SoFi

What Is APR?

APR stands for annual percentage rate, and it’s used to measure the cost of borrowing money from lenders for various reasons, such as with a home loan. While it’s often presented at the same time as your interest rate, it isn’t the same thing.

APR is expressed as a percentage and takes into account not only the interest rate but also many of the costs that are associated with the loan. When it comes to borrowing using a mortgage, these costs can include such items as these:

•  Origination fees

•  Application fees

•  Processing fees

•  Mortgage points, also called discount points

APR provides a more comprehensive picture of the total cost of the mortgage loan. It gives you an overall view of the fees and costs you would have to pay that are included in the finance charge. If you compare just the interest rate, the additional fees and costs aren’t represented, which could give you an incomplete picture when it comes to determining the actual cost of the loan. That could negatively impact your ability to budget accurately for your home loan costs.

Since not all lenders charge the same fees or interest rates, comparing APRs is usually a better way to compare the total cost of your loan from one lender to another.

Why Is APR Important When Taking Out a Mortgage?

Knowing the APR can help consumers be more informed while comparison shopping for loan products. Thanks to the Truth in Lending Act, lenders are required to disclose the APR of their loans, as well as all fees and charges associated with a loan.

The APR should include all finance charge fees, which can make it easier for borrowers to sort through loan comparisons to find the right mortgage.

How Are Interest Rates Calculated?

As we’ve discussed, APR and interest rate aren’t the same, but your interest rate does impact your APR. So, how exactly are interest rates calculated?

Your interest rate is a percentage of your mortgage rate. What that percentage will be depends on what type of mortgage loan you have.

•  With a fixed-rate mortgage, you’ll pay the same interest rate for the entire time you have the loan.

•  With an adjustable-rate mortgage, on the other hand, your rate will fluctuate throughout the life of the loan.Also, keep in mind that any unpaid interest gets added to the mortgage principal. This means you’ll have to pay interest on that interest.

Your lender will determine your specific interest rate based on your financial details, such as your credit score, as well as the current economic conditions and market interest rates. “Working to build your credit score before applying for a home loan could save a borrower a lot of money in interest over time. Lower interest rates can keep monthly payments down or help you pay back the loan faster,” says Brian Walsh, CFP® and Head of Advice & Planning at SoFi. Lenders usually use their own unique formula to calculate interest rates, which is why your rate can vary from lender to lender — and why it’s important to shop around for rates.

Recommended: APR vs. Interest Rate: What’s The Difference?

How to Calculate Your APR

When you’re getting a mortgage, you may want to be extra thorough and calculate the APR yourself. There’s a way to make that happen. Be warned, it’s not necessarily a super fun math project, but hey, where there’s a formula, there’s a way, right?

•  To get started, you’ll have to know the approximate monthly Principal and Interest (P&I) payment on your loan. Maybe your lender has already told you what it would be, but if not, you could calculate it with an online mortgage calculator or by hand.

•  You’ll need to have a loan amount, interest rate, and a term in years.

•  Once you have the monthly P&I payment calculated, you’ll then be able to calculate the APR, which you can do with an online calculator. Keep in mind that because you don’t know what your applicable APR loan fees will be, it can be wise to use a ballpark estimate. If the loan costs that will impact your APR are 2% of your loan amount and your loan amount is $200,000, your loan costs for calculating the APR will be $4,000.

The formula for calculating APR looks like this:

[({Fees + Total Interest} ∕ Loan Principal) ∕ Total Days in Loan Term] ✕ 365 ✕ 100

💡 Quick Tip: Lowering your monthly payments with a mortgage refinance from SoFi can help you find money to pay down other debt, build your rainy-day fund, or put more into your 401(k).

Why You Need to be Careful When Using APR to Compare Mortgages

When you’re getting a mortgage, you will likely have the APRs for all the mortgage offers you’re considering. Your APR is important to consider because it factors in the expense of additional fees over the life of your mortgage. If you’re applying for a 30-year mortgage, those fees are spread over 30 years.

But do you plan to live in your home for the full 30 years of your mortgage and never refinance your mortgage? If you sell your home after five years, rather than staying for the duration of your 30-year loan, you’ll still have to pay for the loan fees (such as origination fees).

That’s why it’s important to consider and compare APRs when choosing a mortgage. If you plan on living in the home for a limited time, a lender that offers fewer fees might be a better choice than a lender with a low interest rate but lots of fees. You may want to consult with your financial advisor before making this decision.

When you’re mortgage shopping, especially if you are a first-time homebuyer, you also may want to proceed with caution when comparing the APRs of fixed-rate and adjustable-rate mortgages if you are using an online calculator. The APR on adjustable-rate loans may not be an accurate representation of the cost of the loan since calculators cannot anticipate the frequency or amounts of the interest rate changes.

Recommended: Tips When Shopping for a Mortgage

The Takeaway

When getting a home loan, your interest rate and APR, or annual percentage rate, are not the same thing. The APR reflects the overall cost of the loan, including various fees, for instance.

If you’re ready to take the next step in your home-buying journey, you’ll want to take stock of your mortgage options. Comparing each loan’s APR is a quick and easy way to see how your offers stack up, although it isn’t the only factor to take into account.

Looking for an affordable option for a home mortgage loan? SoFi can help: We offer low down payments (as little as 3% - 5%*) with our competitive and flexible home mortgage loans. Plus, applying is extra convenient: It's online, with access to one-on-one help.

SoFi Mortgages: simple, smart, and so affordable.

FAQ

What is a good mortgage APR?

A good APR is one that falls below the current average for the type of loan you have chosen. Simply search online for “national average APR” and your loan type (such as “30-year fixed-rate mortgage”) and you’ll see the current rates.

Is it better to have a low interest rate or low APR?

Whether it is better to have a low interest rate or a low APR depends in part on how long you plan to stay in the home. If you have high upfront costs for a loan and then sell the home in just a few years, the APR won’t reflect your overall cost as well as it would if you stayed for the full term of your loan. If you don’t plan to own the home for very long, you might be better off focusing on choosing the loan that gets you the lowest interest rate.

Can I negotiate a mortgage interest rate?

You can negotiate a mortgage interest rate by shopping around and comparing offers from multiple lenders, examining both the interest rate and APR on the loans. Once you narrow the field, you might be able to purchase mortgage points, also known as discount points, to reduce the rate further. But the best way to help ensure a low mortgage rate is to cultivate a strong credit score before you apply for a loan.

---

SoFi Mortgages
Terms, conditions, and state restrictions apply. Not all products are available in all states. See SoFi.com/eligibility-criteria for more information.

SoFi Loan Products
SoFi loans are originated by SoFi Bank, N.A., NMLS #696891 (Member FDIC). For additional product-specific legal and licensing information, see SoFi.com/legal. Equal Housing Lender.

*SoFi requires Private Mortgage Insurance (PMI) for conforming home loans with a loan-to-value (LTV) ratio greater than 80%. As little as 3% down payments are for qualifying first-time homebuyers only. 5% minimum applies to other borrowers. Other loan types may require different fees or insurance (e.g., VA funding fee, FHA Mortgage Insurance Premiums, etc.). Loan requirements may vary depending on your down payment amount, and minimum down payment varies by loan type.

Financial Tips & Strategies: The tips provided on this website are of a general nature and do not take into account your specific objectives, financial situation, and needs. You should always consider their appropriateness given your own circumstances.

SOHL-Q425-051

Read more

If you’re looking for a new home, you may be wondering when is the best time to buy. There are a number of factors that go into deciding when to purchase a house, from buying when interest rates are low to the times of the year you’re most likely to get a deal. Ultimately, when you decide to buy will depend on your financial situation and local market factors.

Here’s how to determine the best time to buy a house.

Do a Financial Checkup

Before going down the rabbit hole of timing the real estate market or watching the Federal Reserve like a hawk, it’s a good idea to explore if buying a home is right for your current personal and financial situation. There are a number of signs that can help you know if the time is right to buy a house.

First, is your budget big enough to cover any required down payment, closing costs, a mortgage payment, and other costs associated with homeownership?

Second, do you plan on staying put for a while, which may give the home you buy time to appreciate in value (subject to market fluctuations)? Also, consider whether you will benefit from itemizing and potentially deducting your home interest.

If you answered yes to those questions, it’s a good idea to check on your credit. A strong overall financial profile and credit history may help you secure better financing terms when you purchase a home. And finally, take a look at whether rent in your chosen area is relatively high compared to the cost of homeownership. Should you buy or rent? If you can rent a home in your city for much less than what you would pay in mortgage payments, it may not make sense to make a purchase right now.

If your budget for buying a house is solid and your credit score is healthy, you’re prepared to stay in the new house for the long haul, and buying is chapter or similar in price to renting, you may be ready to buy a home. Now you can begin looking at other factors to decide when to start house hunting.

💡 Quick Tip: When house hunting, don’t forget to lock in your rate so there are no surprises if your offer is accepted.

Watch Interest Rates

One major factor to consider when deciding whether to buy is interest rates on home mortgage loans. Banks charge interest to cover the costs of loaning you money when they offer you a mortgage. The mortgage interest rate banks charge is influenced in part by the Federal Reserve, but mortgage backed securities are considered the main driver.

If interest rates are low, borrowing money is cheaper for you. Borrowing gets more expensive as interest rates increase. So if you think interest rates are going to rise soon, buying a home now with a fixed-rate mortgage loan may allow you to lock in better terms than you might otherwise get in the future. Conversely, if you think interest rates are high, it may be worth waiting to see if they’ll drop.

Time the Real Estate Market

The idea behind timing any market is that you buy when prices are low and sell when prices are high. Ideally, you would buy your home when there are more sellers than there are buyers, a situation known as a buyer’s market.

In a buyer’s market, the overabundance of housing options drives down the price of homes. Additionally, it may give you leverage to ask for more concessions from sellers desperate to close a deal, such as giving credit toward the buyer’s closing costs or covering the cost of repairs or new appliances.

In a seller’s market, the opposite is true. More people want to buy than there are houses available for sale and housing prices are driven up.

To identify what times may be beneficial to be a buyer, there are a number of factors you can watch. First, take a look at pricing trends in your area. Use real estate websites like Zillow, Redfin, or Trulia to see what houses have sold for in your chosen area.

If prices are low or seem in line with historic trends, it could be a good time to buy. If prices are much higher than they have been historically, it may not be the ideal time to buy, and/or the area may be experiencing a real estate bubble. Bubbles tend not to be sustainable, but many factors play into real estate market conditions.

You can also take a look at how long houses in your desired area are sitting on the market. If houses in good condition are taking a long time to sell, it could mean demand is low and the market is in your favor.

Additionally, examine larger economic factors such as new construction and months of supply. When fewer houses are being built, demand and prices are higher.

The government keeps track of new residential construction. Visit the U.S. Census Bureau to take a look at current trends.

Months of supply is a measure of how many months it would take to sell the current number of houses on the market in your area at the current rate of sale. To do this, divide the total number of homes for sale by the number of homes sold in one month. For example, if there are 40 houses on the market and they are selling at the rate of 10 a month, there are four months of supply. When this measure creeps above six months of supply, it generally indicates that it’s a buyer’s market.

💡 Quick Tip: To see a house in person, particularly in a tight or expensive market, you may need to show the real estate agent proof that you’re preapproved for a mortgage. SoFi’s online application makes the process simple.

Understand Your Local Market

Real estate is generally considered a location driven market, so prices can vary widely from area to area, and general rules of thumb regarding pricing may not be applicable in every case. The same can be true of particularly desirable neighborhoods within a city.

Local economics can also play a part in housing demand. Say a large company leaves a city, sending its manufacturing overseas. That city may experience an economic downturn that puts downward pressure on house prices.

This local variation means that it’s important to pay close attention to economic and housing trends in your chosen area. That way you’ll be more likely to find the best time to get your dream home.

The Takeaway

Figuring out the best time to buy a house first involves taking stock of your financial and personal situation. Make sure you have enough money saved up to cover the costs of buying plus your mortgage payment, and review your credit history to make sure it’s strong.

Then, look at rental prices compared to home prices in your area to see whether buying makes financial sense for you. Assess the interest rates to see if home buying is affordable, and look at the trends in the real estate market to determine how favorable they are as you start house hunting.

Looking for an affordable option for a home mortgage loan? SoFi can help: We offer low down payments (as little as 3% - 5%*) with our competitive and flexible home mortgage loans. Plus, applying is extra convenient: It's online, with access to one-on-one help.

SoFi Mortgages: simple, smart, and so affordable.

---

SoFi Mortgages
Terms, conditions, and state restrictions apply. Not all products are available in all states. See SoFi.com/eligibility-criteria for more information.

SoFi Loan Products
SoFi loans are originated by SoFi Bank, N.A., NMLS #696891 (Member FDIC). For additional product-specific legal and licensing information, see SoFi.com/legal. Equal Housing Lender.

*SoFi requires Private Mortgage Insurance (PMI) for conforming home loans with a loan-to-value (LTV) ratio greater than 80%. As little as 3% down payments are for qualifying first-time homebuyers only. 5% minimum applies to other borrowers. Other loan types may require different fees or insurance (e.g., VA funding fee, FHA Mortgage Insurance Premiums, etc.). Loan requirements may vary depending on your down payment amount, and minimum down payment varies by loan type.

Financial Tips & Strategies: The tips provided on this website are of a general nature and do not take into account your specific objectives, financial situation, and needs. You should always consider their appropriateness given your own circumstances.

Tax Information: This article provides general background information only and is not intended to serve as legal or tax advice or as a substitute for legal counsel. You should consult your own attorney and/or tax advisor if you have a question requiring legal or tax advice.

Checking Your Rates: To check the rates and terms you may qualify for, SoFi conducts a soft credit pull that will not affect your credit score. However, if you choose a product and continue your application, we will request your full credit report from one or more consumer reporting agencies, which is considered a hard credit pull and may affect your credit.

SOHL-Q425-053

Read more

Spring has been a traditional house-hunting season. That’s when parents of school-age kids often look for a place to call home — one they can settle into before classes begin in September.

And summer certainly has its merits for looking at houses, from the comfort of walk-throughs in warm weather to seeing gardens in full bloom.

But buying a house in winter can be a wise move. The so-called “off season” bestows some very real benefits for those who are looking for a new place. These may include everything from less competition (and fewer bidding wars) to faster closing schedules.

With mortgage rates remaining persistently elevated and home prices in many areas still at record highs, homebuyers are looking for every opportunity to capture savings, especially in hot markets in the Northeast in California. The winter ahead might be a good time to bundle up and rev up a home search. Read on to learn seven smart benefits of shopping for a house in winter. You just might snag a great deal on your dream house.

Why You Should Buy a Home in Winter

Wondering why you should consider buying a house in winter, when the days may be short, the trees bare, and the weather nasty? Here are some very good reasons.

1. Having Less Competition for Homes

Not everyone wants to or is able to shop for houses during the winter months. Freezing temperatures and inclement weather can keep would-be homebuyers away.

During the winter season, parents are busy managing school schedules and events, and many people are also busy traveling and hosting guests over the holidays.

But there’s an upside: Fewer people shopping for homes could mean less competition for those in the market for a house. And diminished competition might mean winter homebuyers can be more discerning in their choices. There’s less pressure to snap up a house for fear another buyer will get to it first. In addition, you may be less likely to end up in a bidding war with a slew of other interested buyers, which can drive up costs. You might contend with counter offers. But while there are often fewer houses for sale during the winter, buyers may be more likely to land their desired home closer to the asking price (or even below).

💡 Quick Tip: When house hunting, don’t forget to lock in your home mortgage loan rate so there are no surprises if your offer is accepted.

2. Profiting from a Buyer’s Market in Winter

With some buyers distracted by the jam-packed holidays, it can be trickier to sell a home in the wintertime. Some sellers only put their homes on the market in the winter because they really have to.

The seller’s snag, though, can be a boon for buyers, as winter homesellers may be more motivated to get the sale completed faster than their summertime counterparts.

Motivated winter sellers might be willing to negotiate on things like price, closing costs, and the closing date. Perhaps they need to relocate for work or another time-sensitive reason and are eager to get the deal done.

In some cases, houses that are on the market in the winter have been there since the summer selling season. Homes like these are sometimes referred to as “stale listings.” The seller may be ready to take what would previously be deemed a too-low offer, just to move ahead with a deal.

3. Closing on Your Purchase Faster in Winter

Closing is when the title of a property legally changes hands from the seller to the buyer. When buyers and sellers are negotiating the sale of a home, they work together to set a closing date when the house title will officially transfer between the parties.

Real estate agents often work with mortgage brokers to find a suitable day that will allow enough time for the deal to be executed properly.

In warmer months, banks, inspectors, and appraisers are usually handling a lot of new buyers. In practice, this glut of interested buyers could mean mortgage brokers are backed up for weeks or even months.

In the winter, when fewer interested buyers are typically calling, things can slow down for lenders. As a result, cold-weather buyers might be able to close on their homes faster and get settled in more quickly.

Recommended: What Are the Different Types of Mortgage Loans?

4. Understanding a Home’s Condition More Clearly

Visiting a property in person can tell a buyer a lot about a home. But, in the summertime, some of a house’s less attractive qualities can be masked by warm weather, blossoming gardens, and the brilliant summer sun.

Seeing a house in the winter can give buyers a chance to understand how it holds up under tougher conditions. Is the house too gloomy in low light? Does cold air creep in from the windows? Does ice jam up the gutters causing the roof to leak? Does a long driveway that needs to be shoveled seem less appealing in the winter than in June? You could be destined for some home maintenance costs. Getting a chance to suss out potential problems like these can provide a fuller picture of what actually living in a property might be like year-round.

Keep in mind, though, that some aspects of a home can be harder to grasp in the winter months. For example, it’s tough to test out an air conditioning unit in the wintertime. And snow could cover up foundation issues.

💡 Quick Tip: To see a house in person, particularly in a tight or expensive market, you may need to show the real estate agent proof that you’re preapproved for a mortgage. SoFi’s online application makes the process simple.

5. Hiring Movers Can Be Easier in Winter

Let’s say you do find a new home and move forward with buying a house in winter. Moving costs in the winter can be cheaper than in the summer. Fewer people buying homes means less demand for movers, which in turn could mean more competitive pricing.

With lighter schedules, moving companies may also be more flexible and able to accommodate your desired moving dates. (It can be helpful to stay flexible with move dates in the winter, since a big snowstorm might mean sudden delays.)

Still, if you move when snow is falling, that will obviously slow down your move and make it pricier. Try to reschedule if inclement weather is in the forecast.

6. Getting More Time and Attention from Real Estate Agents

Movers aren’t the only people who are less busy in the winter months. Fewer people shopping for houses could mean there’s less work for real estate agents.

Agents may have more time in the winter to spend helping individual buyers find the house that meets their exact needs. Also, when it comes time to negotiate, agents may have more hours to go to bat for their clients to secure a better deal.

7. Taking Advantage of Last-Minute Tax Savings

Buying a house by late December (rather than waiting until the following spring) may allow buyers to take advantage of last-minute savings on that year’s taxes.

The mortgage interest deduction allows homeowners to subtract mortgage interest from their taxable income, lowering the amount of taxes they owe. Married couples filing jointly and single filers can deduct the interest on mortgages up to $750,000. Married taxpayers filing separately can deduct up to $375,000 each. While you may not accumulate a lot of interest paid if you purchase toward the end of the year, you might be able to deduct anything you pay for mortgage points.

However, you cannot deduct mortgage interest in addition to taking the standard deduction. To take the mortgage interest deduction, you’ll need to itemize. Itemizing only makes sense if your itemized deductions total more than the standard deduction. For the 2025 tax year, the standard deduction is $15,000 for single filers and $30,000 for those married, filing jointly.

Recommended: How to Qualify for a Mortgage: 9 Requirements for a Mortgage Loan

The Takeaway

No matter what season you may be house-hunting, it’s important to figure out how to finance a potential purchase before you find the home that’s “The One.”

Looking for an affordable option for a home mortgage loan? SoFi can help: We offer low down payments (as little as 3% - 5%*) with our competitive and flexible home mortgage loans. Plus, applying is extra convenient: It's online, with access to one-on-one help.

SoFi Mortgages: simple, smart, and so affordable.

FAQ

What is the best time to purchase a home?

Late fall and early winter, roughly November through February, is considered the best time of year to buy a home. Although inventory may be lower than in the spring, sellers may be more willing to bargain because there are fewer shoppers in the winter months.

How do you negotiate a house price?

One of the best negotiation tools is research. You can look up comparable properties’ sale prices or enlist your real estate agent to help with this. It may also help to get an inspection of the property you wish to buy, so you can negotiate based on its results. Seeking preapproval for a home mortgage loan from a lender could give you a leg up in the negotiation process, as being preapproved shows you are serious about making a purchase.

What are red flags when buying a house?

The list of potential red flags when buying a home can be frighteningly long and includes structural problems, electrical or plumbing problems, poor drainage, or pest infestation. But dealbreaking problems can arise outside the home as well. Neighborhood woes or homeowners association (HOA) conflicts can also squelch a transaction. Have a home inspected before buying and consult a knowledgeable real estate agent for perspective on the severity of the problem.

---

SoFi Mortgages
Terms, conditions, and state restrictions apply. Not all products are available in all states. See SoFi.com/eligibility-criteria for more information.

SoFi Loan Products
SoFi loans are originated by SoFi Bank, N.A., NMLS #696891 (Member FDIC). For additional product-specific legal and licensing information, see SoFi.com/legal. Equal Housing Lender.

*SoFi requires Private Mortgage Insurance (PMI) for conforming home loans with a loan-to-value (LTV) ratio greater than 80%. As little as 3% down payments are for qualifying first-time homebuyers only. 5% minimum applies to other borrowers. Other loan types may require different fees or insurance (e.g., VA funding fee, FHA Mortgage Insurance Premiums, etc.). Loan requirements may vary depending on your down payment amount, and minimum down payment varies by loan type.

Financial Tips & Strategies: The tips provided on this website are of a general nature and do not take into account your specific objectives, financial situation, and needs. You should always consider their appropriateness given your own circumstances.

Tax Information: This article provides general background information only and is not intended to serve as legal or tax advice or as a substitute for legal counsel. You should consult your own attorney and/or tax advisor if you have a question requiring legal or tax advice.

SOHL-Q425-054

Read more

This content may include information about products, features, and/or services that may only be available through SoFi's affiliates and is intended to be educational in nature.

Tree removal may be covered by homeowners insurance in some situations, but not all of them. It depends on why the tree fell and whether any property damage occurred.

Here is a detailed breakdown of when you can get tree removal covered by your insurer and when you’ll be financially responsible on your own.

When Does Homeowners Insurance Cover Tree Removal?

Let’s take a look at how homeowners insurance covers tree removal in different scenarios.

Debris Removal After a Covered Peril

Standard insurance policies do not usually cover tree debris removal alone. There needs to be some other type of covered damage in order to successfully file a claim. You can, however, purchase additional insurance coverage specifically for trees and bushes.

When a Fallen Tree Damages a Covered Structure

When a healthy tree falls during a covered peril — think a windstorm, fire, hail, vandalism, or weight of snow — removal is usually covered by your homeowners insurance policy. But insurers expect you to keep up with proper maintenance of trees and other plants on your property. If a dead or rotting tree falls and hits a structure, removal (and any damage caused to your home or other personal property) won’t be covered.

When a Fallen Tree Blocks a Driveway or Access Ramp

Can home insurance cover tree removal when the debris is blocking access to the home? Yes, in many cases, this situation is covered. Generally, if the tree is blocking a driveway or handicap ramp, you can file a claim and have the debris removed.

How Do I File a Claim for Tree Damage and Removal?

Follow these steps to file a claim with your insurance company after a tree causes damage on your property.

Immediate Steps to Take

There are two things you need to do right away to make sure your home is safe and that the damage is properly documented for your insurance company.

•   Perform a safety check: Ensure your family and pets are safe. If the tree fell on your home, stay away in case there is structural damage. Check for downed power lines, and report the incident to 911 and your utility provider. Then, gauge the damage to see if it’s safe to stay in your home or if you need to go elsewhere for the time being.

•   Take pictures and videos: Once immediate safety needs are taken care of, it’s time to contact your insurance company. Record as much of the damage as you can using photos and video.

Documentation Needed for Your Claim

The main documentation you’ll need is photographic evidence of the fallen tree. Be sure to take photos from multiple angles, especially if the tree is covering a structure or access areas, like a driveway or entrance to the home. Also include inventory of any damaged personal property you want to include in your claim.

The Claims Timeline and Process

The timeline for a tree debris removal claim varies depending on your insurer and the extent of an investigation they require.

In terms of process, expect an adjuster to be assigned to your claim. This professional will assess the damage and determine whether or not the tree debris removal (and any property damage) is covered by your policy.

Recommended: Homeowners Insurance Guide

What Tree Removal Costs Are Not Covered?

There are several scenarios when your insurance policy likely won’t cover any tree removal costs.

Standard Policy Exclusions

Some natural disasters and other factors are excluded from standard home insurance policies. In these cases, any fallen tree and resulting damage would usually not be covered unless you have a separate policy or endorsement.

When you’re buying homeowners insurance, take note of the standard policy exclusions, such as:

•  Earthquakes

•  Floods

•  Pest damage

Removal of Standing Dead or Diseased Trees

Homeowners insurance typically doesn’t cover any type of preventive removal of trees, even if those trees are diseased or dead. This is considered home maintenance and is something you’re financially responsible for as a homeowner.

Trees That Fall Without Causing Damage or Blockage

As mentioned earlier, your home insurance policy likely won’t cover tree removal unless the tree has caused damage to a structure or is blocking some type of access on your property.

Understanding Tree Removal Limits and Deductibles

Even when tree removal falls under a covered event, there are some limitations to keep in mind. Let’s take a look at some of them.

Standard Sublimits for Tree Debris Removal

Tree debris removal is covered by home insurance in two parts, which impacts how much the insurer will pay.

When a tree falls on a structure or access point, it needs to be moved out of the way in order for repairs to begin. That falls under your dwelling coverage. But once it’s safely out of the way, it still needs to be removed from the property. Debris removal is subject to its own policy limits, usually between $500 and $1,000.

How Policy Limits Apply Per Storm or Event

One important homeowners insurance term to learn is the per occurrence limit. It means there is a limit to how much the insurer will pay for all claims related to a single event, such as a large storm.

This is different from your policy’s aggregate limit, which is the maximum amount your insurer will pay for all covered claims within one year.

How Your Main Deductible Affects the Claim

When filing a claim that includes tree debris removal, you won’t receive the full estimated amount. Your insurer will subtract your deductible before reimbursing you.

Your deductible is the amount you’re responsible for in each claim. Most homeowners insurance policies range from $100 to $5,000.

Recommended: Homeowners Insurance Costs Explained

The Takeaway

Home insurance can be a powerful financial resource, whether you’re facing tree debris or other damage to your home and property. Does homeowners insurance cover tree removal? In some situations, yes. But it depends on why the tree fell and whether it caused any damage to your property.

Find affordable homeowners insurance options with SoFi Protect.

FAQ

What if my tree falls on my neighbor’s house (or vice-versa)?

Typically, the homeowner who experiences damage files a claim with their own insurance company, regardless of where the tree originally stood. So if a healthy tree from your yard falls on your neighbor’s house, they would likely be covered by their own policy.

If a tree from your neighbor’s yard lands on your property and causes damage, you would file a claim with your own insurance company. They may, however, try to collect reimbursement from the neighbor’s insurer. If they’re successful, you could get reimbursement for your deductible.

Does insurance pay to remove a dead or diseased tree before it falls?

No, removing dead or diseased trees, especially when they’re still standing, is the homeowner’s responsibility. It’s simply part of the home maintenance routine. And it’s an important part. Leaving those trees untended could lead to damage that also isn’t covered by your insurance policy.

How much will my insurance policy pay for tree removal?

Each policy has its own limits for tree removal for approved claims. Check the details to see the maximum reimbursement per event. In most cases, it’s between $500 and $1,000. Remember that you usually can’t get insurance to pay for tree removal if it didn’t block access to your home or cause damage to a structure.

Does my policy deductible apply to a tree removal claim?

Yes, your deductible does apply to a tree removal claim. If you’re getting a tree removed that is simply blocking a driveway and didn’t cause any damage to a structure, your deductible may end up being higher than the actual cost of removal.

If a storm knocks down multiple trees, are they all covered?

Typically, the debris removal limit applies to one tree, but your overall dwelling policy has a total limit for trees, shrubs and landscaping. In other words, the removal of multiple trees may be covered by your policy, but only up to the allowable limit.

---

photo credit: iStock/SolStock
Auto Insurance: Must have a valid driver’s license. Not available in all states.
Home and Renters Insurance: Insurance not available in all states.
Experian is a registered trademark of Experian.
SoFi Insurance Agency, LLC. (“”SoFi””) is compensated by Experian for each customer who purchases a policy through the SoFi-Experian partnership.

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.

SOPRO-Q325-017

Read more

Government-backed mortgages can be easier for potential homebuyers to qualify for as these loans are insured by the federal government, which brings down the risk for lenders. There are three main types of government-backed mortgages that can help consumers — and especially first-time homebuyers — reach their goal of homeownership.

Let’s take a closer look at these different types of government-backed mortgages and how they government-backed insured mortgages work.

What Is a Government-Backed Mortgage?

Essentially, a government-backed mortgage is a mortgage loan that a federal government agency insures. These types of mortgages are typically easier to qualify for than conventional home loans, as the lender takes on less risk due to the government insurance that forms the safety net underpinning the loan.

Of course, consumers can also apply for non-government-backed mortgages, so it’s important to do your research before applying for home loans to see which mortgages best suit your financial needs.


💡 Quick Tip: Buying a home shouldn’t be aggravating. SoFi’s online mortgage application is quick and simple, with dedicated Mortgage Loan Officers to guide you from start to finish.

How Do Government-Backed Mortgages Work?

Let’s take a closer look at how government-backed home loans work. To start, they are insured by one of three different federal agencies.

Note: SoFi does not offer USDA loans at this time. However, SoFi does offer FHA, VA, and conventional loan options.

•   Federal Housing Administration (FHA loans)

•   U.S. Department of Agriculture (USDA loans)

•   U.S. Department of Veterans Affairs (VA loans)

The way this works is that if the borrower defaults on the loan, the government repays the lender instead. This greatly reduces the risk that the lender faces, which means they can in turn extend more favorable interest rates to borrowers who may not normally qualify for low interest rates. Many government-backed loans also don’t require a down payment.

Most of these loans are not issued by the government. Consumers still have to apply with private lenders, and it’s a bit hit or miss which (if any) types of government-backed loans a private lender might offer.

A government-backed loan works differently than a conventional loan. To start, conventional loans don’t have any government backing and therefore have stricter eligibility requirements. Typically, government-backed loans also have different mortgage insurance requirements than conventional loans and may charge more upfront fees.

Borrowers who choose a government-backed loan also have to meet different eligibility requirements than borrowers who choose a conventional loan. For example, only members of the military or select family members can qualify for a VA loan.

Different Types of Government-Backed Mortgages

There are three different types of government-backed mortgages: FHA, VA, and USDA loans. Each type of mortgage is designed to meet the unique needs of different borrowers. Some consumers may qualify for all three loan types or they may meet the requirements and qualify for just one type of mortgage-backed loan. In some cases, a borrower may not qualify for any of these loans.

•   FHA loans This loan type is backed by the Federal Housing Administration and it tends to be much easier to qualify for than USDA and VA loans. FHA loans are popular with first-time homebuyers. Having a credit score of at least 580 is a must and a down payment of 3.5% is necessary. Those with a credit score in the 500 to 579 range can still qualify, but only if they make at least a 10% down payment. The main disadvantage of FHA loans is they require mortgage insurance initially. If the borrower makes a down payment of 10% or more, after 11 years the lender can remove the mortgage insurance requirement, but many borrowers need to refinance to escape this insurance.

•   USDA loans Low- or moderate-income borrowers looking to buy a home in a rural area or select suburban areas may qualify for the USDA’s Rural Development Guaranteed Housing Loan Program. There are a few different types of USDA loans and which one a borrower can qualify for depends on their credit score and income. There are no down payment requirements with USDA loans, but there are mortgage insurance requirements. There is no way to remove mortgage insurance from the loan, however the insurance payments are typically lower than those for conventional or FHA loans.

•   VA loans VA loans are only available to active-duty service members, veterans, reservists, National Guard members, and certain surviving spouses. There are no credit score requirements for VA loans or down payment requirements, although some lenders may have their own credit score requirements. There are no mortgage insurance requirements for VA loans, but there are some extra closing costs that can equate to 1.4% to 3.6% of the loan amount.

Pros and Cons of Government-Backed Mortgages

There are some unique advantages and disadvantages associated with government-backed mortgages:

Examples of Government-Backed Mortgages

There are three types of government-backed mortgage. They are USDA loans, VA loans, and FHA loans. Here is how a USDA loan might work: Let’s say you are home-shopping in an area with a population under 20,000. If you have an average or only slightly above-average salary for the area and a credit score of 640 or higher, you might qualify for a USDA loan. (So, for example, if the median annual income in the area is $62,000, you could qualify with a salary of $71,300 or less.) If you borrowed $100,000, you would have a $1,000 mortgage insurance cost upfront, and you would pay about $29 per month for mortgage insurance after that.

If your military service history makes you eligible for a VA loan, you would likely need a credit score of at least 620 to go with a VA loan, though some may accept lower. You wouldn’t need a down payment or mortgage insurance, but you would pay an upfront funding fee of between 1.4% and 3.6% unless exempt. Your purchase would need to be a primary home, but unlike the USDA loan, the VA loan has no restrictions on where that home could be located or what your annual income might be.


💡 Quick Tip: Your parents or grandparents probably got mortgages for 30 years. But these days, you can get them for 20, 15, or 10 years — and pay less interest over the life of the loan.

Is a Government-Backed Mortgage Worth It?

Whether or not a government-backed mortgage is worth it depends entirely on the borrower’s other home loan options. It’s generally a good idea to shop around with different lenders for the best possible deal. Spend some time comparing potential interest rates, fees, and mortgage insurance requirements to see which loan will cost the most in the long run. First-time homebuyers often find government-backed mortgages especially attractive, in part because it can be difficult to come up with a down payment for a first home.

The Takeaway

Government-backed mortgages can be a great option for borrowers, especially those who don’t qualify for a conventional mortgage. While these government-backed mortgage loans can be hard to qualify for if the borrower doesn’t meet unique requirements (like being a military member or buying a home in a rural area), they can have more relaxed credit score and down payment requirements than those of conventional mortgages.

Looking for an affordable option for a home mortgage loan? SoFi can help: We offer low down payments (as little as 3% - 5%*) with our competitive and flexible home mortgage loans. Plus, applying is extra convenient: It's online, with access to one-on-one help.

SoFi Mortgages: simple, smart, and so affordable.

FAQ

What are government-backed mortgages?

Government-backed mortgages are mortgage loans insured by a select federal government agency. There are USDA, FHA, and VA loans available to eligible borrowers. Because these loans are insured by the federal government, the private lenders who issue them take on much less risk and can work with borrowers who wouldn’t traditionally qualify for a home loan.

What are the benefits of a government-backed mortgage?

Often, government-backed mortgages are much easier to qualify for than conventional mortgages. They typically have lower credit scores and down payment requirements. Because these loans are insured by the federal government, lenders can work with “riskier” borrowers to whom they might not normally offer a conventional home loan.

What are the three types of government-backed loans?

The three main types of government-backed loans are FHA, VA, and USDA loans. The Federal Housing Administration guarantees FHA loans, the U.S. Department of Agriculture backs USDA loans, and the Department of Veterans Affairs is responsible for VA loans.

---

About the author

---

Photo credit: iStock/Prostock-Studio

*SoFi requires Private Mortgage Insurance (PMI) for conforming home loans with a loan-to-value (LTV) ratio greater than 80%. As little as 3% down payments are for qualifying first-time homebuyers only. 5% minimum applies to other borrowers. Other loan types may require different fees or insurance (e.g., VA funding fee, FHA Mortgage Insurance Premiums, etc.). Loan requirements may vary depending on your down payment amount, and minimum down payment varies by loan type.

SoFi Loan Products
SoFi loans are originated by SoFi Bank, N.A., NMLS #696891 (Member FDIC). For additional product-specific legal and licensing information, see SoFi.com/legal. Equal Housing Lender.

SoFi Mortgages
Terms, conditions, and state restrictions apply. Not all products are available in all states. See SoFi.com/eligibility-criteria for more information.

^†Veterans, Service members, and members of the National Guard or Reserve may be eligible for a loan guaranteed by the U.S. Department of Veterans Affairs. VA loans are subject to unique terms and conditions established by VA and SoFi. Ask your SoFi loan officer for details about eligibility, documentation, and other requirements. VA loans typically require a one-time funding fee except as may be exempted by VA guidelines. The fee may be financed or paid at closing. The amount of the fee depends on the type of loan, the total amount of the loan, and, depending on loan type, prior use of VA eligibility and down payment amount. The VA funding fee is typically non-refundable. SoFi is not affiliated with any government agency.
^¹FHA loans are subject to unique terms and conditions established by FHA and SoFi. Ask your SoFi loan officer for details about eligibility, documentation, and other requirements. FHA loans require an Upfront Mortgage Insurance Premium (UFMIP), which may be financed or paid at closing, in addition to monthly Mortgage Insurance Premiums (MIP). Maximum loan amounts vary by county. The minimum FHA mortgage down payment is 3.5% for those who qualify financially for a primary purchase. SoFi is not affiliated with any government agency.
Third Party Trademarks: Certified Financial Planner Board of Standards Center for Financial Planning, Inc. owns and licenses the certification marks CFP®, CERTIFIED FINANCIAL PLANNER®

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.

SOHL-Q325-010

Read more