Buying a House With a Friend: Good or Bad Idea?

Article Summary:

Owning a home is often seen as achieving the American Dream, but the reality is that purchasing a house is a major financial investment. For many people, the cost of buying a property outright is simply out of reach. But homeownership doesn’t have to be a distant dream. One way to make this goal more attainable is to purchase a property with a friend — but deciding whether this is the best option for you requires weighing the pros and cons of co-ownership.

Are you thinking about buying a house with a friend? It can be a great way to save money and get into the property market. But there are a few things you need to consider first. In this article, we’ll take a look at the pros and cons of buying a house with a friend and help you decide if it’s the right option for you.

Pros and cons of buying a house with a friend

Buying a house with a friend is an exciting idea. You can share a home together and hang out every day. However, splitting the financial responsibility of homeownership isn’t all rainbows and sunshine; there are some downsides to it as well. In the following section, we’ll go over some pros and cons of buying a house with a friend.


Here is a list of the benefits and the drawbacks to consider.

  • Larger purchasing power.
  • Easier to qualify for a mortgage.
  • Can potentially avoid PMI.
  • Lower individual expenses.
  • Great way to start investing in property.
  • Can put a strain on your friendship.
  • Your friend’s credit score can affect yours.
  • Breaking tenancy agreements can be complicated.
  • Your debt-to-income ratio can be impacted.
  • Shared financial responsibility.

Pros of buying a house with a friend

Larger purchasing power

When it comes to making one of the biggest purchases of your life, going in with a friend has its advantages. For one, you’ll have increased purchasing power. By pooling your financial resources, you’ll be able to afford a nicer and more upscale property than if you were to purchase a house on your own.

Easier to qualify for a mortgage

Qualifying for a mortgage might be easier with a co-borrower, since lenders will consider your combined income and credit scores. This is especially true if your friend has a good income and a better-than-average credit history. Keep in mind that a co-borrower differs from a co-owner in that a co-borrower doesn’t always have a legal share in the property (unless they’re a co-owner as well).

Can potentially avoid PMI

With a friend’s help, you can most likely put down a larger down payment. And if you’re able to come up with at least a 20% down payment, you can avoid paying Private Mortgage Insurance (PMI) each month. This can save you a good chunk of change in the long run. Though PMI is usually around 0.5% to 1.5% of the loan amount, if you take out a large loan, it can still add up quickly.

Lower individual expenses

If everything goes smoothly, buying a property with a friend can be a great way to save money. You’ll be able to split the cost of the mortgage payments, utilities, and other expenses, making homeownership more affordable for both of you. If you’re looking for a place to call your own but can’t quite afford it by yourself, teaming up with a friend can be a great way to realize your dream of homeownership.

Great way to start investing in property

Choosing a friend to partner up with is a great way to get started in real estate investing. This is especially true if you’re still early in your career and don’t have a lot of money saved up. Unlike renting an apartment, buying an investment property allows you to build equity as you pay down the mortgage.

Cons of buying a house with a friend

Can put a strain on your friendship

One of the biggest cons about buying a house with a friend is that the friendship could be strained or even destroyed by the experience. For example, if you decide you want to sell the house but your friend doesn’t, it could lead to a bitter disagreement. There could also be issues over how to split expenses or who gets to make decisions about renovations.

Your friend’s credit score can affect yours

When applying for a joint mortgage with your friend, both of your credit scores will be taken into consideration to determine interest rates and loan terms. If your friend has a poor credit score, it could negatively affect your financial profile. This means you might not be able to qualify for the best loan terms possible. Be sure to have an honest conversation with your friend about their credit history before co-owning a home with them.

Pro Tip

If your credit score is less than ideal, take steps to increase it before applying for a loan. This will allow you to qualify for better mortgage terms and save money on mortgage interest payments in the long run.

Breaking tenancy agreements can be complicated

Since both of your names are on the mortgage, things can get complicated when one co-owner wants to move out. It’s not as simple as breaking the lease and paying a penalty. Instead, you’ll likely need to go through a refinance to remove one of your names from the mortgage.

Your debt-to-income ratio can be impacted

Though you can split your monthly mortgage payment with your friend, you’re both still technically responsible for the entire mortgage individually. This means if you take out a $250,000 mortgage with your friend, your debt will go up by $250,000 (not just $125,000). And if your income is on the lower side, this extra debt can increase your debt-to-income ratio quite a bit.

Shared financial responsibility

Another major challenge of co-ownership is that both parties are equally responsible for the mortgage, even if one party is unable or unwilling to contribute their share. This can lead to tension and conflict if one person feels like they’re carrying too much of the financial burden.

How to buy a house with a friend

Buying a house with a friend is a major commitment and can involve some complicated steps. Here are some tips to help make this process as smooth and pain-free as possible.

Have an open and honest conversation

Buying a house is a financial decision that shouldn’t be taken lightly. Make sure you and your co-buyer are on the same page before moving forward. Sit down and have an honest discussion about your budget, your must-haves in a home, and your purchasing timeline. Don’t forget to disclose your credit scores, incomes, and amounts of debt, since these can greatly impact your ability to qualify for a mortgage. Having this discussion might be slightly uncomfortable, but it’s an important step to make sure there are no surprises down the road.

Decide on the property type

Before taking the plunge to buy a house with your friend, figure out what type of property you’re looking for. Do you want a condo, a townhouse, or a single-family home? Each option has its own set of pros and cons, so be sure to figure out which one best aligns with your needs and budget. Once you have agreed upon a property type, you can start looking at specific listings in your desired area.

Discuss the type of ownership

When it comes to buying a house with a friend, there are two main types of ownership: joint tenancy and tenancy in common. Under joint tenancy, both co-owners have an equal interest in the property and can use the entire space.

Tenancy in common is different in that each owner has an unequal share of ownership interest in the property. For example, one person may own 60% while the other owns 40%. There are also no rights of survivorship with tenancy in common.

Create a legally binding agreement

If you’re thinking about purchasing a property with a friend, be sure to put together a legally binding agreement beforehand, such as a Cohabitation Property Agreement. This document should spell out each person’s financial obligations, as well as what will happen if one of you wants to sell the property or if the relationship ends.

Having a clear written agreement in place will help to avoid any misunderstanding or disagreement down the road. Before purchasing the home, be sure to consult with a real estate attorney and create a comprehensive agreement. This might require a bit of work up front, but it’ll be worth it in the end.


What is the best age to get a house?

There’s no one-size-fits-all answer to this question, as everyone’s life goals and financial situations are different. In most states, you need to be at least 18 to buy real estate and sign legal agreements. But there are other factors that can determine whether or not you’re ready for homeownership: your income, the area where you’re looking to purchase a home, your future plans, etc.

According to the United States Census Bureau, in 2022, the homeownership rate among Americans under the age of 35 was 38.8%. By contrast, 78.9% of people in the United States over the age of 65 have a property held under their name.

At the end of the day, there’s no right time or best age to buy a house. It all depends on your individual situation and when you feel the most financially comfortable.

How much money should I save before buying a house?

How much money you should save up before buying a house will largely depend on the property price and the down payment amount. Generally, lenders prefer buyers to put down at least 20% of the home purchase price. If you’re able to do so, you can avoid paying Private Mortgage Insurance and potentially lock in a lower rate.

But don’t worry, not all loans require a 20% down payment: FHA loans require as little as 3.5%, with a credit score of at least 580 (for scores between 500 and 579, a 10% down payment is required). You will need 1.5% for USDA loans, provided you meet the qualifications, while VA loans allow zero down payment.

Apart from saving enough money to cover the down payment, make sure to also budget for closing costs (3%–6% of the home price) and moving costs.

Pro Tip

A general rule of thumb: your housing expenses should not exceed 28% of your pre-tax income. Use this calculator to figure out how much home you can afford.

What credit score do I need to buy a house?

To qualify for a conventional loan, you generally need a credit score of 620 or higher. But if your credit score is lower, it isn’t the end of the world. If worst comes to worst, you might just have to pay a higher interest rate or risk having your application denied. You can also try applying for other loans that have less stringent credit score requirements. For example, the FHA loan only requires a credit score of 500 if you can put at least 10% down.

Key Takeaways

  • Buying a house with a friend can increase your purchasing power and allow you to qualify for better loan terms. It could be a great way to achieve homeownership, even if you don’t have a lot of money saved up.
  • Co-owning a home with a friend could also potentially put a strain on your relationship due to shared financial responsibility.
  • Make sure to have an honest conversation about finances before applying for a joint mortgage. This will help prevent unpleasant surprises down the road.
  • Don’t forget to draft a Cohabitation Property Agreement to outline each person’s rights and responsibilities with regard to the property.

Buying a house with a friend is an event worth celebrating. Not only are you becoming a homeowner, but you’re also forming a closer bond with your friend. But before you sign on the dotted line, be sure to consult with a real estate attorney. They can help make sure that everything is correctly set up and answer any questions you may have.

And keep in mind, even if you’re only exploring the idea of co-owning a home with a friend, it’s never too early to start shopping around for the best home mortgage loans.

View Article Sources
  1. Homeownership rate in the United States as of 2nd quarter 2021, by age – Statista
  2. What is a co-borrower? – Federal Housing Administration
  3. What is private mortgage insurance? – Consumer Financial Protection Bureau
  4. What is PMI? Understanding Private Mortgage Insurance –
  5. Chapter 4: Borrower Eligibility – USDA Rural Development
  6. Making the move to homeownership on your own or with someone else – Consumer Financial Protection Bureau
  7. Joint Tenancy – Legal Information Institute, Cornell Law School
  8. Tenancy in Common – Legal Information Institute, Cornell Law School
  9. FHA Loan Requirements – Federal Housing Administration
  10. USDA Announces May 2022 Lending Rates for Agricultural Producers – USDA Farm Service Agency
  11. VA home loan limits – U.S. Department of Veterans Affairs