From Renting to Buying: Buying a Home with a Friend

Why Rent Forever? Buy Together & Build Equity

Sharing a home doesn’t have to mean marriage, family ties, or a landlord collecting your rent. More friends are skipping the rental cycle and pooling their resources to buy property together — building equity while still enjoying the perks of communal living. With rising housing costs, co-ownership can be a smart way to afford a home in a competitive market. But before jumping in, it’s important to understand the financial and legal details that come with buying a home with a friend.

 

The Financial Benefits of Buying a Home with a Friend

Buying a home with friends isn’t just about splitting the mortgage — it’s about turning your monthly payments into an investment. Instead of paying rent with nothing to show for it, you’re building equity in a property that could appreciate over time. Of course, shared expenses also mean lower individual costs for things like the down payment, closing fees, and maintenance, lessening the financial blow of homeownership. Plus, with multiple incomes on the loan application, you might qualify for a better mortgage rate or be able to afford a home in a more desirable location.

Pooling resources doesn’t just make homeownership possible — it can make it surprisingly affordable. Here’s how the numbers might look in two different scenarios.

Scenario One: Two Friends Buy a 3-Bedroom Home

• Home Price: $350,000
• Down Payment (3.5%): $12,250 → $6,125 each
• Closing Costs (3%): $10,500 → $5,250 each
• Monthly Mortgage (with taxes & insurance): ~$2,500 → $1,250 each

Scenario Two: Three Friends Buy a 4-Bedroom Home

• Home Price: $450,000
• Down Payment (20%): $90,000 → $30,000 each
• Closing Costs (3%): $13,500 → $4,500 each
• Monthly Mortgage (with taxes & insurance): ~$3,200 → $1,067 each

 

Protecting Everyone’s Interests

Buying a home with friends is part financial move, part business deal — which means you’ll need a solid agreement to keep things running smoothly. A co-ownership agreement should outline key details like how long everyone plans to live in the home, what happens if someone wants to move out, and whether subletting is allowed. It should also cover how shared expenses — mortgage payments, utilities, repairs — will be divided. To protect everyone legally, it’s smart to work with a real estate attorney to structure ownership rights, decide how the property will be sold in the future, and establish a buyout plan if one person wants out. Clear expectations upfront can prevent headaches down the road.

 

Challenges to Consider

Co-owning a home comes with plenty of perks, but it’s not without challenges. Friends may have different financial situations — one might have a high credit score while another has debt — which can affect mortgage approval and loan terms. Uneven contributions to the down payment or monthly expenses can also create tension if not addressed upfront. Beyond finances, disagreements over household responsibilities, guests, or future plans are bound to happen. The key is having open communication and a plan for resolving conflicts, as with any good friendship!

 

Steps to Buying a Home with a Friend

If you’re considering buying a home with friends but you’re not sure where to start, consider these simple steps to get started:

Step 1: Align on Goals and Budget
Before diving into home shopping, you and your friend will need to get on the same page about goals and finances. Are you buying as a long-term home, a stepping stone to future investments, or a short-term arrangement? Everyone should be clear on their budget, how much they can contribute upfront, and what they can comfortably afford each month.

Step 2: Get Pre-Approved for a Mortgage Together
Once your budget is set, the next step is getting pre-approved for a mortgage as co-buyers. Lenders will evaluate everyone’s credit scores, income, and debt to determine loan eligibility, and the lowest credit score in the group could impact the interest rate.

Step 3: Find a Real Estate Agent Who Gets Co-Buying
Not all real estate agents are familiar with the ins and outs of co-buying, so it’s important to find one who understands the process. An experienced agent can help navigate the unique challenges of buying with friends, from structuring the offer to ensuring the home suits everyone’s needs.

Step 4: Draft the Co-Ownership Agreement
Once you’ve found your home, it’s time to formalize the details with a co-ownership agreement. Collaborate with an attorney to create a legally binding document that outlines all the nitty gritty details. Having everything in writing ensures that everyone’s interests are protected and can help prevent conflicts in the future.

 

Ready to Make it Official? Buy with Friends Today

If you’re ready to explore a more unconventional path to homeownership, buying with friends could be the perfect solution. It’s an opportunity to invest in a property, build equity, and share the joys (and responsibilities) of homeownership without going at it alone. Treadstone is here to help you navigate the mortgage process and make your co-buying dreams a reality. Reach out today to learn how we can guide you through every step of securing a home together.

 

FAQs

What is it called when you buy a house with someone?
An investment! Or technically: co-buying or co-ownership. This means that two or more individuals share the financial responsibility and ownership of the property.

Is buying a home with a friend a good idea?
Unlimited sleepovers with your besties sounds like loads of fun, but you’ll definitely want to make sure you’re on the same page financially and have clear expectations before buying a house with a friend. Once you iron out the details, it can be a great way to invest in something rather than throwing your money into the black hole of renting.

Can you go 50/50 on a house with a friend?
Yes, you can go 50/50 on a house with a friend, as long as you both agree on the terms of the arrangement.

How do two friends buy a house together?
Two friends can buy a house together by aligning on goals, budget, and responsibilities, then getting pre-approved for a mortgage. They’ll find a real estate agent familiar with co-buying and draft a co-ownership agreement with an attorney to outline key details like equity division and exit plans. Once everything is in place, they can close on the property as co-owners.

Terms and qualifications are subject to underwriting approval and can change without notice. Not all borrowers may qualify. Monthly and down payment examples are for illustrative purposes.