Buying a home is one of the biggest financial decisions you’ll make. When you’re doing it with a partner, the process gets even more important. Before you sign any papers or make an offer, there are serious questions you need to ask each other.
This article helps couples have the right conversations before buying a home together. Whether you’re looking into FHA loans, comparing loan types, or saving for a down payment, these questions will help guide your journey toward owning a home.
Before anything else, ask each other: “Can we afford to buy a home right now?”
This includes talking about:
Your credit score affects whether you can get a mortgage loan and what your interest rate will be. A good score can save you thousands over the life of your loan.
Before applying for a loan, both partners should check their credit history, fix any mistakes on their credit report, and pay down existing debts.
FHA loans are backed by the Federal Housing Administration. They are ideal for first time homebuyers because they allow:
FHA loans come with mortgage insurance premiums (MIP), which we’ll cover later.
When thinking about home buying, don’t just ask how much the bank will lend you. Ask how much you can afford each month without stress.
Include all of the following:
Lenders look at your total monthly debt payments compared to your income. This is called your debt-to-income ratio.
Use a mortgage calculator to estimate how much home you can safely afford. Be realistic and honest with each other.
Most people think only about the down payment, but that’s not the only cost. You’ll also need money for closing costs, moving expenses, and repairs.
A low down payment is one of the benefits of FHA loans. You may only need 3.5% down if you meet the credit score requirements. That’s $10,500 on a $300,000 home.
If you’re getting a conventional loan, you might need 5%–20% down, unless you qualify for a special program.
Look into down payment assistance programs in your state or city. These can reduce the amount of cash you need upfront and are especially helpful for first time homebuyers.
Closing costs usually range from 2% to 5% of the purchase price. For a $300,000 home, that’s $6,000 to $15,000.
These can include:
Some payment assistance programs may help with closing costs as well.
Just because you’re buying together doesn’t mean both names must go on everything. Decide together:
If only one person qualifies for the loan (maybe because of a higher credit score), that person might get better loan terms. But this also means they are legally responsible for the loan.
Talk to a lender about your best options. You might also want to talk to a lawyer about what happens if you split up in the future.
Owning a home costs more than just your monthly mortgage payment. Make sure you’re both ready for the regular and unexpected expenses.
These include:
If you refinance later through an FHA streamline refinance, you may lower these costs. Or, if you build up enough equity, you might switch to a conventional loan without mortgage insurance.
The second half of this article will delve deeper into FHA loans and other types of loans. Read on and discuss the material to make an informed decision.
For any couple buying a home together, we recommend first time homebuyer education, which will make sure you're ready for every step of the process right from the start. Don't put off taking the course; articles like this one are no substitute for the full course material.
Life is full of surprises. Losing a job, getting sick, or facing emergency expenses can affect your ability to make payments.
Make a plan:
This is where your emergency fund becomes important. Experts recommend saving 3–6 months of living expenses.
If times get tough, some homeowners explore an FHA cash out refinance to access home equity. But this is not a decision to take lightly—it increases your loan amount and can come with a higher interest rate.
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Most home buyers use either an FHA loan or a conventional loan to buy their home. Both come with pros and cons, and the right choice depends on your financial situation.
FHA loans are insured by the Federal Housing Administration and are a top choice for first time homebuyers. These loans are especially helpful for people with:
Benefits of FHA loans:
Drawbacks:
A conventional loan is not backed by the government. These loans are often better if you have:
Benefits of conventional mortgages:
Drawbacks:
One of the biggest costs of an FHA mortgage is the mortgage insurance premium (MIP). This protects the lender, not you, if you stop making payments.
These insurance premiums are non-refundable and add to your payments. If you want to remove FHA mortgage insurance premiums, you’ll either need to refinance into a conventional loan or pay down enough of your loan to meet specific requirements.
FHA loan limits refer to the maximum loan amount you can borrow using an FHA loan. These limits vary by county, property type, and whether you’re buying in a high cost area or a rural area.
If your purchase price is higher than the FHA limit in your area, you’ll need to consider a conventional loan or look at other programs, such as a jumbo loan.
Once you own your home, you may want to refinance your loan. Refinancing can help you lower your interest rate, reduce your monthly payment, or tap into your home equity.
This option is only for current FHA borrowers. It’s faster and easier than a traditional refinance and is a great option if mortgage rates go down and you want to save on your payments.
With a cash out refinance, you replace your existing FHA mortgage with a new loan for more than you owe.
Use caution—this increases your loan amount and can lead to a higher interest rate. It’s not free money; you’re borrowing against your home’s value. Talk to a housing counselor if you're considering this step.
Besides FHA and conventional, here are a few loan types that may apply to your situation:
These loan products offer different benefits, so explore all your options with a lender who understands your goals.
Even if you qualify for a great loan, buying a home with your partner isn’t just about money. It’s about being a team.
Discuss:
These conversations are just as important as your credit score or loan amount.
Now that you’ve explored your loan options and had the important conversations with your partner, it’s time to focus on the final steps. This part will guide you through making an offer, inspections, closing costs, and available tools and programs for first time home buyer success.
Once you find a home that fits your needs and budget, your real estate agent will help you submit an offer. Here’s what to prepare:
If you’re using an FHA loan program, make sure the seller knows up front. The home must meet certain condition requirements to qualify for FHA financing.
An inspection helps you understand the true condition of the home before you finalize the sale. It is different from the appraisal, which is required by the lender.
Learn more about home inspections from the National Association of Realtors.
Your lender will order an appraisal to ensure the home is worth the amount you’re borrowing. FHA loans have specific appraisal standards.
Learn more about FHA Appraisal Guidelines from Experian.
Closing day is when the home officially becomes yours.
Learn more about a mortgage closing from the Consumer Financial Protection Bureau.
There are many resources to help first time homebuyers succeed. Depending on your income, location, and background, you may qualify for special loan products or other programs.
These programs help cover the payment requirement for your down payment or closing costs. They may be offered by:
Many work directly with FHA loans and require a short homeownership education class. Credit.org offers HUD-approved homebuyer education.
As your financial situation improves or mortgage rates change, you may want to refinance your loan.
This is a simple way to lower your monthly payments if you already have an FHA mortgage. It doesn’t require:
You must be current on your payments and meet other requirements.
If your credit score improves and you build enough equity, you might refinance into a conventional loan. This lets you remove your mortgage insurance premium, lowering your overall cost.
Once you’re a homeowner, protect your investment by:
Track your budget closely. Your loan amount might stay the same, but other costs like property taxes and insurance can change.
Here’s a quick review of what to talk about before buying a home together:
If you work through these questions as a couple, you’ll make smarter decisions and avoid surprises.
Get expert help from a housing counselor on demand.
