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The housing market is rising in some areas of America and falling in others. If you find yourself in a hot seller’s market, it can be challenging to buy a house, but doing so, even with a low down payment, is possible.

Lenders are willing to approve low-down-payment mortgages if you qualify and are comfortable with paying mortgage insurance.

Read on for advice on navigating the real estate market if you have a small down payment but a fair amount of competition from other prospective buyers.

What Is Considered a Low Down Payment?

While many people believe you need at least a 20% down payment to buy a house, the average down payment on a house at the end of 2023 was 8%.

Given the wide range above, what’s actually considered a low-down payment? Popular mortgage programs out there may require as little as 3% down, and a couple of more specific home loan programs allow 0% down.

The reason why that 20% down payment figure keeps popping up is that any amount less than that will likely entail some form of mortgage insurance, an ongoing fee charged by most lenders.


💡 Quick Tip: You deserve a more zen mortgage. Look for a mortgage lender who’s dedicated to closing your loan on time.

Challenges of Buying in a Seller’s Market When You Have a Small Down Payment

There’s truth to the saying “cash is king,” and that continues to be evident in a seller’s market, where real estate investors who pay all cash frequently outbid prospective first-time homebuyers.

Be ready for these potential challenges if you intend to buy a home with a small down payment.

Longer Closing Time

Closing on a home with a mortgage-contingent offer to buy takes longer than closing with a cash offer. There’s often more paperwork, and underwriters may take longer to ensure that your financials are in order before green-lighting your mortgage.

Lenders May Disagree With Mortgage Minimums

Just because a mortgage loan program allows for a 3% minimum down payment doesn’t mean the lender will accept it. Lenders have wide latitude to dictate their own terms, and it’s fairly common for them to set their own minimum down payment requirement somewhere above what the stated minimum for the program is.

Home Sellers May Be Nervous About Your Ability to Close

While it’s true that all funds from your down payment and mortgage transfer to the seller at closing, many sellers still buy into the old “bird in hand” adage when it comes to accepting offers. A higher down payment signals a buyer’s financial capacity and is, therefore, more attractive in the eyes of the homeowner.

If sellers accept a bid with a low down payment, they may run an increased risk of the buyer being rejected at the last minute by their mortgage lender.

In a deal involving a mortgage backed by the Federal Housing Administration (FHA), if the home is appraised for less than the agreed-upon price, the sellers must match the appraised price or the deal will fall through.

And FHA guidelines require home appraisers to look for certain defects. If any are found, the sellers may have to repair them before the sale.

Recommended: Private Mortgage Insurance (PMI) versus Mortgage Insurance Premium (MIP)

Tips for Buying With a Small Down Payment

If you’re trying to score a home with a small down payment, there are some ways you can approach it to increase your odds of buying the home of your dreams.

One way is to select a government-backed mortgage program — FHA, or the US Department of Agriculture or Veterans Affairs — that allows for a low down payment. The government guarantee makes them more palatable for mortgage lenders and easier for a homebuyer to afford.

Some specialized mortgage programs allow qualified buyers to put as little as 0% down; others, from 3% to 5% down. Some of the most popular low-down-payment mortgage programs are:

•   VA loans (0% down)

•   USDA loans (0% down)

•   FHA loans (3.5% down)

•   Fannie Mae HomeReady (3% down)

•   Conventional 97 loan (3% down)

•   Conventional mortgage (5% down)

Another option is to apply for down payment assistance. Many governments and nonprofits offer down payment assistance programs for first-time homebuyers — those who have not owned a principal residence in the past three years — in the form of loans or grants. Some lenders can even assist you in qualifying for these programs to help offset the upfront costs of homebuying.

Finally, you can also ask a family member, or sometimes a domestic partner, close friend, or employer, to help with the down payment by contributing gift money. The money can’t come with any strings attached, and a gift letter will likely be required. This is a popular option for parents and in-laws who want to help their children buy a first home.


💡 Quick Tip: Not to be confused with prequalification, preapproval involves a longer application, documentation, and hard credit pulls. Ideally, you want to keep your applications for preapproval to within the same 14- to 45-day period, since many hard credit pulls outside the given time period can adversely affect your credit score, which in turn affects the mortgage terms you’ll be offered.

Pros and Cons of Using a Low Down Payment

There are both benefits and disadvantages to submitting a small down payment on a home. Here are a couple of points to think about.

Pros of Using a Low Down Payment

•   Gets you in a home faster than waiting to save for a bigger down payment.

•   Start building equity earlier and avoid spending money on rent.

•   Preserve cash for other investments, opportunities, and emergencies.

•   Take advantage of current low mortgage rates, theoretically saving you money over the long run.

Cons of Using a Low Down Payment

•   You’ll have to pay private mortgage insurance, or a mortgage insurance premium, which could add 0.5% to 1.5% of the loan amount to your annual housing costs.

•   Your monthly mortgage payment will likely be larger, as the amount you borrow will increase the less you put down.

•   Your lender may penalize you with a higher mortgage rate to offset the higher risk of a lower down payment.

•   You run a greater risk of your home loan being underwater, should home values drop.

Recommended: Home Affordability Calculator

Tips for Managing a Seller’s Market

So what’s a prospective homebuyer to do if they find themselves in a seller’s market or a tight market and feel the cards are stacked against them?

One way to get a leg up on the competition is to get the ball rolling on financing early and make sure you have everything in place by the time you even submit an offer on a home.

Make sure you’re prequalified (which is when lenders have an idea of your income and assets before you start home shopping, so you have an idea of how much you can afford). Then, it can be smart to get preapproved, which is when you receive a letter from a lender stating that you qualify for a certain loan amount and rate. These steps can ensure that you’ll be ready to roll the second you find the right home.

Once you’ve submitted an offer on a house, make sure you’re ready when it comes to all documents and information requested by your chosen lender.

Another thing you can do is to find a good real estate agent who’s been through the homebuying process countless times and can advise you effectively.

Recommended: How to Buy a House in 7 Steps

The Takeaway

Buying a home with a small down payment, even in a seller’s market, is possible. With preparation and the right mortgage lender, you may be able to land a starter home or your dream home with a low down payment.

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.

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Photo credit: iStock/sturti

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

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

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

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.

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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It is possible to get a home loan while on maternity leave. The process may involve your lender verifying your “temporary leave income,” if any; your regular income; and your agreed-upon date of return. Anyone on a standard temporary leave is considered employed, whether the absence is paid or unpaid.

Read on to learn more about buying a home while pregnant and how this will impact your ability to get a mortgage.

Buying a House While Pregnant

Hey, why not take on two of the biggest life stressors at once? Sometimes it just happens this way, with parents preparing for a baby and a new home and mortgage.

First, consider if you can wait a bit to buy a home. It may lead to less stress overall during the pregnancy. Plus, the added pressure of a deadline may lead to hasty decision-making that buyers could regret.

And unless an employer is covering moving expenses, add that sizable cost to all the rest.

But if the move can’t be avoided because of a job relocation or other circumstances, it may be important to find a home before the baby arrives. Which does have a silver lining: Saving for a down payment could interfere with goals like saving for a child’s college tuition.

Another possible benefit to buying a house while pregnant is that the relocation could lead to a better school district or area to raise a child.

Ultimately, the decision to buy a house while pregnant is personal.


💡 Quick Tip: Want the comforts of home and to feel comfortable with your home loan? SoFi has a simple online application and a team dedicated to closing your loan on time. No surprise SoFi has been named a Top Online Lender in 2024 by LendingTree/Newsweek.

What Is the FMLA?

The Family and Medical Leave Act, or FMLA, gives eligible employees job protection and up to 12 weeks of unpaid leave a year in the event of:

•   Childbirth

•   Adoption or foster child care

•   Care for a spouse, child, or parent with a serious health condition

•   A personal serious health condition

•   Qualifying exigencies arising from covered active duty or “call to covered active duty status”

The FMLA guarantees that the employee can return to their job or an equivalent one and that they’ll receive health care benefits during their leave.

Employees are eligible if they work for a company that has 50 or more staffers and have completed at least 1,250 hours of work in the previous year.

In addition to the FMLA’s 12 unpaid weeks off, more and more states are enacting paid family leave laws. Currently, 13 states plus the District of Columbia have made this mandatory. And your employer may cover your pregnancy, childbirth, and recovery thanks to short-term disability insurance. Your benefit would be a percentage of your normal earnings.

Recommended: How Much Does it Cost to Adopt a Child?

How Maternity Leave Impacts a Mortgage

Before diving into the nuances of maternity leave and its impact on qualifying for a mortgage, here’s a quick refresher course on the home-buying process.

Mortgage approval from a lender primarily hinges on two factors:

•   Creditworthiness. How likely is the borrower to pay back the loan, based on their credit history?

•   Ability to pay. Does the borrower generate enough income, and have a certain debt-to-income ratio, to make the monthly mortgage payments?

The lender may contact an employer to verify a borrower’s employment status and income.

Why could getting loans for pregnant women prove a challenge? Income. Consider these points:

•   As long as the lender can verify that the borrower is employed — and remember, someone on temporary leave is considered employed — and generates enough income to cover the mortgage, that could be enough.

•   Expectant borrowers aren’t legally required to disclose their pregnancy to a lender. However, the employer can tell the lender about impending maternity leave when they call to verify employment status.

•   If a borrower is going on unpaid leave, they may need to disclose it to the lender. That’s because the period without pay may qualify as a financial hardship, which a borrower is required to inform a lender of.

•   The lender can’t assume the mother-to-be won’t return to work after maternity leave. Lenders consider that the mother will return to work after maternity leave and continue bringing home paychecks.

•   Before approval, the lender will ask the borrower for written notice of her intent to return to work, and may ask for an expected return date.

•   The mortgage lender may request a tax slip from the last calendar year if the borrower is a salaried employee.

•   A lender may approve the mortgage if your employer verifies in writing that you will return to your previous position or a similar one after your maternity leave. The lender will also consider the timing of the first payment.

•   If the borrower will have returned to work when the first mortgage payment is due, the lender can consider regular income in qualifying for the mortgage.

•   If the borrower will return to work after the first mortgage payment due date, the lender must use the borrower’s temporary leave income (if any) or regular employment income, whichever is less, and then may add available liquid financial reserves.

•   VA loans don’t count temporary leave income towards qualifying for a mortgage, however.

💡 Quick Tip: Want the comforts of home and to feel comfortable with your home loan? SoFi has a simple online application and a team dedicated to closing your loan on time. No surprise SoFi has been named a Top Online Lender in 2024 by LendingTree/Newsweek.

Should I Buy a Home While on Maternity Leave?

For those who qualify for a mortgage while on maternity leave, the question may be, “Should I buy a house while on maternity leave?” not “Can I buy a house while on maternity leave?”

As mentioned, moving can be an incredibly stressful process, pregnancy or no pregnancy. And even if you made a budget for a baby, life has a way of throwing in surprises.

Homeownership can also come with financial surprises. The majority of homeowners reported paying for an unexpected repair within the first year.

Having a child and buying a home both require saving some significant cash. By budgeting, doing the two simultaneously is possible. So it’s your call. Not taking the double plunge could give you time to review what you need to buy a house.

Recommended: First-Time Homebuyers Guide

Home Loans With SoFi

Pregnancy is not a legal limiting factor in a mortgage lender’s eyes, but getting a home loan while on maternity leave will depend on your income, savings, work return date, and credit history.

Whether you’re on a temporary leave or not, it can be worthwhile to take a look at your home loan options.

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

Does being on maternity leave affect getting a mortgage?

It can, but only in the sense that maternity leave can affect a homebuyer’s reported income. If buyers anticipate an unpaid maternity leave, they may need a sizable savings account.

Should you buy a home on maternity leave?

Buying a home while on maternity leave depends on your family’s needs and finances. But moving can be stressful, and adding infant care can be a lot to handle.

Who does FMLA cover?

The Family and Medical Leave Act provides 12 weeks of unpaid, job-protected leave per year for eligible employees in the case of the birth or adoption of a child or placement of a foster child, and for other reasons.

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Photo credit: iStock/FatCamera

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

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

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

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.

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.

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A decent salary — one that allows for necessities, fun, and savings — might start around $69,000 for a single, childless person in Florida and $94,500 for a couple.

Why those figures? Using the 50/30/20 budget method, start with what MIT calls a living wage in Florida, which covers basic needs (50% of a salary). Add entertainment, vacations, restaurant meals, more shoes for the collection, and other “wants” (30%). Factor in 20% to be saved.

Even adding one child to a household greatly increases expenses (as if any parent needs to be reminded). A looser definition of a good salary for a working adult with a working partner and a child, based on the MIT Living Wage Calculator, could be somewhere in the neighborhood of $129,800.

Of course, your actual cost of living will depend on the city, size of your household, and your spending needs and habits. Read on for a breakdown of what it may take to say you earn a good annual salary in Florida.

Is It Expensive to Live in Florida?

Florida was one of the two fastest-growing states in the U.S. in 2023, the Census Bureau says, and it’s easy to see the draw.

It’s a state with no income tax, moderate property taxes, lots of sunshine, and plenty to do and explore. Corporate and sales taxes are lower than those of most other states.

Despite those perks, it isn’t the cheapest state to live in. Florida had the 29th lowest cost of living in the U.S. in 2022, according to data gathered by the Missouri Economic Research Information Center (MERIC). That means 28 states had a lower cost of living, with Oklahoma the cheapest place to live.

Some cities are as sizzling as the summers. If you’re Miami-bound and plan to rent or buy, for example, that’s when you’ll especially need to check your finances. Miami-Dade is the second-least affordable place in the U.S. to live, according to the February 2024 RealtyHop Housing Affordability Index.


💡 Quick Tip: Online tools make tracking your spending a breeze: You can easily set up budgets, then get instant updates on your progress, spot upcoming bills, analyze your spending habits, and more.

What Is the Average Annual Salary in Florida?

Whether a salary can be considered “good” or not in Florida can depend on several factors, including where you choose to live. Proximity to a big city or beach can draw residents who are willing and able to pay more. So can living in an area known for high-end amenities (like shopping, nightlife, and cultural attractions) and luxurious homes.

The median household income among Floridians is $67,919, according to the latest data from the U.S. Census. That means, of course, that half of the state’s households bring in more than that, and half bring in less.

That figure compares with the median household income in upscale Collier County (which includes Naples and Marco Island) of $82,011. In Monroe County (Key West), it was $80,111. In Palm Beach County (Palm Beach, Wellington, Boca Raton), it was $68,874. And in St. Johns County (St. Augustine, Ponte Vedra), it was $100,020.

On the other hand, the median household incomes in landlocked and lesser-known Glades and Hendry counties in the south, and Hamilton County on the Georgia border, were $37,221, $49,259, and $47,668, respectively.

So what is a good salary in Florida, if you’re talking about one that goes beyond basic needs and allows for “wants” and savings?

A registered nurse pulls in an average base salary of nearly $79,000, according to Indeed. That’s a good income for a single person with no children in most parts of Florida as viewed through the 50/30/20 budget lens.

One Floridian with no children needs to net $46,645 to cover necessities like groceries, a modest rental, health care, and transportation, the MIT Living Wage Calculator shows. Doubling that provides room for discretionary spending (30%) and savings (20%).

Recommended: What Is Competitive Pay?

What Can Affect Affordability in Florida?

As you can imagine, one of the biggest factors affecting how far your salary will go in Florida is housing. Housing costs can vary widely, depending on where you decide to settle and on whether you buy a house or condo. But home and rent prices across the entire state have risen sharply over the past few years.

The cost of insurance coverage — homeowners, health, and auto — also is generally higher than in many other states. Many home and condo owners also must pay for federal flood insurance, which is on the rise.

Still, owners of primary homes may get a property tax break with the homestead exemption, which decreases the property’s taxable value by as much as $50,000.

That doesn’t mean that everyone who lives in the Sunshine State is living large. The state’s median household income in 2022 (the Census Bureau’s most recent number) was just over $67,000 — while the median U.S. household income was closer to $74,580.

And although the state’s minimum wage will rise to $13 this year with more bumps expected in 2025 and 2026, Florida is one of the states impacted most by inflation, according to the U.S. Congress Joint Economic Committee.

What Are Some Average Annual Expenses in Florida?

How should you expect to divvy up your income if you live in Florida? Here are some costs you may want to plug into a money tracker app:

Housing

Whether you rent or buy a home, a major portion of your paycheck will likely go toward putting a roof over your head.

A couple of Florida cities appear on this price-to-rent ratio list. The ratios can be useful when considering whether to rent, buy, or invest.

Also useful if you haven’t owned a principal residence in the past three years or you’re a veteran: first-time homebuyer programs in Florida.

If you’re buying …

Florida’s housing market continues to be red hot, with prices in January 2024 up 4.5% compared with the same period last year, according to Redfin.

Here’s a look at median sale prices in cities across the state for that same period.

Cocoa: $227,500

Daytona Beach: $262,200

Marco Island: $1.34 million

Miami: $599,000

Ocala: $239,450

Orlando: $369,000

Palm Beach: $1.9 million

Stuart: $370,000

Tampa: $393,000

If you’re renting …

Rents are all over the place in Florida, as you can see from the list below. Here are some recent median monthly rents for two-bedroom properties, according to Zillow.

Cocoa: $2,000

Daytona Beach: $1,695

Marco Island: $8,000

Miami: $3,250

Ocala: $1,725

Orlando: $2,095

Palm Beach: $12,000

Stuart: $2,850

Tampa: $2,117

Groceries

The U.S. Census Household Pulse Survey Family Budget Calculator ranked Florida 5th highest for food costs in the U.S. in 2024.

Here are the monthly costs for some Florida counties, based on a family of four (two adults and two children in a household where most food is purchased at a grocery store and prepared at home), according to the Economic Policy Institute Family Budget Calculator.

Brevard County: $1,081

Collier County: $1,173

Hamilton County: $960

Hillsborough County: $1,070

Miami-Dade County: $1,143

Monroe County: $1,304

Palm Beach County: $1,183

Washington County: $853

Utilities

Florida ranks 2nd in the U.S. for utility costs, according to data gathered by Statista. Of course, utility costs can vary depending on whether you rely on natural gas or solar, the size and age of your home, your appliances, etc. But here’s what Statista says are the average monthly utility costs in Florida.

Electricity: $128.64

Natural Gas: $61.69

Water: $45.44

Phone: $114

Broadband Internet: $59.99

Gasoline

According to GasBuddy’s interactive gas price map, Florida’s gas prices are about average compared with other states. But again, the cost can vary depending on where you live.

Here are GasBuddy numbers for some Florida counties in March 2024.

Brevard County: $3.02 per gallon

Hillsborough County: $3.10

Miami-Dade County: $2.79

Orange County: $2.99

Palm Beach County: $2.99

Sarasota County: $3.21

St. Johns County: $3.09

Walton County: $3.09

Child Care

The cost of child care can depend on how old your kids are and if you choose an at-home or classroom setting. According to CostofChildCare.org, the average cost per month in Florida is $989 per child for home-based family care, $1,364 for an infant classroom, $790 for a toddler classroom, and $702 for a preschool classroom.

Which City in Florida Has the Lowest Cost of Living?

According to NewHomeSource, the Florida city with the lowest overall cost of living is Titusville, followed by Winter Haven, Lauderdale Lakes, Daytona Beach, Sanford, Largo, Lakeland, Deltona, Jacksonville, and Pinellas Park.

A few of those, as well as more affluent cities, have a sizable retiree population. Yes, Florida is a senior magnet. (See: Winter Haven.) By 2030, the number of seniors in Florida is expected to top 6 million.

How Much Money Do You Need to Live Comfortably in Florida?

“Comfort” is a subjective term in any context, as we all have different wants and needs when it comes to our lifestyle.

If you plan to spend more time outside doing things that are inexpensive or free, you may find it’s easier to embrace financial minimalism by living in the Sunshine State.

If, on the other hand, you long to reside in one of Florida’s bigger cities or near the beach, you may have to ask for a bigger salary than you’d need in a less expensive location. That’s especially true if you’ll be living on a single income.

Either way, it may be useful to consider your priorities and whether your income will cover those costs. Can you be happy without owning a boat or being a member of a golf club? Do you tend to live below your means or overspend? Are annual passes to Disney a must?


💡 Quick Tip: Income, expenses, and life circumstances can change. Consider reviewing your budget a few times a year and making any adjustments if needed.

The Takeaway

Florida can be an expensive place, mostly because the cost of renting or owning a home has gone up so much. But with a good salary — by one definition at least $69,000 for a single, childless person — and a solid spending plan, you can enjoy the laid-back Florida lifestyle.

Take control of your finances with SoFi. With our financial insights and credit score monitoring tools, you can view all of your accounts in one convenient dashboard. From there, you can see your various balances, spending breakdowns, and credit score. Plus you can easily set up budgets and discover valuable financial insights — all at no cost.

SoFi helps you stay on top of your finances.

FAQ

What is a livable salary in Florida?

MIT’s Living Wage Calculator says a livable salary for a single person in Florida with no children is about $46,000 before taxes.

What job in Florida pays the most?

Cardiologists, emergency room physicians, and orthopedic surgeons are the highest earners in the state, according to the Bureau of Labor Statistics.

Can you live on $30,000 a year in Florida?

You may find it challenging, especially when it comes to finding a place to live. But if you share a home and other expenses, find affordable health care, and budget carefully, $30,000 a year could be enough to get by on in Florida.

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Photo credit: iStock/Pgiam

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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.

Non affiliation: SoFi isn’t affiliated with any of the companies highlighted in this article.

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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It is very unlikely that you can directly pay your mortgage lender with a credit card. However, there are a few workarounds that can help you pay your home loan with plastic. But it’s important to understand other factors involved when paying your mortgage with this kind of card, such as possible fees and other financial consequences.

Read on to learn how to pay your mortgage with a credit card and what to consider before you do so.

How to Pay Your Mortgage With a Credit Card

It’s highly unlikely that you can pay your mortgage directly with a credit card. That said, there are several ways you can use workarounds to pay your mortgage with a credit card, including using a money order, utilizing third-party services, and getting a cash advance.

Use a Third-Party Service

Some third-party services facilitate mortgage payments using your credit card and send a payment to your lender on your behalf. Companies like Plastiq allow you to use select credit cards (including American Express) to make mortgage payments through their platform.

For the privilege, you’ll most likely need to pay a convenience fee — Plastiq charges a processing fee of 2.9% — each time you make a mortgage payment using your credit card. And, depending on how that payment is delivered (say, check or bank transfer), you may also be charged an additional fixed fee that can range from 99 cents to $39. You may also have the option to make recurring payments or to make your payments manually.

Buy a Money Order

Depending on your location and the retailer, you may be able to purchase a money order with your credit card. Then, you’ll simply take the money order and deposit it at your bank and transfer the amount to your mortgage lender.

Keep in mind that many retailers may not accept credit cards as a form of payment for money orders — it’s best to check ahead of time if you plan to do so. Even if you can, money orders tend to have a limit of $1,000. That means if you want to go this route, it may take you a few transactions before your money orders total enough for your mortgage payment.

Additionally, you may incur a fee for each money order you buy. Also keep in mind that some credit card issuers treat money order purchases as cash advances, which can result in a fee and interest charges at a rate that’s usually higher than the standard purchase APR on a credit card.

Transfer a Balance to Your Bank Account

You could attempt to conduct a balance transfer, with the funds going into your bank account — some credit card issuers may allow this type of transaction. Most commonly, credit card issuers provide cardholders with balance transfer checks to facilitate these types of transactions. There may be balance transfer fees involved, and interest may accrue depending on your credit card terms.

Get a Cash Advance

As another method to pay your mortgage with a credit card, you can get a cash advance at the ATM with your credit card. You’d then deposit the cash into your bank account and use the funds to make your mortgage payments. You could also consider using the funds to purchase a cashier’s check and mail it to your lender.

Going this route most likely means you’ll have to pay a cash advance fee, and interest on cash advances will accrue on your credit card with no grace period and often at a significantly higher rate than on your everyday purchases. Credit limits may be lower for cash advances as well.

Recommended: Charge Card Advantages and Disadvantages

Do All Mortgage Lenders Accept Credit Card Payments?

No, most mortgage lenders do not accept credit card payments directly from the borrower.

If you’re curious about why this is, know that paying debt with a credit card isn’t usually a financially responsible move. Mortgage companies likely don’t want the added risk that someone is paying for their home loan with credit vs. cash. Also, it can be expensive for lenders to accept credit cards, given that processing and other fees can take a bite out of every incoming amount of money.

Factors to Consider When Paying a Mortgage With a Credit Card

Before paying your mortgage with a credit card, consider the following.

Fees vs Rewards

Similar to those considering paying taxes with a credit card, many people tend to pay their mortgage with a credit card because they want to earn rewards. Since third-party services will charge you fees — or you’ll pay the fees charged directly by your credit card issuer for balance transfers — you’ll want to make sure the value of the rewards outweighs what you’re paying in fees.

Sure, the fees may seem small, but they can quickly add up over time. Also, in many cases, rewards cards may only count certain transactions as eligible for rewards. Many issuers don’t consider balance transfers as qualifying transactions, for example.

The Cost of Interest

If you don’t pay off your balance each month, interest will start to accrue on your credit card — and credit card interest rates are typically much higher than your mortgage interest rate, even if you have a good APR for a credit card.

Additionally, if you go the cash advance route, these transactions may have higher credit card interest rates, and there’s no interest-free grace period.

Effect on Your Credit Score

If your credit card balance starts to get too overwhelming and you miss making the credit card minimum payment, it could negatively impact your score.

Even if you make on-time payments, having a high balance could affect your credit utilization, which is the ratio between your balance and your available credit. The higher your credit utilization, the more it could negatively impact your score.

Challenges You May Face When Paying a Mortgage With a Credit Card

One challenge with using a credit card for mortgage payments is the time it takes to do so. Any of the above mentioned methods will take you some time and effort to complete successfully. That’s because it’s unlikely your lender will accept a direct credit card payment and you will instead have to use a workaround.

There are also the fees to consider — determining whether paying the extra charges and potentially a higher interest rate is worth it takes some careful calculations.

Should You Pay Your Mortgage With a Credit Card?

Making mortgage payments with a credit card may be a good idea if you’re looking for a way to earn more rewards or get some financial breathing room. However, given the downsides, such as high fees and the impact it may have on your credit, you may be better off pursuing other options first. Also keep in mind that using a credit card to pay your mortgage may trigger a higher cash-advance interest rate than your typical interest rate since you can’t pay directly.

Alternatives to Using a Credit Card for Your Mortgage

Here are several options you can choose from instead of paying your mortgage with a credit card:

•   Consider mortgage forbearance: If you’re struggling with your payments and experiencing a significant hardship, you can contact your lender to see if mortgage forbearance is possible. This could allow you to temporarily stop paying or have your monthly payments reduced until you can get back on your feet.

•   Seek help with a housing counselor: You can find a reputable housing counselor that’s approved by the U.S. Department of Housing and Urban Development (HUD) by contacting the Homeowners HOPE Hotline or using the housing counselor tool on the Consumer Financial Protection Bureau’s website. They could suggest options to help you manage your mortgage payments. You may have to pay a small fee for the service, but it could be more affordable than using a credit card to pay your mortgage.

The Takeaway

While you probably can’t pay your mortgage directly with a credit card, there are workarounds that are possible, as long as you understand what you’re getting into and are strategic about how to do so. Before you move forward with paying your mortgage with your credit card, make sure you weigh the fees involved vs. the rewards you could earn as well as any interest you could accrue and potential impacts to your credit. Understanding the pros and cons of this scenario is an important step in using your credit card responsibly.

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

Can you use a credit card to pay a mortgage?

You probably can’t pay your mortgage directly using a credit card, but you can do so through indirect methods. Some of these include going through a third-party service, making a balance transfer, purchasing a money order using your credit card, or getting a cash advance. Each of these methods will come with its own set of fees and/or higher interest rates.

Can paying a mortgage with a credit card impact credit score?

If you end up with a high balance on your credit card as a result of your mortgage payment, it could negatively impact your score if you have a high credit utilization. Or, if you end up missing or being late on a payment (perhaps you’re struggling to make the monthly payments), then your score could also be impacted.

Are there fees for paying a mortgage with a credit card?

There are fees depending on how you use your credit card to pay for your mortgage. For instance, you may incur balance transfer, cash advance, or third-party fees.

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Photo credit: iStock/vgajic

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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