Hey, lovebirds: If you're newly married, you may be thinking of buying a nest together. Indeed, 35% of married Americans purchased their first home together within two years of tying the knot, according to a study by Coldwell Banker. Yet while we hear plenty about the home-buying challenges faced by unmarried couples, that doesn't mean that marriage makes this process a walk in the park.
"A lot of factors come into play," says Brandy Wright, a certified financial planner at Cambridge Wealth Counsel in Atlanta. So before you start swooning over Craftsman bungalows or granite countertops where you envision your bright new future, be sure to sit down and ask each other these crucial questions first.
What's your credit score?
Back in your dating days, you two probably talked about everything from where you've traveled to your favorite movies. But now, as newlyweds, it's time to get serious and broach a far less romantic topic: your credit scores.
In fact, if you're truly smart, you will have had this conversation already: Half of married couples in the U.S. say that credit scores were a make-or-break factor when choosing their mate, according to an Experian Consumer Services survey. But for other couples, credit is a taboo subject. Unfortunately, if one person's credit score is substantially lower than the other's, that could hinder the couple's ability to qualify for a loan, or at least get an attractive interest rate.
"Knowing your credit scores before you meet with a lender is crucial," says Wright. Doing so will also give you the opportunity to work on repairing any credit issues before you apply for a mortgage. You can also get a free copy of your full report at AnnualCreditReport.com, although for the exact score you'll need to pay a small fee. Or check with your credit card company; many offer free access to scores.
Where would you like to live in five years?
Your future goals will affect which type of home -- and loan -- is right for you. For instance, if you're planning to stay put for the foreseeable future, then a 30-year mortgage with a fixed interest rate may make the most sense, since this means your interest rate (and monthly payment) remains constant over the life of the loan.
On the other hand, if you're planning to move within a few years -- say, to a larger home to raise a family or move closer to your in-laws -- then you should consider other options. For instance, an adjustable-rate mortgage offers a lower interest rate than a fixed mortgage for an initial period of time, such as three to seven years. After that point, it can adjust up or down based on market indexes.
Will one of us stay home to raise the kids?
Fine, you've just gotten hitched, so why rush the discussion about kids? Because this question will affect your family's income, which is the cornerstone for determining how much home you can afford. A good rule of thumb: "Your mortgage expenses should be no more than 30% of your take-home income," advises Wright. (Use realtor.com's Home Affordability Calculator to assess your buying power.)
But keep in mind, you could be paying off that mortgage for 30 years, so you should not only tally how much your family makes now, but also what you anticipate your salary to be in the future. What happens if and when you have kids, and one of you wants to stay home to raise them? That could slash your income in half. So when anticipating how much of a mortgage to get, play it safe. Just because you get pre-approved for $1 million doesn't mean you should buy a $1 million house.
What happens to the home if our marriage hits the rocks?
Although this is a happy time in your relationship, you need to consider all possible outcomes for your marriage. Translation: If you get hit with death or divorce, you'll need to work out how to divide your assets.
There are several types of homeownership to choose from when purchasing property with your spouse. The most common is joint tenancy, where each person holds equal interest in the property. Its distinguishing factor is that in the event one spouse dies, that person's interest in the property automatically conveys to the surviving spouse (also know as "right of survivorship").
Meanwhile, under tenancy in common, each spouse has a distinct, separately transferable interest in the property. This might be a sensible form of ownership if one spouse makes a higher percentage of the down payment or monthly mortgage payments and wants to guard his or her investment in the event of a divorce. Fine, it's not exactly an upbeat discussion, but you never know what could happen once the honeymoon's over, so to speak.
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