How Much Does it Cost to Remodel a House?

In the world of HGTV renovation shows, remodeling a home might look like a breeze. Interior design pros tackle a home in 30 minutes (including commercial breaks) and finish on time—miraculously under budget.

But, real life is rarely like reality TV. Home remodels can sometimes be complicated, and costly. Coming up with a budget beforehand could help avoid the headaches and hard choices that can crop up down the line.

Ready to start calculating a potential dream home remodel? Turn off the home renovation show, grab a calculator, and read on.

There’s no one “magic number” a person can bank on when it comes to the cost of a home renovation.
However, there are several factors that a homeowner can take into account when budgeting for a home remodel: high-end vs low-end, type of home, and rooms renovated.

Factors of a Home Remodel Cost

High-end Versus Low-end Renovation

A renovation of a 2,500 square foot home could cost anywhere between $25,000 and $150,000 on average . The variation in price stems mostly from the scale of the projects. According to HomeAdvisor , a homeowner can expect to generally complete the following within each budget range:

•   Low-end ($15,000-$45,000). A renovation of this size would include small changes, such as new paint and fresh landscaping. It might also include inexpensive finishes, such as new counters and flooring.
•   Middle-end ($46,000-$70,000). In addition to the low-end projects, a middle-end home renovation includes full room remodels, like a bathroom and kitchen, as well as a higher quality flooring than the low-end renovation.
•   High-end ($71,000-$200,000). A high-end budget would include the low- and middle-end projects, as well as high-quality finishes including custom cabinetry and new appliances. It might also include improvements to the foundation, HVAC, plumbing, and electrical.

As a homeowner begins to identify what rooms they want to upgrade and to what extent, they will begin to customize their renovation budget. Just one in five homeowners finish renovations under budget, so it’s recommended to pad estimates in the event of unexpected costs.

Type and Age of Home

Older homes will typically need more TLC during the renovation process. Once walls and floors are opened up, a homeowner might realize the wiring and plumbing is outdated and should be brought up to code.

While a person’s home won’t be unsellable if everything isn’t up to code, there could be issues with financing because generally lenders will not close on a home where health and safety issues are identified.

People may decide that adhering to building standards ensures the work is up to code and that it’s a safe renovation. That can involve time, money, and work. That is why sometimes older homes can involve more work than the average renovation.

If a person’s home is old enough to be considered “historic” in their town or community, they’ll want to be careful about the changes they make. Depending on where a person lives, they’ll likely need to adhere to their city’s guidelines to make sure their home still falls into the “historic“ categorization, even after a remodel.

Designated historic properties in states like Connecticut could boost a home’s value between 4% and 19% , on average.

Depending upon the condition of the home and any past upgrades, a home’s age can have an impact on the cost of renovation, but so too can the type of home, regardless of age.

HomeAdvisor estimates that Victorian homes generally cost the most to renovate per square foot, up to $200 and that farmhouses and townhouses tend to have the lowest cost per square foot, between $10-$35 .

Use SoFi’s Home Improvement Cost Calculator
to estimate the price of your next remodel.


Typical Renovation Costs by Room

For many homeowners, a dream renovation would cover every inch of the home, but for the budget-conscious, that might not be possible.

When it comes to renovation expenses, generally, not every room is created equally. Rooms with cabinets and appliances tend to be the priciest—think bathrooms and kitchens.

Kitchen Remodel

The typical range for the cost of remodeling a kitchen comes in between $13,052-$37,026 , but kitchens can have the most variation when it comes to cost, depending on finishes, appliances, and projects.

Here’s what a homeowner could expect to overhaul in a kitchen based on the budget range :

•   Low-end ($5,000-$30,000). New lighting, faucet, coat of paint, refreshed trim, and a new but budget-friendly sink backsplash. This also might include knocking down walls or a counter extension project.
•   Middle-end ($30,000-$60,000). This budget could include new appliances, floors, and tiled backsplash to the sink. It might also include new cabinets and mid-range priced countertops.
•   High-end ($65,000+). When the budget expands for a kitchen, the projects start to take on custom finishes. A high-end budget would likely include custom cabinets, high-end countertops like stone or granite, and expensive appliances. Other projects might include new lighting, hardwood flooring, and new faucet fixtures.

Because a kitchen can be so customizable and include so many levels of finishes, the budget could fluctuate greatly.

Bathroom Remodel

Bathrooms take on a similar budgeting structure. The typical range for the cost of a bathroom remodel is between $5,989-$14,964 , but that includes a range of projects and features.

For example, new cabinets in a bathroom can account for up to 30% of the budget . Other big-ticket items come in a range of prices based on low-end versus high-end finishes.

On the low-end, a new bathtub might cost just $400 , but if a homeowner is looking for a high-end tub, they could pay upwards of $8,000 . The final cost will likely hinge on the homeowner’s decision on budget range.

Bedroom and Living Room Remodel

Budgeting a bedroom remodel can be a little more cut and dry since it generally doesn’t include as many costly fixtures as a person might find in the bathroom or kitchen. A homeowner can expect to tackle a bedroom for about $7,880, on average .

This typically includes new carpet, windows, door, and refreshed molding. It might also include new heating, insulation, and updated wiring and lighting. But this budget doesn’t account for new furnishings in the bedroom, like a bed or wardrobe.

Remodeling a master suite could cost a bit more since it typically includes a bathroom and bedroom renovation. If a homeowner wants to add or expand a closet in the master suite, they can estimate adding around $1,500 to $2,000 to the room’s budget, on top of the bathroom and bedroom.

A living room remodel can cost between $1,500-$5,500, on average . Like the bedroom, living rooms tend to lack the “wet” features, plumbing and appliances, that can drive up the cost of the bathroom and kitchen.

If a living room has a fireplace feature, homeowners can expect to spend a bit more. Looking to add a fireplace? That could add at least $2,000 to the room .

Exterior Remodel

Updating roofing and refreshing the exterior of a home is commonly part of a renovation. A new roof could cost $20,000 , on average, but will vary depending on materials.

Adding new siding to a home will typically cost around $14,000 , but will once again fluctuate based on the material used. Painting the exterior of a home will cost between $1,710 and $4,000 .

Of course, depending on the degree to which each room is remodeled, the estimates could vary. DIY-ing projects in various rooms could also help bring down the budget.

Other Remodel Considerations

A remodel isn’t just financial spreadsheets. There are other considerations a homeowner may want to consider before taking a sledgehammer to a room.

Timeline

A renovation could take anywhere from a few days to a few months, so a homeowner may want to plan their timeline accordingly. It might be tempting to duck out of town when big projects are underway, but staying around means the homeowner could monitor projects and provide answers if any unexpected issues arise.

Additionally, renovations can be stressful and might be best scheduled around other big life events. For example, homeowners might think twice about a full home remodel that coincides with nuptials, or a baby on the way. Of course, unexpected events could arise, but there may be no need to pile on projects when so much is going on.

Who Is the Renovation for?

Before diving deep into plans, homeowners may want to consider who the renovation is for. Is it for the homeowner to enjoy decades from now, or is it to make the house more marketable for a future sale? The renovation could take a different shape depending on a homeowner’s answer.

If the remodel is just for the homeowner, then they might choose fixtures based on personal taste, or might decide to splurge on high-end bathroom features that they’ll enjoy for years.

On the other hand, if the homeowner plans to sell within a few years, they may consider tackling projects that have the greatest return on investment (ROI). That could mean prioritizing projects like a kitchen update or bathroom remodel.

Not sure about a project’s resale value? SoFi’s home project value estimator can be a useful tool to help determine the approximate resale value of a home improvement project.

Delays and Unforeseen Expenses

Homeowners might expect the unexpected when undergoing a remodel. Unexpected delays could extend the timeline, or emergency expenses could drive a project over budget.

As a general rule of thumb, it is recommended for homeowners to pad their budget by at least 10% for emergencies or unexpected costs.

Financing a Remodel

Coming up with the capital to finance a remodel can be daunting enough to make some homeowners abandon the whole process. However, there are multiple avenues homeowners can explore to start the remodel of their dreams.

Out of Pocket

Homeowners who take on small renovations and have liquid savings might decide to pay for everything out of pocket. This means no debt or interest rates to contend with.

However, paying cash for a large project can be challenging for some, and might lead to cutting corners on important elements in an effort to keep costs down. Plus, unexpected emergency costs could drive the homeowner into unexpected debt.

Out of pocket is possible for some homeowners, but it’s not the only way to pay for a remodel.

From Friends or Family

Another alternative is to borrow money from family members or friends. While this saves homeowners from having to deal with loan applications and approvals, and potentially provides more flexible terms, it can come with its own share of issues, such as risking the relationship if the borrower is unable to pay back the lender (in this case, family or friends).

Homeowners may want to carefully consider the effect borrowing money for a remodel might have on a relationship, and make sure there are plans in place in case the money can’t be repaid.

Additionally, loans from family members may be considered gifts by the IRS (and may be taxable), so it’s best to discuss with a tax professional before proceeding.

HELOC

A HELOC, or Home Equity Line of Credit, allows homeowners to pull a certain amount of equity out of their home to finance things like renovations.

Qualifying for a HELOC depends on several factors, including the outstanding mortgage amount on the home, the market value of the home, and the owner’s financial profile.

HELOCs typically come with an initial low-interest rate, and a homeowner generally has the option to only pay interest on the amount they’ve actually withdrawn.

However, they could also have high upfront costs, and can come with a variable interest rate with annual and lifetime rate caps.

Personal Loan

If a homeowner doesn’t have the cash on hand or enough equity in their home for a HELOC, then a personal loan might be a consideration.

An unsecured personal loan is generally an unsecured installment loan that isn’t attached to a person’s home equity, and typically can be funded faster than secured loans and with fewer or no upfront fees.

Personal loans might be a good option for people who recently bought their homes, need capital quickly for unexpected personal reasons, or need a loan for their home improvement project.

SoFi’s personal loans are generally funded in as little as three days, with competitive rates, and no fees. Qualified borrowers may be eligible to borrow $5,000 to $100,000 for a home improvement or other personal needs, and can apply online in a few clicks.

Home remodels are stressful enough, but with a home improvement loan from SoFi, finding a way to pay for them doesn’t have to be.


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How to Leverage Home Equity to Pay Off Student Debt

Student loan debt can be difficult to manage. Trying to make ends meet when you are saddled with a monthly payment from your education can be a challenge. The burden can become overwhelming once you add a mortgage, a car, and other financial obligations. Stare at your owed balances long enough and you may start wondering just how illegal robbing a bank really is.

Fortunately, there’s another option available—that won’t end with you in handcuffs.
Fannie Mae offers a way for you to use the excess value of your home to pay off student loan debt directly. Some families may benefit from consolidating student loan debt into their mortgage with a new lower fixed rate applied and consolidated into one loan with one monthly payment.

It’s good to note that although the rate and payment may be lower, the term of the debt may be lengthened which would result in higher interest payments over an extended period of repayment.

Mortgage interest rates can run lower than student loan interest rates. Some homeowners may be able to use that to their advantage. Paying off multiple student loans with one loan means making only one payment per month, which not only simplifies life, but could also save borrowers money.

How much you can potentially save depends on things like the difference in interest rates —depending on your loan terms, it can be said, the bigger the gap, the better the savings.

For example, if you’re paying 7.08% interest on a Direct PLUS student loan for 25-years, but can lower the rate on your 30-year mortgage at say a 4.00% interest rate, you’ll not only pay off your student loans with less interest over the life of the loan, but can also refinance your mortgage to a lower rate, possibly saving you significant mortgage interest in the long run.

Working with SoFi, you can consolidate your student loans with your existing mortgage, refinance the total amount at a lower rate, and simultaneously pay off those student loans.

Under the student loan cash-out refinance program, student loans would be paid off directly through escrow after the loan funds which allows this loan program to avoid any additional pricing bumps for cashout to the borrower. Loans must be paid in full, no partial payments are allowed.

The Elements of Equity

Some cash-out refinance loans such as a student loan cash-out refinance is priced to be used for a specific purpose, consolidating your student loan debt and mortgage into better loan terms.

You can also take cash out of your home for most any reason with a vanilla cash-out refinance type loan or if you already have a low rate on your mortgage, you can opt for a 2nd mortgage such as a home equity line of credit (HELOC.)

When your home’s market value is higher than what you owe on your mortgage(s), you have equity in your home. The equity you earn in your home can be utilized as an asset. That means if eligible under the loan program you choose, you can draw upon the available equity, for a variety of reasons (e.g. to pay off your student loans).

You can gain equity in two ways. The first is by making payments on the mortgage; as you pay back what you owe the principal amount owing on your loan is reduced, and if your homes market value doesn’t decline, your equity increases. Say that you purchased a home for $350,000 and you took out a $250,000 mortgage 10 years ago, and have since paid back $50,000 of what you owe.

If your home value remains the same as when you purchased it, you may have $150,000 in available equity for an in-ground pool for the kids, a new car, or, best of all, to refinance and consolidate your student loans. The amount of equity that can be utilized will depend upon many factors, such as the lender, loan program, qualifying, etc.

Sound good? It may be even better. The second way to earn equity in your home is through price appreciation, so as your home gains market value, you earn equity.

If you’re a ladder-climbing professional, who’s great at financial planning, it’s possible that you bought that dream home in a growing market, and it’s now worth $400,000 or more. As of 2018, untapped home equity reached an all time high in the United States, reaching about $14.4 trillion . If your home’s equity is part of that sum, it could be used as a tool to help you further your financial priorities.

Deciding to Pay Off Student Loans with Home Equity

Using the equity you’ve earned in your home to pay off your student loans may sound like an easy fix. But before you commit to refinancing, you may want to weigh the decision carefully. While it may make sense for some, a student loan cash out refinance won’t work for everyone. Here are a few pros and cons to consider as you make your decision.

Benefits of Paying Off Student Loans with Home Equity

Like most financial decisions, paying off your student loans with the equity you’ve earned on your home is a multifaceted decision. Here are some of the ways you could find it beneficial.

Securing a lower interest rate is potentially the most appealing reason to use the equity in your home to pay off student loans. As part of your decision making process consider reviewing mortgage options at a few different lenders. While reviewing rate quotes from each lender do the math to determine if paying off student loans with home equity will truly reduce the amount of money you spend in interest.

If there are any fees or prepayment penalties, try to factor those in. Doing this leg work can help you determine if going through the process is worth it in the long run.

As you are reviewing options, consider the term length of the mortgages. The standard repayment plan for student loans has a 10 year term unless you consolidated them already, in which case you could have a term of up to 25 years. With a mortgage, term lengths can be as long as 30 years .

While repaying your debt over a longer time period could lower monthly payments, it may also mean you pay more in interest over the life of the loan, which could factor into your decision making process.

Another benefit may be reducing the number of monthly payments you need to keep track of. Instead of paying your mortgage and each of your student loans, those bills have all been consolidated into a single payment. Streamlining your payments could help you stay on top of your payments and make your finances a little bit easier to manage.

Downsides of Paying Off Student Loans with Home Equity

There are a few potential negatives that could impact your decision to pay off student loans with your home equity. Firstly, using your home equity to pay off your student loans could potentially put your home at risk.

You’re combining your student loans and mortgage into one debt, now all tied to your home. That means if you run into any financial issues in the future and are unable to make payments, in severe cases, such as loan default, your home could be foreclosed on.

Second, when you use your home equity to pay off your student loans, you’ll still owe the debt (now as a part of your mortgage), but you’ll no longer be eligible for borrower protections that are afforded to borrowers who have federal loans.

These benefits include deferment or forbearance, which could allow you to temporarily pause payments in the event of financial hardship, and income-driven repayment plans, which tie a borrower’s monthly payment to a percentage of their discretionary income.

If you are pursuing student loan forgiveness through one of the programs available to federal borrowers, for example Public Service Loan Forgiveness, consolidating your student loan debt with your mortgage would eliminate you from the program. If you’re currently taking advantage of any of these options it may not make sense to use the equity in your home to pay off your student loans.

As you weigh your options, you might consider comparing the available equity in your home to the amount you owe in student loans. In some cases, you may owe more in student loan debt than you have available to use in home equity under the various loan guidelines.

When It’s Time to Leverage Your Home Equity

Cashing in on your home equity isn’t as easy as withdrawing money from your checking account, but it’s also not as difficult as you might think.

A good first step is to contact a mortgage lender, who will order an appraisal of your home and get you started on paperwork. It could also be a good idea to check your credit score.

To secure a cash out refinance lenders guidelines will likely require a credit score of 620 or higher. The minimum score required depends upon many factors such as credit, income, equity and more. If you don’t meet the minimum fico score requirement for your chosen program, you might want to make a few changes to improve your credit score before applying for a cash-out refinance.

At the very least, you’ll likely need your latest tax filings, pay stubs, and bank statements. Lenders use those documents to evaluate whether you have the savings and cash flow to pay back a fatter mortgage, and they may ask for them every time you try to refinance. So it can be helpful to keep them handy.

When utilized responsibly, home equity can be a useful tool in helping to improve your overall finances. Home equity can be used for most any purpose such as consolidating higher interest credit card debt, student loan debt or home improvements.

Shop Smart

Interested in using your home’s equity to pay off your student loan debt? Take a look at SoFi. This student loan cash-out refinance option offers qualified borrowers competitive rates with no cash-out pricing add-ons applied.

Pre-qualifying takes just two minutes online, so you can get an idea of the rates and terms available to you. Loans are usually approved in about 30 days.

Unlike taking your chances with the lottery, the odds could be more in your favor when you leverage your home equity responsibly. Explore your rate and term options, and then get in touch with us to start the refinancing process. Learning is a lifetime commitment; student loan debt doesn’t have to be.

Learn more about borrowing a student loan cash-out refinance with SoFi.



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The Basics of a Qualified Mortgage

In the 2015 Academy Award–winning film The Big Short, there’s a scene in which actress Margot Robbie sips champagne in a bubble bath and explains the origins of the 2008 financial crisis. At the root of the crisis, she explains, was the practice of banks bundling an increasing number of subprime mortgages into bonds. “Whenever you hear subprime, think ‘shit,’” is how she puts it.

To help prevent history from repeating itself, Congress passed a rule in 2010, as part of the Dodd-Frank Act , to clamp down on the excessive risk-taking in the mortgage industry prior to 2008. The rule, which went into effect in January 2014, created something called a “qualified mortgage.”

Basically, a qualified mortgage is a type of loan that has certain, more stable features that help make it more likely that the borrower actually is able to repay their loan. This means the bank has to do some more in-depth work to make certain that a borrower can repay the loan, such as analyzing the borrower’s “ability to repay .”

It doesn’t necessarily mean more work for the borrower, but it does mean lenders will take a deeper dive into a potential borrower’s finances to better determine whether the mortgage they applied for is considered affordable for them under the guidelines. The rule is intended to protect consumers from harmful practices, but it may also make it harder to qualify under certain loan programs. Unfortunately, not everything in the financial world comes with a Margot Robbie explanation. Since the terminology around qualified and non-qualified mortgages can get confusing, here are a few basics.

What Is a Qualified Mortgage?

Qualified mortgages follow three basic tenets, as outlined by the Consumer Financial Protection Bureau (CFPB):

1. Borrowers should be able to pay back their loans.

2. A qualified mortgage will likely be easier for the borrower to understand.

3. The qualified mortgage should be a fair deal for the borrower.

Based on these simple ideas, the CFPB created stricter guidelines for loans not sold to Fannie Mae (FNMA) or Freddie Mac (FHLMC) to ensure that borrowers could repay loans. FNMA and FHLMC are government-sponsored entities (GSEs)—this designation allows them a special pass on QM rules, commonly referred to as the “QM GSE Patch .” The conforming loans that follow GSE guidelines are normally input by lenders and approved in the automated underwriting systems set by FNMA and FHLMC.

For QM loans not approved and sold to FNMA or FHLMC, there is a limit on how much of a borrower’s eligible income used for qualifying can go toward debt. In general, total monthly debts cannot exceed 43% of gross monthly income, this is referred to as a debt-to-income ratio or DTI.

Limiting the amount of debt a borrower can take on can make them a safer bet for banks and less likely to default on their mortgage. Instead of granting a mortgage that’s possibly not affordable, keeping the loan within a reasonable DTI ensures a borrower is not borrowing more money than they can repay.

Next, the loan term must be no longer than 30 years. Once again, this is in place to protect the home buyer. A loan term beyond 30 years is considered a riskier loan because of the extended loan term with longer payback and additional interest. In addition, a qualified mortgage is barred from some other risky features, such as:

•   Interest-only payments. Interest-only payments are payments made solely on the interest of the loan, with no money going toward the paying down the principal. When a borrower is only paying interest, they don’t make a dent in paying off the loan itself.

•   Negative amortization. Amortization means “paying off a loan with regular payments, so the amount goes down with each payment.” In the case of negative amortization, the borrower’s monthly payments don’t even cover the full interest due on the mortgage. The unpaid interest then gets added to the outstanding mortgage total, so the amount owed actually increases over time. In some cases, depending upon market conditions, a borrower could end up owing more than the home is worth.

•   Balloon payments. These are large one-time payoffs due at the end of the introductory period of the loan, historically 5 or 7 years. These loans are fully amortizing during the full term and are unlikely to carry any sort of prepayment penalty.

In this example, we will refer to points as origination discount points. Origination discount points can vary based on many things such as lender, loan program, rate chosen, but a qualified mortgage will have a cap on the number of total points allowed to be charged to the consumer.

According to the Consumer Financial Protection Bureau , effective in 2017, the maximum total points and fees a borrower could be charged are limited to the following without being referred to as a high priced mortgage which carries additional guidelines:

•   For a loan of $100,000 or more: 3% of the total loan amount or less
•   For a loan of $60,000 to $100,000: $3,000 or less
•   For a loan of $20,000 to $60,000: 5% of the total loan amount or less
•   For a loan of $12,500 to $20,000: $1,000 or less
•   For a loan of $12,500 or less: 8% of the total loan amount or less

Lenders also verify a borrower’s ability to repay the loan. The ability-to-repay rule encompasses different aspects of a borrower’s financial history that a lender must review. The ability-to-pay rule means the lender is likely to review items such as:

•   Income
•   Assets
•   Employment
•   Credit history
•   Alimony or child support, or other monthly debt payments
•   Other monthly mortgages
•   Mortgage-related monthly expenses (PMI, HOA fees, taxes)

Under some circumstances, lenders might not have to follow the ability-to-repay rule but still count the loan as a qualified loan. These lenders and institutions may include:

•   Groups certified by the U.S. Treasury Department to provide mortgage services to underserved populations
•   Nonprofit service groups that receive aid from HUD to make down payments affordable in developing communities
•   Small nonprofit organizations that lend to a select number of low- to moderate-income consumers each year
•   State agencies that provide low rates and down payment assistance
•   Any loans made through the assistance of the Emergency Economic Stabilization Act

In addition to the protections provided to borrowers, the rule also grants lenders safe harbor through verification of the borrowers ability to repay by limiting the ability of borrowers who can’t pay their mortgages from suing the lender. Qualified mortgages offer safe harbor to the lender if ability to repay rules were properly adhered to when qualifying the borrower(s) for the requested loan program.

In these instances, borrowers cannot sue based on the claim that the institution had no basis for thinking they could repay their loans. They also make it harder for borrowers to buy more home than they can afford.

While qualified mortgages include a more involved process, they’re ultimately meant to protect both the lender and the borrower.

What Is a Non-Qualified Mortgage?

A non-qualified mortgage (non-QM) is a home loan that does not meet the standards required for a qualified mortgage.

But a non-QM loan is not the same as the subprime loans available before the housing market crash. Typically, with a non-QM loan, lenders confirm that borrowers can repay their loans based on reasonable evidence, which can include verifying many of the same information as QM loans such as assets, income, or credit score.

Non-QM loans allow lenders to offer loan programs that don’t necessarily meet the strict requirements of qualified mortgages. Because non-QM loans don’t have to adhere to the same standards, it means the underwriting requirements like the QM DTI limit for instance, can be more flexible and provide eligible borrowers with more loan program choices.

Non-qualified loans can also vary by lender, so borrowers who take this route should research their options carefully.

Not all lenders are built the same, similar to borrowers. In some situations a non-QM loan might be the right choice for a borrower.

When Could a Non-QM Loan Be the Right Option?

Many lenders offer non-QM loan programs because they have more flexible loan features. This type of loan may be right for borrowers who can afford to pay but don’t conform to additional qualified-mortgage requirements.

Examples of borrowers who might seek a non-qualified mortgage are:

•   The self-employed. Borrowers with streams of income that might be difficult to document, like freelance writers, contractors, and others, might consider a non-qualified mortgage.

•   Investors. People investing in real estate properties, including flips and rentals, might choose to apply for a non-qualified mortgage because they need funding faster, or have a challenging time proving income from their rental properties.

•   Non-U.S. residents. People who are not U.S. residents can be challenged by qualified mortgages, because they may have a low or nonexistent credit score in the U.S.

Qualified mortgages have safeguards in place for both the lender and the borrower, but in some circumstances, it can make sense for a borrower to choose a non-qualified mortgage. In some instances, this type of loan may be chosen because of property issues such as a condo that doesn’t meet certain criteria, property type, etc.

If you are looking for a mortgage to fit your financial needs, you could check out SoFi’s home loans. Borrowers can put as little as 10% down for loans up to $3 million, and with competitive rates and dedicated mortgage loan officers, applying for a new home might be easier than you think.

While the nitty-gritty of qualified mortgages versus non-qualified mortgages might not be as fun or thrilling as a Hollywood blockbuster, deciding the route to take as a borrower is an essential and important step of the home-buying process, so do your research and ask your chosen lender questions about the different loan programs available.

Understanding the differences between the qualified and non-qualified mortgage programs might make choosing the best loan fit for your needs easier. The process of securing a mortgage has changed considerably in the past decade, but policies have been put in place to ensure better protections and in turn, a better experience for the borrower.

If you’re considering financing a home and are ready to learn more about qualifying for a mortgage, visit SoFi Home Loans today.


External Websites: The information and analysis provided through hyperlinks to third party websites, while believed to be accurate, cannot be guaranteed by SoFi. Links are provided for informational purposes and should not be viewed as an endorsement.
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. A hard credit pull, which may impact your credit score, is required if you apply for a SoFi product after being pre-qualified.
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SoFi loans are originated by SoFi Lending Corp (dba SoFi), a lender licensed by the Department of Business Oversight under the California Financing Law, license # 6054612; NMLS # 1121636 . For additional product-specific legal and licensing information, see SoFi.com/legal.

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Terms, conditions, and state restrictions apply. SoFi Home Loans are not available in all states. See SoFi.com/eligibility for more information.

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How to Qualify for a Home Loan

Buying a home is one of the most expensive purchases most Americans will ever make. As of September 2019, the average price tag for a new home was $362,700 . For many Americans, paying for a house in cash isn’t realistic.

According to the National Association of REALTORS® 2019 Profile of Home Buyers and Sellers , 86% of recent homebuyers relied on financing to complete their purchase.

The vast majority of buyers need to take out a home loan, otherwise known as a mortgage, in order to purchase a house. A variety of institutions offer mortgages, from traditional banks to credit unions to online lenders.

Some mortgages come with fixed interest rates, with terms ranging from five years to 50 (although 40 + 50 year term loans are not common place and can be harder to locate). Some mortgages offer adjustable rates which usually come with initial lower interest rates vs a fixed rate loan.

Other mortgages offer an “interest only” payment option, meaning the borrower has the option to pay only interest on the mortgage and not the principal portion for a certain period of time. Other home loan options available are insured by the federal government.

Interest rates for mortgages go up and down over time. If you’re wondering, “How much home loan can I qualify for,” it depends as many factors play into this figure, but there is a variety of online mortgage calculators to help get you started.

It can help to become familiar with the process and plan ahead before beginning the mortgage application process. What goes into qualifying for a home loan can be especially confusing. Here are some things that may come into play when qualifying for a home loan.

Your Debt-to-Income Ratio

When lenders are considering giving you a mortgage, they have to take into consideration your “ability to repay” the loan. One key way they gauge this is by looking at your debt-to-income ratio.

You can figure this out yourself by taking the total debt you currently pay each month (add your new estimated monthly housing payment including principal, interest, taxes and insurance) and divide that figure by your gross monthly income (before taxes).

For example , say you pay $1,500 a month for a mortgage, $100 a month for a car loan, and $400 a month for a student loan. Your monthly debt therefore comes to $2,000. If you make $6,000 a month before taxes and deductions, your debt-to-income ratio would be 33% ($2000 divided by $6000, multiplied by 100).

To qualify for most non conforming or Jumbo mortgages, you likely need an debt-to-income ratio no higher than 43% . For conforming loans (Fannie Mae/Freddie Mac), there are exceptions from the rule and in some cases the qualifying DTI can be as high as 50%.

If you’re realizing that your debt-to-income ratio is on the high side, you can work to reduce it by using strategies such as increasing your eligible income, adding a co-borrower or paying off some of your debts.

Keep in mind that the 43% figure isn’t set in stone for non conforming or Jumbo loans. Some lenders may choose to make an exception if they have made a good-faith effort to confirm that you’ll be able to repay the mortgage.

Save for a Down Payment

Down payment requirements will vary depending upon the loan program you choose and other qualifying factors.

It’s generally wise to avoid emptying your emergency fund or retirement account just to have a bigger down payment, since those savings can be helpful to secure your long-term financial future.

The amount you need to save will likely vary based on the type of mortgage you’re hoping to get.

If you’re currently serving in the military or have done so in the past, you might be eligible for 100 financing with a VA loan from the U.S. Department of Veterans Affairs. In this case, you might be able to take out a mortgage without a down payment and also benefit from lower fees and/or interest rates.

Another option for those who aren’t able to save much of a down payment is to look into a Federal Housing Administration loan, which is also a federally insured mortgage.

Eligible homebuyers (do not have to be first time homebuyers); might qualify with a down payment of 3.5% depending on their credit score and other factors. Qualifications include things like being a legal U.S. resident, typically having a debt-to-income ratio of less than 43%, occupying the home as a primary residence, and being out of bankruptcy for at least two years, and more.

You’d likely have a hard time finding a loan program with 0% down in the private market, but, for first time homebuyers, there are conventional loans from Fannie Mae requiring as little as 3% down.

However, non first time homebuyers will need to put a higher minimum percentage down for a conventional mortgage, starting at 5%. If you put less than 20% down, the lender might require you to take out private mortgage insurance, or PMI. The purpose of PMI is to protect the lender, since the insurer will have to pay back part of the loan balance if you default.

To reiterate, you would pay for the insurance, but it’s the lender that’s protected. Since PMI can cost between 0.17% and 2.33% of the mortgage amount annually some would-be homeowners prefer to save 20% down if they can. However, it’s good to note that PMI is eligible to be removed from the housing payment on conventional loans once certain criteria is met.

Maintain a Decent Credit Score

In addition to your debt-to-income ratio, reviewing your credit score is another way that mortgage lenders assess your riskiness as a borrower.

This number is based on how you manage credit, such as how much debt you’ve taken out relative to available credit, the number and type of accounts you have, the average age of your accounts, and your history of paying bills on time.

It also takes into account negative events in your financial history, such as bankruptcies or outstanding judgments. A commonly used tool is the FICO® credit score, which is measured on a range from 300 to 850 .

The credit profile required to buy a house varies based on the type of loan program and other factors. For a conventional loan, a credit score of at least 620 is generally needed to get a mortgage.

For an FHA loan, you may only need a credit score of 500 if you put 10% down, or as low as 580 with a minimum down payment of 3.5%. The VA loan program doesn’t have a fixed minimum credit score, but points out that most lenders that offer VA loans have their own internal guidelines that usually look for a score above 620.

Show Proof of Income and Employment

Since the credit crisis the government has put guardrails in place for lenders to use when determining ability to repay.

These guardrails involve things like verifying ongoing eligible sources of income that the borrower will use to pay back the loan.

That’s why qualifying for most mortgages requires showing proof of employment and income. Standard with most loan programs is showing both a history and an ongoing source of income.

In most cases, the lender must be able to verify that the applicant has been employed for at least two years, and any gaps that are more than one month long must be explained. Applicants who are self-employed need to show proof of their income through last two years tax returns, profit and loss statements, and/or similar records.

As mentioned, lenders typically need to verify employment for the past two years, this helps to confirm that the income source used for qualifying is stable and reliable.

In some cases, let’s say if you just graduated with a degree in the same line of work that you have secured a job in, that degree may be used by the lender as history in the same line of work. If you haven’t been working lately or had significant gaps in your recent employment, you can discuss the situation with the lender.

Applying for a Mortgage with SoFi

If you’re in the market for a mortgage, taking out a home loan with SoFi comes with perks. You may be able to qualify for a loan with a down payment as low as 10% and SoFi offers Jumbo loans with No PMI requirement. With SoFi there are no application fees or pre-payment penalties.

You can choose from a variety of loan options, based on your needs, and apply for loans on a primary residence or second home. And if you’re eligible, you can get financing in about 30 days. It takes just two minutes to get pre-qualified online at no obligation—find out how much you may be able to borrow and what rates you might be eligible for.

Want to get pre-qualified for your dream home the painless way? See what your options are with a SoFi mortgage loan today.


External Websites: The information and analysis provided through hyperlinks to third party websites, while believed to be accurate, cannot be guaranteed by SoFi. Links are provided for informational purposes and should not be viewed as an endorsement.
Disclaimer: Many factors affect your credit scores and the interest rates you may receive. SoFi is not a Credit Repair Organization as defined under federal or state law, including the Credit Repair Organizations Act. SoFi does not provide “credit repair” services or advice or assistance regarding “rebuilding” or “improving” your credit record, credit history, or credit rating. For details, see the FTC’s
website
.

Third Party Brand Mentions: No brands or products mentioned are affiliated with SoFi, nor do they endorse or sponsor this article. Third party trademarks referenced herein are property of their respective owners.
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.
SoFi Loan Products
SoFi loans are originated by SoFi Lending Corp (dba SoFi), a lender licensed by the Department of Business Oversight under the California Financing Law, license # 6054612; NMLS # 1121636 . For additional product-specific legal and licensing information, see SoFi.com/legal.

SoFi Home Loans
Terms, conditions, and state restrictions apply. SoFi Home Loans are not available in all states. See SoFi.com/eligibility for more information.

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How to Update a Fireplace

Even in the age of furnaces and smart thermostats, the fireplace is still a focal point of the home. It’s not necessarily keeping you toasty in the cold months, but it is serving as the visual frame of reference in a living space.

So when your fireplace is boarded up, or drably dated, remodeling it can breathe new life and warmth into the entire area.

Not only that, it could bring you some extra cash. An Angie’s List survey of real estate agents revealed that more than 68% believe that having a fireplace in the home increases its value.

So before you try to board it up or knock it down, explore trends and tips for how to remodel a fireplace.

Your fireplace might be housed in a brick wall, meaning you have not only the fire box to contend with, but an entire brick wall to reimagine. While exposed brick is on trend, it can also make a room feel dark or small.

Reimagining your brick wall and brick fireplace may seem daunting, but there are several ways to update the brick, or remodel over it for a fresh new look.

Before you commit to a remodeling plan for your fireplace, consider the following questions:

•   Do I mind if this is permanent? Some fireplace updates won’t be reversible, so you may want to sleep on it before you dive into something you’re not in love with.

•   Do I want wood, gas or both options? Some areas or individuals prefer gas over wood burning options. Wood burning can add to poor air quality in some cases.

•   How much do I want to spend on the project? Materials, installation, and time can be costly, and some updates are more affordable than others.

•   Are you updating the fireplace for potential sellers or yourself? Answering this question might give you a better idea of how much you want to spend, and which style might appeal to a future buyer.

Depending on what you have in mind for your hearth, options for updating may vary. Warm yourself up with these fresh takes on the fireplace.

Painting the Fireplace

Painting your fireplace is likely the most affordable way to give the room an update. Paint can cost anywhere between $30 to $100 per gallon , depending on where you live and what type and brand you go with.

1. Applying a coat of paint to the fireplace shouldn’t take more than an afternoon, but some professionals recommend you prep with these steps beforehand:

2. Brush the wall to clear off mortar or debris.

3. Vacuum the debris from the brick.

4. Clean and degrease the fireplace brick with a sponge.

5. Choose indoor, latex, heat resistant paint (200 degrees).

There are seemingly endless colors and types to choose from, but many designers recommend a neutral black, gray, or white.

A white or neutral tone can have a space-opening effect, making the room seem larger. Some colors will make the room look smaller, and might turn off potential buyers in the future. Flat, semigloss or gloss can be used.

Remodeling the Mantel

Adding a mantel or remodeling your existing one can change the entire look of a fireplace. Your mantel could include additional built-ins around the fireplace, or a simple minimalist board above the firebox.

Switching up your mantel is typically an easy remodel since it’s just a frame for the fireplace itself. The costs associated with it are likely tied to how ornate your plans are. Out-of-the-box mantel kits start around $180 , and can be assembled and installed in a day by a DIY novice.

If you have more ambitious plans for your mantel, it’ll likely cost you. Stone and marble mantels start at $3,000 , and a custom mantel costs a similar amount. The more complicated the design, the higher the price of creation and installation.

Mantel installation can be pricey, but in many cases it can also be reversed, making it an appealing option in the event that you decide to sell the home down the line.

Tiling Over the Existing Fireplace

If you’re looking to refinish your fireplace, tiling might be the right choice for you. Try a white subway tile for a sleek, modern finish, or a printed tile for a unique pop of color in your space.

The cost of remodeling your fireplace with tile will vary widely based on the size of your fireplace, as well as the cost of tile per square foot.

Tile installation averages around $1,500 for a project this size. However, depending on the condition of your fireplace, you might choose to consult with a brick mason in addition to a tiling professional.

A mason can let you know if its possible for the brick to be covered evenly. But, be warned—once you start tiling over your fireplace, you likely can’t reverse the process.

Covering Your Brick Fireplace with Stone

If you’re looking for a natural but updated treatment on your fireplace, stone might be the right fit. However, if your brick is already painted, it’s likely the mortar required to attach the stone won’t adhere. Consult with a masonry professional to see if your brick is porous enough to cover over.

If your fireplace is a good candidate for stone work, you’ll want to install a cement board over the existing brick as a template for the stone. The resurfacing process costs on average, $1,100 for labor , but depending on which stone you use, expenses can balloon.

•   Artificial stone veneer is the most common choice for most fireplace projects. Although it might look like real stone, it’s not as heavy as the real thing. Installation is similar to that of real stone, but on average, it costs less than real rock.

•   Natural stone veneer is the priciest and trickiest stone to install. It’s heavy, hard to come by, and expensive. Additionally, since it’s more difficult to work with than the alternatives, you may want to work closely with a professional.

•   Faux stone is affordable, lightweight, and has no actual stone. Instead of installing piece by piece, faux stone can be installed in larger panels. However, unlike artificial stone veneer, faux stone bears less resemblance to the real thing and is often hollow.

Drywalling Over the Fireplace

You might be done with brick entirely, and just want a white wall to work with. In that case, drywalling over most of the fireplace might be the solution for you.

With drywall, you can choose to cover all, or a portion of the brick wall and fireplace. You might choose to reveal some bricks, but minimize the overall look of exposed brick in the space.

To drywall around the fireplace, you’ll use two-by-fours and attach sheetrock to them. From there, you’ll paint and have a new wall.

But, be warned, this method can leave your room slightly smaller. Work with a contractor to get a better idea how room dimensions might change. Typically, installing drywall costs $1.50 per square foot, and jobs cost $1,711 on average .

Financing Your Fireplace without Burning up Your Budget

Depending on the route you choose to take, updating your fireplace could turn into a pricey venture.

Remodels can sometimes take longer and creep outside your budget. If you don’t have wiggle room in your savings, you might consider an installment loan with SoFi.

SoFi offers unsecured personal loans for loan amounts up to $100K, it won’t be a lien against your property and you could receive the funds you need in as little as 3 days. With low rates and no fees, you can focus on your focal point for the fireplace of your dreams.

Getting ready to remodel your fireplace? Check out SoFi personal loans to fund your rehab project.


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 or products mentioned are affiliated with SoFi, nor do they endorse or sponsor this article. Third party trademarks referenced herein are property of their respective owners.
External Websites: The information and analysis provided through hyperlinks to third party websites, while believed to be accurate, cannot be guaranteed by SoFi. Links are provided for informational purposes and should not be viewed as an endorsement.
SoFi Loan Products
SoFi loans are originated by SoFi Lending Corp (dba SoFi), a lender licensed by the Department of Business Oversight under the California Financing Law, license # 6054612; NMLS # 1121636 . For additional product-specific legal and licensing information, see SoFi.com/legal.

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