The Power of Two

Buyer Beware
The first and most important step is to choose your partner wisely. What you want is a close friend or a family member. The two of you need to have a very strong bond—of friendship and respect. We all have pals who are drowning in credit-card debt. As much as you may love them, you cannot afford to buy a house with any of them.

To make sure you and your potential mortgage mate are a good financial fit, you'll need to share some personal information. You may know her shoe size, but I bet you don't know her FICO score. FICO (which stands for Fair Isaac Corporation, a firm that calculates financial scores) is a snapshot of how good a credit risk you are. You actually have three separate FICO scores from three different credit bureaus—Equifax, Experian, and TransUnion. Lenders use these scores to determine what type of mortgage to give you. If your score is 700 or higher, you'll get a low-interest-rate mortgage. With a number below 700, you'll be stuck paying a higher interest rate. Lenders will use your middle score, or they'll average all your scores to determine the interest rate they'll be willing to offer you.

Each of you should buy at least one of your own scores ($14.95 at and compare notes. If you and she each have a score above 700, I'd say that aspect of the deal is a go. If one or both of you has a number lower than that, it's best to delay your home shopping for a few months while you work on raising your score by paying all your bills on time and getting your total credit-card balance as low as possible. If your friend's FICO score is closer to 650, however, the two of you need to have a serious talk. If it turns out that she's a financial flake, then you'll want to find a new housing partner.