Steps to home ownership for LGBT consumers

Buying a home may be the biggest investment you’ll make in your lifetime. The process can be exciting and for many, it can also be intimidating. There are additional factors for same-sex couples to consider that may make the process more complex, although some of these are changing due to recent Supreme Court rulings on the Federal Defense of Marriage Act and the repeal of Proposition 8 in California. Understanding the steps to achieving your goal of home ownership can help same-sex couples improve the buying experience while steering clear of potential pitfalls.

Following are a few suggestions to help you on the road to home ownership, with an emphasis on considerations for same-sex couples intending to purchase together:

Obtain copies of your and your partner’s credit report and have any errors corrected before you apply for a loan. For both partners: Pay down/off outstanding balances where feasible as doing so will help improve your debt-to-income ratio and your credit score. Organize important documents that you will need, such as current pay stubs, W-2 forms, bank and asset statements, tax returns and accurate records of debts.

The amount you will need for a down payment depends on your lender, but the more money you are able to put toward your down payment, the more equity you will have in your home and the lower your mortgage payments will be.  If you have less than 20 percent to put down, you’ll probably have to pay for mortgage insurance, which protects the bank against default.  You will also need to have cash for closing costs, which are generally equal to about two to six percent of the purchase price of the home.

Learn about different terms and rates available, as well as any loan programs that might be available to you as a homebuyer.  Many banks offer special mortgage programs that may be suitable for you. Look for one that has a record of working with LGBT customers. A trusted lender can estimate how much you can truly afford to pay for a mortgage and offer insight to what type of mortgage is best suited for you.  Lenders can also help you get pre-approved for a loan, which establishes your buying power giving you more leverage in the deal-making process.

Find a licensed realtor you trust who is familiar with the area in which you want to buy and who has worked with same-sex couples. Word-of-mouth recommendations from other gay couples who’ve been through the process may help. An LGBT-friendly bank with experience in this industry may also have recommendations for appropriate real estate agents.  A realtor’s experience buying and selling homes can be very valuable, and their services generally go far beyond helping you find a home in your desired location, as they can also negotiate price and other criteria and walk you through the paperwork.

Once you find a home that meets your price range and criteria, you may be ready to make an offer. The three basic components of a purchase offer are price, terms and contingencies.  Price is the dollar amount of the offer, terms cover the other financial and timing factors that will be included in the offer, and contingencies are clauses that specify what will need to take place in order for you to fulfill the contract.

The seller will either accept your offer, counter-bid, or decline your offer.  If you and the seller are able to come to an agreement, you’ll be asked to sign a contract and put down a “binder” or “earnest money.”

Hire a home inspector, preferably an engineer familiar with the area where you are buying, to take a close look at the condition of the home. An inspection can point out potential problems that could require costly repairs down the road.  In addition to the general home inspection, it may also be prudent to have specialists inspect various areas of the home, such as the roof, electrical, plumbing, chimney, etc.

Confirm with your real estate agent, home insurance agent, and lender that you have all the proper documents in place before signing the closing papers.  At this time, you’ll usually need to settle all closing costs before receiving the keys to your new home.

In June, the Supreme Court ruled that Section 3 of the Defense of Marriage Act is unconstitutional, meaning married same-sex couples in California and other states will have full access to the federal protections and benefits that other married couples receive, including inheritance rights. While this is good news for same-sex couples in the 13 states and the District of Columbia where marriage between same-sex couples is legal, it does not apply to same-sex couples in the other 37 states.  In those states, if you are purchasing property with a same-sex partner, you’ll have to be very specific about whom you’d like to leave it to in your will or trust. This may still be the case for couples in domestic partnerships as well, and it’s still unclear whether benefits will accompany same-sex couples that move from a state where their marriage is legal to one where it is not.  If you have any questions or are unsure how the new laws affect you, consult an attorney with experience working in estate planning with same-sex couples.

The foregoing article is intended to provide general information about steps to purchasing a home and is not considered financial or tax advice from Union Bank.  Please consult your financial advisor.