Buying a House with a Friend: Pros, Cons, and Key Considerations

Key Takeaways:

• You can buy a house with a friend, or multiple friends. 
• Buying a house with a friend makes both home buying and homeownership more affordable from sharing on up-front costs to splitting monthly bills. 
• Clear communication, careful planning, and written legal agreements are crucial to avoid financial issues and relationship strain. 
• Choosing the right co-buyer and setting clear expectations about money, household responsibilities, and exit plans will help keep things smooth. 

While high housing costs might be slowing down home buying, buying a house with a friend can be a smart way to break into homeownership. Pros like pooling resources and sharing costs are appealing, but there are a lot of important things to consider before making the leap. Whether you’re looking for a home in Eureka, CA, moving out of your apartment in Boulder, CO, or upgrading from your rental in Madison, WI, this Redfin article covers the pros, cons, and common questions about co-ownership. 

Can you buy a house with a friend? 

Absolutely! You can buy a house with a friend or group of friends, as long as everyone can afford the mortgage payments and meet the lender requirements. In fact, it’s an increasingly common choice as housing costs rise and affordability becomes a bigger challenge for many people. Pooling resources with a trusted friend can help you split the costs of a down payment, mortgage, property taxes, and maintenance, making homeownership more accessible than on your own.

Friends don’t have automatic legal protections like spouses, so it’s important to create clear, written agreements to help define everyone’s rights and responsibilities and prevent future disputes.

Pros and cons of buying a house with a friend

There’s a lot to think about before buying a house with a friend. It’s fun and has its perks, but there are potential downsides that you shouldn’t overlook. 

Pros

• • Enter homeownership sooner: Partnering with trusted friends is a common way for people to enter homeownership or real estate investing sooner.
  • Start building equity: One of the major pros to buying a house vs renting is the chance to build equity on your investment. While monthly rental payments are an unrecoverable cost, buying a house with a friend can help you start building on your investment sooner for more profit to share when you’re ready to sell.
  • Increase buying power: Co-ownership allows for more options than you would be able to afford on your own. In addition to qualifying for a better loan, features like larger spaces, better locations, and more amenities become available with multiple incomes. 
  • Qualify for a mortgage easier: Combining your average incomes and credit scores can help when a mortgage lender reviews your applications. If you and your friend both have good credit, you could be approved for better interest rates. 
  • Larger down payment: With multiple incomes, you’ll be able to make a bigger down payment which can keep you from having to pay extra costs for private mortgage insurance (PMI). 
  • Share homeownership costs: While going it alone is doable, buying a house with a friend gives you many opportunities to cut costs associated with homeownership. It’s not just the mortgage you’ll share. Property taxes, utilities, regular maintenance, and homeowner’s insurance can all be split.
  • Support throughout the process: The road to homeownership can be stressful, especially if you’re on it by yourself. Having a friend alongside you to help with the complexities, de-stress when you need a break, and go all out on the latest interior design trends can ease the process, and even make it fun. 

Cons

• • One person’s credit impacts everyone: Whether it’s one close friend or three college roommates, just one bad credit score can negatively affect the whole group’s rates, no matter how high your own score might be. 
  • Financial strain: Unlike a rental agreement, if your friend fails to pay their share of the mortgage, you bear the burden of ensuring the payment is met. This can reflect badly on your own credit score and make it harder to apply for future loans. 
  • Impact on your debt-to-income ratio (DTI): Even though splitting the mortgage with your friend can save you money, lenders will see the entire mortgage obligation as your sole responsibility. This makes your DTI look much higher, and could increase your cost of borrowing on things like credit or other loans. 
  • Complicated exits: If one of you is ready to move out before the other, it can put you in a difficult spot. You may need to refinance your mortgage, buy the other person out of their share of the house, or even sell the house if you can’t afford the costs on your own. 
  • Friendships tested: No matter how close you are to someone, buying a house together can put a lot of strain on a relationship. Disagreements on details, financial troubles, and even differing lifestyles can throw a wrench in any friendship. 

How to buy a house with a friend 

Buying property with a friend involves several important steps and considerations. Here are a few tips to help get you started: 

1. Choose your friend carefully 

This is arguably the most important step in the process. Picking someone to co-own your house takes a roommate agreement to a whole new level. You’ll not only be sharing a living space with this person, but finances and responsibilities as well. Make sure to ask direct questions and give honest answers. 

Here are a few important topics to begin with: 

• Current financial situation: Be sure to cover income, debts, and credit score, as well as budgets for both the purchase of the house and recurring costs throughout your ownership. 
• Goals and timelines: You’ll want to make sure you both align on your goals and timelines. What do you each want in a home? How long do you plan on living in it? What happens when one or both of you wants to move?
• Lifestyle and responsibilities: Lifestyle compatibility is significantly more important when buying a house with a friend as opposed to renting. You’ll want to dig into the top roommate agreement topics and get on the same page to avoid potential disagreements before they happen. 

2. Decide how to split ownership

While there are several ways to divide property ownership, these are the two most common: 

• Joint tenancy: This legal arrangement gives each owner equal rights and responsibilities for the house. It also has specific rights of survivorship. In the event of the death of one co-owner, the surviving co-owner automatically inherits the property. 
• Tenancy in common (TIC): TICs on the other hand, allow you to decide on equal or different percentages of ownership between each owner. Those percentages are then left to each owner’s heirs or beneficiaries rather than to the remaining owners. 

3. Decide on property type

Buying a house with a friend can mean many different things. Are you thinking of a starter condo, something bigger with a yard for your pets to share, or a multifamily property as an investment? Before you start house hunting, talk through your goals, must-haves, and deal breakers. Looking at dream homes is definitely a fun part of the search process, but don’t neglect getting serious about what both of you are looking for and can realistically afford. 

4.  Divide responsibilities 

Talk to your friend about how you want to divide household responsibilities. Owning and maintaining a home takes a lot of time and energy. Work out a strategy that leaves you both feeling satisfied with the amount you are contributing to the household. Each person has their own strengths, schedules, and preferences, so compromise and teamwork are extra important when buying a house with a friend. 

5. Plan for the future

Continue your initial conversation about goals, timelines, and lifestyle by making solid plans for any changes that may happen along the way. The more you plan in advance, the less stress you’ll have when something unexpected happens. Life changes—jobs, relationships, or family needs—can shift plans. Discuss how you’ll handle things if one of you needs to move out. Will you sell the home or refinance so one person holds the title? How will you split expenses, profits, and responsibilities?

6. Put everything in writing 

In the world of homeownership, you cannot skim over details. And no matter how much you trust your friend, make sure to get everything in writing. Seek help from professionals to draft a legal agreement that works for your specific situation and covers each detail regarding ownership, responsibilities, exit strategies, and anything else you might need. 

Buying a house with a friend: Is it right for you?

Regardless of what you’ve researched, buying a house with a friend is a largely personal decision that requires careful thought. It can be great to have a friend to go through the homebuying process with, but it can also complicate things. Talk thoroughly with your friend (or friends) about whether this is the right choice so you can all come to a decision that works for your situation. 

FAQs

Q: Is it smart to buy a house with a friend? 

It can be a smart move, but it largely depends on whether you are both in a place physically, mentally, and financially to co-own. Buying a home is a big commitment on its own, and it can get more complicated with more people involved in the process. Ultimately, the decision to buy with a friend comes down to what feels right for you.

Q: How do we split costs fairly? 

Every person’s situation is unique, so it’s important to start by having an open discussion about your finances and what you are each able to contribute. You might decide to split costs 50/50, divide them based on income, or match ownership percentages. Once you agree on a plan, make sure to add it to your written records. 

Q: How much of my personal finances will I need to share? 

Regardless of what a lender might require you to share, you’ll need to be open about your financial habits, debts, credit score, and income with your co-buyer. If sharing financial information feels uncomfortable, remember that your friend will need to share theirs with you as well. Trust and clarity are essential to making co-ownership work. 

Q: What happens if one of us wants to move out?

Your options largely depend on what you’ve decided in your co-ownership agreement. This might mean a negotiation to convince all parties to sell, a buyout of shares, a sale of individual shares, or even legal action. Planning for an unexpected move is crucial to avoid complicated decisions or future disagreements. 

Q: What is the best way to avoid damaging your friendship? 

The best thing you can do is communicate with each other. Be open, honest, and respectful about everything from financial issues to dirty dishes. Letting the little things go can be helpful in any co-living situation, but it’s important to protect your boundaries and not let things fester and become bigger arguments down the line. 

Q: Is it better to buy a house with a friend or rent? 

Buying a house involves a lot of planning and personal responsibility. If you’re planning on sticking around for a while and want to start building equity, owning a home might be the right option for you. If you or your friend want more lifestyle flexibility in the near future, maybe renting is a better choice. It is ultimately up to you to determine the right path for your specific situation. 

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