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How Long Does a Mortgage Preapproval Last?

Mortgage preapprovals more than 3 months old are generally considered out of date, but letters can last as long as 180 days. Depending on how long your search is, you may need to renew it more than once before closing on a home.

Having a letter of preapproval from a financial institution can help ensure that you’re ready to snap up a home you love.

What Is a Mortgage Preapproval Letter?

A letter of preapproval can be an essential part of the home-buying process. It shows sellers that you are serious about buying a home and that a mortgage lender is likely to give you a mortgage loan quickly.

A preapproval letter is a lender’s written statement that it is willing to lend you a specified amount of money for a mortgage, although it’s not quite a commitment.

The lender will review your credit history, income, and assets to determine the amount you qualify for. The letter will then state that number and may outline stipulations to gain the loan, such as maintaining your employment or not taking on any additional debt.

A preapproval letter can help you focus on homes that are in your price range. This is important in competitive markets when you won’t want to waste time reviewing homes that are out of your budget. A preapproval letter can also signal to sellers that you are a serious buyer, and many sellers require one before accepting an offer.

Letters of preapproval may last anywhere from 90 to 180 days, though many view anything older than 3 months as out of date. That time frame tends to work, since homebuyers, on average, shop for a home for three to six weeks, according to the Home Buying Institute.

Recommended: Tips for Buying in a Hot House Market

Mortgage Prequalification vs. Mortgage Preapproval

Since they sound similar, it’s worth mapping out the difference between prequalification and preapproval.

Mortgage Prequalification

Prequalification is a key first step in the mortgage process.

You will tell lenders about your income, assets, and debts to get a sense of the loan programs and rates you might receive.

Lenders use that unverified information, and usually a soft credit inquiry, to give a ballpark estimate of how much you may be able to borrow and at what terms.

This estimate is useful because it can give you an idea of how much house you may be able to afford. Prequalification can also give you an idea of what your monthly mortgage payment would look like.

However, prequalification does not mean that a lender is guaranteeing a loan. At this stage, your loan qualifying information is typically not verified.

Mortgage Preapproval

The mortgage preapproval process is an examination of your income, employment, assets, debt, and creditworthiness, and it represents the next step in buying a home.

When considering you for preapproval, lenders will scrutinize:

•   Income: Employees will need to provide pay stubs, W-2s, and tax returns from the past two years, as well as documentation of any additional income, such as work bonuses. Self-employed workers often need two years’ worth of records and a year-to-date profit and loss statement, although many lenders and loan programs are flexible.

•   Assets and liabilities: You’ll need to provide proof of savings, investment accounts, and any properties. Lenders view assets as proof that you can afford your down payment and closing costs and still have cash reserves. The lender will also look at monthly debt obligations to calculate your debt-to-income ratio.

•   Credit score: Your credit score is a numerical representation of your credit history. It reflects debt you’ve taken on and whether you’ve made payments on time.

Recommended: What Is Considered a Bad Credit Score?

Once your lender has reviewed the information, it may offer a letter of preapproval stating the maximum mortgage amount that you have been preapproved for, how long the letter is good for, and any conditions that need to be met for final loan approval.

A preapproval may help you compete with homebuyers who are purchasing in cash. Some sellers won’t even consider offers that don’t have at least a preapproval, so this letter makes it more likely they will select your offer on a property.

It’s possible that even after preapproval, the lender may choose not to issue a mortgage. A lender, for example, might withhold final approval if it discovers previously undisclosed financial information that changes qualifying eligibility, or if the property you want to purchase is not eligible for lending because of its condition.

To sum it all up:

Mortgage Prequalification
Mortgage Preapproval

•   Doesn’t require a credit check

•   Checks credit history

•   Is based on financial assumptions

•   Is based on verified facts

•   Provides an estimated mortgage amount

•   Provides an offer to lend a specific amount

•   Is less reliable than preapproval

•   Is much more reliable than prequalification

How quickly a mortgage preapproval can be completed can vary by lender and how quickly documentation has been supplied, but it could range from 24 hours to 10 days.

Importantly, receiving preapproval from a lender does not obligate you to use them. If home loans with more desirable terms are available, it would be smart to look into them.

First-time homebuyers can
prequalify for a SoFi mortgage loan,
with as little as 3% down.


Estimate Your Potential Mortgage Payment

Before you start the pre-qualification or pre-approval process, it’s a good idea to get an idea of how much your monthly mortgage payment could be. Use the mortgage calculator below to quickly see the difference in mortgage payments based on down payment, interest rate, and loan terms.

What to Do When Your Preapproval Expires

Lenders put an expiration date on preapproval letters because they need to have your most up-to-date financial information on hand. The credit, income, debt, and asset items they reviewed for your preapproval typically need to be updated after 90 days.

You might leave your job and no longer have a steady income, or a financial emergency may have taken a big bite out of your savings. As a result, the lender will want to reassess your finances.

If you’re using the same lender you will need to provide updated pay stubs and bank statements, and your credit may be checked again.

You can minimize the effect of “hard pulls” on your credit score by avoiding seeking a renewal when you’re not actively shopping for a home, and by working with only one lender during the preapproval stage.

If your finances have mostly stayed the same, your lender is likely to renew your preapproval.

Finalizing Your Mortgage

If you find a house while your mortgage preapproval is still valid, you can move on to finalizing your mortgage application. At this point, in many cases, lenders will check again to see if there have been any changes to your financial situation.

The mortgage underwriter will review all the information, order an appraisal of the chosen property, get a copy of the title insurance, and consider your down payment. Then comes the verdict: approved, suspended (more documentation is needed), or denied.

Your mortgage is not officially approved until you receive a final commitment letter. After you have the letter, a closing date can be scheduled.

Buyers may want to minimize changes, like applying for other loans or credit, when a home loan is in underwriting.

The Takeaway

How long is a mortgage preapproval good for? Ninety to 180 days, though a letter older than 3 months is generally considered out of date. Getting prequalified is a good precursor to getting preapproved.

If you’re ready to start house hunting, check out the fixed-rate home loans SoFi offers. You may be able to put as little as 5% down.

Get prequalified for a SoFi Home Loan in just two minutes.


SoFi Loan Products
SoFi loans are originated by SoFi Bank, N.A., NMLS #696891 (Member FDIC), and by SoFi Lending Corp. NMLS #1121636 , a lender licensed by the Department of Financial Protection and Innovation under the California Financing Law (License # 6054612) and by other states. For additional product-specific legal and licensing information, see SoFi.com/legal.

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

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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Understanding Your Mortgage APR

Your APR, or Annual Percentage Rate, is an important term for any potential homebuyer to know. Distinct from your interest rate, your mortgage APR tells you the overall cost of your mortgage loan, taking into account both your interest rate as well as any additional costs.

Understanding what an APR is and how it can impact your loans is critical when borrowing any loan, especially a mortgage. Here’s a primer on what elements make up an APR and how you can calculate it.

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 your mortgage 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 a mortgage, these costs can include items such as origination fees, application fees, processing fees, discount points, and other types of fees that lenders may charge.

APR provides a more comprehensive picture of the total cost of the mortgage loan since 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.

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. For instance, 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 specifics, such as your credit score, as well as the current economic conditions and market interest rates. 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

If you 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. And remember, right now, we’re just trying to give an idea of the difference between the interest rate and the APR.

Once you have the monthly P&I payment calculated, you’ll then be able to calculate the APR, which you can do with this calculator . Keep in mind that because we don’t know what your applicable APR loan fees will be, we suggest using a ballpark estimate. Let’s say that the loan costs that will impact your APR are 2% of your loan amount. So, if your loan amount is $200,000, your loan costs for calculating the APR will be $4,000.

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

So you’ve got 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 APR but lots of fees. You’ll want to make sure to consult with your financial advisor before making this decision.

When you’re mortgage shopping, 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 some calculators cannot anticipate the frequency or amounts of the interest rate changes.

Recommended: Tips When Shopping for a Mortgage

The Takeaway

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

One way to start the process of mortgage shopping is by checking out SoFi mortgages. We offer a variety of mortgage loans, so you can select the option that works best for you. You can start the application online and find out if you’re pre-qualified in just minutes.

Learn how a mortgage with SoFi can help you buy the house of your dreams. Start today!


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

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), and by SoFi Lending Corp. NMLS #1121636 , a lender licensed by the Department of Financial Protection and Innovation under the California Financing Law (License # 6054612) and by other states. For additional product-specific legal and licensing information, see SoFi.com/legal.

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How to Negotiate House Prices: 7 Tips

Buyers who learn how to negotiate house prices lay the foundation for a mutually acceptable deal.

Whether you’re a first-time homebuyer or not, these strategies to negotiate home prices may help you score a property at the best possible price.

Why You Should Be Negotiating House Prices

While negotiating the price of a home can seem intimidating, the benefits can often outweigh the fear. For starters, negotiating lets the seller know you’re serious about the home.

It also gives you the opportunity to create a concise offer that you’re happy with and helps you stay within your budget so you don’t break the bank to get the house you want.

Finally, if the asking price is over what you feel comfortable with, negotiating can help you see if there is any wiggle room in the price. That way you aren’t putting yourself in a stressful financial situation.

Things to Know Before Negotiating Home Prices

Know Your Market

The market will dictate how much leverage you have to negotiate a home price. Determining whether it’s a hot seller’s market or a buyer’s market will help you navigate your negotiations.

The power is typically in your hands if the property you want is in a buyer’s market when the number of homes for sale exceeds the number of willing buyers. In this case, you could offer 10% under the asking price and ask the seller to pay closing costs.

But you don’t want to offend sellers by lowballing them. There is a happy medium between a fair offer and getting the biggest bang for your buck. If you do decide to lowball, make sure you’re willing to walk away.

Markets can vary from city to city and neighborhood to neighborhood. So check with your real estate professional to be certain what type of market you’re working with. After all, you don’t want to lose the home of your dreams just because you were unaware of the market conditions in your area.

Recommended: Tips for Buying in a Hot House Market

Know the Value of an Agent

Can you buy a house without a real estate agent? Sure, but it’s not a decision to make lightly.

Besides the fact that Realtors® and other agents know the markets around your desired community, they have valuable experience that can help you make offers and handle counteroffers.

They know what’s reasonable for the current market conditions. Because they aren’t emotionally attached to the outcome, they are better set up to get the best deal without making ​​excessive concessions.

But you don’t want to work with just any agent. You want to work with someone who is a buying and selling expert, has connections with other agents in the area, and is knowledgeable about the community you’re interested in.

Got your eye on a house for sale by owner? You can use an agent or go it alone.

Recommended: How to Find a Real Estate Agent

First-time homebuyers can
prequalify for a SoFi mortgage loan,
with as little as 3% down.


How to Negotiate Home Prices

Here are several tips to help seal the deal on a home.

1. Do Your Homework

One of the best ways to get an idea of how much to offer is to research the prices of “comps,” recently sold homes in your target area that are similar to the property you’re trying to buy.

A real estate agent will have access to market trends in your area. But fortunately for us 21st-century dwellers, this information is readily available on sites like Zillow, Realtor.com, Redfin, and Trulia.

Zillow also lists how long for-sale properties have been on the market, which can give you some insight into how negotiable a list price may be.

2. Get an Inspection

While your mortgage lender might not require a home inspection — and while forgoing one may make your offer more appealing to the seller — it’s probably in your best interests to have one.

Without a home inspection, the only information you have about the house comes from what the seller is able (or willing) to disclose and what you perceive with your senses. Home inspections can reveal hidden issues like cracks in the foundation or plumbing problems.

Along with helping you plan for unforeseen repair costs ahead of time, the inspection can also give you leverage to ask the sellers to knock down their price a bit, offer you a credit for closing costs, or fix the problem themselves.

3. Have Your Finances in Order Ahead of Time

Sellers are apt to be most enthusiastic about buyers who have been preapproved, as opposed to prequalified.

While both involve a lender taking a peek at your financial information, such as income, credit history, debts, and assets, preapproval involves an in-depth application and verification process, and thus carries more weight than prequalification.

TL;DR: Having a preapproval letter is a great way to send your offer to the front of the pile.

Also, if you’re a homeowner looking for an upgrade (or lateral move), selling your old home ahead of time could be a mark in your favor from the seller’s perspective: It means you won’t have to wait until your home is sold to go forward with the buying process.

This “chain-free” approach requires careful timing and possibly setting up a temporary living space. So while it’s not feasible for everyone, it is an option to keep in mind if you’re hoping to increase your odds of success in a competitive market.

Recommended: How Long Does a Mortgage Preapproval Last?

4. Don’t Negotiate House Prices Too Hard

You don’t want to insult sellers by pitching a price that’s too low, particularly if you’re negotiating in a seller’s market or purchasing a beloved property that’s been in the family for years.

While you may be able to get as much as 10% off the list price, depending on the local housing temperature, you could knock yourself out of the running if you lowball too hard.

In a hot housing market, you may even end up bidding more than the list price on a house.

5. … But Do Try to Negotiate Home Prices

On the other hand, you don’t want to shortchange yourself by failing to negotiate at all. So, starting from the first time you walk through the home, it’s a good idea not to show all your cards by appearing overeager, even if you’re totally in love with the place.

If you come across as desperate for the house, sellers may feel they can expect a higher offer from you.

Don’t be afraid to point out the drawbacks that give you pause, and be sure you give yourself time to shop around before you get serious about putting money on the table.

When it comes time to make an offer, consider not only the list price but closing costs and any repair or renovation expenses.

6. Put Your Offer in Writing and Be Detailed

Rather than make a verbal offer on a home, many experts recommend putting your offer in writing and adding as much detail as possible. That way you avoid any disagreements on what was said and can negotiate on factors beyond price.

When competing against multiple offers on a house, buyers may waive one or all contingencies to sweeten their offer. Contingencies are simply conditions that must be met in order to close the deal.

An appraisal contingency can be an opportunity to negotiate the home price or back out if the property does not appraise at the price in the purchase contract.

A clear title contingency also gives the buyer a way out if liens or disputes are associated with the property.

And it can’t hurt to ask for help with closing costs.

You might also consider adding a personalized letter to your offer, which might sound cheesy, but selling a home can be just as emotionally fraught as buying one. Describing why you love the house or how you imagine your family growing with the property can help your offer stand out from others, even if you aren’t the highest bidder.

7. Include an Expiration Date

Although you’ll generally hear back on (realistic) offers within a few business days, sellers aren’t legally obligated to respond to your offer at all.

By including the expiration date, you’ll have a firm calendar date on which you’ll know for a fact you didn’t get the home, which means you’ll be able to redirect your efforts.

Purchasing a home can take a long time. There’s no reason to waste your energy when it’s a moot point.

Recommended: First-Time Home Buyer’s Guide

The Takeaway

Negotiation goes on in love and war, in a salary decision, with parents and toddlers, and in real estate. If you’re a buyer, the more you know about negotiating home prices, the better.

As important as it is to shop around for the right home — and negotiate for the right price — it’s also important to find the right mortgage.

SoFi offers competitive fixed-rate home loans, and qualified buyers can put down as little as 5%.

Get prequalified for a SoFi Home Loan in two minutes.


SoFi Loan Products
SoFi loans are originated by SoFi Bank, N.A., NMLS #696891 (Member FDIC), and by SoFi Lending Corp. NMLS #1121636 , a lender licensed by the Department of Financial Protection and Innovation under the California Financing Law (License # 6054612) and by other states. For additional product-specific legal and licensing information, see SoFi.com/legal.

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

Financial Tips & Strategies: The tips provided on this website are of a general nature and do not take into account your specific objectives, financial situation, and needs. You should always consider their appropriateness given your own circumstances.
Third-Party Brand Mentions: No brands or products mentioned are affiliated with SoFi, nor do they endorse or sponsor this article. Third-party trademarks referenced herein are property of their respective owners.
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Cash-Out Refinance vs HELOC (Home Equity Line of Credit)

Cash-out refinances and home equity lines of credit are two borrowing options that allow homeowners to tap into the equity they have built in their home.

A HELOC is a line of credit secured by the borrower’s home that can be accessed on an as-needed basis, up to the borrowing limit. The borrower is only charged interest and is responsible for repaying the amount they actually borrowed.

For a cash-out refinance, the borrower takes out an entirely new mortgage while borrowing a portion of their existing home equity. The total borrowed amount of the cash-out refinance will be greater than the borrower’s original mortgage, and the borrower will receive the difference in a lump sum payment from the lender.

So while both allow borrowers to access the equity they’ve developed, there are differences in how each type of loan works that may influence which is right for you. In general, HELOCs give borrowers flexibility since they can draw on the line of credit as needed and are generally suited for shorter-term financial needs. Cash-out refinances require the borrower to take out a new mortgage and the borrower generally needs to pay closing costs upfront. They often have a fixed interest rate and may be a better option for borrowers who have a long-term need.

Read on to learn more about the pros and cons of a HELOC vs a cash-out refinance.

Difference in HELOCs and Cash-Out Refinancing

Home Equity Line of Credit (HELOC)

A HELOC is a line of credit that borrowers can draw from using their home as collateral. The amount of the line of credit is determined by the mortgage lender and based on the amount of equity a homeowner has built. Lenders usually limit the line of credit to around 80% to 90% of the equity amount.

A unique feature of a HELOC is that it works somewhat like a credit card in that it is revolving. If a borrower, for example, is approved for a $30,000 home equity line of credit, they can access it when they want for the amount they choose by writing a check or even using a specified credit card.

Many lenders, however, have a minimum draw requirement, which means a borrower must take out a minimum amount even if it’s more than they need at the time. Also, lenders have the right to change the terms associated with the line of credit and can even close it, often without having to provide advanced notice.

A major drawback of a home equity line of credit is that the interest rate is usually adjustable. This means the interest rate can rise, and if it does, the monthly payment can increase. Another point that borrowers should keep in mind is that there is a draw period of 5 to 10 years during which a borrower can access funds and a repayment period of 10 to 20 years.

During the draw period, the monthly payments can be relatively low because the borrower pays interest only. During the repayment period, on the other hand, the payments can increase significantly because both principal and interest have to be paid.

Recommended: How Do Home Equity Lines of Credit Work?

Cash-Out Refinance

A cash-out refinance is a form of mortgage refinancing that allows a borrower to refinance their current mortgage for more than what they currently owe in order to receive extra funds.

For example, if a borrower owns a home worth $200,000 and owes $100,000 on their mortgage at a high-interest rate, they could refinance at a lower interest rate, while at the same time taking out a larger mortgage. Let’s say they refinance the mortgage at $130,000. In this case, $100,000 would replace the old mortgage, and the borrower would receive the remaining amount of $30,000 in cash.

Borrowers should keep in mind that a cash-out refinance replaces their current mortgage, and even though they receive additional cash, they still only have to make one monthly payment. Another key difference of a cash-out refinance vs HELOC is that a cash-out refinance may have a fixed interest rate, meaning the interest rate remains unchanged for the life of the loan. This means monthly payments remain the same. Additionally, interest rates are typically lower with a cash-out finance vs a HELOC.

Recommended: Home Buyer’s Guide

The approval process for a cash-out refinance is similar to the initial approval process when buying a home. It can be somewhat cumbersome, but the payoff is a lower interest rate, a fixed payment and access to additional cash.

HELOC vs Cash-Out Refinance

Here’s a look at how HELOC and cash-out refinance stack up when it comes to everything from the borrowing limit to the interest rate to the fees:

HELOC

Cash-Out Refinance

Borrowing Limit 80% to 90% of borrower’s equity 80% of borrower’s equity
Interest Rate Generally variable May be fixed or variable
Type of Credit Revolving Credit

Borrowers receive a line of credit for a specified amount and draw period (5 to 10 years) followed by a repayment period (10 to 20 years).

Installment Loan

Borrowers receive a lump sum payment. The resulting mortgage has a new rate and repayment terms (generally 15 to 30 years).

Fees Several types of fees, depending on the loan terms, may be charged periodically such as an annual fee or an inactivity fee for non-usage. Fees are generally paid upfront in the form of closing costs (typically 3% to 5% of the loan amount).
When It Might Make Sense to Borrow HELOCs can be useful for shorter-term needs or situations where a borrower may want to access funds over a specified period of time. Cash-out refinances may be useful if borrowers need a large sum of money that is often used to improve their financial situation on the whole (for example to pay off debt or to finance a large home improvement project).

Which is Better?

Like most things in the world of finance, the answer to whether a HELOC vs. a cash-out refinance will vary by person based on their individual financial circumstances and unique needs. In some situations, a HELOC may make more sense than a cash-out refinance and vice versa.

Because HELOCs generally have a variable interest rate, they can be useful for shorter-term needs or situations where a borrower may want access to funds over a certain period of time, for example when completing a home renovation.

Cash-out refinances can make sense if there is a need for a large sum of money or if they can be used as a tool to improve your financial situation on the whole.

Both a home equity line of credit and a cash-out refinance have fees associated with them. With a cash-out refinance, fees are paid upfront in the form of loan closing costs. With a HELOC, several types of fees can be charged periodically, such as an annual fee or an inactivity fee for non-usage. One way for a borrower to reduce these fees is to shop around and compare lenders.

While it’s typically faster to get approved for a home equity line of credit, the adjustable interest rate and lack of a fixed payment can potentially be a drawback. The approval process for a cash-out refinance is more complex than that of a HELOC, but the loan will have a set payment and a lower interest rate that can provide significant savings.

In both cases, borrowers are borrowing against the equity they have built in their home, which comes with risks. In the case that a borrower is unable to make payments on their HELOC or cash-out refinance, the consequence could be selling the home or even losing the home to foreclosure.

Recommended: The Different Types Of Home Equity Loans

The Takeaway

Cash-out refinancing and HELOCs both have their place in a borrower’s toolbox. Both options give borrowers the ability to turn their home equity into cash, which can make it possible to achieve certain goals, consolidate debt and improve their overall financial situation.

Home owners interested in tapping into their home equity may want to consider cash-out refinancing with SoFi. Qualifying borrowers can secure competitive rates and mortgage loan officers are available to walk borrowers through the entire process.

Learn more about SoFi’s competitive cash-out refinancing options. Potential borrowers can find out if they pre-qualify in just a few minutes.


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

SoFi Loan Products
SoFi loans are originated by SoFi Bank, N.A., NMLS #696891 (Member FDIC), and by SoFi Lending Corp. NMLS #1121636 , a lender licensed by the Department of Financial Protection and Innovation under the California Financing Law (License # 6054612) and by other states. For additional product-specific legal and licensing information, see SoFi.com/legal.

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.
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Should You Buy or Rent a Home? Take the Quiz

Purchasing a home may be the biggest financial commitment you’ll ever make, so it makes sense to carefully consider the upsides and downsides of buying vs. renting.

Stay tuned for a quiz that might help you decide.

Rent or Buy a Home: Pros and Cons

Advantages of Renting

•   Your landlord is typically responsible for repairs and maintenance, so your money can go elsewhere.

•   Your landlord may also pay some of your monthly utilities, and you aren’t responsible for paying property taxes.

•   When your lease is up, you can renegotiate or move.

•   You don’t need to make a big investment (like the down payment and closing costs associated with home buying) when you move into the next place you rent.

Disadvantages of Renting

•   Your landlord may have restrictions that you don’t like, such as no pets or remodeling.

•   The rent you pay each month doesn’t give you any equity in a property. It just goes to the owner, unless you set up a rent-to-own agreement.

•   Your rent could spike .

•   If the owners decide to sell their home, you may need to quickly move.

Advantages of Buying

•   Getting a good mortgage rate makes the monthly payments more palatable. And as you make payments, you could be gaining equity in your home.

•   You have far fewer restrictions involving remodeling, pet ownership, and so forth.

•   You have more stability. You can generally stay as long as you’d like.

•   Sometimes a mortgage payment can be cheaper than rent. Looking at the price-to-rent ratio of a city helps gauge whether it makes more sense to buy or pay a landlord and wait.

Disadvantages of Buying

•   The price of homeownership may be painful in a hot market.

•   You typically need to qualify for a mortgage, make a down payment, and pay closing costs to secure a home.

•   You’re generally responsible for all repairs, maintenance, and utilities, plus homeowners insurance, property taxes, and any HOA dues.

•   If you decide to move, until your home is sold, you’re still responsible for mortgage payments and the expenses attached to your new place.

Take the Rent or Buy Quiz

Are You Really Ready to Buy?

The answer may already be clear to you. If you’ve decided to buy, it might make sense to do the following.

•   Make sure you’re ready for a long-term commitment. If you’ve saved enough for a down payment and know how much house you can afford, that’s a good sign.

•   Consider if your line of work allows for job continuity with steady income. Have you had this type of income for the past two years or more?

•   If your debt-to-income ratio appears too high for the loan program you would like to apply for, you may need to consider paying down some debt. To calculate your DTI ratio, divide your monthly debt payments by your monthly gross (pretax) income. The federal Consumer Financial Protection Bureau advises renters to consider keeping a DTI ratio of 15% to 20% or less (rent is not included in this ratio). In general, mortgage lenders like to see a DTI ratio of no more than 36%, though that is not necessarily the maximum.

•   Save money for a down payment, closing costs, and other fees, plus some funds for moving expenses and any remodeling/repairs.

•   Check your credit scores and work on improving them, if necessary.

•   Do a gut check to see if you’re really ready to be your own landlord, meaning being responsible for your own home maintenance, inside and out.

•   Get prequalified for a mortgage by providing a few financial details to lenders, who usually will do a soft credit check and estimate how much you may be able to borrow and the terms.

First-time homebuyers can
prequalify for a SoFi mortgage loan,
with as little as 3% down.


The Takeaway

Should you buy or rent a home? Reflecting on prices, your financial health, your desire for or fear of commitment, and other factors may yield the answer.

If you’re ready to be a bona fide homeowner, getting prequalified for a mortgage loan with SoFi is simple. SoFi offers competitive rates and may require as little as 5% down.

Got two minutes? That’s all it takes to learn your rate.


SoFi Loan Products
SoFi loans are originated by SoFi Bank, N.A., NMLS #696891 (Member FDIC), and by SoFi Lending Corp. NMLS #1121636 , a lender licensed by the Department of Financial Protection and Innovation under the California Financing Law (License # 6054612) and by other states. For additional product-specific legal and licensing information, see SoFi.com/legal.

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

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.
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