Buying and selling real estate is one of the most common things people do as married couples. Families change over the years and as they expand and contract, couples move from one house to the next. They might buy or sell property together as a financial investment or even purchase a second home with plans for the future. In order for buying and selling real estate to go smoothly for married couples, there are a few things they should know:
Financial Pre-Approval is Important
If you are buying real estate, receiving pre-approval for a mortgage is essential. Even if the exact amount you end up borrowing is different than your pre-approval amount, having the “go-ahead” from a mortgage company speeds up the process once you are ready to buy. It also shows sellers you are serious about buying and will be able to make a solid offer if you are interested in their home.
As part of a married couple, there are several things you should know about credit scores that are different from when you were single. Even after you are married, you will still have an individual credit score. However, both will be taken into account when purchasing real estate.
A couple with two good credit scores is more likely to qualify for a lower interest rate mortgage than a couple with one low score and one high or two low scores. If you have a good credit score and your spouse’s is low, it is possible for you to apply for a mortgage in only your name, but then only your income is taken into account. This means the mortgage amount for which you will be approved is much lower because your spouse’s income is not considered.
Selling Real Estate Requires the Approval of Both Owners
When the time comes to sell real estate that is jointly owned, both owners must approve the sale. For example, if you want to sell your home and your spouse is unwilling to sign a listing contract, you cannot legally make the sale. Typically, this is not a problem for married couples, but it can cause issues when couples are separated or planning to divorce.
Furthermore, tax issues arise when property is sold by a married couple, as opposed to a single. For example, IRS Code section 121 allows homeowners to exempt the first $250,000 of capital gains when selling their primary home, but that amount is doubled to $500,000 when the sellers are married. Tax issues change somewhat frequently and have drastically changed in recent years, so it is important to consult a tax expert if you have recently sold your home.
Buying and selling real estate are important decisions and have a major effect on your financial status. If you and your spouse are thinking about buying or selling property, speak with an attorney or real estate professional before moving forward.