## Price to Rent Ratio in 5 Cities

The path to homeownership isn’t always a straight line. After all, there are so many factors that could come into play in the rent vs. own debate. Considerations might include how long you plan to stay in a specific home and location, have you saved enough for a down payment, if you are ready for the responsibility that comes with maintaining a house.

However, one of the biggest considerations when thinking about your housing options comes down to the cost of rent vs the cost to own in any town or city. Often referred to as the price to rent ratio, this calculation can be a helpful tool when determining the rent to value ratio in a certain area.

This ratio is a benchmark that can help potential homeowners as they decide whether or not to plunk down their life savings on a home. Here’s exactly what that ratio is and what it looks like in the top five major metro areas in the United States.

## What Is the Price to Rent Ratio?

The price-to-rent ratio may sound intimidating, but fear not, it’s easier to break down than you may think. It’s compares cost of rent to mortgage in a ratio format.

Here’s an example for you: Let’s say the average annual rent paid in the city you are considering living in is \$3,000 a month and the average property selling price is \$1,000,000.

The price to rent ratio would be calculated by taking the \$1,000,000 property value and dividing it by 12 months. That equals \$8,333.33 a month.

Next, divide that number by the average rent. In this case, that would be \$8,333.33 ÷ \$3,000. This gives you the price to rent ratio, which in this example is 27.78.

Alternatively, you could divide the median home price by median “yearly” rent, so \$1,000,000 / \$36,000. This will give you the same price to rent ratio of 27.78.

This rent to price ratio can indicate whether housing may be overpriced in an area. It can also be helpful when estimating whether it is cheaper to buy or rent. Investors who purchase rental properties often look at this ratio before purchasing an investment property to rent out later as well.

The price to rent ratio can sometimes be used as an indicator of an impending housing bubble. Since a substantial increase in this ratio could mean that renting is becoming a more attractive option in that specific housing market.

Understanding what this ratio means and learning how to calculate this ratio for yourself could be useful information as you consider whether to rent or buy.

There are a variety of resources that describe price to rent ratios in different communities that can helpful in determining what areas are best to rent in or to buy across the country. There are even some helpful online calculators that can give you an estimate of the price to rent ratio in specific zip codes.

## Price to Rent Ratio: When to Buy and When to Rent?

So, is the theoretical town with a price to rent ratio of 27.78 a better place to buy or to rent?

A price to rent ratio ranging from 1 to 15 typically indicates that it is better to buy than it is to rent in a given community. A price to rent ratio of 16 to 20 indicates it is typically better to rent than buy, and a ratio of rent to home price of 21 or more indicates it is better to rent than buy.

Since the theoretical town falls into 21+ category, it would be a rent friendly community. Of course, like all things in life, there are a few exceptions to this rule, but these are general guidelines to follow when making the all-important housing decision.

Looking for a few real-life ratios? Here are five popular metropolitan areas in the United States and their price-to-rent ratios to help you make a better informed decision on your next move.

## New York, NY

According to SmartAsset’s 2019 analysis , New York City’s price to rent ratio is 36.83 based on the equivalent of a \$1,000 rental to its \$441,987 purchased home counterpart. And, as described above, that makes the city a renter’s market rather than a buyer’s one.

## San Francisco, CA

It’s no secret that San Francisco’s housing market is one of the most competitive in the country . So, perhaps unsurprisingly, its price-to-rent ratio is a whopping 50.11 based on a \$1,000 rental that is equivalent to a \$601,362 purchased home, according to SmartAsset.

## Boston, MA

In Boston, SmartAsset found that would-be residents will find a price-to-rent ratio of 29.23 based on that \$1,000 rental equivalent to a \$350,811 home. While that’s lower than New York and San Francisco, but the price to rent ratio indicates that it may still be a renter’s market.

## Denver, CO

Compared to SF and NY, Denver may have a more buyer friendly market, with an estimated price to rent ratio of 25.60 based on a \$1,000 rental and a \$307,232 home. That still puts it above the threshold for those wavering between renting and buying.

## Chicago, IL

One major city to make the list of places where it’s better to buy than rent is Chicago, which scored a 19.99 based on a \$1,000 rental and a \$239,831 home price.

But not all cities have price to rent ratios as high as these five hot markets. For example, Detroit has one of the lowest price to rent ratios at just 5.35 when comparing a \$1,000 rental price and a \$64,194 home.

If you decide you’re ready to buy there are ways to make it more financially feasible, no matter your chosen city’s price-to-rent ratio. And that includes looking into mortgage options so you can find the best option. As you embark on your search, consider SoFi.

SoFi Mortgages offer qualifying borrowers competitive rates and no hidden fees. Plus some people can qualify for a loan with as little as a 10% down payment. You can find out if you pre-qualify for a mortgage in just a few minutes. That way, when the right home comes along—at the right price—you’ll be ready.

Price to rent ratio just right? When you’re ready to buy check out SoFi’s mortgage options.

External Websites: The information and analysis provided through hyperlinks to third-party websites, while believed to be accurate, cannot be guaranteed by SoFi. Links are provided for informational purposes and should not be viewed as an endorsement.

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.

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

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SOMG19037

## What is PMI?

Buying a house is quite possibly the largest investment that most people will ever make. And when you consider that the median price of a new home in the U.S. is \$342,000 , the thought of actually hitting that milestone may seem out of reach for some. It is also one of the most confusing, especially for first-timers. Homebuyers attempt to master a whole slew of new vocabulary terms, from “contingencies” to “escrow” to “fixed versus adjustable rate mortgages.”

One of the most mystifying terms is PMI, which stands for “private mortgage insurance.” When you hear “insurance,” you may think it’s there to protect you in case something goes wrong with your home loan.

Actually, PMI is there to protect the lender that’s likely offering you a conventional mortgage whether it be a refinance or a purchase loan.

If you are making a down payment of less than 20% of the home’s value, the lender will typically require PMI on the mortgage from a private insurance company. Why would you pay for insurance that benefits your lender and not you? And should you take on this expense? Read on to find out how PMI works.

## Why PMI?

The purpose of PMI is to make low down payment mortgages less risky for the lender so they in turn can offer you a loan if you don’t have sufficient funds for a 20% down. If you have PMI and default on your home loan, the insurer will be responsible for paying a portion of the loan balance, so that the lender isn’t on the hook for the entire amount.

When a lender is considering whether to extend a mortgage loan, and on what terms, they look at something called the loan-to-value ratio, or LTV. This is equal to the mortgage balance divided by the value of the property.

The more money you have for a down payment, the less you need to take out a loan for, and therefore the lower your LTV ratio. Whether you’re buying a home or refinancing, the higher your LTV ratio, the more of a gamble you’re likely to appear to lenders. And they’ll usually want you to have PMI when your LTV is less than 80%, which is what happens when you put less than 20% down.

## Who Takes Out PMI?

Private mortgage insurance has been around for more than 60 years . Over that time period, more than 30 million families , including 1 million in 2017, relied on PMI in order to buy or refinance a mortgage. A significant amount of those who did were low-income or buying their first homes.

Specifically, more than 40% of borrowers who have taken out PMI earned less than \$75,000 a year, and 56% were first-time homebuyers. In 2017, the top five states for homeowners with PMI were Texas, California, Florida, Illinois, and Michigan.

PMI generally costs between 0.55%-2.25% of the mortgage amount annually, but premium costs can vary depending upon the loan scenario.

## How to Pay PMI

There are a few different options for paying PMI, which depend on your preferences. Most borrowers pay PMI as a monthly premium that is added on to the mortgage payment. You can see what the premium is in both the loan estimate you get when you apply for the mortgage and again in your closing disclosure.

The PMI factor can change between these two estimates because the appraisal valuation which drives the final LTV (loan to value) may be received by the lender after the Loan Estimate is generated. Another option is to pay your PMI all at once in a single sum when you close on the house. Or you can ask the lender if they can cover some or all of the PMI cost through lender rebate money.

Generally, in this scenario a borrower accepts a higher rate and the rebate money in that higher rate comes back to the borrower as a credit and the borrower can use that lender credit to cover some or all of the PMI cost. Ask a lender to generate a quote with different PMI payment options so you can compare and choose the best plan for your budget.

Keep in mind that some PMI policies are refundable and some are non-refundable. A third scenario is to pay some of the PMI up front and get the rest added on to your mortgage payment each month.

If you’re confused about the different policies and payment options, ask the lender’s representative to explain the options to you and ask for a quote on how much you will owe in different scenarios. If you are purchasing a home you may be receiving a seller credit towards your closing costs, this can be another way to cover the PMI in one lump sum and not have ongoing monthly payments.

## How to Get Rid of PMI

For a principal residence or second home, the borrower can initiate cancellation of PMI under the following scenario: The LTV ratio must be:

•  75% or less, if the seasoning of the mortgage loan is between two and five years.

•  80% or less, if the seasoning of the mortgage loan is greater than five years.

If Fannie Mae’s minimum two-year seasoning requirement is waived because the property improvements made by the borrower increased the property value, the LTV ratio must be 80% or less.

For automatic termination of PMI the guidelines are:

•  Loan is closed on or after July 29, 1999 and is secured by a one-unit principal residence or second home.

•  on the applicable termination date, provided the borrower’s payments are current on the termination date.

The applicable termination date is:

•  the date the principal balance of the mortgage loan is first scheduled to reach 78% of the original value of the property, or

•  the first day of the month following the date the mid-point of the mortgage loan amortization period is reached, if the scheduled LTV ratio for the mortgage loan does not reach 78% before the mid-point.

## How to Avoid PMI

PMI can come in handy for people who want to become homeowners and otherwise wouldn’t qualify for a mortgage. However, the costs can add up, and unlike other types of insurance, you’re not gaining any protections yourself. Luckily, there are ways to avoid PMI altogether.

As stated above, lenders can cover the cost of PMI through lender credit. Lender credit can be generated by the borrower taking a higher rate in exchange for rebate money which is used to pay for some or all of the PMI cost. Whether or not this higher rate ends up saving you money vs paying a lower rate and monthly PMI depends on your unique situation.

An alternative is to take out a mortgage that is not a conventional loan, such as a Federal Housing Administration Loan . FHA loans require a government insurance (MIP) which usually runs with the life of the loan. FHA loans have an upfront premium as well as a monthly premium. Whether a conventional or government loan is the best fit for you depends on many factors , such as your credit history and the mortgage market.

The most surefire way to help avoid paying PMI is to save 20% down before you buy a house. Even if it might take you a bit longer to become a homeowner, consider whether it makes sense to rent until you can save up that magic number.

There are also some loan programs that do not require PMI. VA loans would be one loan program that does not require PMI and some lenders do not apply PMI requirements to their Jumbo loan products. It is good to note that SoFi offers as little as 10% down on their Jumbo purchase loans with no PMI.

If you’d like to put away more than you currently are, start by making a budget. Note down all the money coming in and going out every month, and see if there’s room to cut expenses so that you can save a bit more. Once you’ve freed up some cash, set up an automatic transfer from your savings to your checking account to make sure that money is set aside.

If you don’t have a lot of wiggle room as far as cutting spending, you may want to consider ways to increase your income. This can include asking for a raise, applying for a higher-paying job, or taking on a side hustle.

If you can save 20% down before applying for a mortgage and avoid PMI, you may save yourself a significant chunk of money for years to come. That said, only you can decide whether paying PMI is worth it in your particular situation and housing market.

## Looking Into a Mortgage with SoFi

With SoFi, you make your dream home a reality with competitive rates, no hidden fees, and as little as 10%. When deciding on loan eligibility, SoFi, like other lenders, will consider your credit history, your income, your employment, and other factors. You can see if you pre-qualify in just two minutes online.

Explore a mortgage loan with SoFi.

External Websites: The information and analysis provided through hyperlinks to third-party websites, while believed to be accurate, cannot be guaranteed by SoFi. Links are provided for informational purposes and should not be viewed as an endorsement.

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

SoFi Mortgages

SOMG19003

## What is a Bridge Mortgage and What Are They Used For?

There’s a great Apple commercial spoof where an iPhone®​ owner is trying to upgrade to the new model without his current model’s Siri finding out she’s getting dumped. She freaks him out and hijinks ensue.
And while the connection may seem flimsy at best, upgrading to your next home can feel equally precarious, at least when it comes to your mortgage. After all, what do you do when you’ve found your new dream home, but selling your current one could take months, if not longer?

That’s where bridge loans can come to the rescue. A bridge loan, also known as a swing loan, gap financing, or interim financing, is a temporary loan that bridges the gap between the down payment of a new property and the mortgage balance of your previous home. Basically, a bridge loan is a short-term loan taken out by a homeowner against their current property in order to finance the purchase of a new property.

Bridge loans are designed to help home buyers purchase a new property in the event that their old property has not yet been sold. And assuming you don’t have a contingency contract or an extra couple hundred thousand dollars in the bank, you may well need to bridge that gap.

## Pros & Cons of Bridge Loans

Bridge loans can be a major benefit in a time crunch: The home seller can immediately put their home on the market and move into another house. This can be especially helpful if you are a homeowner going through a period of sudden transition.

For example, if you have a new job or have children who need to switch schools soon, this could be necessary. Bridge loans are not a replacement for a mortgage but a temporary solution. They are generally designed to be repaid within six months to three years.

The terms vary widely for bridge loans, but they can have high interest rates because bridge loans are usually tied to a variable rate index such as the Prime Rate.

Borrowers may also encounter differences in how lenders deal with interest payments . Some require monthly interest payments while others require an upfront or end-of-term lump sum interest payment.

Bridge mortgage loans are secured to the borrower’s existing home, which means your old house can be claimed in the event of defaulting repayments. The standards for qualifying for a bridge mortgage tend to be high. After all, you’re trying to prove that you can afford not one, but two homes.

Many lenders do not actually have a set credit score requirement or a maximum debt-to-income ratio. Most of the time, your ability to qualify will depend on your future home purchase and the long-term financial benefits the lender predicts.

## Exploring Other Financing Options

Borrowing a bridge loan can be risky—you may be required to start paying off your mortgage and the bridge loan at the same time. You are also depending on the sale of your home in order to pay off the bridge loan, which could take time depending on the state of the real estate market as you are selling your home.

If you are planning on taking out a bridge loan to cover the cost of a new home, you may want to negotiate for the extension of your bridge loan in the event that your home does not sell in a timely manner. Bridge loans can be a risky investment for banks too , which means they can be extremely difficult to get.

Due to the risks and costs that come with a bridge mortgage, borrowers may want to consider other options. One alternative to a bridge loan is a home equity line of credit (HELOC) which allows you to draw equity against the value of your current home in a similar way to a bridge loan.

With a HELOC you’ll usually get a better interest rate, pay lower closing costs, and have more time to repay the loan than you would with a bridge loan. It’s important to note that many lenders will not loan a HELOC on a home that is currently on the market for sale, so it may require advance planning.

If you are considering borrowing a HELOC, you may want to look for one without any prepayment penalties or early closure fees, which could significantly cut into your profits in the event that your home sells quickly.

Another alternative to bridge loans is borrowing a personal loan. If you have decent credit history and a solid income, you may consider applying for a competitive-rate personal loan, especially because bridge loan interest rates can run fairly high .

In addition, because personal loan lending is a more diversified market, you can likely find personal loans without the expensive origination fees. Personal loans, including the ones available with SoFi, are often unsecured and therefore require no collateral.

And when you borrow a personal loan with SoFi there are no prepayment penalties, which means if your home sells quickly, you can pay off the loan without losing any of your profits.

No matter what, make sure to do your research. As long as you do your homework, you can find the option that works best for your personal situation, so you can get the home you need at a cost that works for your budget.

Looking to move into a new home? With SoFi personal loans, you can bridge the gap so that you can move into your new house now instead of later.

Check out SoFi’s personal loans today to see if you qualify.

The information and analysis provided through hyperlinks to third party websites, while believed to be accurate, cannot be guaranteed by SoFi. Links are provided for informational purposes and should not be viewed as an endorsement.
SoFi Mortgages are not available in all states. Products and terms may vary from those advertised on this site. See SoFi.com/eligibility-criteria#eligibility-mortgage for details.
Disclaimer: Many factors affect your credit scores and the interest rates you may receive. SoFi is not a Credit Repair Organization as defined under federal or state law, including the Credit Repair Organizations Act. SoFi does not provide “credit repair” services or advice or assistance regarding “rebuilding” or “improving” your credit record, credit history, or credit rating. For details, see the FTC’s website .

MG18121

## Why Consolidate Debt Before Buying a Home

As adults, we tend to bounce from one big financial quest to the next. We need money to buy a car, to go to college, to own a home, which usually means we have to keep asking for loans.

You’d expect it would get easier as you go, but sometimes it doesn’t, especially if you’ve made mistakes along the way. Unfortunately, your missteps could keep you from qualifying for a mortgage—the Mount Everest of money-borrowing pursuits. If you’ve buried yourself in credit card and other debt, it’s crucial to get clear before you can move forward.

## Consolidating Credit Card Debt Before a Mortgage Approval

Your credit card debt and mortgage approval can sometimes go hand in hand. Mortgage lenders want to know that you can afford to pay back the loan they’re offering, so they’re going to be curious about what you already owe others. While every lender is different, they’ll typically look at what you earn every month versus what you’ll be paying for your home and other debt obligations. Our home buyer’s guide is an excellent resource for first-time home buyers or existing homeowners looking to brush up on the home buying process.

Even if you have a good credit score and a debt-to-income ratio of 43% or less, high credit card debt payments could still make it difficult for you to pay a mortgage.

Credit cards typically come with a high interest rate and as long as you don’t pay your balance off in full every payment cycle, interest can continuously compound.

Taking out a debt consolidation loan is a way to help break the debt cycle. While you’ll then have to take out a personal loan, the interest rate may be lower than your credit cards, and personal loans usually offer fixed interest rates.

Recommended: Home Affordability Calculator

## Using a Personal Loan To Consolidate Debt

Let’s get into more detail about how it all works:

You’ll combine the credit card debt into one manageable bill with a single payment due date. That means you’ll no longer have to worry about multiple payment due dates (or what will happen to the interest rates attached to those accounts if you don’t make your payments on time).

You may also qualify for a lower interest rate. The average interest rate on credit cards hovers around 16%, which is pretty hefty. Or maybe you accepted a higher rate on a new card a while ago when you needed it to build your credit and never got the rate adjusted. If you have a good credit record, a consistent job history, and a solid income, you may be able to bring your interest rate down with a personal loan.

Those high interest rates might be the very reason you got into trouble in the first place. Perhaps you aren’t an over-spender or maybe you just got into the habit of paying the minimum on your credit cards each month, figuring you’d catch up “someday.”

And it wasn’t until you started thinking about purchasing a home that you realized you’re on thin ice. With a lower interest rate and just one bill, you could help set yourself up for success with a better chance of staying on top of your debt.

Having the balance of one or more of your credit cards near the credit limit may negatively affect your credit score. Credit utilization is one of five major factors that help determine your credit score (along with payment history, the age of the credit, credit mix, and the number of recent credit inquiries).

Credit utilization is a comparison between the amount of credit you have available to you (your account limits) and what you’re actually using (your balances). If your credit utilization is high, a lender might see you as more of a risk, and the ratio can impact up to 30% of your credit score . Paying off your credit cards —and keeping them paid off—may help you boost your credit score.

Being on firmer footing with debt also could boost your savings sense. You’re probably going to want to get home-loan-ready one careful step at a time, and knowing you’re doing something about your debt might inspire you to make other savvy moves, like spending less and saving more.

If you reduce your monthly debt payments with a consolidation loan, you could put that extra money toward the down payment you’ll need for your new home. And putting down more up front will ultimately mean you own more of your house—and have a smaller mortgage.

Using a personal loan to lower the amount you’re required to pay on your debt each month may help improve that statistic lenders lean so hard on: the debt-to-income ratio.

Lenders may conclude that those with higher debt-to-income could have more difficulty paying their mortgage. You may seem like a safer bet in the eyes of a lender with a lower debt-to-income ratio.

Understandably, they just don’t want the risk, so why give them an excuse to turn you down? Your consolidation loan won’t magically make your debt disappear, but by paying regularly on your personal loan, you can get a better grip on your debt load and eventually improve your credit profile.

You might find you don’t even need those credit cards anymore—at least not as many or not so often. Maybe when you were starting out on your own, you used credit to get by when times were tight. Now that you’re earning more money and your finances are more in order, that’s hopefully not true anymore.

You might find yourself chopping up some of those extra cards. After all, if your personal loan comes with a lower monthly payment, you’ll likely have more cash in your pocket to pay for the small stuff.

## Other Options For Knocking Down Debt

If you think you have the resources and discipline to knock down your credit card balances on your own within six months or so, you probably don’t need to bother with a loan.

Or you might want to look into using a balance transfer card—that is, if you think you can focus on paying it off within the required timeline to take advantage of the low interest rate…and you can resist the temptation to keep charging.

But, if it feels as though your debt is becoming a slippery slope, and consolidation would help you set up a new and better payment structure for getting rid of it, you may want to consider a personal loan.

Consolidating debt before buying a home can be a wise first step. And if all goes as planned, when you’re ready to purchase that home, you could decide to apply for a mortgage loan through SoFi.

Take control of your credit card debt with a SoFi personal loan today.

The information and analysis provided through hyperlinks to third party websites, while believed to be accurate, cannot be guaranteed by SoFi. Links are provided for informational purposes and should not be viewed as an endorsement.
Disclaimer: Many factors affect your credit scores and the interest rates you may receive. SoFi is not a Credit Repair Organization as defined under federal or state law, including the Credit Repair Organizations Act. SoFi does not provide “credit repair” services or advice or assistance regarding “rebuilding” or “improving” your credit record, credit history, or credit rating. For details, see the FTC’s website .
The tips provided on this website are of a general nature and do not take into account your specific objectives, financial situation, and needs. You should always consider their appropriateness given your own circumstances.
SoFi Mortgages are not available in all states. Products and terms may vary from those advertised on this site. See SoFi.com/eligibility-criteria#eligibility-mortgage for details.

SOPL18133

## How Much Debt is Too Much to Buy a House?

Perhaps you’ve found your dream home, or maybe you’re still in the exciting stages of looking for the house you want. In either case, you’re likely thinking about getting a mortgage loan—and you may be wondering if the amount of debt you currently have will become a stumbling block to qualifying for a mortgage.

To qualify for a mortgage, a lender needs to be confident that you can responsibly manage the amount of debt that you’re currently carrying along with a mortgage payment. The formula used to determine that is called a debt-to-income (DTI) ratio.

More specifically, a DTI ratio is the percentage of your qualifying monthly income, before taxes, that is needed to cover ongoing debts. This could include student loan payments, a car payment, credit card payments, and so forth. If the DTI ratio is too high, then a lender may see you as a higher risk.

This post will describe DTI in more detail, including how to calculate yours, what lenders typically like to see, and what might be too much debt to buy a house. We’ll also share strategies to manage your debt and lower your DTI ratio to help you qualify for the house of your dreams.

The DTI formula is pretty simple. First, make a list of all your debts with recurring payments. Then, if you’re a W2 earner, take your pre-tax monthly income and divide your monthly expenses by this amount. That percentage is your DTI ratio .

Note that, with a mortgage, to calculate your DTI ratio, you’ll need to have a reasonable estimate of monthly property taxes on the home, insurance (homeowners, for sure, and PMI and flood insurance, if applicable), and HOA dues, if applicable. Even if you wouldn’t necessarily pay those bills on a monthly basis, you’ll need the bill broken down into a monthly amount for DTI calculation purposes. (And remember these are just examples. Your actual DTI, as calculated by a lending professional, may differ.)

If your debt-to-income ratio is too high, it can impact the type of mortgage you’ll qualify for. Each mortgage lender will have their own preferred DTI ratio, of course, and lenders can and do make exceptions based on your unique financial situation. Here’s an explainer on desirable debt-to-income ratios from the Consumer Financial Protection Bureau.

## Preparing for When You Need a Mortgage

If you know you’ll want to buy a house within, say, the next year or two, it can be beneficial for you to understand how much home you can afford. This will give you time to manage your finances to make getting a mortgage approval easier. Perhaps you can’t pay off all your debt in that time frame, but there are strategic moves to make to position yourself better when mortgage time is upon you. In addition, consider reviewing our home buyers guide to get a better understanding of everything you need to prepare for your mortgage.

First, be careful. There are plenty of debt-related myths, but let’s address two debt-related realities:

1. Having a lot of debt in relation to your income and assets can work against you when applying for a mortgage.
2. If you are consistently late on debt payments, lenders may question your ability to pay your mortgage on time.

Here are a few tips that can help with some of the most common debt challenges:

## Student Loan Debt

If you’re looking to take control of your student loan debt, consider refinancing your student loans into one new student loan with a potentially lower interest rate.

This can make paying back your loans easier, because there is just one monthly payment to make. Plus, with a (hopefully) lower interest rate, you can pay back less interest, overall. And, if you’re concerned about your monthly DTI ratio being too high when you go to apply for a mortgage, you may be able to refinance your student loan to a longer term for lower monthly payments, to reduce your current monthly DTI ratio. (Keep in mind, though, that extending your loan term may mean paying more interest over the life of your loan.)

When you refinance at SoFi, you can combine federal loans with private ones, something not many lenders permit. Request a quote online to see what you can save. Note that SoFi does not have any application fees or prepayment penalties.

## Credit Card Debt

When you have a significant amount of credit card debt, the monthly payments can negatively impact your DTI ratio.

If you’re concerned about managing credit card debt payments while paying a mortgage, you could even consider focusing your efforts on getting out of credit card debt before you start the homebuying process.

To manage your credit card debt, and ultimately eliminate it, here are a few debt payoff methods to consider

•  The snowball method. List your credit cards from the one with the lowest balance to the one with the highest. Then, focus on paying off the one with the smallest balance first, while still making minimum payments on the rest. When that first card is paid off, focus on the next one on your list and so forth.

•  Tackling high-interest debt first. Using this method, you list your credit cards from the one with the most interest to the one with the least. Then, focus on paying off the credit card with the highest interest while making minimum payments on the rest. Then tackle the next one, and then the next one.

•  Consolidating credit card debt using a personal loan before you apply for a mortgage loan. When you do this, you’ll have just one loan, and personal loans typically have lower interest rates than credit cards (if you qualify). Ideally, keep credit cards open while only using them to the degree that you can pay off in full each billing cycle. And as with all debt payments, make all personal loan payments on time.

By reducing and managing your credit card debt, you can better position yourself for a mortgage loan on the house of your dreams.

## Consolidating Your Credit Card Debt with a Personal Loan

Ready to consolidate credit card debt into a personal loan? SoFi makes it fast and easy, and it only takes minutes to apply. Plus, our personal loans have the following perks:

•  Low rates

•  No fees

We look forward to helping you achieve your financial goals and dreams. Learn how a personal loan from SoFi can help.

The information and analysis provided through hyperlinks to third party websites, while believed to be accurate, cannot be guaranteed by SoFi. Links are provided for informational purposes and should not be viewed as an endorsement.
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Notice: SoFi refinance loans are private loans and do not have the same repayment options that the federal loan program offers such as Income Based Repayment or Income Contingent Repayment or PAYE. SoFi always recommends that you consult a qualified financial advisor to discuss what is best for your unique situation.
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