How early should we start this stage?

The earlier, the better.

Planning and building consensus is a critical first step in co-buying. Before you engage a lender or a real estate agent, there should be a clear understanding among co-buyers of the who, what, when, where, and why. Respect your time and develop a plan before you contact professionals. If you're ready when you engage these folks, you can move into action.

Why would a co-buyer group choose “No Go”?

It generally comes down to insufficient financial inputs, failure to build consensus, or timing.

Examples of insufficient financial inputs:

• Co-buyers can't qualify for a mortgage because of insufficient funds for the down payment, low credit scores, or employment status.
• Co-buyers can qualify for a mortgage, but the size or terms don't pencil (e.g., their down payment plus what they can borrow isn't enough to purchase a home in their target location).
• Co-buyers can qualify for a mortgage, but they aren't happy with the terms.

Examples of failure to build consensus:

• Co-buyers discover their goals are vastly different and incompatible.
• Co-buyers disagree on participation.
• Co-buyers have different views about the type of home they want to purchase.

Examples of bad timing:

• A co-buyer loses their job.
• Life circumstances change.
• Economic uncertainty causes doubts about moving forward.

Financial inputs can be addressed when they are the barrier to moving forward. Fundamental differences between co-buyers and life events can pose a more significant challenge.

What financial criteria can we use to determine our eligibility?

There aren't hard rules here. Remember, confirming readiness is a pre-check. It's a self-assessment to help you understand if it's worth moving forward.

The eligibility component of confirming readiness helps you assess whether you and your co-buyer(s) have the required financial inputs to get a mortgage. Your total funds available for a down payment plus a mortgage need to be sufficient to purchase the type of home you want in your target location.

Every situation is different. We'll look at mortgage specifics in the next section, but here are a few guidelines.

💵 Net income

Your combined income will need to be sufficient to cover mortgage payments. Most mortgage lenders prefer debt-to-income ratios below 35%, but you may be able to borrow with a debt-to-income ratio as high as 45%. We'll discuss debt-to-income ratios in the next section. You can also calculate your debt-to-income ratios using the CoBuy Wizard Worksheet.

💰 Net Assets

Lenders will look at the total cash you have available to cover down payment and closing costs. You don't need a down payment of 20%. Depending on your circumstances, your down payment can be as low as 3% or even 0% in some cases.

For reference, the average (mean) down payment of all CoBuyers we've worked with is around 12%. The national average (median) down payment for all homebuyers is 13%.

📈 Credit score

Technically, you can get an FHA loan with a credit score of 580 (sometimes lower), but a reasonable rule of thumb is a minimum credit score of 620. The higher your credit scores, the better.