Buying a Home With More Than One Person: What You Need to Know

When most people think about buying a home, they usually imagine making the purchase alone or with a partner. But those aren’t the only possible scenarios. There are several situations where it might make sense to buy a home together with more than one other person.

How does that situation differ from some of the more traditional home-buying scenarios? Are there additional factors to consider? How do you decide whether it’s a good idea to sign a mortgage with other people?

Let’s dive in and look at the essential factors you should consider when buying a home with several other people.

When It Makes Sense to Buy a Home With a Group

If you’ve only ever considered purchasing a home on your own or with a romantic partner, it may seem strange to think about cosigning a mortgage with more than one other person. But there are several situations when it could make a lot of sense:

Once you and your group decide to purchase a home together, the next step is to ensure that everyone is on the same page financially. 

Step #1: Prioritize Communication

Open communication is crucial in any situation where you’re living with other people, but it’s even more important when you’re tied to everyone else via a significant financial investment. Before you start browsing Zillow and making a list of wants and needs, take some time to talk to everyone about their goals for this venture. 

Additionally, make sure that everyone understands the importance of ongoing communication throughout the process of buying a home and beyond. It might help to schedule regular meetings so that everyone has a chance to ask questions, get clarification, and bring up any potential issues in a neutral environment.

Step #2: Set Expectations

Once you’ve had those initial conversations, it’s time to start discussing the future. This is a chance for everyone to share their thoughts, goals, and expectations for homeownership:

  • Reasons for buying a home together
  • Goals (financial, quality of life, etc.)
  • Use of common spaces
  • Preferences (cleanliness, schedules)
  • Rules about pets

It’s also vital to talk about how you plan to handle changes in the living situation. What if someone gets married or divorced? What if there are kids in the future? You can’t plan for every single possibility, but it’s a good idea to cover as many as possible ahead of time.

Step #3: Verify Financial Resources

Once everyone is clear on the expectations and chooses to move forward, it’s time to talk about finances. A mortgage is a significant financial commitment, and it’s not something you should take lightly.

Moreover, it’s crucial to understand that everyone whose name is on the loan is liable for it. In other words, every person on the mortgage is responsible for the entire amount. Your lender doesn’t care how you and your partners split the mortgage payment amongst yourselves — they’re just concerned about getting the correct amount each month.

For example, let’s say you enter a group housing situation with two roommates, and you all contribute one-third of the mortgage payment. A year later one roommate loses their job. You and the other roommate now have to each pay half of the mortgage. 

So before you decide to buy a home and sign a mortgage with others, take the time to verify each person’s financial situation. Everyone should be willing to discuss their finances openly — assets, debts, down payment contributions, income, expenses, credit history, and so on. 

Don’t forget to talk about expenses besides the mortgage. How will you pay for home insurance and property taxes? Who will cover repairs and maintenance? How will you split the cost of utilities? 

Verify that each person understands the financial commitment they’re making. If you doubt that one of your partners will be willing or able to uphold their financial obligations long-term, you may want to reconsider your plan to buy a home with them.

Step #4: Create a Legal Agreement

One way to help reduce the financial risks for you and your partners is to draft a legal agreement for your home purchase. This document should outline each person’s rights and responsibilities as they relate to the home. You might also want to create plans for different scenarios that might occur in the future, such as selling the home or resolving disputes between co-owners.

This type of legal document can be complicated, and the exact terms may differ depending on state laws. Consider hiring a real estate attorney to help you draft a comprehensive, accurate agreement.

Step #5: Make a House-Hunting Plan

Now that you’ve handled the serious conversations, it’s time for the fun part — choosing a home to buy! Before you start, review the decisions you and your fellow homebuyers made about the budget, down payment, and mortgage. Decide how much home you can afford, and start browsing.

You and your partners should discuss all the factors that could impact your decision:

  • Location
  • Size
  • Layout/floor plan
  • Number of bedrooms/bathrooms
  • Yard
  • Garage
  • School district
  • Architectural style

These are just a few examples, but there are many other aspects to consider. Talk openly with your partners to ensure that everyone understands each other’s priorities, preferences, and deal-breakers.

Step #6: Have an Exit Plan

Before you sign the closing papers and start planning a housewarming party, make sure you have an exit strategy. Even if you go into this arrangement with the closest of friends — people you wholeheartedly trust — you still can’t guarantee the future. So develop a plan to handle unforeseen circumstances.

Work together to decide what should happen if things change. For example, what will you do if someone wants to move out and sell their share? What if one of your partners decides they want to bring someone else into the house, like a new spouse? 

What if some people want to sell the property and others don’t? What if someone’s job changes and they can’t afford their share of the mortgage? Think through situations that could change the ownership structure, and develop a plan for them.

Want Expert Financial Guidance to Buy a Home?

Whether you’re considering purchasing a house with a group of people or on your own, there are many factors to consider and questions to answer. How will this impact your financial stability and goals? Is now a good time to buy? How much home can you afford?

If you’d like expert answers to those questions, we can help. Our Home Buying Budget plan is a one-time financial planning service that helps you get your finances in shape for this big purchase. 

You’ll work 1:1 with an experienced planner to discuss the one-time and ongoing costs of homeownership. After your meeting, you’ll get a comprehensive road map with personalized advice on budgeting, insurance, down payment, net worth, and more. Schedule a consultation learn more about our Home Buying Budget plan.