Jumbo Loans vs Conventional Loans

If you’re planning to buy a higher-priced home, you may be looking to finance your purchase with a jumbo loan. And you’re probably also wondering about the difference between a jumbo and a conventional loan.

A jumbo loan is necessary to purchase a home where the loan amount is above the conforming loan limit values set by the Federal Housing Finance Agency (FHFA). Conforming loan limits change every year. For 2023, the limit for a single-unit property is $726,200 for most counties across the U.S. In high-cost areas, this amount increases to $1,089,300.

If you’re buying a home below this amount, you can finance with a traditional, conventional, conforming mortgage, or perhaps through one of several first-time home buyer programs. But if you need a mortgage that goes above the conforming loan limit, you’re going to be looking at a jumbo loan, so it’s time to get familiar with how to qualify and how the costs compare to other loans.

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


Recommended: The Cost of Living by State

What’s the Difference Between Jumbo and Conventional Loans?


Here’s a surprise: There isn’t really a difference between a jumbo and a conventional loan. Jumbo loans are conventional. “Conventional” simply means that a loan isn’t backed by a specific government agency such as the Federal Housing Administration (FHA), United States Department of Agriculture (USDA), or U.S. Department of Veterans Affairs (VA).

Many people get tangled up in the terminology. While jumbo loans are conventional, they are not “conforming.” Though the terms conventional and conforming are often used interchangeably (and mistakenly), a conforming loan is one that falls within the FHFA limits, meaning the lender can sell it to Fannie Mae and Freddie Mac to increase its liquidity. (Again, in 2023, the amount is $726,200 for most areas in the U.S., but can go up to $1,089,300 for high cost of living areas. If you’re wondering about your specific region, have a look at the conforming loan levels by state.)


💡 Quick Tip: One answer to rising house prices is a jumbo loan. Apply for a jumbo loan online with SoFi, and you could finance up to $2.5 million with as little as 10% down. Get preapproved and you’ll be prepared to compete in a hot market.

A jumbo loan exceeds these limits and is, thus, non-conforming. So when you’re comparing jumbo loans against other loans, you’re really comparing non-conforming loans against conforming loans. Other differences that affect borrowers are summarized in the table below:

Conforming Loan

Jumbo Non-conforming Loan

Loan amount Below $726,200 for most areas, $1,089,300 for high-cost areas Above $726,200 for most areas, above $1,089,300 for high-cost areas
Loan type Fixed or variable rate Fixed or variable rate
Down payment Can be as low as 3% Usually 10% or more
Credit score 660+ 700+
Income requirements Lower income requirements Higher income requirements. For example, a payment on a $726,200 mortgage at 6.7% interest would be $4,969. In order for your payment to not exceed 28% of your monthly income (the margin of safety, you would need to make $17,746 per month or $212,952 per year.
Cash reserves or assets Not required 6 to 12 months may be needed
How the loan is backed Backed by Fannie Mae and Freddie Mac Not backed by Fannie Mae or Freddie Mac

How to Qualify for a Jumbo Loan

Requirements for jumbo loans are more stringent than those for other types of loans. Because these types of mortgages can’t be sold to Fannie Mae or Freddie Mac, the lender takes on more risk should the borrower default.

These requirements include:

•   Debt-to-income (DTI) ratio. You need plenty of income to qualify for a jumbo loan. Qualified mortgages require a DTI of 43% or lower.

•   High credit score. Lenders want to be sure you’ll repay the loan, especially since it’s a much larger amount. A credit score of 700 or above is recommended.

•   Assets. Lenders look for cash that can be used to pay the mortgage. To be safe, you may want to put aside enough money to cover the mortgage for 6 to 12 months.

What to Know About Jumbo Loan Mortgage Rates

Prospective jumbo loan borrowers often wonder, “Are jumbo loan rates higher than other loans?” Jumbo conventional loans don’t automatically have higher interest rates and can be competitive with conforming conventional loan interest rates. They fluctuate with market conditions. Sometimes, they’re even lower than conventional loan interest rates.

You may be able to check your jumbo loan rate with your lender before submitting a full application.

Jumbo Loan Closing Costs

With a larger loan amount, you can also expect jumbo loan closing costs to be higher. While many closing costs are fixed, there are others that are larger due to percentage-based compensation closing costs.

Should I Choose a Jumbo Mortgage?

If you have the option to choose between a jumbo loan vs. a conforming loan, (such as when you have enough money to reduce the principal loan amount so that it qualifies as a conforming loan), you’ll want to ask yourself if it’s worth it to put down the extra money to qualify for a conforming conventional loan. There are some specific scenarios where a jumbo loan vs. a conforming loan makes sense.


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

When to Choose a Jumbo Mortgage

Borrowers who should consider jumbo mortgages:

•   If you’re looking for a luxury home

•   If you’re buying a vacation home

•   If you live in a high-cost area

•   If you have a great credit score

•   If you have a strong DTI ratio

•   If you have plenty of income

When to Choose a Conventional Mortgage

Borrowers who should consider conventional mortgages:

•   If you have moderate income

•   If you’re looking for a moderately priced home

•   If the mortgage amount is below the conforming loan limits

•   If you need a down payment lower than 10%

•   If your cash reserves after your down payment will be limited

If you’re close to the conforming loan limits, you may also want to consider a piggyback mortgage. If you’re able to obtain a piggyback loan, you may be able to buy your home with a conventional, conforming mortgage instead of a jumbo loan.

How it works: A piggyback loan allows you to take a second loan to “piggyback” off the first mortgage with the purpose of lending you enough money to avoid a jumbo mortgage or the PMI that comes with a down payment less than 20%. It’s essentially a second mortgage, and you’ll be making a second payment to cover it.

The Takeaway

When it comes to whether or not to choose a jumbo loan, the decision may be made for you based on the price of the home you want to buy. Mortgages above the conforming loan limit need jumbo loan financing. If you want a conforming, conventional loan, you’ll need to get a mortgage below $726,200 for most areas in the U.S. and $1,089,300 for high cost of living areas.

When you’re ready to take the next step, consider what SoFi Home Loans have to offer. Jumbo loans are offered with competitive interest rates, no private mortgage insurance, and down payments as low as 10%.

SoFi Mortgage Loans: We make the home loan process smart and simple.

FAQ

Are jumbo rates higher than a conventional mortgage?


Jumbo rates fluctuate with market conditions. They may be on par with rates of loans that fall within the limits for conforming loans set by the Federal Housing Finance Agency (so-called conforming loans). Sometimes, they’re even lower.

What is the downside of a jumbo mortgage?


Possible downsides of a jumbo mortgage include requirements for a higher down payment, higher credit score, more cash reserves, and a higher monthly payment because of the higher home price.

Do jumbo loans have PMI?


Private mortgage insurance is not always required on jumbo loans. Whether or not PMI is needed will depend on your lender and the size of your down payment.


Photo credit: iStock/courtneyk

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). For additional product-specific legal and licensing information, see SoFi.com/legal. Equal Housing Lender.


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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A Guide to How Counter Offers Work in Real Estate

Most people aren’t prepared for the wild and sometimes-bumpy ride of negotiating counter offers in real estate, even though the experience is remarkably common.

Home sellers are free to make a counter offer if they’re dissatisfied with a buyer’s initial bid. Usually, that counter offer indicates they’ve accepted the buyer’s offer subject to certain changes, including updates to contingencies, closing date, and sales price.

Counter offers are a fairly standard part of the home-buying process, but the rules of engagement might not seem remotely intuitive at the time. To help understand how counter offers in real estate work, what the typical negotiating steps look like, and how to counter offer on real estate, here’s a little guide you can cram with.

Common Reasons for Counter Offers

From the beginning of the home-buying process, unexpected twists and turns can arise. After sifting through hundreds of listings, attending several showings, and putting an offer in on a dream home (or two, or three), the deal can be far from done.

There are many reasons why it takes time to buy a house, and counter offers can certainly be one of them. Counter offers in real estate can come into play in these scenarios:

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


A Change in Sales Price

One of the most commonly contested items in the purchase of a house is the sales price. If buyers come in lower than the asking price with their offer, sellers might counter with the original asking price (if they’re unwilling to negotiate) or somewhere between the asking price and the offer.

Recommended: What to Know About Getting Preapproved for a Home Loan

Requesting a Later Closing Date

Sometimes sellers simply need more time to vacate the premises. Whether they have unfinished business or unexpected plans, they may present a counter offer that extends the escrow period to allow them more time to move out.

Increasing the Earnest Money Deposit

In some cases, the seller could up the ante by increasing the earnest, or “good faith,” money deposit the buyer submits with the offer. Earnest money deposits are typically between 1% and 3% of the purchase price, but in a hot market, there’s a chance the seller could ask for more to ensure the buyer is serious about purchasing the property.


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

The Removal of Certain Contingencies

Contingency clauses are actions or conditions that must be met before a real estate contract becomes binding. If you’re a first-time homebuyer (or even if you aren’t) it’s wise to brush up on these terms. Common contingencies, which most sellers will see as standard in a real estate offer, are:

•   An appraisal contingency to protect buyers if the property is valued lower than the amount they offer.

•   A financing contingency that allows buyers adequate time to get a mortgage or other financing to purchase the property.

•   An inspection contingency that ensures buyers have the right to a thorough inspection of the property within a specified period of time.

Some contingencies, however, are considered less than standard. For example, a home sale contingency grants buyers a set amount of time to sell their existing home so they can finance the new property. Some sellers may find this contingency burdensome, particularly in a hot market, so they could make a counter offer that removes the home sale contingency. They can also counter with a “kick-out clause” that gives a real estate agent the right to keep showing the house while buyers attempt to sell their existing home.

Requesting Repairs

If a home inspection reveals necessary repairs or renovations to the property, the buyer could submit a counter offer to negotiate a lower price or ask the seller to complete the repairs before closing.

Deciding Who Covers Closing Costs

In a buyer’s market, it might be possible to negotiate the house price or some or all of the closing costs to be paid by the seller. These costs include appraisal fees, settlement fees, title policies, recording fees, land surveys, and transfer tax. Many buyers are surprised by how expensive closing costs are, but in particularly hot markets with multiple offers, sellers can counter with a simple “no” to indicate they won’t be covering those costs for the buyer.

How Do Counter Offers Work in Real Estate

While real estate counter offers vary depending on the market, the seller’s unique circumstances, and other standalone factors, there are some fairly standard parameters to the counter offer process:

What’s a ‘Normal’ Number of Counter Offers?

There’s no legal limit to the number of counter offers in real estate transactions. Initial offers, counter offers, and subsequent counter offers could ping pong back and forth for weeks or more.

Knowing the local real estate market trends can be key here. In a buyer’s market with plenty of houses for sale, sellers might want to be cautious about submitting an unnecessary number of counter offers.

Similarly, in a seller’s market where inventory is low and buyer competition is high, buyers might want to limit the number of counter offers they push back at the seller.

Can a Seller Make Simultaneous Counter Offers?

Depending on the state where the real estate transaction takes place, a seller may or may not be able to make counter offers to more than one buyer. That said, most real estate agents advise against multiple simultaneous counter offers, as it could end up in two legally binding contracts for the seller.

How Long Does the Process Take?

Number of counter offers aside, homebuyers can expect a closing to take about 45 days, on average. But how long it takes still varies from buyer to buyer, with factors like whether they’re paying cash, how long it takes them to find an inspector, and if the house appraises at a lower value, affecting the overall timeline.


💡 Quick Tip: You deserve a more zen mortgage. SoFi Mortgage Loan Officers are dedicated to closing your loan on-time — backed by a $5,000 guarantee offer.‡

How to Counter Offer in Real Estate

To some degree there’s such a thing as real estate counter offer etiquette. Here are a few things to consider when engaging in the counter offer process:

Have a Comprehensive Picture of Costs

For buyers, having an accurate handle on what it will cost to buy the house is essential for negotiating counter offers discerningly.

Closing costs can be one of the most negotiated items between buyers and sellers and add up to as much as 5% of the mortgage amount. Having a firm grasp of how much to expect in closing costs can help guide the counter offer process.

Setting realistic expectations for the monthly housing payment (including the mortgage principal and interest, insurance, maintenance, any homeowners association fees, and other costs) and what they can afford to pay as a lump sum at closing can help shape this picture for the buyer.

A mortgage calculator helps buyers break down the cost of purchasing a home. Understanding the various factors that might affect your home loan costs is important, too.

Recommended: The Cost of Living by State

Go In With a Strong Offer

A “strong” offer is backed by data that defines what’s happening in the market, and research (with the help of an agent) around what’s considered “fair market value.” Being preapproved for a home loan will make you an attractive candidate from the seller’s point of view.

Coming in at 15% or more under the fair market value is generally considered a “lowball” offer and can start buyers off on the wrong foot. In some cases, sellers might skip right over anything that isn’t considered a strong offer.

Know What Can Be Negotiated

One of the first steps in making a real estate counter offer is knowing what can be negotiated:

•   Possession date. Giving the sellers more time to move out could mean an exchange for a condition the buyer desires. Buyers hoping to move in sooner might make a counter offer requesting an earlier possession date.

•   Personal property. Some of the seller’s personal property like furniture, window treatments, artwork, or gardening tools could be negotiated into the contract in a counter offer.

•   Home warranty. Older houses can come with their own unique sets of systems and appliances, so buyers might make a counter offer asking the sellers to cover the cost of a one- to two-year home warranty ($350 to $600 annually, on average) if unexpected repairs need to be made after move-in.

•   Earnest money deposit. Whether buyers are trying to reduce their risk of something going wrong during closing or strengthen their offer, they can negotiate a lower or higher earnest money deposit with a counter offer.

Be Timely and Responsive

Real estate offers and counter offers often come with a set expiration date, so time is usually of the essence. Forty-eight hours is a standard acceptance window in many real estate markets, but in hot markets offers might expire within 24 hours or less.

Some sellers take this concept to a whole new level, setting stringent requirements around offer acceptance. It’s up to buyers to determine whether or not they’re willing to reply quickly enough to meet the sellers’ time demands or risk losing the deal.

Try Not to Take Things Personally

It might not feel like “all’s fair in buying and selling a home” since it’s one of the biggest financial transactions many will make in their lifetime. But buyers and sellers shouldn’t be surprised if it comes with a little bit of literal give and take.

And while it might seem like a personal affront to have a real estate offer rejected, it’s possible (and even likely) that the seller has multiple offers or was simply able to strike a better deal.

When push comes to shove and purchase comes to close, buying a house is a matter of business, no matter how personal the home-buying journey can feel.

The Takeaway

Real estate offers and counter offers are a common form of business negotiation, and a first step in making a counter offer is knowing what can be negotiated. Being cognizant of counter offer etiquette can be helpful.

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


SoFi Mortgages: simple, smart, and so affordable.

FAQ

How do you handle counter offers in real estate?

Counter offers are an expected part of the negotiation process so approach any counter offer calmly. Know your goal for the overall cost of your home purchase or sale, and what levers you can pull to get there (lower/higher price? Change in contingencies or closing timeline?). Come back with your strongest counter offer but always be prepared to walk away.

What are the steps in a counter offer?

Understand the complete picture of costs in the transaction. Go in with your strongest counter offer, in a timely fashion, and don’t take it personally if you don’t get 100 percent of what you want from the deal.

What is the general rule of counter offers?

The number one rule of counter offers, whether you’re buying or selling, is to know what total price you can ultimately afford. Keep calm and negotiate on, but don’t get emotionally involved — you may need to walk away at any time.


*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 On-Time Close Guarantee: If all conditions of the Guarantee are met, and your loan does not close on or before the closing date on your purchase contract accepted by SoFi, and the delay is due to SoFi, SoFi will give you a credit toward closing costs or additional expenses caused by the delay in closing of up to $10,000.^ The following terms and conditions apply. This Guarantee is available only for loan applications submitted after 04/01/2024. Please discuss terms of this Guarantee with your loan officer. The mortgage must be a purchase transaction that is approved and funded by SoFi. This Guarantee does not apply to loans to purchase bank-owned properties or short-sale transactions. To qualify for the Guarantee, you must: (1) Sign up for access to SoFi’s online portal and upload all requested documents, (2) Submit documents requested by SoFi within 5 business days of the initial request and all additional doc requests within 2 business days (3) Submit an executed purchase contract on an eligible property with the closing date at least 25 calendar days from the receipt of executed Intent to Proceed and receipt of credit card deposit for an appraisal (30 days for VA loans; 40 days for Jumbo loans), (4) Lock your loan rate and satisfy all loan requirements and conditions at least 5 business days prior to your closing date as confirmed with your loan officer, and (5) Pay for and schedule an appraisal within 48 hours of the appraiser first contacting you by phone or email. This Guarantee will not be paid if any delays to closing are attributable to: a) the borrower(s), a third party, the seller or any other factors outside of SoFi control; b) if the information provided by the borrower(s) on the loan application could not be verified or was inaccurate or insufficient; c) attempting to fulfill federal/state regulatory requirements and/or agency guidelines; d) or the closing date is missed due to acts of God outside the control of SoFi. SoFi may change or terminate this offer at any time without notice to you. *To redeem the Guarantee if conditions met, see documentation provided by loan officer.
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.

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How Much Does It Cost to Build an Apartment Complex?

As with any construction project, the cost to build apartment complexes differs, based on many factors. The national average is around $12.5 million, but the range varies considerably based on the square footage, number of units, and type of apartment complex.

For anyone considering building apartments, it can be helpful to know what influences the cost early in the process.

Key Points

•   Building an apartment complex costs around $12.5 million on average, but this can vary significantly.

•   Costs per square foot for apartment construction range from $95 to $645.

•   The number of units can affect the overall cost, with each unit costing between $70,000 and $200,000.

•   Different types of apartment complexes, such as infill, low-rise, mid-rise, and high-rise, have varying costs.

•   Prefab or modular construction offers potential savings, with costs ranging from $150 to $400 per square foot.

What Determines the Cost of Building Apartments?

So, how much does it cost to build an apartment complex? Some design choices, like the number of stories, will increase the cost more than others. Here’s what you need to know about different cost factors to calculate the project budget and other things to consider if you’re thinking of building a house or apartment.

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


Location

Where you plan to build an apartment complex will impact the cost. Land prices vary across the U.S., with New Jersey ranking among the most expensive at $242,900 for one acre on average. On the lower end, Wyoming is the most affordable with an average cost per acre of $54,000.

Square Footage

The cost to build a townhouse is impacted by the size, which is measured in square feet. Generally speaking, the larger the size, the higher the cost. How much it costs to build apartments is subject to many cost factors, but the price range for an apartment complex falls between $95 and $645 per square foot. The average price comes in at around $398 a square foot.

Number of Units

The number of units in an apartment complex is another way to assess construction cost. The cost of a single unit spans from $70,000 to $200,000.

This wide cost range is due to other apartment characteristics, such as the square footage, finishings, and materials used. Whether you plan to design units as a condo or apartment may impact the type of amenities offered and overall design, which impacts the cost per unit.

Replicating the same floor plan across apartments is one strategy to reduce the total cost per unit.


💡 Quick Tip: Don’t overpay for your mortgage. Get your dream home or investment property and a great rate with SoFi Mortgage Loans.

Type

There are different types of apartment complexes, including infill, low-rise, mid-rise, and high-rise.

•   Infill: This type of apartment is constructed on land in a neighborhood that is already largely developed, which generally limits the size of the structure to a duplex or triplex apartment. Building an infill apartment costs between $95 and $205 per square foot on average.

•   Low-rise: This generally involves apartment complexes with four or fewer stories. Low-rise apartments may be built with wood and have an average construction cost of $180 to $275 per square foot.

•   Mid-rise: This includes apartments between five and 10 stories which involve more complex design elements, such as elevators, double-sided corridors, and use of concrete and steel in construction. The average price to build a mid-rise apartment averages $210 to $310 per square foot.

•   High-rise: This type of apartment has 11 or more stories and usually requires more permitting, a driven pile foundation, and use of concrete and steel. High-rise apartments range in cost from $270 to $675 per square foot.

Whether an apartment complex includes mixed uses, such as ground floor storefronts or a basement parking garage, will affect the construction cost.

Recommended: Different Types of Houses

Number of Stories

How much does it cost to build apartment complexes by story? In most cases, the taller the building, the greater the expense. Mid- and high-rise apartment buildings usually require pricier materials, such as concrete and steel. Meanwhile, low-rise apartments may be built with wood, which is comparatively less expensive. Labor costs may also increase for apartments with a higher number of stories.

Prefab Apartment Building Cost

Option for prefab or modular construction is a potential cost saving opportunity. The uniform nature of these apartments reduces design expenses, plus the materials are manufactured off-site, reducing labor costs and weather-related delays. Prefab apartment buildings run from $150 to $400 per square foot on average. This construction style can be applied across apartment types, too.



💡 Quick Tip: One answer to rising house prices is a jumbo loan. Apply for a jumbo loan online with SoFi, and you could finance up to $2.5 million with as little as 10% down. Get preapproved and you’ll be prepared to compete in a hot market.

Apartment Building Construction Cost Breakdown

There are many factors that impact the cost of building an apartment. Although every apartment complex is unique, you can get a rough estimate of the total project expenditure by breaking down the costs by category. Here’s what you can expect to pay for different elements of the project.

•   Architects: 8-10% of the total cost

•   Builder or general contractor: 25%

•   Structural engineer: 1.5%

•   Foundation: 9%

•   Floor structure: 12%

•   Flooring: 5%

•   Masonry walls: 9-10%

•   Wood walls: 6-10%

•   Roof: 10%

•   Plumbing: 12%

•   Windows and doors: 5%

•   Kitchen: 8%

•   Electrical: 10%

•   Interior features: 3-5%

•   Interior finish: 10%

Recommended: Tips for Buying a New Construction Home

Factors Affecting the Cost of Constructing an Apartment Building

There are many moving parts and cost categories that affect the construction cost of an apartment building. Besides the labor and materials expenses outlined above, it’s also important to consider soft costs and paying for building and zoning permits.

Soft costs can include fees for services like interior design, legal support, and interest and fees on a construction or home loan. When talking to lenders, it can be helpful to ask mortgage questions to identify the estimated closing costs and what fees apply. Using a mortgage calculator can help you get a sense of the financing that might be necessary for a home purchase.

Average Maintenance Cost for an Apartment Complex

A newly constructed apartment could have less maintenance costs for an initial period while equipment and building structures are in good condition. However, it’s recommended to set aside a portion of rental income each month to ensure you have sufficient funds for routine maintenance and emergency repairs.

Following the 1% rule, for example, involves budgeting one percent of the property value each year for maintenance costs. For a $2 million apartment building, this would amount to $20,000 a year for maintenance. Doing the maintenance yourself is one way to keep costs down, but this may not be feasible for larger apartment complexes.

If you plan to sell your apartments to individual owners, then maintenance could be handled through a homeowners association (HOA). As members of a HOA, apartment owners pay dues through monthly fees that support the cost of maintenance, which can vary depending on the extent of a complex’s amenities.

Recommended: How to Buy an Apartment

Cost of Owning an Apartment Complex

Besides maintenance, owning an apartment complex can involve costs associated with property taxes, amenities, insurance, and staff. If you finance the construction or work with investors, you may also need to make loan payments or divide profits between shareholders in the business.

Enhancement and Improvement Costs

Building a luxury apartment building or complex will likely entail greater enhancement and improvement costs. This may include high-end appliances, on-site parking, and dedicated outdoor space for each unit.

Luxury properties often have numerous communal amenities too, such as fitness centers, pools, and outdoor recreational areas. These upgrades bring the average cost of a luxury apartment to $550 to $650 per square foot.

A construction loan is an option to pay for the added enhancement and improvement costs. For a thorough review and tips on financing options, check out a home loan help center and compare different types of mortgages.

The Takeaway

How much does it cost to build an apartment complex? The total project cost will depend on a variety of factors, including the location, number of units, size, and design of the apartment but you can figure it is in the neighborhood of $398 per square foot. There are government-backed loans and private loan options for financing the cost to build an apartment complex.

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

SoFi Mortgages: simple, smart, and so affordable.

FAQ

How much does an apartment complex cost?

The cost of an apartment complex varies considerably based on location, size, and other factors. With an average price of $398 per square foot, the estimated cost of a 10,000 square-foot apartment complex would be $3.98 million.

Do apartment buildings hold their value?

Apartment buildings that are well-maintained are likely to hold or increase their value over time.

How many units are in an apartment complex on average?

The number of units differs significantly depending on the size of the complex. Larger, high-rise buildings may have hundreds of units while an infill building built on a lot in an existing neighborhood might have only a few units.


Photo credit: iStock/AlbertPego

*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.

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How Much Does It Cost to Build a Townhouse?

Townhouses offer convenience and amenities that appeal to a range of homebuyers. They’re also growing in popularity, with new townhouse construction up more than 28% from 2020 to 2021. Construction costs also increased during the same time period.

Whether you’re building an investment property or your own new home, determining the project cost is essential before breaking ground. The cost to build townhouses depends on the size, location, number of units, onsite amenities, and the style of the building.

Key Points

•   Building a townhouse costs between $111 and $125 per square foot on average.

•   Costs vary based on type, size, location, and additional features like garages or basements.

•   Economies of scale can reduce costs when building multiple units.

•   Location affects construction costs due to labor rates and material availability.

•   Adding features like basements or pools increases overall construction expenses.

What Is a Townhouse?

A townhouse, also called a townhome, is a type of single-family home that has two or more floors and a shared wall with at least one other home. Compared to different home types, like duplexes and triplexes, each townhouse is individually owned and has its own entrance. Given the high-density design, townhouses tend to be more common in urban and suburban communities.

Townhouses often have their own yard or garage, but may share other communal amenities, such as a pool or tennis court, with neighboring townhouses. These shared facilities are typically governed by a homeowner’s association (HOA), which townhouse owners pay fees to for managing amenities and providing services like landscaping and snow removal.

If choosing between a condo or townhouse, another distinction is that townhomes usually have more autonomy in customizing the exterior of their home and outdoor living space, and more responsibility for that space as well.

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


Recommended: What is a Townhouse?

What Determines the Cost of Building a Townhouse?

The cost to build townhomes depends on a variety of factors. The type of townhouse, size, number of units, location, and additions like garages and basements all contribute to the total construction cost.

Here’s what to consider when estimating how much to build a townhouse.

Type of Townhouse

There are different types of townhouse layouts and configurations, including traditional, stacked, and urban.

•   Traditional: Generally organized in a row with two floors of living space, a basement, and garage.

•   Stacked: Refers to townhouse units stacked in a multi-floor building, which typically have their own entrances.

•   Urban: Similar to traditional townhomes, but often have more modern and spacious floor plans and higher prices.

Another key decision when purchasing a new construction home or townhome is whether to go with a modular or stick-built design. The components of a modular townhome are manufactured off-site, saving time and labor.

Stick-built townhouses are constructed on-site using a wooden frame and finished with a brick or vinyl exterior. This type of construction allows for greater customization, but generally comes at a higher cost than modular townhomes.

Recommended: Pros and Cons of Building a Townhouse

Square Footage

The cost to build a townhouse is impacted by the size, which is measured in square feet.

Townhomes cost between $111 to $125 per square foot on average. Because townhouses share walls and occupy smaller lots, they’re often more affordable than detached single-family new construction, which breaks down to an average of $150 per square foot.

Using the square footage to estimate total townhome cost is a fairly straightforward calculation. For instance, builders can expect to pay between $222,000 and $250,000 to erect a 2,000-square-foot townhouse based on the average range. Bear in mind that does not include the cost of the building site.

With these estimates, you can compare mortgage rates and determine what financing you qualify for.

Number of Rooms

The interior layout, including the number and types of rooms, is a key determining cost factor.

Not all rooms are created equal though, with kitchens and bathrooms being the most expensive due to appliances, tiling, plumbing, and more complex electrical work. The living spaces and bedrooms are generally simpler and cheaper to build.


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

Number of Units

By definition, townhouses are built in groups. Leveraging economies of scale to build multiple units or a complex could reduce the cost per unit. Keeping the design and floor plan consistent across units can also lower the price.

So, how much does it cost to build a townhouse complex? That depends on the extent of amenities included, as well as the number of units.

Location

Location, location, location. Where you choose to build a townhouse will impact the cost of construction and its value once completed.

The cost of labor varies significantly between regions. Paying builders and contractors typically accounts for 40% of new home construction expenditures. The location of the townhouse also matters in terms of costs related to accessing the site and sourcing materials.

Additions

Wondering how much to build townhomes with attractive amenities? Here’s what you can expect to pay for common townhome add-ons.

•   Basement: Building a basement foundation costs between $24,000 and $44,500 on average.

•   Driveway: The materials and installation costs for a new driveway range from $2 to $15 per square foot depending on the material used.

•   Fencing: More affordable fence materials like wood, vinyl, and composite range from $10 to $45 per linear foot.

•   Garage: Cost varies by size, with one-car garages ranging from $10,500 to $27,000 and double garages costing between $14,500 and $40,300.

•   Pool: Expect to pay between $28,000 and $66,500 for an in-ground pool, with vinyl and fiber-glass lining typically costing less than concrete.

•   Shed: Adding a storage shed ranges from $300 to $15,000, with pre-fabricated options usually costing less than custom builds.


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

Construction Cost for Building a Townhouse

Construction costs are often the deciding factor when thinking of buying or building a house. Townhouses are generally less expensive to build per unit than a detached single-family home.

In addition to the factors discussed above, townhouse construction involves a range of pre-construction costs, like purchasing land, building permits, and architectural or design fees. The materials and labor usually account for the majority of the expenses to build a townhouse.

Townhouses can be designed as starter homes or luxury properties, and project budgets can be structured according to the target market and expected return on investment. Still wading into the waters of homebuying? Consult a Home Loan Help Center for useful tips and guides to master the basics.

Recommended: Construction Loans for Building a House

The Takeaway

How much does it cost to build a townhouse? In short, it depends on the type of townhouse, size, number of units, location, and added amenities. But you can estimate roughly $111 to $125 per square foot or $225,000+ for a 2,000 square-foot abode, not including land cost.

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

SoFi Mortgages: simple, smart, and so affordable.

FAQ

How many townhouses can fit on an acre?

The number of townhomes that can fit on an acre will depend on what’s permitted by local zoning, as well as space allocated for landscaping, parking, and other amenities. However, an acre can accommodate around 20 two- or three-story townhomes.

How much are utilities in a townhouse?

Utility costs vary by location, unit size, personal energy use, and equipment used for heating and cooling. Due to their smaller footprint, townhomes typically have lower utility bills than single-family homes.

Should I buy a townhouse or single-family home?

There are pros and cons with either type of home. Townhomes may require less maintenance and include extra amenities, while single-family homes can offer more space and discretion in how you design and decorate your home’s exterior.

What are the disadvantages of living in a townhouse?

Living in a townhouse can mean less privacy from your neighbors and noise from shared walls.


Photo credit: iStock/vkyryl

*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.

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What Is a Home Title Policy and How Does It Work?

A home title policy — also called title insurance — protects homeowners and lenders from claims and litigation stemming from title defects. Title insurance, according to the American Bar Association, allows for a secure transfer of ownership from one party to another.

To address top questions surrounding home title policies, we’ve compiled this guide. You’ll learn:

•   What is title insurance for a home?

•   How does it work?

•   What are common title issues?

•   What does the home title policy cover?

•   What are the different types of home title policies?

By the end, you still won’t be thrilled to pay this additional cost at closing, but you may understand better what it protects.

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


What Is a Home Title Policy?

A title policy on a home is an insurance policy that protects against title defects. Title issues aren’t common, but when they occur, the amount of money involved can be massive. Home title policies are required by lenders to protect their investment in your property. That’s right, just like mortgage insurance, it’s not really for you. In fact, these policies are also called lender’s title insurance policies.

Confusingly, you can also buy a home title policy that provides the exact same protection for you: This is called an owner’s title insurance policy. If you want to be completely protected as a homebuyer, you need to purchase both. (Ugh!)

What could go wrong that necessitates this layer of insurance? If, for example, the seller didn’t have the full right to sell the property because there was another property owner and the title company missed this in their title report, the title company is responsible for the error. The title company could pay for litigation costs or payouts for property owners.

Title issues that could potentially arise include:

•   Existing mortgages

•   Undisclosed heirs that have claims on the property

•   Tax or construction liens

•   Property line disputes

•   Judgments involving the property, such as in the case of a divorce

•   Deeds, wills, or trusts with errors

•   Easements or encroachments that may restrict access and/or devalue the property

•   Notary mistakes

•   Errors in public records

•   Fraud and forgeries


💡 Quick Tip: Thinking of using a mortgage broker? That person will try to help you save money by finding the best loan offers you are eligible for. But if you deal directly with an online mortgage lender, you won’t have to pay a mortgage broker’s commission, which is usually based on the mortgage amount.

How Does a Home Title Policy Work?

There are two parts to a home title policy: a title search and a policy issuance. After real estate purchase contracts are written and the property is in escrow, homeowners select a title company to conduct a title search.

In the title search, the title company looks through public records for defects (or problems, like those listed previously). If the search turns up a mortgage lien issue, judgment, or other issue, it will need to be addressed before ownership can be transferred.

If the title search hasn’t revealed any issues, the title company will issue the policy when the transfer of ownership is recorded. The borrower pays a one-time fee for the home title policy in their closing costs.

Recommended: What Is Escrow?

What Does the Home Title Policy Cover?

The title search helps eliminate risk, but it’s still a possibility that title problems can arise. That’s where the title policy for a home comes in. After the policy has been issued, should any additional items come up, the title company will litigate those issues for the benefit of the lender — but only up to the amount of the loan. As the loan balance decreases, so does the amount of home title insurance coverage.

One important thing to note is the home title policy that you get is usually a lender’s title insurance policy. What this means is the lender is protected against legal claims against the home. The borrower’s claim to the home — their equity — is not protected unless the borrower also purchases an owner’s title policy.

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

Home Title Policy Requirements

Home title policies aren’t required by a governing body like a city or state — they’re required by the lender. When a borrower seeks funds for a home mortgage loan, the lender has certain requirements that the borrower must meet in order for them to issue that mortgage. One of these is a home title insurance policy. Borrowers must pay for a home title policy in order to close the loan. Lenders want to make sure the property the borrower selected is free to be bought and sold and their investment is protected.

Recommended: First-Time Homebuyer Programs

Pros and Cons of a Home Title Policy

It’s worth summing up the benefits and drawbacks of a home title policy.

Pros

Cons

The title search can reveal title defects before you close on a home. Home title policies are required.
The title insurance can litigate up to the amount of the mortgage if there is an issue. They’re expensive.
If it’s a lender’s home title policy only, it won’t protect the equity in your home.

When buying a home, you’ll encounter lots of different types of insurance. It’s worth taking a few minutes to familiarize yourself with the definitions.

Types of Home Title Policies

As noted above, home title policies come in two types: lender’s title insurance and owner’s title insurance.

Lender’s home title policies protect the lender from losses that come from title issues or defects. If title issues arise, the title company will cover losses or litigate for the lender up to the amount of the mortgage.

Owner’s home title policies protect the amount of equity an owner has in the home. If someone has a claim or brings suit against the title of the home, it is possible homeowners could lose the amount of equity they have in their home.

Fees for these policies vary widely by state. But for a typical home valued at around $400,000, you can expect to pay about $2,000 to purchase both types of title insurance and to pay for the title search. Fortunately, this is a one-time cost — unlike other types of homeowners insurance you might buy, you won’t have to renew your title insurance every year.

The Takeaway

It’s not exciting to pay for a home title policy, but the expense is more palatable once you understand what it protects. If you purchase both lender’s and owner’s home title policies, you’ll be well protected in the event of an unexpected claim or ownership dispute on your new home.

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

Is it worth shopping around for title insurance?

Title insurance can be costly so it is worth it to shop around. The insurer your lender typically uses might be an affiliate. So there could be a financial benefit to your lender if you use their partner company, but that doesn’t mean there will be a financial benefit to you. Comparison shopping could save you money.

What is the disadvantage of title insurance?

The chief disadvantage of title insurance is its cost, and the fact that it is usually required by a lender. Beyond that, keep in mind that lender’s title insurance only covers the lender in the event of a title problem — it doesn’t protect the equity that you have in the home. For that, you would need a second owner’s title insurance policy.

What is the difference between title and mortgage insurance?

Lender’s title insurance, which is paid for by the borrower, protects the lender in the event that a title dispute arises on the property. Mortgage insurance protects the lender in the event that the borrower defaults on the loan.


Photo credit: iStock/Wasan Tita

*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 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). For additional product-specific legal and licensing information, see SoFi.com/legal. Equal Housing Lender.


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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