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I grew up in Michigan but currently live in Georgia. My GF and I are looking at buying a house, and both states have first time home buyer incentives, but they're income based.
So we make about $100,000 combined, I make just shy of 70K and she makes about 30K.
Both states have programs for first time homebuyers, but our incomes together prohibit us from qualifying, whereas separately we both qualify.
Would it be considered fraud if I were to apply for one as myself, get the house in my name, but we both pay on it? I can't find anything on either page about it, but obviously we are not legally married.
NOT A LAWYER: This is unlikely to constitute fraud because you're basically buying the house and charging your girlfriend rent, which is likely permissible (just like it would be if you bought the house, then put up one of the rooms for lease). However, keep in mind that this arrangement means that...you're basically buying the house and charging your girlfriend rent. Your income will be lower for mortgage applications, so you won't get approved for as large of a loan. And separately, if you break up, your girlfriend will (probably) be left with nothing, instead of being entitled to part of the house.
The latter point is probably a net positive because it makes things less messy, but it's something to be aware of going in. I think it will be very difficult to avoid a scenario in which your girlfriend feels like she's bought the house with you from an emotional (and maybe ethical) standpoint, but hasn't actually done so from a legal standpoint. I can easily see that breeding resentment.
I can see complications here, it might be worthwhile for OP to talk to a lawyer. For example, for the above to be "valid", the rent his girlfriend pays should technically be considered income for him and should be reported on taxes.
What if she lived there for free but paid for other normal budget items?
No clue, I am not a lawyer. Just highlighting one potential complication. For anything involving these sums of money I think the best move is to just pay a lawyer to make sure everything is in order and above board. At most it would cost a couple thousand but is worth it for the peace of mind.
Unless you want to make an LLC for the home.
Funny enough the whole shtick was actually her idea. I actually didn't propose it for those reasons, but she brought it up herself.
It might help to have a contract written up stating that if you end up getting married all equity in the house cannot be protected by a prenup or what not to make that simpler. Also, if your girlfriend gets a good deal on rent and doesn't contribute to your down payment, it won't feel like she's losing equity in "her home" if you break up.
Even without the home owner incentives in play, I would really recommend against buying a house together until you're married. I'm not old fashioned and opposed to living together before marriage. In fact, I recommend that. But buying a house together before marriage is something I would highly recommend against.
The reason for this is fairly straightforward; what happens if things go south? In a marriage, if things end, you get a divorce. It sucks, but there is at least an existing and organized legal framework for handling such separations. But with an unmarried couple, each with their title on the home? What happens if you break up? You're probably not going to keep living together, but both of you are still on the deed and on the mortgage. This is the same process divorcees face, but there again is a legal process to sort that out. With an unmarried couple, things can get really, really messy in regards to shared property. Divorces already can be messy affairs, but now you're compounding that chaos by not having a formal marriage document in place.
What happens if you break up? Legally speaking, both of you own 50% of whatever equity you build in the home. Are both of you going to contribute an equal share to the mortgage payment, maintenance, upgrades, etc? Since you make twice what she does, that seems very unlikely. Inevitably, if you buy a house together, you will pay for more than 50% of it, but you each will have a 50% ownership stake. In a marriage with shared finances, this is less of a concern. You simply share all your money, property, and assets. You go into a marriage with a firm understanding that everything will be split 50/50 in the event of a divorce (unless there's a prenup in place.) But this? What happens if you break up? Are you going to try and take her to court for the extra equity she's built up? Are you going to try and write a contract for this possibility? What if she offers to make up her lower contribution to the mortgage payment by putting in sweat equity in the form of DIY upgrades/repairs, or if she takes on a greater share of the housework? How are you going to even begin to assess the value of that contribution? What happens if one of you get hit by bus? In a marriage, unless stated otherwise in a will, the other partner gets full ownership of the house. Will the deceased partner's relatives want to kick the survivor out of the home so they can inherit their share of the equity? What if the roof leaks and you have $10k in damages for insurance deductibles or uncovered expenses? Are you going to split those equally? What if one of you gets really sick or loses their job, and can't make their share of the payment? Are you going to throw them out on the street? Whether they pay their share or not, they still have 50% of the equity.
Really, the whole thing is a mess. You're walking into a situation that will result in as many financial ties as marriage, with all the potential entanglements, but without getting any of the legal protections of marriage. The law is built to handle situations like breakups, deaths, etc for married couples, but those structures just aren't as robust for unmarried couples. It is almost never a good idea to buy large assets together prior to marriage. There are very practical reasons the LGBT community fought so hard for same-sex marriage. It wasn't just about vibes. It was so couples in long term relationships could do things like buy houses together using the existing legal structures that are built to handle all of these questions.
Instead, if you want to buy a house, here's what I would recommend. My husband and I are now married and have since bought a house together. But we lived together for several years before marriage, in a house that I owned before we met. When it was time for him to move in, we agreed that he would pay me rent. We figured out what the house we lived in would rent for, then we divided by two. Then, we subtracted some large percent, and that was what he paid me each month. I actually ended up getting less from him than I did combined from the two roommates I previously had before he moved in. And he paid me less than he did for the one bedroom apartment he was renting before. But until the day we were married, I was the only one on the deed. After we got married, we put the house in his name as well and merged all of our other assets. But we kept things entirely separate until it was time for marriage. Hell, I even had him sign a lease. I wanted it in writing that he wasn't expecting any ownership stake in the house from the rent he was paying. He didn't mind, because he was a mature adult who realized what my concerns were.
The key to avoid animosity is to make sure that both of you are benefiting financially from the arrangement. Figure out what she would pay in rent if she were living on her own. Then lop off a big percentage of that. So she's getting a discount on what she would otherwise have to pay in rent, and you're building some additional equity. She can take the money she would save from rent and invest it in an index fund or similar. If she doesn't like the fact that only you're the one building home equity, remind her that in turn, she can also just walk away from the whole thing if things go south. If you break up, you're stuck paying the mortgage on a big empty house, while she can wash her hands of everything.
Or perhaps the best option is to just talk it over. Figure out something that both of you feel is fair. It's always tricky balancing finances when two partners make different amounts of money. (And our situation was odd in that I owned the house, but he earned far more. I just happened to have bought one earlier.) But still, until you are at the point where you're willing to merge finances completely in a marriage, I wouldn't recommend buying a house together. Better instead for one of you to buy the house and the other to get an amazing deal on rent.
It’s really only fraud if she’s your wife or domestic partner who you’ve been filing taxes jointly with and you lie about that.
Otherwise…it’s a grey area. I’ve looked into doing exactly this, but with a USDA direct loan rather than with a cash incentive program (because there aren’t many available in my area right now). So a lot of what I have to say will be based on that. However, I believe it’s a similar situation because USDA loans are also income restricted and have limited funding much like many of these first time buyer incentive programs.
The short answer is, if you don’t have any shared finances like a car, personal loan, credit card etc, then go for it. Be prepared for them to scour your financial history either way though. They may even ask about her directly, and why you aren’t signing together. Ultimately, it’s up to you how you want to handle that. I’ve heard several people say they chose to live separately while the paperwork was going through because they didn’t want to lie or complicate the situation further.
I heard it said by someone who pulled this off, that the bank, the underwriter and everyone involved in approving you, can’t predict the future, especially not when it comes to relationships. People do all kinds of irrational things when it comes to their relationships, and it’s not worth someone’s time to prove that you didn’t really break up and decide to get get back together later or something along those lines.
If you do have a long history of shared finances, it might be more complicated. I would probably caution you to look more deeply into the specific programs you’re thinking of going with and ask around to see if anyone has experience with them. At worst, they should just deny you though. Again, it’s probably not worth anyone’s time to go after some person and their girlfriend who for personal reasons didn’t sign the paperwork together.
You are 100% entitled to do that and should strongly consider it. My long term partner and I are not legally married and have found ourselves in similar situations. For example, there’s an EV car rebate that phases out if your income is “too high” which is honestly kind of offensive given how high cost of living is in our city. For this reason, the car was bought and registered under her name. We both pay for it, but on paper it’s hers.
Aside from any local/state incentives, one thing you should consider is an FHA loan. It is a federal program for first-time home buyers that helps you not have to put as much money down (if you don't have a large savings for a downpayment, most regular mortgages ask for at least 20% down, but with an FHA loan you can put in as little as 3.5% down) and also can potentially help with the interest rate a bit (since it's a federally backed program). They're also easier to qualify for if you need it, since it's understood that this is your first house and you may not have the same credit or savings as someone who's bought and sold multiple houses before.
I did an FHA loan in 2020 and really benefited from it, but there are a couple of caveats though:
some places might not want to sell to FHA loans or work with you, since as part of the FHA loan, the bank will force you to get an inspection, which you should do anyways, but they might require additional things like wind mitigation or termite inspection or whatever. Sellers might be impatient to sell and not want to wait for all these inspections, so they might be holding out for a cash offer.
normally banks ask for 20% downpayment on a mortgage. The reason you normally want to put that much down is because if you go less than that, say 10%, you'll be required to pay a mortgage insurance premium, which is basically the bank charging you more for having less invested into the house. Once you reach 20% in equity on a regular loan though, you lose that mortgage insurance and it becomes the same as if you had put in 20% down to begin with. HOWEVER, for an FHA loan, that mortgage insurance premium will stay for the entire length of the loan, regardless of how much equity you have in the house. You can have the house 99% paid off and you'll still be paying that mortgage insurance. This may not be the end of the world (see my example below), but you should definitely keep it in mind and plan on refinancing in a few years once you've hit that 20% threshold.
My situation was a really lucky one, so I wouldn't use it as the model of what an FHA loan looks like, but my wife and I were able to purchase our home in 2020 despite not having much at all saved up. We both had full-time jobs and no debt (had recently paid off some student loans), but also did not have much saved up for the 20% of a downpayment. But we had enough for 3.5%, so we used that as a downpayment and then even negotiated with the sellers for them to pay $5,000 of our closing costs. But I fully knew about the mortgage insurance, and that we would have to refinance the house maybe like 5-10 years later once we hit 20% equity, so I factored that into our calculations. We ended up getting extremely lucky and were able to refinance less than two years in (house prices went up, so even though we had barely paid off our loan, our equity in the house went up). But the TL;DR of the story is that we wouldn't have been able to afford the house without the FHA loan because we barely had any savings and didn't have much credit history (good credit, but not much history). The FHA loan allowed us to put MUCH less down than we otherwise would have and also a competitive interest rate despite our lack of credit history.
I’m in a similar situation but married. Would the advice be the same for me or does the marriage change things?
If you are married then you are considered a "household". I would think that there would be no way to separate your incomes from each other if the programs are based off household income.
Makes sense, figured it was worth asking. Lot of details to learn when pursuing home ownership for the first time.
I just wrote up my experiences with an FHA loan a few years ago, maybe it could help you.
Oh thanks, I bookmarked your comment so we can take a deeper dive when we are ready for next steps.