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Can my friends and I buy a house together?

Q: Currently I am renting with three friends. I am interested in knowing if we can buy a house together that we all would live in?  Would we all have to qualify?  Would it be considered an investment property or owner-occupied?  If you could, please send me additional information regarding this matter. Thank you for your time.

A: The answer is "yes," you can certainly all buy a house together, and if you live in the property, it would be considered owner-occupied. Since you are unrelated, it would most likely be done as a tenant-in-common transaction or similar arrangement.

That said, buying a home is a serious endeavor. If one of the parties needs to move or wants to sell, the others would need to "buy them out" and refinanceto get their name off the deed and mortgage. This can be inconvenient and costly, especially if mortgage rates have risen when that needs to occur, and it can be difficult if not impossible to get names off the deed and mortgage without refinancing, and that presumes that the remaining owners will be able to qualify for a new mortgage on their own. Furthermore, should one of the "owners" decide to move or stop paying, the other remaining owners would be liable to make payments.

Friends are all well and good, but this is more of a business transaction than a friendship one.

Before you all jump in with both feet, you'll want to sit down and talk to a lawyer. You may all also want to discuss where you expect to be in the future, and when that future might start. There are any number of issues you'll want to settle beforehand, including how to proceed in the event that one of you wants or needs to break the deal, how you will budget for maintenance and repair costs and more. It would be a good idea to have everyone's responsibilities written down and signed by all parties to prevent future misunderstandings.

Given the costs of acquisition (down payment, mortgage costs) and disposition (commission when the home is sold), buying a home is usually best as a longer-term commitment.

Ask the expert
Keith Gumbinger
Keith Gumbinger
Mortgage Expert
Vice President, HSH.com
About Keith: Mortgage market observer and analyst with 35 years experience... (more)
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