Co-Buying a House: How It Works and What to Know
Platonic partners are affording homes by combining their purchasing power. Here's what to know if you're considering this route.
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Buying a home is no longer a wait-until-you're-married goal. But it doesn't have to be a wait-until-you're-in-a-serious-relationship goal, either. If solo homeownership feels out of reach — zero shame there, houses are expensive — co-buying might be an option to consider.
With co-buying, you buy a home with a platonic partner (though a spouse or romantic partner might be part of the group, too). Co-buying can mean buying with your bestie for a two-person household or buying a multi-unit property that can be shared amongst a large group — and pretty much everything in between.
But because it's a shared financial commitment, you need to be sure everyone's finances are as strong as your relationships. Co-buying requires extra planning and paperwork, and a high level of trust. If you’re willing to get vulnerable about your finances and long-term goals, the payoff of co-buying a house can be worth it.
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Why co-buying appeals
In the National Association of Realtors’ 2024 Profile of Home Buyers and Sellers, 4% of first-time home buyers were “other household compositions” — that is, something different than single, married or coupled.
“It can be a great situation, and a way to enter the market that they wouldn’t be able to enter otherwise,” says Don Koonce, a real estate agent in Seattle who has helped dozens of co-buyers.
Many co-buyers Koonce has worked with are platonic friends who have been living together for years. But they’re as diverse as the types of homes they buy, which range from traditional single-family homes to condos and duplexes.
The right home depends on your group’s size and tolerance of personal versus shared space. Houses with basements work well for separate living spaces, Koonce says, or you could remodel.
Koonce helped one mother-daughter duo buy a split-level that they renovated into two distinct units, including separate kitchens.
“It was beautiful,” he says. “I don’t see any problem with a resale on that, because somebody could rent it out.”
Emotional and financial stakes
Even for family members or experienced roommates, the financial commitment of co-buying raises the stakes. Whether or not you share space within the home, you're now sharing a major investment.
Ashley Agnew is an investment advisor and financial therapist with Centerpoint Advisors, a wealth management firm in Needham, Massachusetts. When working with co-buyers, she role-plays worst-case scenarios to “stress test” the relationship, such as how they’d handle major home repairs or theft.
“You really do have to get a little bit financially naked with the person that you’re buying with,” she says. “There has to be a lot of transparency.”
Agnew always recommends that co-buyers seek legal counsel. An estate attorney can draft a cohabitation agreement — something that’s not just for romantic partners, she notes. That way, all parties know what to expect if someone wants out of the homeownership commitment. These agreements may also outline how conflicts will be addressed.
“It’s almost like running a minibusiness, especially if it’s not a coupleship,” Agnew says.
Types of ownership
An estate attorney can also help co-buyers understand options for titling the home. Each arrangement has pros, cons and legal obligations. Here's a quick overview of the two most common types:
Tenancy in common: Tenancy in common is the most common type of joint ownership. It splits ownership based on the owners' individual financial stakes in the property. That means the owners don't have to have equal shares; for example, three people could have a 50/30/20 split. Unequal shares don't necessarily mean the owner with the largest share occupies more of the property, but if the home is sold, proceeds are distributed based on ownership amount. The title will also stipulate whether the other owners' permission is required for one owner to sell their stake. Requiring that agreement can help avert surprises, but could create a thorny situation if co-owners aren't aligned.
Joint tenancy: With joint tenancy, all owners have an equal interest in the property regardless of their financial stake. What makes joint tenancy different from say, a tenancy in common agreement with a 50-50 split, is how ownership changes in the event of one owner's death. With joint tenancy, the property automatically transfers to the surviving owner. Because of that right-of-survivorship, joint tenancy might appeal to co-owners who are partnered couples or relatives.
There are other options as well; for example, if the home is an investment property, forming a limited liability corporation or LLC may be an option. That can make titling easier, since the individual owners aren't named, but can make getting a loan more difficult as many mortgage lenders don't work with LLCs.
Build the right team
To move your plans from dream to reality, it’s essential to find a lender that is familiar with — and supportive of — co-buyers’ unique needs.
Unless you've created an LLC to buy the property, you'll move through the regular steps of getting a mortgage. Be aware that every co-buyer who's officially on the loan will need to have strong enough finances to qualify and will have to go through underwriting. If one member of your squad could use a credit boost, for example, take care of that before you start working with a lender.
If you're buying with a large group, be aware that many lenders won't underwrite loans with more than four borrowers. A mortgage with five or more borrowers requires the lender to manually underwrite the loan — they can't use software to speed up the process — and not all lenders offer manual underwriting. Forming an LLC is one option for a large group; working with a mortgage broker who can track down lenders amenable to a bigger group of borrowers could help, too.
Some real estate agents hesitate to work with co-buyers, too. “It’s a lot more paperwork,” Koonce says, “and a lot more coordinating and getting people to agree.”
To provide better service, Koonce earned a professional certification established by Seattle-based real estate startup CoBuy. The company offers education for real estate agents, attorneys and lenders, as well as services for co-buyers themselves.
Pros and cons of co-buying a home
Quicker path to homeownership: If owning a home is a serious goal for you, buying with a group can help make that reality on a shorter timeline. Three people can save up a down payment more rapidly than one.
More purchasing power: With multiple incomes contributing to the home purchase, you might be able to afford a nicer property or live in a more desirable neighborhood.
Easier loan qualification: Added income from more than one buyer can also help with your debt-to-income ratio, which the lender will calculate based on all the borrowers. Lenders look favorably on DTIs that are below 36%.
Lower housing costs: Splitting up a mortgage payment multiple ways could make owning less expensive than renting. Sharing costs can make repairs or renovations more manageable, too.
More complex process: Homebuying is geared toward, if not couples, then duos. Lack of familiarity with co-buying can make it harder to find lenders or real estate agents open to working with larger groups. And naturally, the more borrowers involved, the more there is to coordinate, like making sure everyone's uploaded necessary documents.
Serious shared responsibility: You're sharing the debt as well as the home. If one co-owner faces a serious financial setback, like a job loss or a major medical issue, the other owners may have to pay their share of the loan.
Additional preparation: What will you do if one co-owner wants to sell — or if you want one of the co-owners out? You don't know what life will throw at you, but you can take additional steps to protect yourselves before you buy. A legally-binding cohabitation agreement can outline items like how the home will be used, how finances will be divided, and what will happen to the property if one person decides to leave.