one of you is a veteran. If you are married, it is likely that you will quality for a VA loan unless you live in a state that does not recognize same sex marriages. The Veteran’s Administration is evaluating those applications on a case-by-case basis.

Generally, obtaining a VA loan allows lenders to mortgage your new home with no down payment and negotiable interest rates. Closing costs are comparable or lower than traditional mortgages and you may be able to finance VA’s funding fee in the mortgage.

For more information on VA loans, you should contact your gay realtor for a referral to a VA qualifying lender.

3. Seller financing is available on some homes. When a seller finances the home, there is no need to apply for a mortgage from a traditional or other type lender. You will sign a promissory note and make your payments, including interest, directly to the seller. If you live in a state, such as California, that has enacted anti-discrimination laws because of sexual orientation or sexual identity, the seller would be forced to sell to you if you meet his qualifications including down payment and credit worthiness.

The benefits of seller financing include no lender origination or other fees and there is no need to worry about strict mortgage lender requirements. Since the terms are negotiated between you and the seller, you may end up with a lower down payment and interest rate than you would with a traditional mortgage.

If you are interested in purchasing a seller financed home, you should check the laws in your state to ensure that you cannot be discriminated against.

In addition to the above, many states offer mortgage assistance programs. For example, MaineHousing’s First Home Program offers low fixed rate mortgages. You should check with your state government to find out what options are available in your area.

A great way to get started is to contact a top gay realtor at GayRealEstate.com. The Nation’s Oldest and Largest Gay Realtor Directory. No Cost or Obligation to find the Perfect Agent.

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.

How much home can I afford?

That depends largely on your income. Experts suggest your mortgage payment be no more than 28-35% percent of your monthly income. This income-debt ratio is the percentage of your monthly income dedicated to making your monthly mortgage payment. If you want to maximize your home buying potential, you can assume that more of your income will be tied up in your monthly mortgage payment.

Let’s assume your gross income is a $100,000 a year and you have $20,000 for a down payment. You conservatively elect to spend 28% of your income on monthly mortgage payments. If you take out a 30yr fixed mortgage at 5% interest, you can afford about $393,000 of home (rounded to the nearest thousand).

Here’s how:

-$28,000 of your income *30 years= $840,000(rounded)

-The principal of your loan is $372,000(rounded)

-Your amortized interest will be $346,000(rounded)

-The principal plus the interest will be about $719,000(rounded)

-Assume property taxes and insurance that will cost about $4,000 annually: at $4,000* 30 years, add another $120,000.

 

                                    Principal:                                $372,000

                                    Interest at 5%:                       $346,000

                                    Taxes and insurance:                       $120,000

                                    Total cost =                            $840,000

All told, your annual income of $100,000 plus your $20,000 down payment can buy you 393,000 of home. If this seems complicated, consult an amortization chart. An amortization chart is a useful tool that will calculate how much interest will cost you across thirty years at a given rate. 

Fundamentally speaking, you can calculate home cost by the percentage of your income you are willing to dedicate to a mortgage payment. Again, experts recommend you spend no more than 40%, maximum, of your annual income on mortgage payments. The best place to start is to calculate how much your income you can free up, and then consult a mortgage calculator and/or amortization chart to see what your income can buy.

Regular loans over jumbo loans 

Right now, the prime rate on loans is at an historical low. This means that you have more purchasing power so long as you lock in the rate with a fixed-rate mortgage. It is an incredible time to buy if you are in a position to do so financially. 

You should be aware that an ultra-low prime rate is typically predicated on taking a home loan below $625,000. These are called “conforming loans” because Freddie Mac and Fannie Mae, the nations two largest publicly trading and federally backed loan securities institutions, will only back loans that ‘conform.’ The average conforming loan is about $417,000. Loans that do not conform are a higher risk for lenders because they are a greater risk, and will come at a greater interest rate. 

Improve your credit score

How much home you can afford is predicated, like most things, on how much income you generate and your credit score. An ideal credit score will get you the best interest rate, and save you money over the course of your mortgage. Do small things to help your credit score like paying down old debt, and tidying-up your borrowing habits and history. This will improve your debt-credit ratio, thus improving your credit score.

Consult a loan officer at www.GayMortgageLoans.com and a real estate agent at www.GayRealEstate.com for more information.

A loan officer can tell you exactly how much home you can afford to buy. He or she will calculate your financial portfolio to the minutiae, and give you the most accurate estimation of your home-buying power. Loan officers often make use of the same tools used in this blog: mortgage calculators and interest amortization charts. If you still have questions, a real estate agent from GayRealEste.com will help you measure the unforeseen, like projected home values and mortgage interest rates.

The difference between pre-qual. and preapproved for mortgage.

Many LGBT real estate buyers and gays and lesbians borrowing a mortgage to finance or refinance a home want to know the difference between a prequalified and a preapproved loan. On the surface they sound quite similar, but in practice they have significant differences that relate to the level of commitment a lender is making to the LGBT borrower.

 

  • The big difference is that prequalification has to do with the process a lender goes through to find out if a gay real estate buyer is eligible for a mortgage. This typically means that the lender will check the credit rating of the LGBT mortgage borrower and ask for a few financial details. Gay and lesbian real estate buyers who meet basic criteria for borrowing will be considered prequalified – which means they essentially qualify for making a loan application.

 

  • But in no way does prequalification represent a legal commitment on behalf of the lender to actually loan money. It is no guarantee that the LGBT borrower will get the loan, it is more like a prediction that the gay borrower will succeed in getting a loan once they make an official loan application.

 

  • In other words, prequalification is a screening or filtering process to weed out those LGBT borrowers who don’t have a chance of qualifying for a loan. Without loan prequalification it is too easy to assume that a loan is forthcoming, and that misleads the LGBT real estate buyer by giving them false hope. It is also a waste of time for the lender, who wants to concentrate instead on those LGBT mortgage borrowers who do qualify and will eventually have a realistic chance of getting a loan.

 

  • Preapproval, on the other hand, is a status that represents a much bigger commitment by the lender. For a gay or lesbian home buyer to go through the necessary steps of getting preapproved, they basically have to do all the documentation of income, assets, and credit that is involved in a full blown mortgage application process.

 

  • If they pass all of the standards set by the lender, then the lender makes a firm commitment to providing a loan – and the lender specifies exactly how much the LGBT home buyer can borrow.

 

  • Armed with that information the LGBT buyer can then go with a gay-friendly Realtor to shop for homes in that price range and negotiate with sellers from a position of strength. Since the seller can see a lender-signed letter of loan preapproval, that lets them know that the potential gay or lesbian buyer really does have the financial means to purchase.

To learn more about LGBT mortgages and how gay and lesbian real estate buyers can get preapproved or prequalified for a loan from a LGBT or gay-friendly mortgage company, check out the informative articles and resources at GayRealEstate.com. The site has everything a LGBT borrower needs to find a loan and a home, and it maintains the largest database of LGBT Realtors and gay-friendly real estate agents in the world.