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Homebuyers who want modern touches and few maintenance worries may opt to purchase new construction or have a home built to order.

In mid-2024, the median price of a new home was $429,800, according to the U.S. Census Bureau. As homebuyers have found a shortage of existing homes on the market in recent years, new-home construction has worked to fill the gap and consumers may find builders offering incentives to choose new construction. You’ll want to understand the market and learn some of the lingo.

Understanding New Construction Homes

On the upside, newly constructed homes can come with warranty-backed electronics, energy efficiency, and high-end features.

But new construction isn’t without potential snags, such as construction delays and the mounting price of upgrades.

The type of new construction you choose will determine cost and ability to customize and may also affect your home loan options.

•   Tract homes. These go up in a builder’s new development. The buyer chooses the lot and design features.

•   Spec homes. These are move-in-ready homes, but the buyer still might be able to choose some of the finishings. It’s a good idea to understand the difference between standard property features and upgrades.

•   Custom homes. A builder tailors a house to the buyers’ specifications on their land.

How Do I Buy a New Construction Home?

A first step is to get preapproved for a mortgage and hire a real estate agent. You’ll choose a builder, go over your desired home features, and sign the builder contract, which will include the anticipated timeline, the cost, and all other details.

Mortgage options for a tract or spec home are the same as buying an existing home: conventional or government-backed home loans.

Those who are building a custom home might use a construction loan for the build and then obtain a mortgage once the home is complete. There are, however, FHA, VA, USDA, and conventional construction-to-permanent loans, also called single-close loans.

Figuring Out the Costs of New Construction

How much does it cost to build a new house? For 2,500 square feet, it could cost $345,000, but of course, there are lots of variables, including location, the price of labor and materials, and your tastes.

For a spec home, it might be a good idea to look at comparables in your area. For a new build, HomeAdvisor suggests budgeting the amount each project of the home requires as well as the necessary time to build.

In normal times, expect to spend about 50% of your budget on materials, HomeAdvisor says.

Buying a staged model house? The upgrades are considered marketing costs, and the home may have been walked through many times. You might have lots of room to negotiate.

Pros and Cons of Building or Buying a New Construction Home

Buying new has its pros and potential cons.

Pros

Everything’s New. Novelty can be a lure all its own. From a practical standpoint, new items signal less maintenance for years.

Additionally, with a from-scratch property, homebuyers may also be able to build their house on the precise plot of land that they want. Buying an existing home could mean having more neighbors nearby or less choice about the size or borders of the property.

Warranties. Appliances, roofing, and the HVAC system may be covered by manufacturer and construction warranties. Replacement or repair may be guaranteed for years, which can be a big relief when buying new construction as opposed to buying an existing home. Ask most homeowners about typical home repair costs. They are the opposite of fun.

Energy Efficiency. Homebuilding has been moving toward energy efficiency, or green architecture. Features like solar panels, treated windows, efficient lighting, and energy-saving appliances curb home energy expenses over the life of owning a home.

Reduced Homebuyer Competition. If a buyer opts to build a new home on an undeveloped tract of land, chances are low that a competing homeowner wants to build in that exact location at the same time.

Benefitting From Buying Discounts. A local contractor has ties to building supply companies and hardware stores. These business-to-business connections may translate into lower costs.

Cons

Land-Starved Locations and Zoning. The denser a community — think a big city or large suburb — the harder it may be to find land to build on. Moreover, local zoning regulations often regulate the size and type of new homes that can be built on residential lots.

Potential Building Delays. It takes 7 to 12 months on average for a contractor to build a house, and 12.1 months for an owner to, according to census data. That’s a significant wait, but building delays are fairly common and add to the bottom line. If a homebuyer needs to rent, for instance, while the house is being constructed, any delays could mean extra housing expenses.

New-home buyers can prepare for changes by touring similar finished homes in the community, researching the builder’s reputation, and speaking to residents. It’s also a good idea to talk with the builder about common construction delays and how unexpected costs are handled.

Negotiating Price May Be Harder. When working with a homebuilding company, negotiating may not be possible. Many builders attach a minimum price to the construction of a new home.

Upgrades Add Up. If wood floors, glass-front cabinets, and premium tile are must-haves, be prepared to pay for them. There is usually a “starting-from” price attached to newly constructed homes. Upgrades can add substantial costs to a new home.

Buying Tips for Newly Built Homes

Prepare to breathe in that new-house smell, but first lay the foundation.

Line Up Financing

When it comes to buying any type of house, getting prequalified is good. Getting preapproved is more serious, because you will have let lenders vet your finances and give you a specific amount you qualify for.

Lenders can also recommend the best kind of financing for a new build.

Hire a Real Estate Agent

Homebuyers wanting to make a new dream home a reality may want to find a good real estate agent. Here’s one reason why that’s important: The sales contact from the home construction company is hired to represent the seller (i.e., the builder or developer). A buyer’s agent can champion buyers’ interests, negotiate the contract, and answer questions.

Ask for Builder Concessions, Sign the Contract

Homebuyers aren’t likely to get a builder to slash a new home’s sales price, but they might be able to gain some concessions. Some builders may offer upgrades at a reduced price to incentivize a homebuyer to buy.

Upgrades may come in the form of a higher grade of carpet, granite countertops, a more advanced HVAC unit, or higher-end kitchen appliances. It doesn’t hurt to ask.

Once you’re pleased with your decisions, you’ll sign the builder contract to buy a spec home or start construction on a home.

The Takeaway

Newly constructed homes have obvious appeal, but they can come with potential delays and other drawbacks. Buyers who have their heart set on a brand-new home will find that financing often works the same way as it does for an existing-home purchase.

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

SoFi Mortgages: simple, smart, and so affordable.

FAQ

Can you negotiate the price of a new construction home?

Negotiating the price of a new construction home can be challenging as many builders set a minimum price. However, it might be possible to negotiate upgrades or concessions instead of a price reduction. Homebuyers can work with a real estate agent to help them negotiate with the builder.

What is a realistic budget for building a house?

A realistic budget for building a house will vary depending on the location, size, and desired features. In general, a 2,500 square foot home requires a budget of around $345,000, not including the cost of land. But cost can increase or decrease depending on the specific materials and finishes chosen.

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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.

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

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

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

Third-Party Brand Mentions: No brands, products, or companies mentioned are affiliated with SoFi, nor do they endorse or sponsor this article. Third-party trademarks referenced herein are property of their respective owners.

‡Up to $9,500 cash back: HomeStory Rewards is offered by HomeStory Real Estate Services, a licensed real estate broker. HomeStory Real Estate Services is not affiliated with SoFi Bank, N.A. (SoFi). SoFi is not responsible for the program provided by HomeStory Real Estate Services. Obtaining a mortgage from SoFi is optional and not required to participate in the program offered by HomeStory Real Estate Services. The borrower may arrange for financing with any lender. Rebate amount based on home sale price, see table for details.

Qualifying for the reward requires using a real estate agent that participates in HomeStory’s broker to broker agreement to complete the real estate buy and/or sell transaction. You retain the right to negotiate buyer and or seller representation agreements. Upon successful close of the transaction, the Real Estate Agent pays a fee to HomeStory Real Estate Services. All Agents have been independently vetted by HomeStory to meet performance expectations required to participate in the program. If you are currently working with a REALTOR®, please disregard this notice. It is not our intention to solicit the offerings of other REALTORS®. A reward is not available where prohibited by state law, including Alaska, Iowa, Louisiana and Missouri. A reduced agent commission may be available for sellers in lieu of the reward in Mississippi, New Jersey, Oklahoma, and Oregon and should be discussed with the agent upon enrollment. No reward will be available for buyers in Mississippi, Oklahoma, and Oregon. A commission credit may be available for buyers in lieu of the reward in New Jersey and must be discussed with the agent upon enrollment and included in a Buyer Agency Agreement with Rebate Provision. Rewards in Kansas and Tennessee are required to be delivered by gift card.

HomeStory will issue the reward using the payment option you select and will be sent to the client enrolled in the program within 45 days of HomeStory Real Estate Services receipt of settlement statements and any other documentation reasonably required to calculate the applicable reward amount. Real estate agent fees and commissions still apply. Short sale transactions do not qualify for the reward. Depending on state regulations highlighted above, reward amount is based on sale price of the home purchased and/or sold and cannot exceed $9,500 per buy or sell transaction. Employer-sponsored relocations may preclude participation in the reward program offering. SoFi is not responsible for the reward.

SoFi Bank, N.A. (NMLS #696891) does not perform any activity that is or could be construed as unlicensed real estate activity, and SoFi is not licensed as a real estate broker. Agents of SoFi are not authorized to perform real estate activity.

If your property is currently listed with a REALTOR®, please disregard this notice. It is not our intention to solicit the offerings of other REALTORS®.

Reward is valid for 18 months from date of enrollment. After 18 months, you must re-enroll to be eligible for a reward.

SoFi loans subject to credit approval. Offer subject to change or cancellation without notice.

The trademarks, logos and names of other companies, products and services are the property of their respective owners.

SOHL-Q324-056

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Looking to buy a manufactured home, a boat, or a piece of equipment for your business? You may need a chattel mortgage.

Chattel mortgages are used to finance movable assets separately from the land they occupy. They come with a higher cost than a traditional mortgage, so manufactured home dwellers who qualify for a standard mortgage will save money by choosing that route.

Here’s what you need to know about how chattel loans work and when you might want to look for alternative financing.

What Is a Chattel Mortgage?

First of all, a chattel mortgage is used for personal property, not real property. Real property includes land and property that cannot be easily removed from the land.

When a chattel mortgage is used for a large, movable asset like a manufactured home — called a mobile home before June 15, 1976 — or a piece of equipment (the “chattel”), the asset is held as collateral on the loan. If the borrower defaults on the loan, the lender can recoup costs by selling the asset.

A chattel loan may have a lower interest rate than an unsecured personal loan but a higher rate than a traditional mortgage.

Note: SoFi does not offer chattel mortgages at this time. However, SoFi does offer conventional loan options.

How Does a Chattel Mortgage Work?

Chattel mortgages are used in two main instances: when an asset can be moved or when the land the asset sits on, or will, is leased. (In fewer cases, a chattel loan may be used when a borrower doesn’t want to encumber their owned land with a loan, as when land is owned jointly in a trust.)

Applying for a chattel loan is similar to applying for other types of loans, such as home equity loans and personal loans. The lender will look at your creditworthiness and ability to repay the loan before making a decision.

Chattel loans are typically small, with relatively short terms, but usually require no appraisal, title policy, survey, or doc stamps (the documentary stamp triggers a tax in certain states).

Recommended: First-Time Homebuyer Guide

What Are Chattel Loans Used For?

Here are some of the most common applications for chattel loans.

Manufactured Homes

Manufactured homes are built in a factory on a permanent chassis and can be transported in one or more sections. Formerly known as mobile homes, they’re designed to be used with or without a permanent foundation, but must be elevated and secured to resist flooding, floatation, collapse, or lateral movement.

Many are titled as personal property. Manufactured housing that is titled as personal property or chattel is only eligible for chattel financing.

When a manufactured home is titled as chattel, you’re also going to pay vehicle taxes to the Department of Motor Vehicles instead of property taxes.

Many consumers may encounter a chattel loan at the sales office of a manufactured home builder. They’re convenient with quick closing times, but come with a higher interest rate and a shorter term than most traditional mortgages.

This makes the financing cost of the manufactured home high, even if the payment is low thanks to the lower cost of a manufactured home compared with a site-built home. Around 42% of loans for manufactured homes are chattel loans, according to the Consumer Finance Protection Bureau.

When you own a manufactured home and rent the land it occupies, such as in a mobile home park, you will need a chattel mortgage, except when an FHA Title I loan is used.

Tiny Houses

A chattel mortgage may be used for tiny house financing when the tiny house is not affixed to a permanent foundation and/or when the land is leased.

Tiny houses are usually too small to meet building codes for a residential home, so even if the home is on a foundation and on owned land, a traditional mortgage is almost always out of the question. Even if Fannie Mae or FHA allows the property, the lender won’t.

Tiny houses on foundations are usually classified as accessory dwelling units.

Vehicles

A chattel loan may finance assets that are not permanently affixed to the property, such as vehicles. Dump trucks and construction vehicles may qualify.

Equipment

A chattel loan can be used to purchase large equipment for a business, such as a forklift or a tractor. Even livestock can be purchased with a chattel loan.

How Much Does a Chattel Mortgage Cost?

Chattel mortgages are more expensive than many other different mortgage types. The Urban Institute concluded that chattel loans were substantially more expensive than non-chattel loans. Owners of manufactured homes would spend thousands more per year in interest compared with a traditional mortgage.

These types of mortgages are not being purchased by Fannie Mae or Freddie Mac on the secondary mortgage market. When a conventional mortgage is purchased by one of these entities, the loan originator obtains more liquidity and can provide more loans to more people. This drives the cost of the mortgage down.

A chattel mortgage, on the other hand, must stay on the books of the lender, making the loan riskier and more expensive.
If you qualify, you might want to consider refinancing your chattel mortgage into a traditional mortgage.

Recommended: Home Loan Help Center

Chattel Mortgage vs Traditional Mortgage

To qualify for a conventional or government-backed mortgage instead of a chattel mortgage, you must own the land your home sits on, the home must be permanently affixed to a foundation, and it must have at least 400 square feet of living space (600 for Fannie Mae’s conventional loan for manufactured homes).

Mobile homes built before June 15, 1976, will not qualify for a mortgage loan. A personal loan is about the only option.

You must also meet all other requirements set forth by the lender to qualify for a traditional mortgage. A mortgage calculator tool can help with this.

For some types of assets, a chattel mortgage may be a good option to consider. Take a look at the major differences.

Chattel Loan	Traditional Mortgage
For movable property only	Includes the land and all attached structures
May have a lower interest rate than an unsecured personal loan	Usually has a lower interest rate than a chattel mortgage
Shorter terms (e.g., 5 years)	Longer terms (e.g., 15 years, 30 years)
Lower origination fees	Higher loan fees
Shorter close time	Longer close time
Lender holds the title, which is only given to the buyer when it is paid off	Lender holds a lien on the property, not title

Pros and Cons of a Chattel Mortgage

A chattel mortgage is more expensive than a traditional mortgage, so anyone who can qualify for a traditional mortgage may wish to pursue that option first. It’s not all bad news for chattel mortgages, though, especially for other types of property where a chattel loan is desirable.

Pros	Cons
Lender only has a security interest in the movable property, not the land	If you default on the loan, the lender can take your asset. Also, the lender owns the asset until the loan is paid off
Taxes may be lower on property titled as “chattel” rather than “real” property	Higher-cost loan than a traditional mortgage
Possible faster close and lower loan fees than a standard mortgage	Fewer consumer protections. Chattel loans are not covered by the Real Estate Settlement Procedures Act or CARES Act
Lower interest rate than a personal loan	Higher interest rate than a traditional mortgage
Pays down more quickly than a traditional mortgage	Shorter term may create higher payments
Interest paid is tax deductible	Interest paid is also tax deductible with a traditional mortgage

Consumer Protection and Chattel Mortgages

Chattel mortgages on manufactured homes are a special concern to the Consumer Financial Protection Bureau because that type of housing:

•   Serves an important role in low-income housing

•   Is typically taken on by financially vulnerable people

•   Has fewer consumer protections

Manufactured home sellers often have an on-site lender where borrowers can walk away with a chattel loan the same day as the home purchase. In certain scenarios, though, better financing options might be available.

The Takeaway

Buying a manufactured home or a piece of heavy equipment? A chattel loan could be the answer. If, though, you are buying a manufactured home and own the land, a traditional mortgage makes more sense than a chattel mortgage.

FAQ

Where can I get a chattel loan?

Lenders specializing in chattel or manufactured housing loans will offer this type of loan.

How much does a chattel mortgage cost?

The interest rate of a chattel mortgage could be several percentage points higher than that of a standard mortgage loan.

What happens at the end of a chattel mortgage?

When a chattel mortgage is paid off, the borrower receives legal title to the property or asset borrowed against. It’s also possible for landowners with permanently affixed manufactured homes to refinance into a traditional mortgage to end their chattel loans.

Is a chattel mortgage tax deductible?

A chattel mortgage qualifies for the same tax deductions that a traditional mortgage does. This includes a deduction on mortgage interest paid throughout the tax year.

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Photo credit: iStock/MicroStockHub

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

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

*SoFi requires Private Mortgage Insurance (PMI) for conforming home loans with a loan-to-value (LTV) ratio greater than 80%. As little as 3% down payments are for qualifying first-time homebuyers only. 5% minimum applies to other borrowers. Other loan types may require different fees or insurance (e.g., VA funding fee, FHA Mortgage Insurance Premiums, etc.). Loan requirements may vary depending on your down payment amount, and minimum down payment varies by loan type.
Financial Tips & Strategies: The tips provided on this website are of a general nature and do not take into account your specific objectives, financial situation, and needs. You should always consider their appropriateness given your own circumstances.

Third-Party Brand Mentions: No brands, products, or companies mentioned are affiliated with SoFi, nor do they endorse or sponsor this article. Third-party trademarks referenced herein are property of their respective owners.

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

SOHL-Q324-037

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Not counting the reams of time you probably will spend looking for a house, both virtually and IRL, it takes and average of 30 to 60 days to get from an accepted offer on a house to the closing if you’re financing the purchase.

Here’s the scoop on how long it takes to buy a house and get the keys in your hand.

How Long Does It Take to Buy a House In 2024?

Once you’ve homed in on a home you love, the mortgage process — from application to closing — takes an average of 30 to 60 days.

So yes, a life-changing event can happen within a month or two.

But closing times vary. A cash buyer might be able to close on a house within days. An applicant with an iffy credit history and unpredictable income may need 90 days or longer.

Before You Start Looking for Your Next Home

It’s a good idea to get your head in the game before the hunt begins.

Organize Your Finances

If you’re asking yourself “How much of a mortgage can I afford?” you can get an estimate easily.

A home affordability calculator will give you a feel for a home price limit and monthly payments. Getting prequalified will also give you a quick ballpark estimate.

Pulling a down payment together to buy a house in many parts of the country isn’t as hard as many people think. The average down payment on a house is less than 20% (though putting less than 20% down on a conventional loan usually triggers mortgage insurance).

Conventional loans may call for just 3% down for first-time homebuyers; FHA loans, as little as 3.5% down; and VA and USDA loans, nothing down. (With government loans, mortgage insurance or fees come along for the ride.)

Low- and moderate-income borrowers can sometimes get down payment assistance through a state or local agency.

Figure Out Where You Want to Live

You might know exactly what neighborhood, school zone, and vibe you want. Then your search can zero in on that area.

But looking at the cost of living by state can be eye-opening.

And narrowing things down, you might want to check out market trends by city and neighborhood.

Determine Your Must-Haves

Do you want to buy a house that has been completely updated, or will a dowdy abode or fixer-upper do? The cost of any renovations or repairs must be factored in, of course, and may be funded with a home improvement loan.

If only new construction will do, that can mean a tract home, spec home, or custom home.

What size range can you live with? Maybe you need more space, or maybe you’re financially downsizing.

Is a low-maintenance condo or townhouse more your style, or do you need a single-family home with room for a swimming pool or garden?

Five Steps to Buy a House

Ready? This timeline assumes you’re about to start seriously shopping for a house.

Step 1: Get Mortgage Preapproval (Minutes to Days)

Unlike prequalification, mortgage preapproval means one or more lenders have vetted your finances, usually with a hard credit inquiry. Once your offer on a home is accepted, if your chosen lender is one of these, it has a big head start on your final approval.

An online application might take about 20 minutes to complete if you have all of the documentation in hand, including two years of W-2s and/or 1099s, two years of tax returns, recent pay stubs, a list of fixed debts, and two months’ worth of account statements.

Lenders will look at your credit scores and credit history.

They will look at income, debts (including student loans), assets, proof of employment, rental history, divorce, bankruptcy, and gift funds for a down payment.

Depending on the lender, preapproval could be nearly instantaneous or it could take days.

If you’re shopping for a mortgage, know that multiple credit inquiries by lenders are counted as a single inquiry for 14 days and sometimes more, so try to put in your preapproval requests with various lenders within the same week.

What Is a Pre-approval Letter?

A preapproval letter from a lender states that you’ve been tentatively approved to borrow up to a specific amount. It lets sellers know that you are likely to be able to get financing. The letter will have an expiration date of 30 to 90 days.

What Is a Verified Approval Letter?

This is the term used by some lenders for a preapproval letter, to make clear the difference between prequalification and preapproval. A hard credit inquiry will have been performed, and an underwriter will have examined your preapproval application and additional documents.

Step 2: Make an Offer on a House (a Day to a Few Days)

Once you find a house you want to call your own, it might take up to five days to make an offer and come to an agreement with the seller on price and contingencies in the purchase contract. A closing date will be in the purchase agreement.

Usually when you make an offer, you will provide an earnest money deposit to the escrow company, ​​typically 1% to 2% of the purchase price.

Step 3: Secure the Mortgage (30 to 60 Days on Average)

Now you can make a full mortgage application with as many lenders as you wish, and not just lenders that preapproved you.

It’s smart to look at more than rates — one of the different types of mortgage loans might be a better fit than the others.

You’ll need to choose a mortgage term as well. Thirty years is the most common.

Once you apply, you will receive official loan estimates, allowing you to compare mortgage APRs (annual percentage rates) and more. Choose a lender. Check at the top of Page 1 of the loan estimate to see whether your rate is locked, and until when.

Step 4: Prepare for Closing

Appraisal and Title Search

Your lender will order an appraisal of the home. A property valuation that comes back lower than the purchase price could hinder loan approval.

The appraisal may be performed from 14 to 45 days before closing.

A title search of the property also will be ordered, resulting in a preliminary title report.

Underwriting

This is mostly a waiting period for the buyer. Credit reports are ordered, and the application information is verified.

Mortgage underwriting focuses on the three C’s:

•   Capacity (will your income and debt load allow you to make the mortgage payments each month?)

•   Credit

•   Collateral (did the appraisal show that the home price and value are aligned?)

Your mortgage loan officer may come back to you with questions. Once you receive final loan approval, a mortgage contingency can be lifted.

Home Inspection

A home inspection is optional but widely recommended.

Closing Disclosure and Cash to Close

Your lender is required to send you a closing disclosure at least three business days before the closing. It should match your loan estimate or come close.

You’ll need to send a wire transfer for cash to close one to two business days before closing. The closing disclosure will tell you how much money you need to wire. If you don’t wire the money, you’ll need to prepare to take a certified check or cashier’s check to the closing table.

Cash to close is closing costs (unless you chose a no-closing-cost mortgage) plus your down payment minus your earnest money deposit and any seller credits.

An option: Prepare to take a certified check or cashier’s check to the closing table.

Final Walk-Through

Your real estate agent will schedule a final walk-through within 24 hours of closing. This is a chance to be sure the home is in the condition you agreed to under the purchase terms.

Step 5: Close on Your Loan (an Hour or Two)

The lender will send your closing documents to the closing attorney or title company.

You’ll sign a river of documents in person or remotely.

The deed will be recorded with the appropriate county to transfer title to the new owner, you. Then you’ll receive the house keys.

The Takeaway

How long does it take to buy a house? An uncomplicated mortgage and closing process could take about 30 to 60 days from the time your offer is accepted. That’s a quick close on a new beginning.

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

How many months does it take to buy a house?

If you are financing your purchase with a home loan, and you have a steady income and good credit, you could get from an accepted offer to the closing table in one to two months. If you have a complex financial profile, or if negotiations with the seller become complicated, expect to add time to the process.

How long does it take to get preapproved for a mortgage?

The evaluation process for a mortgage preapproval can take around 10 days. If your financial picture is clearly documented and in good shape, it could take less time. You’ll need to fill out an application with your chosen lender and agree to a credit check, plus provide information about your income and assets.

How fast can you buy a house?

A cash buyer could purchase a home in a matter of days. If you require a home loan, expect the homebuying process to take one to two months from the point that you have an accepted offer.

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

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

*SoFi requires Private Mortgage Insurance (PMI) for conforming home loans with a loan-to-value (LTV) ratio greater than 80%. As little as 3% down payments are for qualifying first-time homebuyers only. 5% minimum applies to other borrowers. Other loan types may require different fees or insurance (e.g., VA funding fee, FHA Mortgage Insurance Premiums, etc.). Loan requirements may vary depending on your down payment amount, and minimum down payment varies by loan type.
Financial Tips & Strategies: The tips provided on this website are of a general nature and do not take into account your specific objectives, financial situation, and needs. You should always consider their appropriateness given your own circumstances.
This article is not intended to be legal advice. Please consult an attorney for advice.

SOHL-Q324-033

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If you just closed on a home and have yet to see paperwork from your lender about your first mortgage payment, you might be wondering when is the first payment on a mortgage due?

Most mortgage payments are set up from the beginning to be due on the first of the month. For new mortgages, you make the first month’s payment at closing, and you won’t make your first “real” mortgage payment until the end of the next month.

So that you’re prepared, let’s walk through when your first mortgage payment is due, how to make it, and what happens if you miss a mortgage payment. By the end, you’ll know how to make your first mortgage payment and have a solid plan for keeping your mortgage in good standing.

Determining Your First Mortgage Payment Due Date

After you close on your loan, the next part of the mortgage process is receiving a “welcome package” from your new mortgage servicer. It will include instructions from your servicer on paying your first mortgage payment. It will have your loan number, how to contact the servicer, the servicer’s website information, your payment amount, due date, list of fees, payment methods accepted, information on paying off your mortgage, and some other legal disclosures they’re required to send.

As far as the exact due date, when is the first payment on a mortgage due after closing? Lenders require your first mortgage payment within 60 days of closing your loan. Since they’ve already collected prorated interest for the first month at closing, you’ll be making your first payment at the end of the first full month you’re in the home.

For example, if you close on a home April 15, you’ll have paid prorated interest for the month of April at closing. Your first payment will likely be due June 1 so you will make your payment at the end of May. This payment will include the interest you’re being charged for the month of May.

Recommended: How to Get a Home Loan

Preparing for Your First Mortgage Payment

Now that you know when you’ll likely make your first mortgage payment, you have a few things to do to get everything in order. Sometimes, preparing for your first mortgage payment means waiting for the letter from your new mortgage servicer — so keep an eye on your mail. When you do have the information about where your payments need to go, you’ll want to set up automatic payments as soon as you can.

Setting Up Automatic Payments

Most borrowers can set up automatic payments in one of two ways:

•   With your mortgage servicer

•   With your bank

Setting up an automatic payment from your bank can help you centralize your finances and make things easier for you to see and control. An automatic withdrawal pulled from your bank account by the mortgage servicer will do the same thing, but you’ll need to set it up with the mortgage servicer.

Budgeting for Additional Costs

Your home loan payment usually includes an amount for mortgage insurance, property taxes, and homeowners insurance, but you’ll want to make sure you are saving money for other costs that come your way, such as:

•   Homeowners association (HOA) fees

•   Home maintenance and upkeep

•   Utilities

•   Security system

•   Emergency repairs

Recommended: Mortgage Calculator

Consequences of Missing Mortgage Payments

Missing a mortgage payment can have some serious consequences, but before you get to that point, you’ll have a chance to rectify it. If you miss a mortgage payment, you’ll want to call your lender to work out a repayment plan and try to avoid some of the consequences, such as late fees and penalties, a lower credit score, and foreclosure.

Late Fees and Penalties

Mortgages generally have a grace period, usually around 15 days. After 15 days, you’ll be assessed a late fee. How much the late fee is will vary by lender and mortgage amount. You can find the late fee for your mortgage in your loan documents.

In general, you may see a late fee up to 5% of the principal and interest portion of your mortgage payment. For a $2,000 mortgage payment, that could be up to a $100 late fee.

Impact on Credit Score

Missing a mortgage payment will have a negative impact on your credit score when it is reported. Mortgage companies typically wait until the mortgage is 30 days past due to report it to the credit bureaus. The late payment could stay on your credit report for up to seven years.

Payment history accounts for 35% of your credit score. A missed mortgage payment can drop your credit score approximately 50 points, according to analysis of more than one million mortgage loans by Milliman, an actuarial and consulting firm. Four missed payments lowers a score around 100 points.

If you do miss a mortgage payment by accident, most credit scores are able to recover within two years.

Risk of Foreclosure

In 2023, there were 357,062 foreclosure filings made in the United States, which represents a quarter of a percent of all housing units in the U.S. If you know you’re going to have trouble making a payment, contact your lender as soon as possible to see if there are any relief programs available.

If a borrower misses payments, in most cases a lender may start foreclosure proceedings when they haven’t received a payment for 120 days. From there, the amount of time before the lender forecloses on your home depends on state law. States like Hawaii, Louisiana, and New York average more than 2,000 days (more than 5 years!) to complete the foreclosure process. States like Montana, Virginia, and Texas average 123, 152, and 163 days, respectively.

Tips for Staying on Track

If you’re worried about staying on track with your mortgage payment you can try these ideas:

•   Use a budgeting app. There are a whole host of budgeting tools that can help you keep track of your mortgage payment due date (as well as other important financial information).

•   Set automatic payments. As noted above, you can set up your mortgage payment to be paid automatically, from either your bank or the mortgage servicer. You’ll link account information and set a date for payment to be delivered.

•   Utilize calendar reminders. A calendar reminder, either in the analog or digital world, could help you remember to make your mortgage payment if you don’t have automatic payments set up.

•   Put emergency funds on autopilot. Some mortgage servicers may allow you to link more than one payment method. If there’s not enough money for the mortgage payment in one fund, you may be able to pay your mortgage from savings.

•   Be aware of market changes. If you’re struggling to make payments, you may be able to save money by pursuing a refinance with either a different type of mortgage, a lower interest rate, or a different mortgage term.

If you have the urge to pay off your mortgage early or make extra payments to reduce the principal owed (a process called mortgage curtailment), study your mortgage agreement carefully to understand if there are prepayment penalties.

The Takeaway

Your first mortgage payment is typically due at the end of the first full month after you close on your loan. There’s some leg work involved with setting up and making the first mortgage payment, but if you’re able to create a system, you’ll have a good chance of successfully paying your mortgage on time each month.

If you get into trouble or need help with your mortgage payment, contact your mortgage servicer as soon as possible. They may have a plan to help get you back on track with your mortgage payment and keep you in your house.

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

SoFi Mortgages: simple, smart, and so affordable.

FAQ

Can I make my first mortgage payment before the due date?

Yes, lenders accept mortgage payments (including your first mortgage payment) before the due date. It might be helpful to wait until the mortgage servicer’s instructions come in the mail to know exactly where you need to send your mortgage payment.

What happens if I miss my first mortgage payment?

Mortgage payments have built-in grace periods, so if you miss your first mortgage payment by a few days, you’ll likely be fine, but you should make your payment promptly to keep your mortgage current and your credit in good shape. If you can’t find a letter from your mortgage servicer, give the servicer a call and ask if they’ll take payment over the phone.

How long is the grace period for mortgage payments?

The grace period for mortgage payments is typically 15 days.

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Photo credit: iStock/PIKSEL

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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.

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Investing in real estate can be a lucrative endeavor. But if you don’t have hundreds of thousands of dollars saved in cash to put toward a property, using a credit card to secure a real estate investment might be an option.

There are ways to execute this investment approach. However, there are also serious caveats to consider before moving forward with using a credit card to invest in real estate.

Can You Buy Real Estate With a Credit Card?

You can’t purchase a physical real estate property outright with a credit card the way you would when using a credit card to buy lunch or a new television. One reason for this is because a typical consumer credit card likely doesn’t offer a credit line large enough to cover the entire home price.

Even if you do qualify for a credit line to cover all or a significant portion of the home price, you’ll face another challenge. The title company or real estate agency that’s facilitating the deal requires that payment is provided using bank-certified funds — such as a cashier’s check, certified bank check, or wire transfer — to finalize your investment transaction. Given what a credit card is, it won’t meet those standards.

Recommended: Does Applying For a Credit Card Hurt Your Credit Score?

How to Finance Real Estate Investments With a Credit Card

While you can’t swipe your credit card to purchase real estate, there are ways that you can leverage your credit card to help fund your real estate investments.

Through a Cash Advance

If you have a high enough credit limit, a viable way to buy real estate with a credit card is by getting a cash advance against your card. By doing this, the funds you borrow from your credit card will become quickly available for use on a real estate investment, which might be helpful if you’re buying real estate in a hot market.

Keep in mind that fees typically apply for cash advances. Typically, you’ll pay a fee in the range 3% to 5% of the transaction amount, depending on your particular card.

Also know that cash advances typically come with interest rates that are higher than the card’s standard annual percentage rate (APR). Plus, interest begins to accrue immediately rather than at the end of the grace period like it does on regular credit card purchases.

Recommended: What Is the Average Credit Card Limit?

For Related Real Estate Costs

Some investors also use credit cards to invest in real estate by using their card for renovation project expenses. If you purchased a low-cost investment property and want to update it for passive rental income, for example, you might be able to invest in your property by putting charges for contractors and materials on your credit card.

By Using Credit Card Rewards

Another unconventional approach to buying real estate with credit cards is directly redeeming earned rewards as cash. Cash redemption values are typically lower compared to redeeming rewards toward travel, for example, but this approach can still unearth the capital you need to invest in your next property.

This strategy is particularly effective if you’ve already amassed years of rewards through a business credit card, and are willing to pool earned rewards from your personal credit card rewards programs, too.

Recommended: Can You Buy Crypto With a Credit Card?

Advantages of Using a Credit Card to Invest in Real Estate

Although buying real estate with a credit card is an unconventional approach, there are some benefits in doing so. In particular, the advantages include that:

•   You can invest faster: If you don’t have a lump sum of cash savings ready, it might take years to save up enough capital to get your foot into real estate investing. Using a credit card to invest in real estate can help you realize your investment goals faster.

•   You’ll have fewer costs at closing: Since you’re not financing through a mortgage lender, there are fewer fees to worry about. Unlike when buying a home as your primary residence through a mortgage loan, costs like origination fees, appraisals, and escrow fees aren’t a required part of a real estate investment transaction done in cash.

•   You might earn rewards in the process: Most card issuers don’t let you earn credit card rewards from cash advances. However, you can accelerate your rewards earnings by using your card for spending associated with your property investment. For example, materials and contractor costs for renovation projects, like a kitchen update or a room addition, can help you rack up rewards faster.

Downsides of Using a Credit Card to Buy Real Estate

There are major disadvantages to using a credit card to invest in real estate. If you’re considering how to buy rental property with credit cards, keep in mind the following drawbacks:

•   You’ll have a hard time using credit cards directly to invest in real estate: A notable downside to buying real estate with credit cards is that you’ll likely be unable to throw a credit card onto the table to close a real estate transaction. You’ll have to undergo the extra step of getting a credit card cash advance. But be aware that card issuers might set a lower available limit for cash advances and will impose a higher APR. Plus, you’ll pay cash advance fees.

•   You’ll face high interest rates: If you have to draw a cash advance against your credit card to buy real estate, you’ll face expensive APRs, compared to other financing sources, like a personal loan. According to the latest Federal Reserve data, the average credit card rate across all accounts with balances is currently 22.76%. By comparison, the average personal loan rate is 12.36%.

•   You’re taking on a lot of risk: How credit cards work is that they let you purchase goods and services, even if you don’t have the cash to cover the full amount, immediately. The caveat, however, is that you’ll need to repay the amount either in a lump sum when your statement is due or over time.

   If you successfully buy real estate with a credit card, you’re legally liable for that debt and must repay it based on the rate and terms of your credit card agreement. This holds true regardless of whether your investment turns a profit. Plus, if you choose to pay back the funds you borrowed over many months, you’ll incur exorbitant interest charges in addition to the principal balance.

Recommended: How to Avoid Interest On a Credit Card

Factors to Consider Before Using Your Credit Card to Invest in Real Estate

After assessing the pros and cons of investing in real estate using a credit card, also consider the following factors that might impact your investment:

•   Whether you’ll need additional funding sources: If your credit card doesn’t provide a sufficient amount for your real estate investment, you’ll need to seek funds elsewhere.

•   What the local real estate market is like: Whether your goal is buying a property to flip and sell or buying rental real estate, do your homework. This includes finding a desirable neighborhood and a suitable property, as well as assessing renovation projects and other repairs necessary to set your investment up for profitability.

•   If you can repay your credit card bill: At best, consider your credit card as a short-term loan tool. Plan to put profits you’ve earned toward paying down your debt ASAP.

Alternatives to Buying Real Estate With Credit Cards

If you don’t have hard cash stowed away for your next real estate investment, but aren’t ready to leverage your credit cards for the investment, you have a couple of other options:

•   Personal loans: A personal loan is another financing option, particularly if you have strong credit. It offers a higher borrowing limit and longer repayment timeline compared to a credit card. Also, as mentioned earlier, personal loan interest rates are generally lower than credit card APRs.

•   Personal savings: Another option is using cash and avoiding credit cards and other methods of borrowing altogether. If you have personal savings that you can tap into or are willing to hold off on investing in real estate until you’ve built up enough savings, you can potentially avoid costly finance charges.

The Takeaway

Tread carefully when using a credit card (i.e. borrowed money) to fund any investment, including real estate. Adhering to important credit card rules — like staying on top of your credit utilization and paying your credit card statements in full — can help you avoid going into debt for your investment.

Whether you're looking to build credit, apply for a new credit card, or save money with the cards you have, it's important to understand the options that are best for you. Learn more about credit cards by exploring this credit card guide.

FAQ

How can I buy rental property with a credit card?

If done strategically, you can use a credit card to finance a rental property either through a credit card cash advance or by using the credit card to pay for renovations on an investment property flip.

Can I use a business credit card to buy real estate?

Yes, you may be able to use a business credit card to invest in real estate. Doing so separates the debt from your personal credit profile, so the high credit utilization on the business credit card doesn’t affect your personal credit score.

Is it a good idea to buy real estate with a credit card?

Whether buying real estate with credit cards is a good idea depends on your investment risk tolerance. A credit card might work as a short-term funding option, but plan on repaying the debt with your profits quickly to avoid an underwater investment.

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Photo credit: iStock/SDI Productions

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.

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