More couples are buying a house now and getting married later. Four things they should know first.

By Weston Blasi

Four decades ago, less than 1% of first-time home buyers were unmarried couples. Today, that number is 16%.

A lot of new home buyers are getting a mortgage before a wedding ring.

There's a growing trend of first-time home buyers purchasing a home with a partner who isn't their spouse, according to data from the National Association of Realtors. In 1981, less than 1% of first-time home buyers were unmarried couples. Today, that number is 16%.

More people have been buying a first home together recently, despite mortgage rates staying around 7%. And a lot of those buyers are unmarried couples. The number of such couples buying a first home together has risen over the past four decades.

"We'll get married later, maybe we won't, but that's a decision for another day - and it's separate from the housing choice," Jessica Lautz, the deputy chief economist for the National Association of Realtors, told MarketWatch about the trend.

"Housing affordability is a problem regardless, but perhaps people are saying, 'Well, let's take advantage right now while we can afford this property,'" she added. "Perhaps there's less competition in the marketplace because interest rates have risen."

Another possible reason more unmarried couples are buying homes is the overall decline in marriage rates in the U.S. The median age for first marriages is also on the rise.

But buying real estate with a partner you aren't married to potentially comes with serious financial risks. Here are four things to consider before buying a home as an unmarried couple, according to certified financial planner Cathy Curtis.

See also: Biden lays out plan to lower housing costs ahead of State of the Union, but effort draws criticism

Draw up a cohabitation agreement

In many instances, one member of a couple may have more money than the other for a down payment. Such an uneven investment could create issues if they sell the house in the future.

"Right from the start, the investment is not equal," Curtis told MarketWatch. "How does one track this uneven investment over time and at the point of sale? It would be important to have a legal document, like a cohabitation agreement, that records initial investments and outlines how they will be accounted for upon sale of the property or a breakup."

In the event of a breakup, a cohabitation agreement can stipulate whether one party has the option to buy the other out, whether both parties have to agree to sell, and who gets to stay in the property.

See also: Mortgage rates edge down. Home buyers are seizing the moment - while it lasts.

Increase the credit score of the partner with the lower score

Having a strong credit score is paramount to securing a favorable interest rate on a home loan. If both partners' incomes are necessary to qualify for the loan, it's important to make sure they both have a good credit score.

A good credit score ranges from 670 to 739 on the FICO scale and 661 to 780 with VantageScore, according to Experian.

If one partner has a credit score lower than those ranges, it's a good idea for them to work on improving their score before buying.

If that isn't possible and one person's score is low enough to severely impact the interest rate, it may make sense to not apply for the loan together.

"Couples can consider improving the lower credit score before applying or possibly having the person with the higher score apply individually ... if their income qualifies separately," Curtis said.

See also: Housing sentiment is at the highest level in nearly two years, Fannie Mae says, because of home sellers

Resolve how an uneven monthly payment impacts home equity

"Decide how to divide the mortgage payment," Curtis said. "What if one person makes a lot more money than the other? How does the mortgage payment get divided?"

Talking with your partner about those monthly payments is key, because it's rare that both members of a couple make the same amount of money. If the mortgage payments are unevenly distributed, a couple may insert terms into the cohabitation agreement where one person accrues more equity in the home than the other.

"Over time if the salary or income disparity changes, the amount each puts into the mortgage can change, too," Curtis added.

Decide who is on the property's title

There are several different ways in which a couple can structure their property title for estate-planning purposes. One option is joint ownership.

"Joint ownership means when one person dies, the other automatically becomes 100% owner," Curtis said. "Is this what each person wants?"

A couple could also opt for a tenancy-in-common arrangement, in which case "each person will be able to bequeath their share to whom they want," she added.

Having an attorney draft a cohabitation agreement can increase the overall cost of home buying but leads to "fewer headaches later," Curtis said.

See also: My mother signed her house over to my brother before she died. He refinanced it and sold the contents. Are we entitled to a share of the proceeds?

The report comes as President Biden announced his plan to combat the rising cost of housing, particularly for first-time buyers.

Biden's 10-point plan, which was released ahead of the president's State of the Union address, included items including a $10,000 tax credit for middle-class home buyers, up to $25,000 in down-payment assistance to first-generation home buyers and lowering closing costs for refinancing by an average of $750.

Read on: This isn't a bull market - it's a 'duck' market. Here's why.

-Weston Blasi

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03-08-24 1411ET

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