The American Dream of home ownership usually demands some rather peculiar legal considerations for LGBT couples, since the law doesn’t treat LGBT couples with the same respect and consideration reserved for those who can waltz into any 24-hour chapel of love in Las Vegas and get legally married.
But Sin City recently passed a new ordinance that may curtail the hours for all-night marriage chapels, so who knows what might happen next? Maybe one of these years legislation will also end the 24-hour ban on LGBT marriages.
In the meantime, those LGBT couples thinking of buying real estate together may want to make some unique preparations in terms of information gathering and fact-finding, to learn as much about the process – and what to expect in the future – as possible.
Here are three things to ponder before taking the plunge into your share of the American Dream of home ownership:
1) Sharing payments:
If you are both planning to contribute equally to the transaction, there is more to consider than just the purchase price and monthly mortgage payments. You will need to divide the down payment, which can be up to 20 percent of the purchase price, and closing costs, which will likely be a few thousand dollars. And there are other incidental expenses such as mortgage insurance, homeowner’s insurance, and property taxes.
If you decide to pay unequal portions – for example, if one partner pays 60 percent and the other 40 percent – then you will want to have your attorney specify the ratio of ownership in the deed. Otherwise, most states will assume that you each own half. Dividing the property if you ever sell it or go your separate ways is much easier if you have proper legal documentation of your shared ownership interests.
In most states, a contract can be drafted that spells out the agreement between partners so that there is no confusion and other legal obstacles are easily overcome. The contract can be recorded at the courthouse, but if you prefer for it to remain private, that is also an option.
2) Applying for the mortgage:
When two people apply for a mortgage, the lender will check such things as credit history, income, and assets for both parties. If one of you has stellar credit but the other has had a recent bankruptcy, for instance, it could create problems with the loan. On the other hand, if both of you have great credit and substantial income, combining your track records may get you a lower interest rate or other perks.
So before you apply for the mortgage, get a good picture of your credit worthiness and other relevant financial information, so that you know your potential strengths and weaknesses in terms of borrowing power. While you’re at it you can gather all the various documents that a lender will request, such as income tax statements and pay stubs, so that when you are ready to apply for a loan the process will go smoothly and quickly.
3) Survivorship rights:
Perhaps the most significant property rights issue for gay and lesbian couples versus married couples in the USA has to do with survivorship rights. If two people own the same piece of real estate but are not legally married, the courts generally define the ownership as shared, but not subject to rights of survivorship. “Right of survivorship” means that when one of the people who shares ownership dies, legal ownership of the entire property passes automatically to the surviving partner. So gay and lesbian couples need to take steps on their own if they want to ensure that if one partner dies, the other partner will be able to keep the house and automatically inherit full ownership.
And although a Last Will and Testament can take a long time to execute, the document that is most commonly used by gay couples to ensure survivorship happens automatically, because it is not actually a will but is a special kind of property deed. If the deeds states that there is “Joint Tenancy with the Right of Survivorship”, the transfer of ownership will likely not have to go through probate court like a Last Will and Testament. Joint Tenancy with survivorship rights is not legal everywhere, but many states still honor it and it is a good option for GLBT couples.
Before shopping for a home, it is a good idea to seek out expert legal and financial advice. If you visit a bank or mortgage company, you can get plenty of information regarding loan options and mortgage application criteria. And by enlisting the help of an attorney who specializes in real estate law – and also has experience with the kinds of legal issues that are particularly important to gay and lesbian couples – you can take steps to ensure the protection of your real estate assets. Planning ahead will also give you and your partner extra peace of mind.