Understanding Property Valuations

If you’re thinking of taking out a mortgage, you probably expect lots of paperwork. The lender will likely take a look at your income, debt, credit history, employment, and assets, among other factors. There’s another loan element the lender will consider that may be less familiar: a home valuation.

It makes sense that a mortgage lender would want to know how much the property you intend to buy is worth. A seller can choose any listing price he wants—whatever they think someone is willing to pay, however, if the buyer needs financing then the selling price must be supported by market value (what like for like homes have sold for in the area)

Of course, most sellers keep in mind what comparable properties are going for, but there’s no requirement that the listing price reflects a reasonable value. And sellers usually have an incentive to inflate the price.

An independent property valuation helps the lender mitigate risk by ensuring that the home is actually worth at least the amount of the contract sales price.

The purchase price of a home is usually spelled out by the lender as being the contract sales price or the appraised value whichever is less.

If the home is appraised for less than the sales price, the seller would either lower the sales price to the appraised value.

If the seller does not want to lower the purchase price, the buyer would be asked to make up the difference. The kind of valuation required depends on many factors.

These may include the type of home you’re looking to buy, the type of loan you’re applying for, the amount of equity in your home, your credit score, and more. Here are some of the common ways that lenders may value homes.

Home Appraisals Explained

The most common kind of property valuation is an appraisal.

How Does a Home Appraisal Work?

An appraisal can be an interior/exterior inspection, exterior only or drive by just to confirm the property is still there. But a full interior/exterior appraisal is an independent estimate of the home’s value by a licensed real estate appraiser and is based on a detailed inspection of the property.

The appraiser looks at factors like the location of the property, the condition of the home (both inside and outside), the size and layout of the home (including the number of bedrooms and bathrooms), the year it was built, and any renovations that have been done.

As part of the standard appraisal process, an appraiser will also consider the prices that similar homes have recently sold for in a specific area, as well as the value estimate used by tax assessors, zoning and more.
The appraisal will determine a market value that is either “as is” or “subject to” certain conditions, such as completion of repairs or upgrades.

Lenders rely on the appraiser’s market value to come up with the loan-to-value ratio of a property, which influences the amount they’re willing to lend and the terms of the loan.

When Does an Appraisal Happen, and How Much Does It Cost?

Lenders usually require a full interior/exterior home appraisal when issuing a new mortgage—though there are some exceptions, as you’ll see below.

The Mortgage Bankers Association recommended leveraging technology to eliminate manual appraisals on mortgages below $400,000.

Most lenders still order a full appraisal even though 68% of all homes fall under the $312,500 threshold. Jumbo loans—those that exceed the conforming loan limits set by Fannie Mae and Freddie Mac—generally require a full appraisal.

The appraisal typically occurs once the seller has accepted an offer on the property, subject to whatever contingencies are in the contract. Because home valuation is part of the loan approval process, the appraisal is normally performed within the loan contingency date of the purchase contract, usually 21 days.

This loan contingency is the contract clause that states the buyers offer is contingent upon securing financing
The buyer is the one usually responsible for paying for the appraisal ordered through the lender and is entitled to free copies of the final document.

The average cost of an appraisal is dependent upon many things such as type of property, location, etc and runs an average of $334, with fees ranging from $250 to $450, according to a national survey from HomeAdvisor, an online platform for home services professionals.

What If You Get a Low Appraisal?

If the appraisal finds that the property is worth as much as the selling price or more, that encourages the lender to move forward with the loan (assuming the other aspects of the property and your application are in order).

If the appraisal finds that the home is worth less, the lender may reduce the amount of the loan they’re willing to offer.

As the buyer, you can either opt to contribute the difference in cash or try to get the seller to reduce the price. Sellers may be willing to negotiate since other potential buyers are also likely to run into a low appraisal.

If you or the seller believe the appraiser made a mistake, the seller can dispute the appraisal with the lender or ask for a second one. The buyer can also choose to pull out of the purchase if the contract included a loan contingency.

Alternatives to a Home Appraisal

In certain situations or stages of the home buying process, you may not need to go through a full formal home appraisal. Here are some alternative methods used by lenders for home valuations.

Automated Valuation Model

An automated valuation model (AVM) is a value estimate for a property using mathematical models. The algorithms take into account the size of the home, the number of bedrooms and bathrooms, recent sales of like for like properties sold in the area, and other factors.

Some lenders of conventional mortgages using Fannie Mae or Freddie Mac’s automated underwriting systems may receive a waiver for a full appraisal.

This may be due to the strong data on robust sales in the neighborhood to support the purchase price, could be the amount of the downpayment and strength of the borrower, the type of transaction and more. Some lenders may also use AVMs when deciding whether to extend or adjust a home equity line of credit (HELOC).

Drive-by or Exterior Only Appraisal

As the name suggests, a drive-by appraisal (also known as a summary appraisal) refers to an inspection that only looks at the exterior of a home. A licensed appraiser will photograph the front and sides of the home, as well as the street in both directions.

Appraisers take notes on the neighborhood and the condition of the home. They also look at comparable properties that have recently sold or listed nearby when coming up with an estimated value.

Broker Price Opinion

A broker price opinion, or BPO, is an estimate of a property’s value determined by a real estate agent or broker, rather than a licensed appraiser. A client may request this estimate to underpin a home’s listing price.

A BPO may be requested by a lender on a property where the borrower is behind on payments and risks entering into a short sale or foreclosure.

A BPO allows the lender to confirm whether the value of the home is below the amount of the loan, potentially making the borrower eligible to negotiate a short sale.

BPOs can also be used to buy and sell mortgages on the secondary market.

Lenders prefer to go with BPOs in these cases because a full appraisal isn’t required, and BPO valuations are fast and generally less costly.

Apply for a SoFi Mortgage

Before you get to the home valuation stage, the first step to becoming a homeowner may be applying for a mortgage loan. SoFi offers home loans of up to $3 million with as little as 10% down.

If you’re eligible, you can choose from competitive fixed-rate mortgages, or from adjustable-rate mortgage options. It takes just two minutes to see if you pre-qualify online.

Apply for a SoFi mortgage today to see if you qualify for competitive rates and terms.


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.
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.
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.

SOMG19040

Read more

5 Tips for Finding a Mortgage Lender

Buying a home is an incredible accomplishment but does not come without its challenges. Not only are you on the hunt for your dream home (you know, that one with that perfect yard for the dog and amazing fireplace), you’re likely running through your finances to figure out what you can afford.

And then, there’s getting a mortgage loan, which means finding a good, reputable mortgage lender; that offers the type of loan program (down payment requirement, DTI, etc) that best suits your needs, but also offers excellent customer service and competitive rates.

An organization that you can trust and that understands that this is one of the biggest financial decisions you’ll make.

Luckily, there are plenty of viable options for borrowers. There are online lenders, credit unions, direct lenders, and mortgage brokers with a vast array of loan programs to choose from, to name just a few. The trick is narrowing down a crowded field to find someone you trust that offers the loan program you want.

We might not be able to help you find the house of your dreams, but if you’re wondering how to find a good mortgage lender, here are five tips on how to find the best mortgage lender for you.

Tips for Shopping For a Mortgage Lender

1. Decide What’s Important

Throughout the process of obtaining a loan, you’ll have a lot of conversations with a bunch of different people. Before jumping in headfirst, take some time to understand what loan programs you may qualify for such as the amount of downpayment you have to work with and if you are a veteran, what lenders offer VA loans.

Once you narrow down the type of mortgage loan program you will be shopping for you can think deeper about what other elements are important to you.

Right off the bat, it can be hard to pinpoint what type of communication you’ll want during the loan process out of a mortgage lender. But you’ll likely know it when you experience it, for better or worse.

Good mortgage lenders should be clear and upfront about the loan process and all associated costs. They should be willing to answer questions because you will have questions—and you should definitely feel comfortable asking them.

You may even want to ask about a mortgage lender’s communication channel before engaging in a relationship. Here are a few questions you could consider asking them: “Do you communicate through phone, email, or text?” and “How quickly do you respond to questions?”

As you can imagine, there are multiple steps that require back-and-forth correspondence and paperwork when applying for a mortgage. Maybe it’s important for you to have someone who responds quickly. Ask your potential mortgage lender: “What are your turnaround times on things like pre-approval, appraisal, final approval and closing?”

2. Be Prepared

Part of knowing how to find the best mortgage lender is to go in ready to hold your own in conversations. It’s hard to choose between two options if you don’t truly know what you’re looking for, especially when there’s as much fine print as is typically involved in taking out a mortgage loan.

First, know the costs involved in taking out the type of mortgage you need in addition to the interest rate. There will likely be various fees associated with taking out a mortgage, such as origination and application fees, appraisal fees, and other third-party fees.

Fees can vary by lender, so have some idea of what is common and what to look out for. Such as if the rate quote is lower, are the fees higher as a result?

Next, it’s smart to have an idea of how much home you can afford and how much of a down payment is required under your preferred type of loan program. It’s good to note here that even the same loan program can have different down payment requirements at different lenders.

For instance, with a Fannie Mae first time home buyer loan you can put as little as 3% down, but not all lenders carry this program at only 3% down, some lenders may require 5% or 10% according to their internal guidelines.

Armed with this type of information may help you narrow your search to the lenders who best fit your needs. Also, having your financials in order will allow you to know how much you have to work with so you can get down to business with the lender of your choice.

Throughout the mortgage process, how you have managed your credit and the resulting credit scores will come into play. Your credit score may be one of the determining factors on what mortgage lenders you can choose from based on the loan programs you may be eligible to qualify for.

To maximize your buying experience, you may want to take some time to make sure your credit profile is in good enough shape for the loan program you want to qualify for before starting the process of searching for a mortgage lender.

3. Know Your Options

Finding the right mortgage lender means being able to navigate who you can work within the big world of mortgage lending. Here are some of the major types of mortgage lenders out there. Many may offer similar types of loan programs, but through varied channels and possibly with different fees and qualifying criteria:

Mortgage bankers: Bankers work for a financial institution that underwrites loans, but does not take deposits. Mortgage bankers can sometimes also broker out loans.

Retail lenders: Similar to mortgage bankers and also known as direct lenders, retail lenders only originate mortgage products offered by their financial institution.

Mortgage brokers: Brokers don’t generally work with one institution, but instead act as an intermediary between the borrower and a wholesale lender. For the service of pairing you with a mortgage loan from one of the lending institutions they are approved to work with, the mortgage broker will generally take a commission that is a percentage of the loan amount. The loan is approved and funded by the wholesale lender.

Online lenders: A newer option for borrowers, online lenders like SoFi offer mortgage loans and focus on competitive rates and a more streamlined application.

Correspondent lenders: Typically, correspondent lenders are local mortgage loan companies that have the capital to fund a loan, but then quickly turn around and sell the loan to a major financial institution.

Wholesale lenders: Unlike retail lenders, wholesale lenders don’t interact with borrowers and rely on brokers to sell their products.

Portfolio lenders: These lenders originate and fund loans from bank deposits and do not typically resell them after closing. They typically include bigger banks, community banks, credit unions, and savings and loan institutions.

Still, wondering how to find a reputable mortgage lender amongst these options? One thing you can do is read online reviews, like those on the Better Business Bureau’s website You can also check to make sure that your lender is registered to originate loans Nationwide Multistate Licensing System Registry in your state.

4. Compare Lenders

It’s a good idea to shop around for mortgage rate quotes through a number of different lenders. Check with banks, online lenders, credit unions, and other local independent lenders to compare loan terms, interest rates, fees, and closing timelines. Request quotes on writing.

You can plug offers into a mortgage calculator to get an idea of the total interest costs. With a mortgage calculator, you can also play around with different down payment options.

And remember, the interest rate isn’t the only cost to take into consideration; don’t forget to account for all of the fees associated with each rate and program offer.

Third-party fees should pretty much be the same no matter what lender you choose, so it’s the lenders loan terms (qualifying) rate and fees to compare apples to apples.

Checking on costs isn’t the only reason to get multiple quotes. This way, you will get to experience a number of communication styles, and you’ll have a look into the process for each lender.

5. Get Pre-approved

Once you’ve narrowed it down to your chosen lender, apply for mortgage pre-approval. During pre-approval, you’ll be asked to provide documentation on your financials, such as your paystub, W2s, tax returns, bank account balances, and credit information.

This step in the process is valuable when placing an offer on a home. A pre-approval letter shows that you have been vetted for the first (credit) portion of the loan process and you just need to find an eligible property.
Once you apply with a lender you will receive a Loan Estimate laying out the down payment, fees, estimated monthly payment and more.

This is the time to ask any lingering questions on the terms of the loan such as lending fees, rates, commissions, points, and any other fine print you may not understand.

Don’t be shy! This is a huge, important decision and you should feel welcome to ask every question twice if you need to.

At this point, you may even want to consider negotiating your offers. If at all possible, use the competing offers as leverage to obtain better pricing. If the very thought of asking is intimidating to you, just remember that it never hurts to ask and the worst they can say is no. You might be surprised at what you can get if you just ask.

As you compare your mortgage options, consider SoFi Mortgages. With SoFi, you could secure a mortgage with as little as 10% down.

If you’re looking for competitive rates on mortgages, excellent customer service ratings, and a painless prequalification process that takes less than two minutes, check out SoFi Mortgages.


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
.

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.
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.
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.

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.

SOMG19019

Read more

Budgeting for Buying A House

The American Dream—buying your own home— is sometimes perceived as an Impossible Dream, but it can be achieved if you have a plan and stick with it.

When planning a budget for buying a house, you might ask yourself the following questions:

•   What are the costs/fees to consider?
•   How can I create a budget in order to reach my goal?

Remember that life goes on while you are saving for your new house. You’ll likely have other priorities and monthly obligations while trying to fit those new home costs into your existing budget.

Consider this priority list when planning ways to budget for a house:

Upfront Expenses

Once an offer on a new home is accepted, there are certain costs the buyer needs to pay right off the bat, and in most cases, out of their own pocket. These are called upfront expenses. Here are a few:

20% Down Payment

You may have heard of the traditional 20% down payment guideline, which helps you avoid paying private mortgage insurance (PMI) on applicable loan programs. Additionally, a higher down payment can sometimes result in better loan terms which may translate into lower monthly mortgage payments.

Yep, it’s a lot of money to try to save, but if you can swing it, in the long run, applying a 20% down payment will likely save you from paying thousands of dollars in additional mortgage interest over the life of the loan
The 20% down is a guideline.

The minimum down payment for a First Time Homebuyer on a conventional loan can be as low as 3% and an FHA government loan that is open to everyone requires a down payment of at least 3.5%.

Sometimes exceptions can be found to minimum down payment requirements such as with Veteran VA loans or government USDA loans which will allow eligible borrowers to finance up to 100%.

In these instances, even if you save for a lower down payment, buying may still significantly reduce your overall expenses, compared to your current rent and real estate market conditions.

2-5% Closing Costs

You can likely expect to pay an estimated 2-5% of your home price for closing costs, and save accordingly. For example, if you buy a home that costs $150,000, you may be required to pay between $3,000 and $7,000 in closing costs.

Some costs are fixed and not tied to the price, so the percentage can be higher for the lower range and lower for the higher purchase price range. Keep in mind that there are alternatives to paying the closing costs out-of-pocket, such as requesting a seller credit, requesting a lender credit, or a down payment/closing costs assistance loan program.

Moving Costs

According to the American Moving and Storage Association, the average intrastate move is $2,300, and the average move between states is $4,300.

Costs can vary widely, so you might want to comparison shop for moving companies and factor this expense into your budget.

If you are moving for work reasons, check with your company to see if they offer a relocation package to help cover some or all of the moving costs.

New Furniture and Appliances

Your new house may not have the same dynamics, dimensions, and overall feel of your old house. That could mean that you need to buy new furniture, appliances, and even items you may have never considered, like shower rods.

You might want to start a savings account for these types of adaptations—some of them may be unexpected.

Ongoing Expenses

PITIA (principal, interest, property taxes, homeowners insurance, and other assessments) is an acronym describing all the components of a mortgage payment. The principal is the “meat” of the payment—paying down the principal will reduce the loan balance.

Interest is what you are charged for borrowing the money. Taxes refer to your property taxes. The insurance represents both your homeowners and mortgage insurance, if applicable. The other assessments refer to things that may be applicable to the home you purchase such as Homeowner Association Dues, Flood or Earthquake Insurance, and more.

HOA Dues

HOA stands for Homeowners Association. These dues usually apply to a condo, co-op, or property owned in a planned community.

The charge is usually monthly (but it could also be charged quarterly or annually), and it typically goes to maintaining the community (landscaping, garbage collection, repairs, and upgrades).

Ask the Homeowners Association for a complete HOA questionnaire so you can view how healthy the association is, whether there is any outstanding litigation due to structural or other issues, etc.

Maintenance and Lawn Care

Your budgeting probably won’t stop once you’ve moved and settled into your new home. Expenses will likely continue to knock on your door—landscaping, roof repair, and water heater replacement are just a few items that might require ongoing financial consideration.

You may want to budget for 1%-2% of the cost of your home in maintenance each year—however, deferred maintenance costs may depend on the age, quality of construction, where you live, and more.

Pest Control, Security, Utilities

Cost for electricity, gas, water, and phones may differ from market to market. This is also true with pest control, and making sure your home is secure and safe. You could find yourself paying more (or even less) for these services in your new home.

Planning Ahead

Do your research on the different types of mortgage loan programs and which programs may best suit you so you can start to budget for any down payment while taking care of current bills and other financial obligations.

Calculating After-Tax Income

Here’s how: subtract out all non-housing expenses that occur both now and that will occur in the future. Include savings goals; for instance, retirement contributions. Include any other debt that may be paid off before the house purchase.

Whatever is left over after this subtraction is what may be put toward housing costs.

What Are Your Savings Goals?

Once you determine which loan program(s) you may qualify for, you can begin to put together an estimate on how much money is needed to be saved each month in order to meet the target date of a home purchase.

What Are Your Priorities?

Take care of your current obligations first, especially if they have to do with the money you owe. Ridding yourself of debt may help you achieve your goals.

This may also help improve your financial profile so that the best loan deal may be more available.

You may also want to establish an emergency fund that, in a pinch, can keep you from using your credit card and running up even more debt.

Ready to Buy?

Once you have your savings set, you can begin to look for different mortgage loan options. SoFi for example, offers competitive rates, no hidden fees, and as little as 10% down. It takes just minutes to start your application online.

Ready to purchase your dream home? Find your rate with SoFi.


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.

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.

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
.

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.

SOMN19148

Read more
man and woman couple bills laptop kitchen mobile

5 Things to Consider When Choosing a Mortgage Lender

Buying a home is likely one of the biggest moves you’ll make in your personal and financial life, and your home may represent one of your largest assets.

If you take out a mortgage loan to help you buy it, you will end up making mortgage payments—and if your lender ends up servicing your loan after closing—you will make payments to that lender, possibly for decades. This is one possible reason you may choose to shop around before committing to a mortgage lender and loan program that’s right for you.

Today, borrowers have more choices on ways to apply. With the rise of online and marketplace lenders, there’s increased competition, which fuels improvements in process, service, and cost—and can mean a much better experience for you.

That said, there may be different factors each individual wants to consider when on the lookout for a lender. If you want to avoid getting stuck with a not-so-great lender, take the time to shop around. Asking questions could help you evaluate your options. Here are some of the questions you may be looking for answers to:

1. Does the lender offer competitive interest rates?

First things first, it’s generally recommended to get the lay of the land by looking at various lenders and the rates and fees they advertise. Taking this step may help you understand what the market looks like overall and who may be offering competitive rates.

Remember that the rates and programs you are ultimately eligible for will likely depend on the lender you choose along with your needs and financial situation, yet this initial comparison can give you a baseline to start working from.

Try taking a look at the common loan types offered. Interest rates for fixed-rate loans do not change over the life of the loan. Interest rates for adjustable-rate mortgages can change over the life of the loan and are influenced by the Federal Reserve boosting or lowering their benchmark rate which in turn causes movements in the indexes tied to ARM rates, such as the LIBOR .

Hybrid Adjustable-rate mortgages are mortgages that offer an initial fixed rate for a certain period of time. These hybrid ARMs are commonly offered and typically come with a low introductory rate for either 1, 3, 5, 7 or 10 years. These introductory rates may be one element that entices borrowers to use them.

Another element may be that some hybrid ARMs offer an interest-only payment option for a specified period of time such as 10 years.

When the initial fixed-rate period is over, the interest rate is normally reviewed on an annual basis for adjustment. Although the index tied to the ARM rate may have moved much higher, these loans offer yearly and annual interest rate caps to control rate and payment fluctuations.

When talking to a lender about their mortgage offerings don’t just ask about interest rate, also ask about APR, or annual percentage rate . This figure takes into account certain fees like broker fees, points, and other applicable credit charges, giving you an easier way to compare loan offers.

2. Does the lender offer loan products with terms that suit your needs?

Your needs and financial situation can play a large part in which mortgage programs you choose and are eligible for. For example, some lenders require a 20% down payment to qualify for a mortgage.

If you can’t pay 20%, lenders may require that you have private mortgage insurance, which covers them in case you default on your mortgage payments. Mortgage insurance premiums vary depending upon many factors.

Ask your chosen lender how much insurance payments will add to your monthly payment and keep in mind that in certain circumstances private mortgage insurance does not apply, such as with some Jumbo loan programs and in other cases, can be eligible for removal from your home loan later if certain criteria is met.

If you can’t afford a 20% down payment, you can look for lenders who offer more flexible down payment requirements. Also, consider what term—the length of time you’ll be paying off your loans—works best for you. See what kinds of terms lenders offer and the interest rates that accompany those terms.

A shorter-term will likely come with higher monthly payments, but lower interest rates that result in lower interest charges over time. Not everyone can afford those higher monthly payments, however, in which case a longer term may be preferable. Note that longer terms usually mean that you end up paying more in interest over the life of the loan.

Once you’ve found a loan with rates and terms that work for you, you can obtain a rate lock from your lender, generally for the time it takes to close on the transaction, such as 30 or 45 days.

You may have to pay a fee if you want to lock in the rate for a longer extended period of time, but once you do it will guarantee that you have access to the mortgage at a specific rate during the lock-in period even if interest rate rises while your loan is being processed.

3. What type of origination, lender, and other fees might you be responsible for?

We’ve already alluded to the fact that you’ll likely be on the hook for other costs in addition to your down payment. One good idea is to request a Loan Estimate (LE) for any mortgage you’re considering to see a solid estimate of what costs you may be on the hook for.

Keep your eye out for things like:

•   Commissions: Mortgage brokers are paid on commission, which is either paid by you, your lender, or a combination of both.
•   Origination fees: These fees may cover the cost of processing your loan application.
•   Appraisal fees: Appraisal fees cover the cost of having a professional come in and put a value on the home you want to buy. You must have a property valuation of some type in order to borrow money to buy a home and in most cases a full appraisal is required.
•   Credit Report Fee: Covers the cost of the bank obtaining your credit report from the credit reporting bureaus.
•   Discount Points: Optional fee the borrower can pay to reduce or buy down their interest rate.

The added fees will typically impact the overall cost of buying the home if the borrower does not receive a seller or lender credit towards closing costs, so doing your research and reading the fine print up front might pay off.

Depending on the loan terms and fees charged, some will be paid upfront at the beginning of the application process such as credit report and appraisal, while other fees might be paid at loan closing such as lender fees, title insurance and more.

In some cases, under certain loan programs, you can borrow the money to cover these fees, which will increase your overall mortgage payment(s). Therefore, having a clear understanding of what fees you’ll owe is critical to understanding how much you’ll end up paying.

Request from your lender a quote on all the costs and fees associated with the loan. A Loan Estimate (LE) is a typical form used to disclose loan fees to a borrower. Ask questions about what each fee covers. Have your lender explain any fees you don’t understand, and then find out which ones may be negotiable or can be waived entirely.

4. How much of the process is online vs. on paper or in person?

How much facetime you have to put in to apply for a mortgage can vary by lender. Some online banks will have you complete the process entirely online, while brick and mortar banks may require an in-person visit.

In the past, applying for a mortgage required a lot of physical paperwork. But much of this has now been replaced by online interactions. For example, you are now likely able to send your financial information like bank statements and W-2s electronically.

Lenders who complete much, or all, of the mortgage application process online may be able to offer lower rates or fees, since they don’t have the cost of brick and mortar bank locations and their employees to maintain.

That said, if you’re someone who likes face-to-face help, you may consider a lender that allows you to apply in person or a lender who utilizes facetime.

5. How quickly can the lender close once you’re in contract?

Once you’ve found the home you want to buy and you’re under a purchase contract with the seller, the amount of time it takes to close on a loan can vary. Depending on the situation you may have to wait for inspections, appraisals, and all sorts of paperwork to go through before you can close.

However, your lender may offer you ways to speed up the process. For example, you may be able to get preapproved for a loan, which takes care of a lot of potentially time-consuming paperwork upfront before you’ve even started shopping for a home.

Ask your lender how much time their closing process usually takes and what you can do to expedite it. Especially if you’re crunched for time, their answer can have a big impact on which lender you choose. Afterall, the faster you’re financed, the sooner you’ll be able to move in.

SoFi offers loan options with as little as 10% down on loans up to $3 million. And there are no hidden fees.
On the path to homeownership?

We’re right there with you. Download the SoFi Guide to First Time Home Buying to get valuable tips on these topics and more. Our guide also demystifies modern mortgage myths around down payments, the pre-approval process, student loans, rising interest rates, and more.

Ready to buy a home? Check out mortgages with SoFi Home Loans.


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.

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.

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.

MG17112

Read more
couple on couch with laptop

Using a Co-borrower on a Joint Personal Loan

There are times in life when people need to finance something they simply don’t have the money for. Maybe you’re finally looking to go back to school but need financial support, or you’ve found your dream home but can’t qualify for the mortgage amount on your own.

Whether money is tied up in long-term investments, or is just not available, being confronted with an upcoming expense without the cash for it can be unpleasant. Thankfully, there are options, even if you find yourself unable to qualify for a loan on your own.

To some, borrowing money may seem nerve-wracking. However, there are also instances in which doing so may actually put someone on the path to a more financially-stable future, say, in the case of buying property or starting up their own business. Still, no matter how savvy the expense might be, that doesn’t always make the idea of borrowing a large amount of money any less daunting.

Whether you’re renovating a house or opening a new business, big-ticket items tend to require big loans. And the larger the investment, the more likely a lender will want some form of security to back up your loan.

Depending on the size and terms of a loan, sometimes it’s worth considering possible options that might make taking on the loan less intimidating for the borrower—and less risky for the lender—such as using a co-borrower.

A co-borrower is an additional borrower on a variety of loan types who is obligated to repay the loan alongside the primary borrower and shares the responsibility of paying it back. And a co-borrower—if they have great credit and income, among other factors—may have the added benefit of helping to make the original borrower seem less of a risk to a lender.

Applying for a Loan with Another Person

Though co-borrowers may bring with them peace of mind, they also require a great deal of forethought—especially regarding who to ask. And, regardless of whether or not someone opts for a co-borrower, it’s still important for the primary borrower to get their own application in the best shape possible.

When considering how to go about finding an ideal co-borrower for your situation, the criteria can vary from lender to lender and the terms used to describe a co-borrower could vary as well.

As mentioned earlier, a co-borrower can be any additional borrower that appears on a loan document. This additional person’s income and credit history is typically verified in order to qualify and, under this kind of arrangement, everyone whose name is on the loan is responsible for ensuring that the loan is repaid.

If a potential borrower does not feel confident about qualifying for a loan or has concerns about a potentially higher interest rate due to a less-than-stellar credit history, employment, or any other reason, then finding a reliable co-borrower might bring ease to the process—and could help improve the chances of approval, along with the interest rates and terms offered.

What’s more, co-borrowing may also be a better deal for the lender. Loaning money to more than one person might make the likelihood of repayment more certain, since two or more people are responsible for repayment.

If your credit isn’t up to scratch, applying for a loan with a co-borrower might be a good option. While there are many ways to work on improving credit, sometimes improving scores can take time. And, if the loan you’re looking to take out is time-sensitive, working on raising your credit score may be moot.

By applying with a co-borrower, you may end up with a lower debt-to-income ratio (DTI), which is a number many lenders use to determine how risky of a borrower the applicant may be.

DTI is calculated by adding up all debt and dividing it by total gross income. In most cases, the lower the DTI, the better the potential borrower looks in the eyes of the lender. Much can depend on the type of loan—typically, DTI requirements are less stringent for unsecured personal loans than they are for home loans. But, again, criteria varies from lender to lender.

But if you’re planning to apply for a loan with a second person, should you choose a co-signed loan or a joint loan with a co-borrower? Let’s take a closer look at both options.

So What’s the Difference Between a Co-signed Loan and a Joint Loan?

Both co-signed and joint loans include an additional borrower. However, a co-borrower taking out a joint loan has different rights and responsibilities than a co-signer.

Depending on your lender and loan program, a co-applicant may need to apply as either a co-borrower (normally someone who resides at the same residential address) or a co-signer who would normally reside at a different address.

Say you want to take out a joint loan, in this case, your co-borrower would have a right to any property you purchase with that loan, and he or she is responsible for monthly payments. In the case of a cosigned loan, however, the cosigner has no rights to property, only responsible for the loan if you are unable to pay.

So while a joint loan gives the second borrower rights and responsibilities, a cosigner has responsibilities but no rights. Depending on the unique scenario you find yourself in and what the loan is for, this may prove to be a better approach.

While there is no precise formula that will tell you whether a cosigned or joint loan is right for you, you may want to ask the lender you choose if they allow for a co-applicant—and whether or not the co-applicant would be a co-signer or co-borrower, as some lenders may allow one and not the other—and then weigh the pros and cons of each type of loan before deciding which action is the best choice for you.

The Advantages of Choosing a Cosigned Loan

Cosigned loans are, in some ways, simpler than joint loans with a co-borrower. For one thing, lenders are often reluctant to issue joint loans to borrowers who aren’t blood relatives or a married couple. The reason for this is simple: In the event of a disagreement, disaster, or even death, a joint loan can be tricky because both co-borrowers have rights to the property.

However, in the case of a cosigned loan, the second borrower has no rights to the property but still has to pay if the primary borrower is unable to. And because cosigners only take responsibility for paying the loan, there’s no risk of losing your property to them in the event of a rift.

Most personal loans, however, will use co-borrowers, not co-signers, and, as they are typically unsecured, there is no property involved. The biggest upside to getting another person to cosign or co-borrow on a loan with you is that the addition of their (hopefully stronger) credit history and income can be the difference between your ability to qualify for a loan—whether that’s a student loan, mortgage, or other financial product you can’t get on your own—or not.

And, even if you are able to qualify on your own, but your credit isn’t up to snuff, a co-borrower may be the key to better loan terms such as a lower rate.

The Advantages of Choosing a Joint Loan

The main advantage of a joint loan is that it’s easier to qualify for loans when you want equal ownership of the property in question. Choosing a joint loan means you are able to present a higher total income than you could alone, signaling to lenders that it’s more likely someone will be able to keep up with the monthly loan payments.

Because joint loans give both co-borrowers equal rights, they are well-suited for people who already have joint finances or own assets together. This may be something to keep in mind when deciding which option is right for you and your co-borrower.

With joint loans, payment methods are typically flexible: Either you can choose to make separate monthly payments of equal or varying amounts, or you can set up monthly payments from a joint bank account.

What’s the Better Loan Option?

If you’re seeking a loan with a spouse or relative, and one of you has the strong credit history needed to get a low-interest rate and terms you’d prefer, then a joint loan as co-borrowers may be right for you.
However, if you’d rather have a loan in your name with a little added security, then having a cosigner may make more sense.

No matter which situation you find yourself in, it’s important to weigh all of the options and do the necessary research that will allow you to arrive at the best option. After all, taking out a loan and repaying it responsibly has the power to put someone on a path to a more secure financial future, but it can also come with risks if a borrower hasn’t done their homework.

In the end, taking out a loan can be the key to being able to take the steps necessary to build a strong personal or professional foundation. And if a co-borrower means being able to get approved for a loan with a better interest rate, then it may be an option worth considering.

If you’re looking for personal loans that accept co-borrowers, SoFi’s unsecured personal loan is a potential option. SoFi accepts co-borrowers on personal loans; the co-borrower will be equally liable for the loan, and must live at the same location as the primary applicant.

SoFi personal loans can be used for a variety of personal purposes, like renovating a home, credit card consolidation, unexpected medical expenses, or paying for that dream wedding.

The application is all online, and finding out if you pre-qualify is fast and easy. Additionally, if you’re approved, you’ll become part of the SoFi community and have access to a slew of member benefits. For example, if you lose your job, you may be eligible to pause your payments. SoFi also offers career counseling (that can help you find a new job), exclusive member events, and lots more.

Looking to get a personal loan? Check out SoFi’s personal loans, and check your rate in a matter of minutes.


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
.

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.

PL18122

Read more
TLS 1.2 Encrypted
Equal Housing Lender