Mortgage bankers originate, sell, and service residential mortgages for consumers on behalf of the lender they work for. They may also provide escrow services. A mortgage banker plays a central role as people navigate the complexities of applying for a mortgage.
Mortgage bankers are often the first and last point of contact. Getting an interest rate and terms that work for your financial situation, as well as saving you money, is incredibly valuable.
• Mortgage bankers originate, sell, and service loans for residential properties.
• Mortgage bankers typically work for a single lender.
• Licensing requirements vary: Nonbank originators must register.
• Mortgage bankers provide preapproval and guide borrowers through the loan process.
• Revenue comes from fees, points, loan servicing, mortgage-backed securities, and yield spread premiums.
What Is a Mortgage Banker?
An individual or an institution that originates, sells, or services a home mortgage loan can be considered a mortgage banker.
Individual mortgage bankers work for a single lending institution and help applicants sort through the different mortgage types. Mortgage bankers are also called mortgage lenders or mortgage loan officers when referred to in this way.
Mortgage bankers can get homebuyers on the right road with mortgage preapproval. They serve as the primary point of contact for buyers’ lending needs.
A mortgage banker can also be an institution, such as a bank, credit union, or other direct mortgage lender. When talking about a mortgage banker that services a loan, for example, it’s in reference to the institution.
A mortgage loan originator employed by a credit union, bank, or a subsidiary of a bank doesn’t have to obtain a loan originator license. Nonbank mortgage loan originators must be licensed in the states where they do business and must be registered with the Nationwide Multistate Licensing System & Registry.
The licensing requirements were put in place after the mortgage meltdown of 2008 to protect consumers from predatory lending and to prevent fraud.
At their core, mortgage bankers have the ability to create or sell a new mortgage loan. They also have the ability to service it once the loan closes. Here are the details of the mortgage banker’s role:
Originate Loans
Mortgage bankers originate loans, meaning they take an application and create a new mortgage for a residential home. Conforming loans are usually sold to Fannie Mae or Freddie Mac.
Sell Loans
Mortgage bankers sell loans so they can engage in more lending. If it’s a conventional loan, conforming loan, the sale typically goes to the government-backed enterprises, Fannie Mae or Freddie Mac. This increases lenders’ liquidity, so they can originate more loans to more customers instead of carrying the amount of the loan on their books.
Service Loans
Once the mortgage has closed, the lender needs to be paid every month. This is what mortgage servicers do: They take on the day-to-day task of making sure your payment gets to all parties that need to be paid. Servicing loans is usually in reference to the mortgage banker as an institution, not the individual mortgage loan officer.
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How Do Mortgage Bankers Make Money?
Individual mortgage bankers may make money from a salary, commission, or a combination.
Institutional mortgage bankers make money from origination fees, mortgage points, mortgage servicing, mortgage-backed securities, and lender credits. The yield spread premium is how much money they make based on what they charge a customer relative to how much it costs to obtain that financing.
Differences Between a Mortgage Banker and a Loan Officer
Mortgage banker and loan officer, or loan originator: These terms are often used interchangeably.
However, while a mortgage banker can refer to both individuals and institutions, a loan officer is always an individual.
Differences Between a Mortgage Banker and a Mortgage Broker
In your research to get the best mortgage, you may have also come across mortgage brokers. Though applying for a mortgage will have the same requirements whether you go through a mortgage broker or a mortgage banker, a mortgage banker differs from a mortgage broker in who they work for and how they obtain your mortgage.
A mortgage banker works for a single lending institution that makes loans directly to consumers. The lending decision and underwriting are typically made at the bank level, which can streamline the process.
A mortgage broker works with many different lenders. This is helpful if you want to shop around and don’t have time to do the legwork or need to find a specialty loan not offered by all lenders.
When Is It Better to Have a Mortgage Banker Than a Broker?
Your best bet for finding a home loan with terms most favorable to your financial situation is to shop around for a mortgage. A mortgage banker is closer to the lending process than a mortgage broker, but a broker has access to a greater number of lenders.
Be sure you’re comparing apples to apples on the mortgages offered to you by studying the loan estimate you’re given by each lender after applying. You should take into account both the interest rate and the fees being charged for the loan.
The Takeaway
A mortgage banker can play a major role in getting you to the closing table with the right loan. By any name, mortgage banker, loan officer, or loan originator, the person who guides you through the loan process is a key part of the home-buying journey.
Looking for an affordable option for a home mortgage loan? SoFi can help: We offer low down payments (as little as 3% - 5%*) with our competitive and flexible home mortgage loans. Plus, applying is extra convenient: It's online, with access to one-on-one help.
SoFi Mortgages: simple, smart, and so affordable.
FAQ
What does a mortgage banker do?
A mortgage banker can originate, sell, and service loans for customers. They may also help borrowers compare loan options and guide them through the financing process.
Is a mortgage banker similar to a mortgage broker?
Not really. A mortgage banker works for a single lender and makes loans directly to you. Mortgage brokers don’t lend money but instead find a lender to work with their buyer.
How do you choose a mortgage banker?
Compare rates and terms from different lenders by getting prequalified for a mortgage. As you communicate with the mortgage banker at various lenders, consider the speed and clarity of communications, how knowledgeable the person seems to be, and how much attention they pay to your needs.
Photo credit: iStock/Lacheev
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SoFi loans are originated by SoFi Bank, N.A., NMLS #696891 (Member FDIC). For additional product-specific legal and licensing information, see SoFi.com/legal. Equal Housing Lender.
SoFi Mortgages
Terms, conditions, and state restrictions apply. Not all products are available in all states. See SoFi.com/eligibility-criteria for more information.
*SoFi requires Private Mortgage Insurance (PMI) for conforming home loans with a loan-to-value (LTV) ratio greater than 80%. As little as 3% down payments are for qualifying first-time homebuyers only. 5% minimum applies to other borrowers. Other loan types may require different fees or insurance (e.g., VA funding fee, FHA Mortgage Insurance Premiums, etc.). Loan requirements may vary depending on your down payment amount, and minimum down payment varies by loan type.
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Assuming a mortgage means that the buyer of a home is able to take over the seller’s existing mortgage. When mortgage assumption is possible, it may help a buyer score a lower interest rate and save money in other ways as well. In times when interest rates are high or headed upward, an assumable mortgage can be quite a windfall.
But, reality-check time: Mortgages are only assumable in certain situations, and there are pros and cons to consider. If you’re home shopping and want to consider this option, read on to learn more, including what is an assumable mortgage, how to know if a mortgage is assumable, the benefits of an assumable home loan, and, of course, the downsides of an assumable mortgage.
• An assumable mortgage allows a buyer to take over the seller’s existing mortgage.
• The buyer often must qualify with the lender for the assumable mortgage.
• The buyer must cover the difference between the mortgage balance and the home’s value.
• FHA, VA, and USDA loans are often assumable.
• Assumable mortgages can save money on interest payments and closing costs.
What Does Assumable Mortgage Mean?
The meaning of an assumable mortgage is that the buyer, when purchasing a home, takes over the existing mortgage held by the seller. This means the buyer assumes responsibility for the loan’s outstanding balance, its interest rate, and making payments for the remaining loan term.
This can be an appealing option if, say, the seller’s mortgage has a considerably lower interest rate than is currently available. In this scenario, the buyer could stand to save thousands over the life of the mortgage loan.
However, a buyer may also need to finance the amount of equity the seller has in the home.
It’s important to note that not all mortgages are assumable. For those that are, it’s recommended that all parties know in advance what obligations they have when they agree to a mortgage assumption, just as with any other financial agreement.
Note: SoFi does not offer assumable mortgages at this time. However, SoFi does offer fixed-rate and variable-rate mortgages and special opportunities for first-time homebuyers. Learn more from the Home Loan Help Center.
How Do Assumable Mortgages Work?
With an assumable mortgage, the buyer will become the holder of the mortgage originally taken out by the seller. The buyer, as mentioned above, may have to clear certain qualification hurdles to do so.
But there’s more to answering the question of how does assuming a mortgage work. It’s also important to note that, as briefly mentioned above, the homebuyer must make up any difference between the amount owed on the mortgage and the property’s current value. That could mean the buyer pays cash to make up the difference or takes out a second mortgage.
An example: Say a house is valued at $350,000, and the home seller has a $225,000 balance on the home’s original mortgage. Under the terms of most assumable mortgage loans, the homebuyer would need to deliver $125,000 at closing to cover the difference between the original mortgage and the current estimated value of the home, usually determined by an appraisal.
Another important aspect of how assumable mortgage loans work are the two models possible: a simple mortgage assumption or a novation-based mortgage assumption.
Simple Assumption
In a typical simple mortgage assumption, the buyer and seller agree to engage in a private transaction.
• This means that the mortgage lender is not necessarily aware of the transfer of the mortgage and therefore the new buyer does not go through the mortgage qualification and underwriting process with the lender.
• The home seller usually just transfers the title of the property to the buyer after the buyer agrees to take over the remaining mortgage payments.
• If the buyer misses monthly payments or defaults on the original mortgage loan, the lender could hold both parties responsible for the debt, and the credit scores of both buyer and seller could be significantly damaged if the debt isn’t repaid. In this scenario, an assumable mortgage home for sale could wind up being problematic for both parties.
Novation-Based Assumption
Unlike a simple mortgage assumption, where mortgage underwriting usually isn’t directly involved, an assumption with novation means the lender is involved:
• The lender vets the buyer and agrees to the loan transfer.
• This means the buyer agrees to assume total responsibility for the existing mortgage debt and remaining payments.
• Under those terms, the original mortgage lender releases the home seller from liability for the remaining mortgage loan debt. The new documentation, such as a deed of trust (if used), will be in the buyer’s name alone.
What Types of Loans Are Assumable?
There are many different types of mortgage loans, but not all are assumable. Typically, home loans that operate outside the federal government’s mortgage loan environment, such as conventional 30-year mortgages issued by private lenders, are not assumable. (How do you know if a conventional mortgage is assumable? It will likely be an adjustable-rate loan, and the seller will have to check with their lender to be sure.)
Certain kinds of mortgages that are insured by the government and issued by private lenders are, however, assumable. A seller usually must obtain lender approval for the assumption, or in the case of U.S. Department of Agriculture (USDA) loans, agency approval. And the buyer must qualify. These loans include:
• FHA loans: The Federal Housing Administration (FHA) insures these mortgages, which are popular with first-time homebuyers. With a minimum 3.5% down payment for borrowers with a credit score of 580 or higher, FHA mortgages are assumable.
• VA loans: Home loans guaranteed by the Department of Veterans Affairs (VA) are also assumable, and, perhaps surprisingly, the buyer does not have to be a veteran or in the military. It’s important to understand VA loan assumption clearly before proceeding. Note: The seller of these loans may remain responsible for the mortgage if the buyer defaults.
• USDA loans: Loans guaranteed by the Department of Agriculture (USDA) are assumable only if the current owner is up to date on payments.
One last note about the options above: While assumable mortgages can be part of a wrap-around mortgage, they are not one and the same.
When a mortgage is assumed, the buyer pays the lender every month. With a wrap-around mortgage, which is a kind of owner financing, the buyer pays the seller.
Why Do Assumable Mortgages Exist?
Actually landing an assumable debt can be beneficial for both a buyer and a seller, but the mortgage lending industry may not make it easy to cut a deal. Why? Because as history attests, mortgage lenders may lose money on assumable mortgages.
In the late 1970s and early 1980s, when interest rates were at the highest levels in modern history, assumable mortgage deals were attractive to buyers who could take over a seller’s mortgage at the original loan interest rate. In many cases, this would yield a bargain vs. the then-current rate for a new mortgage. (How high did rates go? In October 1981, 30-year fixed-rate mortgages hit an eye-watering peak of over 18.00%.)
Mortgage companies, however, could see that they would lose money if home buyers chose a lower-rate assumable loan over a higher-rate new mortgage loan. That’s one reason mortgage companies began inserting due-on-sale clauses, which mandated full repayment of the loan for most home transactions.
As the FHA and VA began issuing more mortgage loans to homebuyers, they offered more relaxed rules allowing assumption transactions. Mortgages could transfer to the homebuyer as long as they demonstrated the ability to repay the remaining home loan balance, usually after a thorough credit check.
Pros and Cons of Assumable Mortgages
Assumable mortgage loans have upsides and downsides.
Upsides of an Assumable Mortgage
First, consider these pluses:
• A lower rate may be possible. The buyer may save significant money on the loan if the original mortgage’s interest rate is lower than current rates.
• Closing costs are curbed. The buyer might also benefit because closing costs are minimized in private home sale transactions between a buyer and a seller.
• No appraisal is needed. With no need to get a new mortgage on the property, a home appraisal isn’t required for a mortgage assumption, which can save time and money. The buyer could request an appraisal as part of the general home purchase agreement, however.
Downsides of an Assumable Mortgage
Now, the minuses:
• Upfront cash may be required. To meet the terms of an assumable mortgage, the buyer may need to have a substantial amount of upfront cash or take out a second mortgage to close the deal. This usually occurs when the property’s value is greater than the mortgage balance. The seller has perhaps built up considerable equity over the years.
• Second mortgages can be problematic. Second mortgages aren’t always easy to obtain, as mortgage lenders may be reluctant to issue a second home loan when the original mortgage still has a balance due. And a second mortgage probably carries closing costs, meaning the seller needs to shell out more cash.
• The property may be in distress. In some cases, the home seller may be eager to get out of a home that is proving to be too expensive for their budget. Simply put, they might be behind on payments. In that event, the mortgage lender may require the mortgage to be made current (meaning getting up to date on payments) before it will approve an assumable mortgage.
• FHA loans may carry an add-on. If the home seller puts down less than 10% of the home’s cost when getting an FHA loan, there will be a mortgage insurance premium for the entire loan term. This would add to the buyer’s monthly costs.
Here’s how this intel stacks up in chart form:
Pros of Assuming a Mortgage
Cons of Assuming a Mortgage
Possibility of a lower interest rate than market rate, saving money over the life of the loan
Buyer must make up difference if home value exceeds mortgage balance
Reduced closing costs
Home may be in distress
Home appraisal not necessary
FHA loans usually carry mortgage insurance premium
Examples of Assumable Mortgages
If you’re hoping to find an assumable mortgage, it will most likely be a government-insured or -issued loan, as mentioned above, perhaps one offered as a first-time homebuyer program. Here’s a bit more about these mortgages and how a loan assumption would work:
• Federal Housing Authority (FHA) loans: These government loans, which are insured by the FHA, may be assumable. Both parties involved in a mortgage assumption, however, must qualify in certain ways. For instance, the seller must have been living in the home as a primary residence for a period of time, and the buyer needs to be approved via the usual FHA loan application process.
• Veterans Affairs (VA) loans: If a seller has a loan backed by the VA, it may indeed be assumable. A buyer who wants to take over the loan can apply for a VA loan assumption and doesn’t need to be a current or former member of the military.
• U.S. Department of Agriculture (USDA) loans: To assume a USDA loan on a rural property, a buyer will have to show an adequate income and credit to be approved by the USDA.
Assuming a mortgage can be a good option for those who are property shopping in a time of high or rising interest rates and would like to take over the seller’s lower-rate loan. This can help save money, and it can also spare the buyer some of the time, energy, and money needed to apply for a new loan.
In addition, an assumable mortgage may work best for buyers with access to cash, as they will probably need to cover the difference between the mortgage amount and the value of the home they are buying.
Who Are Assumable Mortgages Not For?
Those purchasing a home that currently has a conventional mortgage will most likely not be able to take over that loan.
Additionally, if a mortgage is assumable, it’s important to recognize this scenario: If there’s a considerable gap between the mortgage amount and the property’s value, the buyer needs to bridge that. That means either ponying up a chunk of cash or finding a second mortgage, which may not be financially feasible for some prospective homebuyers.
How to Get an Assumable Mortgage Loan
Here are some points to consider if you are contemplating assuming a mortgage:
• First, confirm that the loan is assumable. For most conventional mortgages, assumption is not an option.
• If assumption is possible, the homebuyer must apply for the assumable mortgage and be vetted for creditworthiness and the ability to meet all the contractual requirements. It’s vital that the buyer show that they have the financial assets needed to qualify for the loan. Even in a simple assumption, the buyer may need to reassure the seller that they are creditworthy.
• Recognize that the buyer will need to make up any difference between the amount owed and the home’s current value. This means that if the seller of a $300,000 home has a $100,000 mortgage that’s assumable, the buyer would need to be able to come up with $200,000 to assume that loan, either by paying cash or by getting a second mortgage. Obviously, this scenario could present a significant financial hurdle for many prospective homebuyers.
• If the mortgage lender or agency signs off on the deal, the property title goes to the homebuyer, who starts making monthly mortgage payments to the lender or mortgage servicer.
• If the lender denies the application, the home seller must move on, and the buyer would likely resume shopping elsewhere.
If you can’t find a property with an assumable mortgage or don’t feel this financing option is right for you, rest assured there are other ways to finance your purchase.
Looking for an affordable option for a home mortgage loan? SoFi can help: We offer low down payments (as little as 3% - 5%*) with our competitive and flexible home mortgage loans. Plus, applying is extra convenient: It's online, with access to one-on-one help.
SoFi Mortgages: simple, smart, and so affordable.
FAQ
Is it a good idea to assume a mortgage?
Assuming a mortgage can have benefits. If you find an assumable-mortgage home for sale, you might be able to take over the seller’s mortgage at a lower rate than what’s currently offered by lenders, thereby saving you money over the life of the loan, and closing costs and schedules might also be leaner. However, mortgage assumption is not always possible, and if it is, you may have to make up the difference between the mortgage amount and the home’s current value.
What is required to assume a mortgage?
To assume a mortgage, the seller must have a loan that allows for assumption. These are usually government-insured or -issued mortgage loans. In addition, you may have to submit credentials to the lender and be approved. You may also have to pay the difference between the mortgage amount and the property’s market value.
How much does it cost to assume a mortgage?
Typically, when you assume a mortgage, you may pay some closing costs, but these could be lower than on a new loan. In addition, there may be a one-time funding fee. For instance, on a VA loan, this amounts to 0.5% of the existing mortgage balance. Last but not least: The buyer usually has to pay the difference between the remaining balance on the mortgage and the current value of the home.
What mortgages are assumable?
Government loans such as FHA, USDA, and VA loans are often assumable. Conventional loans (those issued by private lenders and not via a federal government mortgage loan program) are usually not assumable. When in doubt, the mortgage holder should inquire with their lender.
SoFi Loan Products
SoFi loans are originated by SoFi Bank, N.A., NMLS #696891 (Member FDIC). For additional product-specific legal and licensing information, see SoFi.com/legal. Equal Housing Lender.
SoFi Mortgages
Terms, conditions, and state restrictions apply. Not all products are available in all states. See SoFi.com/eligibility-criteria for more information.
*SoFi requires Private Mortgage Insurance (PMI) for conforming home loans with a loan-to-value (LTV) ratio greater than 80%. As little as 3% down payments are for qualifying first-time homebuyers only. 5% minimum applies to other borrowers. Other loan types may require different fees or insurance (e.g., VA funding fee, FHA Mortgage Insurance Premiums, etc.). Loan requirements may vary depending on your down payment amount, and minimum down payment varies by loan type.
Financial Tips & Strategies: The tips provided on this website are of a general nature and do not take into account your specific objectives, financial situation, and needs. You should always consider their appropriateness given your own circumstances.
Checking Your Rates: To check the rates and terms you may qualify for, SoFi conducts a soft credit pull that will not affect your credit score. However, if you choose a product and continue your application, we will request your full credit report from one or more consumer reporting agencies, which is considered a hard credit pull and may affect your credit.
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You can’t be lily-livered if you want to build a houseboat, a self-propelled boat with a cabin. It will take a lot of time and more than a few doubloons.
Houseboat kits are a thing, and an alternative to building your own boat is buying a used houseboat and modifying it.
This piece will help you navigate how to build a houseboat and more.
• Building a houseboat is a significant time and financial investment.
• Options include building from scratch, using a prefab kit, or renovating a used houseboat.
• Costs range from a few thousand dollars to well over $35,000.
• The process involves finding a location, obtaining approvals, and installing systems.
• Research local regulations and ensure you have the necessary space and resources.
First Off, Can You Build a Houseboat Yourself?
As long as you have the time and money, which can mean securing financing, yes, you can build your own houseboat.
Small houseboats may only have one or two rooms in their cabins, with people using them to fish or enjoy time on a river. Larger ones may be used somewhat like a summer home, with several rooms included. Houseboats of just about any size have a sort of porch on the ends, perhaps covered with awnings.
Although they have this in common with another type of house, the floating home, which is permanently moored, houseboats are designed for quick connection and disconnection with a marina’s electrical, water, and sewer services.
Typical Costs of Building a Houseboat
How much does it cost to build a houseboat? Well, as is the case with the cost to build a house, it depends. Costs will vary based on the size of the boat, the materials used, the fixtures included, and so forth.
A small single-slip houseboat may cost somewhere around $25,000 to build, while a somewhat larger dual-slip one can range from $60,000 up to $70,000 or higher. (That said, there are luxury houseboats worth millions, so the sky’s the limit if the budget permits!)
How Long Will It Take to Build a Houseboat?
The time investment will depend on the size of the boat, the materials used, your level of building experience, how much help you have, and perhaps even the weather. One estimate suggests that building your own houseboat would take around 600 hours.
Pros and Cons of Building a Houseboat From Scratch
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Pros:
• When you build something yourself vs. finding a contractor, you can save on labor costs.
• You can pick the design you’d like and, when possible, make customized choices.
• You can benefit from the satisfaction of DIY.
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Cons:
• This can be a big job.
• If this is the first time you’re building a houseboat, there can be a learning curve.
• You’ll need to ensure that you have space to build, ideally near water.
How to Build a Houseboat
Steps include the following:
• Find a spacious location to build.
• Request approval to build.
• Design your own houseboat.
• Build or buy a hull.
• Purchase materials.
• Start building.
• Install plumbing and electrical.
Here’s more information about each step.
Find a Spacious Location to Build
Even a small houseboat can take up space to build, so make sure you have enough room for the boat and for any workers.
Plus, consider how, once the boat is constructed, you’ll get it to the waterfront. Where do you plan to dock the houseboat? Is there sufficient building space near the dock to solve two problems at once?
Request Approval to Build
The U.S. Coast Guard’s Boating Safety Division provides information about relevant federal laws and regulations, Coast Guard directives, state boating laws, and more. Be sure to follow those while also checking in with your city and county government agencies to dot your local I’s and cross your T’s.
Design Your Houseboat
Determine the design. Check local associations, Google “houseboat plans,” and/or ask the owners of a houseboat what they recommend.
Plans are pretty affordable and can save you plenty of hassle, so pick the one that fits your budget and dovetails with your vision.
The hull is the heart of the houseboat’s design and engineering ability and also the part of the houseboat where you can walk around. The quality and appropriateness of the hull determine how well it floats and how stable and durable the boat will be.
As you seek out building plans for the houseboat, examine what’s involved in building the hull and then make your style decision from there. The hull may be a V-bottom, a flat bottom, multihull, or pontoon style, the most popular for a houseboat.
Pontoon boats can be spacious and more likely to provide a smooth, comfortable ride. They can be easy to maintain and may be a good choice for family use.
On the other hand, pontoon boats aren’t built for speed or easy maneuverability. They typically come with an outboard engine, and it can be hard to find another kind.
Purchase Materials
Just as you wouldn’t want to run out of egg whites when preparing a soufflé, you won’t want to run out of important building materials for your houseboat.
A personal loan could come in handy. You might be able to borrow up to $100,000.
Another possibility, for some homeowners, is a home equity line of credit (HELOC) or home equity loan. The interest rate will be lower than that of unsecured loans.
Make a list, check it twice, and then make sure you buy the right quality and quantity. Buying parts bit by bit can be more expensive, create more stress, and delay the project.
Start Building
This is what you’ve been waiting for, right? Now is the time to take the materials you’ve purchased and, by following the plans you’ve chosen, actually build your houseboat. Perhaps you’ll need to reach out for help, or maybe you’ve got this all by yourself. Either can work!
Install Plumbing and Electrical
With a houseboat, you can navigate the waters rather than being moored in place. Electrical wiring and plumbing will allow you to have access to electricity and use toilets. Waste will go into a holding tank that, when you get to a marina, can be removed by attaching your electrically powered pump to the marina’s system.
Are Houseboats Cheaper Than Houses?
Because houseboats can range from a few thousand dollars to over $1 million, the answer is that some, but certainly not all of them, are cheaper than a house.
Expenses will continue to flow after the build. Most houseboat owners will pay mooring fees, liveaboard fees, insurance, and pump-out fees. But they may catch a tax break: A boat can be a main or second home, allowing owners the mortgage interest deduction if they itemize.
You can! It may make sense to explore those options to see if one fits your needs and budget — and compare that to the cost of building your houseboat from scratch.
Other Ways of Getting a Houseboat Other Than Building From Scratch
Here are two methods:
• Buy an old houseboat and renovate it.
• Buy a new houseboat.
Buy an Old Houseboat and Renovate It
You can save money by buying a used houseboat, especially if you have the know-how to make any necessary repairs and modify it. Or, depending on what needs to be done, you might still come out ahead financially if you buy an old houseboat and have an expert renovate the vessel.
Buy a New Houseboat
Just as with a car, truck, or RV, when you buy new, you can benefit from the warranty and enjoy your new houseboat without worrying about what parts have worn down.
The Takeaway
How to build a houseboat? You could try building one from scratch or using a prefab kit, or you could buy a used houseboat and renovate it. What’s most important is choosing what fits your budget and enhances your lifestyle. How to launch your houseboat plans? One way is with a HELOC brokered by SoFi that has a lower interest rate than unsecured loans.
SoFi now offers flexible HELOC options to turn your home equity into cash. Access up to 85% of your home equity, or $350,000, to finance home improvements or consolidate debt. Competitive interest rates and repayment terms up to 20 years could result in lower monthly payments versus other loans. And the online application process is quick and convenient.
FAQ
Can you live permanently on a houseboat?
Yes. Some marinas allow full-time liveaboards. Otherwise, check with your state’s anchoring regulations to see how long you can remain in a certain spot with the houseboat and what you’d be required to do.
Do houseboats retain their value?
Boats in general decrease in value, especially during the first couple of years and then gradually after that. That said, pontoon houseboats can last for decades. So when looking at what you’d invest and then dividing that cost by the anticipated years of potential use, you may consider this a good investment even without lots of resale value.
How long do houseboats last?
Pontoon boats can last up to 20 years or longer. Regular maintenance and care can extend a boat’s lifespan.
Can you get a loan to finance a houseboat?
Although it may be challenging to find a loan program specifically for houseboats, you can contact banks, credit unions, and online lenders to see if their boat financing program includes houseboats. Or, if buying one, check with the dealer.
Other options include a HELOC, home equity loan, or personal loan to pay for your houseboat.
Photo credit: iStock/Cucurudza
SoFi Mortgages
Terms, conditions, and state restrictions apply. Not all products are available in all states. See SoFi.com/eligibility-criteria for more information.
SoFi Loan Products
SoFi loans are originated by SoFi Bank, N.A., NMLS #696891 (Member FDIC). For additional product-specific legal and licensing information, see SoFi.com/legal. Equal Housing Lender.
*SoFi requires Private Mortgage Insurance (PMI) for conforming home loans with a loan-to-value (LTV) ratio greater than 80%. As little as 3% down payments are for qualifying first-time homebuyers only. 5% minimum applies to other borrowers. Other loan types may require different fees or insurance (e.g., VA funding fee, FHA Mortgage Insurance Premiums, etc.). Loan requirements may vary depending on your down payment amount, and minimum down payment varies by loan type.
Financial Tips & Strategies: The tips provided on this website are of a general nature and do not take into account your specific objectives, financial situation, and needs. You should always consider their appropriateness given your own circumstances.
²SoFi Bank, N.A. NMLS #696891 (Member FDIC), offers loans directly or we may assist you in obtaining a loan from SpringEQ, a state licensed lender, NMLS #1464945. All loan terms, fees, and rates may vary based upon your individual financial and personal circumstances and state.You should consider and discuss with your loan officer whether a Cash Out Refinance, Home Equity Loan or a Home Equity Line of Credit is appropriate. Please note that the SoFi member discount does not apply to Home Equity Loans or Lines of Credit not originated by SoFi Bank. Terms and conditions will apply. Before you apply, please note that not all products are offered in all states, and all loans are subject to eligibility restrictions and limitations, including requirements related to loan applicant’s credit, income, property, and a minimum loan amount. Lowest rates are reserved for the most creditworthy borrowers. Products, rates, benefits, terms, and conditions are subject to change without notice. Learn more at SoFi.com/eligibility-criteria. Information current as of 06/27/24.In the event SoFi serves as broker to Spring EQ for your loan, SoFi will be paid a fee.
• Townhouses tend to offer more control over the exterior and land use compared to apartments.
• Townhouse homeowners association (HOA) fees are generally lower, covering fewer amenities.
• Financing a townhouse is similar to a single-family home, while condos and co-ops often have stricter requirements.
• Apartment or townhouse communities often include amenities such as pools and gyms, maintained by the HOA.
• Townhouses may offer more privacy, balancing homeownership and reduced responsibilities.
What Is a Townhouse?
At first glance, a townhouse might look like a typical house, but a closer look will show that it’s attached to at least one similar unit.
Townhouses are often found in urban areas where space is at a premium. They often come with a front or back yard. Owners own the inside and outside of their unit and the land it sits on.
The townhome community may have a homeowners association (HOA) and maintenance fees. You’ll want to make sure you understand the costs of the HOA and its rules before signing a contract and getting a home mortgage loan.
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Benefits of Buying a Townhouse
There are at least three upsides to purchasing a townhouse.
Owner Rights
Because people who buy a townhouse own the land it’s on, they have more freedom in how to use the yard. A yard or patio can open possibilities for a grilling spot or a dog or child play area.
They also have at least some freedom of choice about the appearance of the inside and outside of the structure, although HOAs may have rules about all of the above.
Price
In communities with high home prices, townhouses may be an affordable alternative for first-time homebuyers.
House hunters, from millennial homebuyers to empty nesters, may also find a townhouse a sweet spot between a condo and a traditional detached home with yard.
Plus, because lots tend to be smaller than ones with detached homes on them, property taxes are usually lower as well.
Low Maintenance
Smaller yards mean less yardwork, ideal for busy people and those who are downsizing their home and responsibilities.
The townhouse complex may be gated and have security, and some have pools, gyms, and other shared recreational spaces whose maintenance is covered by homeowner fees.
Disadvantages of Buying a Townhouse
When you think of townhouse living, keep in mind the close quarters with neighbors and possible HOA fees and rules.
HOA
Townhouse communities are less likely to have an HOA than condominiums are, but if they do, the resident-led board will collect ongoing fees to cover common areas and any community perks such as a pool. The HOA will also enforce community rules.
Lack of Privacy
Because of the shared walls, a townhouse provides less privacy than a detached home (although it may offer more privacy than many condo buildings, where you may have a unit above and below yours). Townhouse living may therefore create some challenges for families with young children.
What Is an Apartment?
An apartment is a room or set of rooms within a building. In major cities, some people refer to buying a condo or co-op shares as buying an apartment.
Condo owners own everything within their unit and have an interest in the common elements. Buying a co-op apartment really means holding shares in the housing cooperative that owns the property.
Then there are people and companies that buy a multifamily property, such as an apartment building, and rent out the units. An owner could decide to live in one of the units and serve as an on-site landlord.
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Benefits of Living in an Apartment
Let’s look at some benefits of buying a condo or a co-op apartment.
Low Maintenance
You won’t typically need to make many repairs, mow the grass, or paint. That’s covered by the monthly or quarterly fees you’ll pay.
Low Utilities
First, condos tend to be smaller than single-family homes, which can reduce the cost of heating and cooling the space and take less electricity to keep it well lit.
HOA
If the building has an HOA (which may be called a condo or co-op association), the association will take care of property maintenance and enforcement of rules.
Disadvantages of Living in an Apartment
Apartment life can come with disadvantages, too. Here are a few.
Parking
You may or may not have a parking space set aside for you, and street parking isn’t always a given in busy locales. Even if you have a parking spot, if people come to visit, they may not easily find anywhere to park.
Noisy or Nosy Neighbors
If you appreciate quiet calmness, you may not find all you’d like in condo living. Neighbors are nearby and they can be noisy. If you’re in a crowded city, surrounding events can contribute to the jostling and noise.
Limited Space
If you’re used to living in a house, you could find a more compact apartment to be challenging as you try to fit in your belongings. Plus, apartments often lack yard space or a patio, which further limits the amount of space you have to use and enjoy.
Differences Between a Townhouse and an Apartment
When comparing an apartment or condo vs. a townhouse, keep in mind these differences.
Townhouse
Apartment/Condo
Single-family unit that shares one or more walls with another home
Room or rooms within a building
May have a small yard or patio
May be less likely to have outdoor space
Gives owner some control over how to change the exterior and use yard
Any exterior space is often shared and cared for by the HOA.
Can be more affordable than traditional detached homes in markets with high prices
Can also be more affordable than traditional detached homes
If there’s an HOA, fees are usually lower because owners are responsible for much of their own upkeep.
If an HOA is in place, it will collect fees to cover most maintenance, and condo fees can be higher than those for townhouses.
May not provide as much privacy as a freestanding house
May not provide as much privacy as a freestanding house
Thanks to land ownership, financing is similar to a traditional mortgage.
It can be harder to finance a condo than a townhouse.
The Takeaway
Buying a townhouse or an apartment can give you many of the pleasures of homeownership with less of the associated upkeep. But there are unique qualities to each and potential downsides, too. Make sure you understand the role a homeowner’s association might play in any property you purchase before you make an offer and nail down your financing.
Looking for an affordable option for a home mortgage loan? SoFi can help: We offer low down payments (as little as 3% - 5%*) with our competitive and flexible home mortgage loans. Plus, applying is extra convenient: It's online, with access to one-on-one help.
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FAQ
Do townhomes appreciate as much as houses?
In general, townhomes do not appreciate as quickly as single-family detached homes. This is because of the amount of land that comes with traditional standalone homes.
Are townhouses a bad investment?
In some circumstances, a townhouse may be a good investment. The price, current market conditions, and location are factors.
Are fees higher for a townhouse or condo?
Condo homeowners association (HOA) dues are typically a lot higher than townhouse fees (if the townhouse community even has an HOA). Condo communities usually have many more amenities to maintain.
Photo credit: iStock/Auseklis
SoFi Loan Products
SoFi loans are originated by SoFi Bank, N.A., NMLS #696891 (Member FDIC). For additional product-specific legal and licensing information, see SoFi.com/legal. Equal Housing Lender.
SoFi Mortgages
Terms, conditions, and state restrictions apply. Not all products are available in all states. See SoFi.com/eligibility-criteria for more information.
*SoFi requires Private Mortgage Insurance (PMI) for conforming home loans with a loan-to-value (LTV) ratio greater than 80%. As little as 3% down payments are for qualifying first-time homebuyers only. 5% minimum applies to other borrowers. Other loan types may require different fees or insurance (e.g., VA funding fee, FHA Mortgage Insurance Premiums, etc.). Loan requirements may vary depending on your down payment amount, and minimum down payment varies by loan type.
Financial Tips & Strategies: The tips provided on this website are of a general nature and do not take into account your specific objectives, financial situation, and needs. You should always consider their appropriateness given your own circumstances.
Tax Information: This article provides general background information only and is not intended to serve as legal or tax advice or as a substitute for legal counsel. You should consult your own attorney and/or tax advisor if you have a question requiring legal or tax advice.
‡Up to $9,500 cash back: HomeStory Rewards is offered by HomeStory Real Estate Services, a licensed real estate broker. HomeStory Real Estate Services is not affiliated with SoFi Bank, N.A. (SoFi). SoFi is not responsible for the program provided by HomeStory Real Estate Services. Obtaining a mortgage from SoFi is optional and not required to participate in the program offered by HomeStory Real Estate Services. The borrower may arrange for financing with any lender. Rebate amount based on home sale price, see table for details.
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With the median U.S. home listing price sitting at $403,200 in the first quarter of 2026, most people will need a mortgage to fund their purchase, and the majority of them will choose a fixed-rate loan, in which the interest rate does not fluctuate over the life of the loan.
But if you’re preparing to take the homeownership plunge, how do you know which kind of loan is right for you, and what are the pros and cons of fixed-rate mortgages? Let us be your guide.
• Fixed-rate mortgages offer a consistent interest rate and monthly payment throughout the loan term.
• These loans are especially popular among first-time homebuyers.
• Fixed-rate loans are available in terms of 10, 15, 20, and 30 years.
• Shorter-term mortgages have higher monthly payments but lower total interest.
• Refinancing a fixed-rate mortgage is possible but involves additional costs.
What Is a Fixed-Rate Mortgage?
The fixed-rate mortgage definition is, as its name suggests, a mortgage loan whose interest rate is fixed across the lifetime of the loan. The rate is stated at the time the documents are signed and does not change at any point throughout the loan term (provided that all payments are made in full and on time).
Fixed-rate mortgages are the most common type of mortgage, with 92% of all buyers using a fixed-rate mortgage. Fixed-rate mortgage terms can be 10, 15, 20, or 30 years. A mortgage calculator can help you work through the different monthly payments for each and see what best suits your situation.
How Does a Fixed-Rate Mortgage Work?
Once you sign your home loan documents and close on your purchase, you’ll begin making a monthly mortgage payment. With a fixed-rate loan, you can expect to pay the same amount each month. How much of your payment goes toward the principal vs. interest will change over the life of your loan. Typically, more of your payment goes toward interest at the outset of the loan, with more going toward the principal nearer to the end of the term, but the overall payment amount will remain the same. You can see the breakdown of your payments in your loan’s mortgage amortization table.
How are fixed mortgage rates determined? Monetary policy actions by the Federal Reserve and overall economic factors (such as inflation) broadly influence the rates lenders offer. The specific rate each individual borrower is offered is additionally affected by factors such as the loan amount, the loan type, and the loan term, as well as borrower credit scores and financial profile.
Fixed-Rate Mortgages vs. Adjustable-Rate Mortgages
If you’re deciding between a fixed-rate vs. adjustable-rate mortgage (or ARM), the difference is that with an ARM, the interest rate can move up or down according to the market. The rate is calculated according to the index and margin: the index is a benchmark interest rate based on market conditions at large, and the margin is a number set by the lender when the loan is applied for.
You may see options like a 5/1 ARM, which means the rate is set for the first five years of the loan and then adjusts annually after that.
Long story short: A fixed-rate mortgage offers you a predictable interest rate and monthly payment, whereas an adjustable-rate mortgage can shift over the course of the loan term, according to external factors such as inflation affecting the APR or the actions of the Federal Reserve.
It is, however, important to understand that your total monthly housing bill can still change, even with a fixed-rate mortgage, if, for example, your property taxes or homeowners insurance rates change or if you miss several payments.
There are a few variables to fixed-rate mortgages:
• Conventional loans: Conventional fixed-rate mortgages are offered by banks, credit unions, and other lending institutions. They typically have stringent requirements about credit score and debt-to-income ratio (or DTI) that an applicant must meet.
• Government-insured loans:FHA, USDA, and VA mortgages tend to have less rigorous requirements and target certain kinds of homebuyers, such as those with lower income, in the military (past or present), and living in rural areas. They may offer no or low down payments and other perks, too.
• Conforming and nonconforming loans: Mortgages can also be considered conforming or nonconforming, depending on whether or not they meet the guidelines established by the Federal Housing Finance Agency (commonly known as Fannie Mae and Freddie Mac). For 2026, the conforming loan limit for one-unit properties is $832,750, or up to $1,249,125 in areas deemed high cost.
Of course, homes costlier than these limits exist, and it is possible to take out a mortgage to buy one. Those loans are considered nonconforming and are also sometimes called jumbo loans.
Because the loans are so large, eligibility requirements tend to be more stringent, with borrowers usually needing a down payment well above 3%, cash in the bank, and a solid credit score.
Fixed-Rate Mortgage Term Lengths
You can’t answer the question “What is a fixed-rate mortgage?” without looking closely at mortgage term lengths. The term length that a buyer chooses for a fixed-rate mortgage can have a significant effect on the overall costs of the loan, so it’s helpful to understand how term lengths and costs intersect.
30-Year Fixed
The most common term length for a fixed-rate mortgage is 30 years. Repaying the loan (plus interest) over three decades means paying more interest over the life of the loan than you would if you chose a shorter term length, but the longer term also makes for a lower monthly payment than a shorter term. This is one reason it’s such a popular choice. A chart showing 30-year mortgage rate trends can help you see how current rates compare to historical highs and lows.
15-Year Fixed
A shorter term means higher monthly payments but less interest paid over the life of the loan, which is a critical consideration when choosing between a 30-year and a 15-year mortgage. For example, if a homebuyer borrowed $350,000 at 7.00% with a 30-year loan, the monthly payment amount would be $2,328.56 and the total interest paid would be $488,279. But borrowing the same amount at the same rate with a 15-year term would mean a monthly payment of $3,145.90 and total interest paid of $216,261.81. A 15-year mortgage term or other shorter-term fixed-rate loan may be a good choice for those who can afford to comfortably make the higher monthly payment.
Other Terms
As noted above, a fixed-rate mortgage term can also be 10 or 20 years. To see how changing the term length affects the monthly payment amount and the total interest paid over the life of the loan, try plugging different term lengths into a mortgage calculator.
Here’s an example of how a fixed-rate mortgage might work if you buy a house for $428,700 with 20% down and take out a 30-year fixed-rate home loan. Your mortgage principal will be $342,960, and at a rate of 6.72% with a solid credit score of 740+, your monthly payment (not including any taxes or insurance) will be $2,217.
As we’ve seen, when you make your loan payments, at first most of the money goes towards interest. This is because the interest is front-loaded, to use the industry lingo. Perhaps 90% of your payment will be paying interest and 10% will be applied to the principal. As you get to the end of your loan payment, these figures may well be reversed. That is, 10% of the $2,217 goes toward interest and 90% toward the principal.
Pros and Cons of Fixed-Rate Mortgages
Fixed-rate mortgages are more common among homebuyers because of the predictability they offer. Still, there are both drawbacks and benefits to pursuing this kind of home loan.
Benefits of Fixed-Rate Mortgages
Because homebuyers who take out fixed-rate mortgages will know their rates at the time they sign on the dotted line, these loans provide long-term predictability and stability, which can help people who need to fit their housing expenses into a tight budget.
Fixed-interest mortgages and other types of fixed-rate loans shield borrowers from potentially high interest rates if the market fluctuates in such a way that the index significantly rises.
Drawbacks of Fixed-Rate Mortgages
Although fixed-rate mortgages are more predictable over time, they tend to have higher interest rates than ARMs — at least at first. Sometimes an ARM might have a lower interest rate but only for a relatively brief introductory period, after which the rate will be adjusted.
If the index rate falls in the future, homebuyers who opt for a fixed-rate loan might end up paying more in interest than they would have with an ARM.
Because lenders risk losing money on fixed-interest mortgages if index interest rates go up, these loans can be harder to qualify for than their adjustable-rate counterparts.
How to Calculate Fixed-Rate Mortgage Payments
Now that you know what a fixed-rate mortgage is and how it functions, you might wonder how much it could cost you. If you’re curious about what fixed-rate mortgage payments would look like at different home price points for varying terms, use an online mortgage calculator or, for an even more detailed look at what you’ll pay each month, check out a mortgage calculator with taxes and insurance.
When Is a Fixed-Rate Mortgage the Right Choice?
Fixed-rate mortgages offer long-term predictability, which can be a must for those who need budget stability. Furthermore, fixed interest rates can be beneficial for those who plan to stay in their home for a longer period of time — say, at least seven to 10 years.
Here’s why: Homebuyers with 30-year fixed-rate loans may need that long to build home equity (remember: during the initial years of the loan most of your payments go toward interest, not equity).
Finally, if homebuyers suspect that interest rates are about to rise, a fixed-interest loan can be a good way to protect themselves from those increasing rates over time.
That said, there are some instances in which an ARM may be a better choice. If a homebuyer is planning to sell in a short amount of time, for example, the low introductory interest rate on an adjustable-interest loan could save them money (as long as they can sell the property) before the rate can tick upward.
Fixed-rate loans, in which the interest rate holds steady for a loan term of 10, 15, 20, or 30 years, are popular in part because their costs are predictable. But when you’re in the market for a home, shopping for the right loan is almost as important as shopping for the house itself, so an adjustable-rate mortgage might be worth a look too, especially if you need a lower monthly payment and don’t plan to stay in the home for very long.
Looking for an affordable option for a home mortgage loan? SoFi can help: We offer low down payments (as little as 3% - 5%*) with our competitive and flexible home mortgage loans. Plus, applying is extra convenient: It's online, with access to one-on-one help.
SoFi Mortgages: simple, smart, and so affordable.
FAQ
Can you refinance a fixed-rate mortgage?
Yes, you can refinance a fixed-rate home loan. Because refinancing means taking out an entirely new loan and involves some upfront costs, it’s important to make sure that these costs don’t outweigh the savings you will enjoy due to, say, a lower interest rate or a shorter loan term (two of the chief reasons people opt to refinance).
What is the average fixed-rate mortgage?
Mortgage rates can change daily, so if you want to know the current average fixed-rate mortgage number, it’s best to check online. For most of the last two and a half years (dating back to January 2024) the 30-year fixed rate has been between 6.50% and 6.60%.
Are most mortgages fixed rate?
Fixed-rate mortgages have been more popular than adjustable-rate mortgages since the housing market crisis in 2007, largely because they offer borrowers a predictable payment schedule. In 2025, adjustable-rate mortgages accounted for nearly 21% of the overall mortgage market.
SoFi Loan Products
SoFi loans are originated by SoFi Bank, N.A., NMLS #696891 (Member FDIC). For additional product-specific legal and licensing information, see SoFi.com/legal. Equal Housing Lender.
SoFi Mortgages
Terms, conditions, and state restrictions apply. Not all products are available in all states. See SoFi.com/eligibility-criteria for more information.
*SoFi requires Private Mortgage Insurance (PMI) for conforming home loans with a loan-to-value (LTV) ratio greater than 80%. As little as 3% down payments are for qualifying first-time homebuyers only. 5% minimum applies to other borrowers. Other loan types may require different fees or insurance (e.g., VA funding fee, FHA Mortgage Insurance Premiums, etc.). Loan requirements may vary depending on your down payment amount, and minimum down payment varies by loan type.
Financial Tips & Strategies: The tips provided on this website are of a general nature and do not take into account your specific objectives, financial situation, and needs. You should always consider their appropriateness given your own circumstances.
Third-Party Brand Mentions: No brands, products, or companies mentioned are affiliated with SoFi, nor do they endorse or sponsor this article. Third-party trademarks referenced herein are property of their respective owners.
Tax Information: This article provides general background information only and is not intended to serve as legal or tax advice or as a substitute for legal counsel. You should consult your own attorney and/or tax advisor if you have a question requiring legal or tax advice.
¹FHA loans are subject to unique terms and conditions established by FHA and SoFi. Ask your SoFi loan officer for details about eligibility, documentation, and other requirements. FHA loans require an Upfront Mortgage Insurance Premium (UFMIP), which may be financed or paid at closing, in addition to monthly Mortgage Insurance Premiums (MIP). Maximum loan amounts vary by county. The minimum FHA mortgage down payment is 3.5% for those who qualify financially for a primary purchase. SoFi is not affiliated with any government agency.
†Veterans, Service members, and members of the National Guard or Reserve may be eligible for a loan guaranteed by the U.S. Department of Veterans Affairs. VA loans are subject to unique terms and conditions established by VA and SoFi. Ask your SoFi loan officer for details about eligibility, documentation, and other requirements. VA loans typically require a one-time funding fee except as may be exempted by VA guidelines. The fee may be financed or paid at closing. The amount of the fee depends on the type of loan, the total amount of the loan, and, depending on loan type, prior use of VA eligibility and down payment amount. The VA funding fee is typically non-refundable. SoFi is not affiliated with any government agency.
Checking Your Rates: To check the rates and terms you may qualify for, SoFi conducts a soft credit pull that will not affect your credit score. However, if you choose a product and continue your application, we will request your full credit report from one or more consumer reporting agencies, which is considered a hard credit pull and may affect your credit.
