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A qualified mortgage is a type of loan with certain stable features that make it more likely that a borrower will be able to repay their loan. This doesn’t necessarily involve more work for the borrower, but it does mean that lenders will take a deeper dive into a potential borrower’s finances. The lender will analyze factors such as a borrower’s ability to repay to better determine if the mortgage they applied for is considered affordable for them under the guidelines.

Created in an effort to clamp down on the excessive risk-taking in the mortgage industry prior to the 2008 financial crisis, a qualified mortgage is intended to protect consumers from harmful lending practices. However, its stricter guidelines may make it harder to qualify for certain people.

How Qualified Mortgages Work

Qualified mortgages follow three basic tenets, outlined by the CFPB:

•   Borrowers should be able to pay back their home loan.

•   A qualified mortgage should be easier for the borrower to understand.

•   The qualified mortgage should be a fair deal for the borrower.

Based on these ideas, the CFPB created stricter guidelines for residential mortgages to help ensure borrowers could repay their loans.

For these loans, there’s a limit on how much of a borrower’s eligible income can go toward debt. In general, total monthly debts cannot exceed 43% of a borrower’s gross monthly income, a percentage referred to as a debt-to-income ratio (DTI). Limiting the amount of debt a borrower can take on makes the homebuyer a safer bet for banks and less likely to default on their mortgage. Keeping the loan within a reasonable DTI ensures that a borrower isn’t borrowing more money than they can repay.

Next, the loan term on a qualified mortgage must be no longer than 30 years. Once again, this is in place to protect the home buyer. A loan term beyond 30 years is considered a riskier loan because the extended term means longer payback and additional interest — both key considerations when it comes to how to choose a mortgage term.

In addition, a qualified mortgage is barred from having other risky features, such as:

•   Interest-only payments: Interest-only payments are payments made solely on the interest of the loan, with no money going toward paying down the principal. When a borrower is only paying interest, they don’t make a dent in paying off the loan itself.

•   Negative amortization: With amortization, the amount of the loan goes down with each regular payment, as is illustrated when using a mortgage calculator. In the case of negative amortization, however, the borrower’s monthly payments don’t even cover the full interest due on the mortgage. The unpaid interest then gets added to the outstanding mortgage total, so the amount owed actually increases over time. In some cases, depending upon market conditions, a borrower could end up owing more than the home is worth.

•   Balloon payments: These are large, one-time payoffs due at the end of the introductory period of the loan, historically after five or seven years.

Additionally, qualified mortgages have certain limits on the points and fees that lenders are allowed to charge. A lender can only charge up to the following maximum fees and points on a qualifying mortgage. Otherwise, it’s referred to as a high-cost mortgage, which carries additional guidelines:

•   For a loan of $100,000 or more: 3% of the total loan amount or less

•   For a loan of $60,000 to $100,000: $3,000 or less

•   For a loan of $20,000 to $60,000: 5% of the total loan amount or less

•   For a loan of $12,500 to $20,000: $1,000 or less

•   For a loan of $12,500 or less: 8% of the total loan amount

Alongside caps on points and fees, there are also limits on the annual percentage rate that can be charged on a qualifying mortgage. This threshold can vary depending on the loan’s size or type.

Lastly, lenders must verify a borrower’s ability to repay the loan so they’re not immediately scrambling to figure out how to lower mortgage payments. The ability-to-repay rule encompasses different aspects of a borrower’s financial history that a lender must review. Specifically, a lender is likely to review items such as:

•   Income

•   Assets

•   Employment

•   Credit history

•   Alimony or child support, or other monthly debt payments

•   Other monthly mortgages

•   Mortgage-related monthly expenses (such as private mortgage insurance, homeowners association fees, or taxes)

Under some circumstances, however, lenders may not have to follow the ability-to-repay rule, and the mortgage can still count as a qualified loan.

In addition to the protections provided to borrowers, qualified mortgages also grant lenders some protection. They offer safe harbor to the lender if ability-to-repay rules were properly adhered to when qualifying the borrower(s) for the requested loan program. In these instances, borrowers can’t sue based on the claim that the institution had no basis for thinking they could repay their loans. The rules also make it harder for borrowers to buy more house than they can afford.

What Is a Non-Qualified Mortgage?

A non-qualified mortgage (non-QM) is a type of mortgage loan that does not meet the standards required for a qualified mortgage, outlined above.

However, a non-QM loan isn’t the same as the subprime loans that were available before the housing market crash. Typically, with a non-QM loan, lenders confirm that borrowers can repay their loans based on reasonable evidence. This can include verifying much of the same information as qualified mortgage loans, such as assets, income, or credit score.

Non-QM loans allow lenders to offer loan programs that don’t necessarily meet the strict requirements of qualified mortgages. Because non-QM loans don’t have to adhere to the same standards, it means the underwriting requirements, such as the qualified mortgage DTI limit, can be more flexible.

The upside is that this can provide eligible borrowers with more loan program choices. That being said, non-QM loans can vary by lender, so borrowers who take this route should research their options carefully and take advantage of tools such as a home affordability calculator to help ensure they don’t get in over their heads.

Recommended: First-Time Homebuyer Guide

When Could a Non-QM Loan Be the Right Option?

While qualified mortgages have safeguards in place for both the lender and the borrower, in some circumstances, it can make sense for a borrower to choose a non-QM loan.

Many lenders offer non-QM loan programs because they have more flexible loan features. In some instances, a borrower may opt for a non-QM loan because of property issues, such as a condo that doesn’t meet certain criteria or a certain property type.

This type of loan may be right for borrowers who can afford the mortgage but who don’t conform to additional qualified-mortgage requirements. Examples of borrowers who might seek a non-QM loan are:

•   The self-employed: Borrowers with streams of income that may be difficult to document, such as freelance writers, contractors, and others, may consider a non-QM loan.

•   Investors: People investing in real estate properties, including flips and rentals, may choose to apply for a non-QM loan. This could be because they need funding faster or have a challenging time proving income from their rental properties.

•   Non-U.S. residents: People who are not U.S. residents may find it challenging to meet the requirements for qualified mortgages because they may have a low or nonexistent credit score in the U.S.

While understanding the nitty-gritty of qualified mortgages vs. non-qualified mortgages may feel overwhelming, understanding the differences and other mortgage basics may make choosing the best loan fit for your needs easier. It’s important to do your research and ask lenders questions about the different loan programs available.

Recommended: How Does Mortgage Interest Work?

The Takeaway

A qualified mortgage must conform to strict guidelines that are designed to ensure the borrower can pay back their loan. Qualified mortgages also have limits on the rates and fees lenders can charge. They can provide peace of mind for both borrower and lender, but as always, it’s important to do your research and ask lenders questions about the different loan programs available.

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

What isn’t permitted in a qualified mortgage?

Qualified mortgages generally don’t permit a DTI ratio above 43% or a loan term longer than 30 years. There can be no negative amortization, balloon payments, or interest-only payments. Qualified mortgages are designed to help borrowers successfully repay the loan.

What’s the maximum DTI for a qualified mortgage?

The highest a borrower’s DTI ratio can be for a qualified mortgage loan is 43%. By limiting the total monthly debt, qualified mortgages ensure borrowers can’t borrow more money than they can reasonably pay.

Are qualified mortgages the right option for everyone?

No. A non-QM loan may be a better fit for borrowers who have difficulty conforming to the strict requirements of a qualified mortgage. This often includes self-employed individuals with hard-to-document income, real estate investors, and non-U.S. residents with limited U.S. credit history.

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

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

*SoFi requires Private Mortgage Insurance (PMI) for conforming home loans with a loan-to-value (LTV) ratio greater than 80%. As little as 3% down payments are for qualifying first-time homebuyers only. 5% minimum applies to other borrowers. Other loan types may require different fees or insurance (e.g., VA funding fee, FHA Mortgage Insurance Premiums, etc.). Loan requirements may vary depending on your down payment amount, and minimum down payment varies by loan type.
Financial Tips & Strategies: The tips provided on this website are of a general nature and do not take into account your specific objectives, financial situation, and needs. You should always consider their appropriateness given your own circumstances.
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.
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. Checking Your Rates: To check the rates and terms you may qualify for, SoFi conducts a soft credit pull that will not affect your credit score. However, if you choose a product and continue your application, we will request your full credit report from one or more consumer reporting agencies, which is considered a hard credit pull and may affect your credit.
Non affiliation: SoFi isn’t affiliated with any of the companies highlighted in this article.

This content is provided for informational and educational purposes only and should not be construed as financial advice.

SOHL-Q126-107

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If you want to sell your home fast and for the highest possible price, you may find that it helps to thoughtfully stage it for potential buyers.

Even in a hot real estate market, staging can be a useful tool. First impressions can be critical for buyers to quickly decide how much to offer or whether to make an offer at all.

A 2025 report from the National Association of Realtors® (NAR) found that 83% of buyer’s agents said that staging made it easier for their buyers to visualize a property as their future home.

What Is Home Staging?

Staging your home to sell typically involves cleaning, decluttering, and rearranging furniture — or even replacing your current decor with rented or borrowed pieces that can better showcase the home.

It’s all about making your home as appealing as possible to attract buyers, minimize the amount of time it takes to sell, and maximize your return — goals that can be especially important if you’re trying to buy and sell simultaneously.

How Home Staging Affects Time on Market and Sale Price

It’s hard to predict exactly how staging will affect any particular home sale, but here are some factors to consider.

Research Shows Benefits for Sellers

A 2025 report from NAR found that 29% of agents said that staging led to a 1%-10% increase in the dollar value offered on staged homes, with about 17% of buyer agents and 19% of seller agents reporting a 1%-5% increase, compared with similar non‑staged homes. In terms of days on market, 30% of sellers’ agents reported a slight decrease, and 19% reported a significant decrease in time on market for staged homes, meaning nearly half saw staging shorten the selling time.

You Have Competition

As soon as you list your home for sale — whether you’re selling traditionally or with owner financing — you start competing with every other house in the neighborhood and the surrounding area. Depending on that competition, as well as your goals for getting the house sold, locking in a new home loan, and buying a new home, staging could be a worthwhile strategy for making your home stand out.

Recommended: 2024 Home Loans Education Portal

Expectations Can Be High

Home decor seen in TV shows may set high expectations among some buyers for what your house should look like. In the NAR 2025 Profile of Home Staging study, 58% of survey respondents said that buyers were disappointed by how homes looked compared with the homes they saw on TV.

Should You Hire a Professional Stager?

While some parts of the home staging process may be easy to DIY (paring down the number of personal photos and knick-knacks, for example), it may help to hire a professional.

An experienced home stager will likely have more insight into what buyers in your area are looking for and what the current home trends are. A professional may also have access to furniture, art, and other decor items that could transform your home for a quick or more lucrative sale. The amount you get for your current home could directly affect how much you can spend on your next one.

Here are some things to consider when deciding whether or not to hire a home stager.

Cost

Professional home staging can cost hundreds or even thousands of dollars, depending on how much work the stager does, how big your house is, whether you decide to rent staging furniture, and how long the house is on the market. There are ways you might be able to cut the expense, including:

•   Meeting with the pro to do a walk-through and consultation on how to stage your home to sell, but then doing the work yourself

•   Asking the stager to work with your furniture instead of using rented items (this could also save on storage costs)

•   Focusing on a few important spaces, such as the entryway, the living room, and the master bedroom, instead of reworking your entire home

Recommended: Home Mortgage Calculator

Fresh Eyes and Objectivity

Of course, you love your family photos, the trinkets you’ve collected through the years, and the paint colors you’ve chosen for every room. Buyers, however, might not.

An experienced stager can walk through and objectively point out what might need to be put away, cleaned, moved around, or refreshed before the house is photographed for the listing or has its first showing. A professional also may have home-staging tips to help you market to the types of buyers most often found in your area, whether that’s growing families who are upsizing or baby boomers who are downsizing their home.

Living With Someone Else’s “Look”

Stagers are trained to give the homes they work on a polished, cohesive look that buyers are used to seeing on Home and Garden Television. But living in a home that’s been styled for others may be a bit nerve-wracking. And if the furniture is not your own, you may have to keep kids, pets, and glasses of red wine away to avoid any damage.

Exposing Bigger Problems

Moving furniture around to create a more open layout could also create some problems if, for example, those changes expose a crack in the wall or a stain on the carpet. Making these repairs may delay getting your home on the market.

Pros and Cons of Hiring a Professional Home Stager

12 Tips for Home Staging Success

Whether you decide to hire a helper or do the work yourself, here’s a list of home-staging ideas to keep in mind.

1. Clear the Clutter

Clutter is distracting, and it takes up space. As soon as you hire a real estate agent, they’ll likely nudge you to sell, donate, or throw away anything you no longer use. Things you want to keep but won’t need for a while (seasonal clothing and sports equipment, photo albums and keepsakes, or books you hope to read someday) can be boxed up and stored until you move. But remember: Buyers will want to assess your closet space, so you may want to move those boxes to the basement or rent a storage space.

2. Depersonalize

Framed family photos, souvenirs, your kids’ artwork, and other personal items can get in the way when buyers try to envision themselves living in your home. Even the day-to-day stuff can divert attention from the illusion you’re trying to create. That means no shoes by the front door, no wet towels in the hamper, and keeping bathroom counters clear of everything but hand soap and guest towels.

3. Deep Clean

Neat and tidy is good, but crisp and gleaming is better. A clean house sends a message to buyers that you take good care of your home and have likely also been on top of house maintenance. If your place isn’t new, you still can try to make it look as new as possible. Shine up all the appliances. Scrub the sinks, tubs, floors, and toilets. Check the corners for cobwebs and the baseboards for dog hair. And don’t forget to dust the ceiling fans and bathroom exhaust fans. If you don’t have the time or energy to do it yourself, you may want to hire a cleaning service — or double up on the service you already have.

4. Repair All Damage

You know all those little dings, stains, and scuff marks you’ve become blind to? They can be a big turnoff for buyers, who will definitely see them. Why not do a thorough walk-through and make a list of required touch-ups and repairs (and repair costs)? Then you can head to the home improvement store, get what you need to make the fixes, and get to work. If something is beyond your skillset (a running toilet, broken appliance, or finicky fireplace), you can address it before buyers come through. Find all the help you need in a list of homeownership resources.

5. Focus on Essential Rooms

If you have a limited staging budget, you may want to focus on the rooms buyers tend to prioritize. A 2025 report from NAR found that staging the living room was considered most important to buyers, followed by the primary bedroom and kitchen. The most commonly staged spaces by sellers’ agents were the living room (91%), the primary bedroom (83%) and the dining room (69%).

6. Neutralize the Decor

Decorating with neutrals — think 50 shades of gray — can be another big step toward depersonalizing your home. Your favorite colors may be bright and bold, but that might be a bit much for some buyers. Their agent probably will tell them it’s an “easy fix,” but if they can’t get past the chartreuse kitchen or the green-striped wallpaper in the dining room, buyers may not be able to see their family using those spaces.

To break up all the beige, gray, or white, add touches that evoke a feeling of comfort, but use them sparingly. For example, you can give your bathroom that spa vibe simply by adding a basket filled with crisp white towels. A bowl of lemons, potted orchids, or a vase filled with fresh flowers can add a pop of cheer and color in the foyer or kitchen.

7. Let There Be Light

Present your home in the best light by letting in as much sunshine as possible during the day and turning on all the lights for night showings. (No need to make buyers fumble for switches.) Open the curtains and blinds (unless the view is a drawback). Keep pathways and porches well-lit when the sun goes down. Replace burned-out bulbs and think about bouncing a little light around rooms with well-placed mirrors, which can make a room appear larger.

8. Curb Appeal Matters

Why do all that work to fix up your home’s interior if there is a chance buyers won’t even get out of the car? First impressions are lasting, so put out the welcome mat (literally, make sure a clean doormat is outside the door) and use other ideas for amping up your home’s curb appeal.

Consider power-washing the walkway and updating (or at least cleaning) outdoor light fixtures. In the winter, clear the snow. If you need a pop of color, you can do it with plants, and if the front door is dated or just dingy, think about fixing it up. If buyers have to wait a minute for you or an agent to let them in, they’re likely to notice if the door looks great … or doesn’t.

9. Look Beyond the Porch

Depending on the weather, buyers may spend time outside checking the exterior of the house, front and back. If the weather permits, you may want to sweep the leaves off the roof, try to get rid of any mold or mildew on the house or fences, clean the patio or pool deck, and wash the windows inside and out. The goal here is to make your home more appealing, but also to help buyers focus on the fabulous features of your home instead of potential maintenance.

10. Create Space

To achieve a more open look, consider removing any oversized or unused pieces of furniture. A small bedroom may look bigger, for example, with just a dresser instead of a dresser and chest, or if you remove a bed’s oversized headboard or footboard. In the living room, smaller pieces may be preferable to an overstuffed sectional that seats 10. Remember, the living room is a key room for buyers, so it may be worth renting furniture that shows off its size and other features, such as built-in bookshelves or a fireplace.

11. Clear the Air

If you have pets or a smoker in your home, you may need to take some extra steps to keep buyers from sniffing them out. You may want to have the rugs cleaned, and if you haven’t done it in a while, it may help to have the ductwork cleaned as well. Mildew may be another odor issue. If odors linger, open the windows if possible, but be sparing with sprays and plug-in air fresheners — some buyers may be sensitive to certain smells. If a quick cover-up is necessary, consider baking some cookies.

12. Define Rooms

Give each room a purpose, even if you don’t use the space that way yourself. Could a spare bedroom be turned into a craft room or office? Would your attic be a great space for a teen hangout room? Could your basement be transformed into a home theater by moving a TV downstairs and adding a popcorn machine? Get buyers excited about the possibilities.

The Takeaway

Any competitive edge a home seller can find is worth considering. Home staging could boost the timeline and the bottom line of the deal. At the very least, you’ll want to tidy and spruce up your home so you can get the deal done and move on to your next home as swiftly as possible.

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

What is the three-foot and five-foot rule in home staging?

The three-foot and five-foot rule in home staging is a visual guideline that a well-staged room should look good both from a slight distance (5 feet) and up close (three feet). This means keeping areas sparkling clean and free of clutter and adding some decor items that are larger and look good from a distance, and others that are smaller details seen only up close.

What is the 1/5 rule in home staging?

While the exact “1/5 rule” terminology is more common in consumer staging tips, professional staging guidance emphasizes the same principle: storage areas such as closets, cabinets, and shelving should be kept well-organized and only partially filled. This allows buyers to clearly see the available storage space and visualize how their belongings might fit, making rooms feel larger, more functional, and appealing. Overstuffed storage can make a home feel cluttered and smaller, so staging experts recommend showing just enough items to suggest utility without overcrowding.

Are small decor items important in staging?

Yes — using decorative accents strategically enhances visual appeal. Staging experts recommend a mix of larger items (like lamps or rugs) that draw the eye from a distance, and smaller items (books, vases, plants) for up-close interest. This creates depth and makes rooms feel lived-in but uncluttered.

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Photo credit: iStock/FollowTheFlow

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

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

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

This content is provided for informational and educational purposes only and should not be construed as financial 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.

SOHL-Q126-133

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One thing you should always look out for, regardless of the type of loan you’re applying for, is a loan origination fee. Many lenders charge origination fees for new loans to help cover costs on their end. What these fees are called and what they amount to, however, can vary quite a bit from lender to lender.

Knowing these things about origination fees before you settle on a lender can help you make the right borrowing decision for your financial situation.

What Is a Loan Origination Fee?

An origination fee is a cost the lender charges for a new loan. It’s a one-time expense you are generally asked to pay at the time the loan closes. The fee covers the costs the lender incurs for processing and closing the loan.

How Are Origination Fees Determined?

Loan origination fees depend on a number of factors. They include:

•   Type of loan

•   Amount of loan

•   Credit score

•   Inclusion of a cosigner

•   Your financial situation, including assets, liabilities, and total income

Recommended: First-Time Homebuyer Guide

Do I Have to Pay Origination Fees?

You don’t necessarily have to pay origination fees for a home mortgage loan — while most lenders charge these fees, not all do. Additionally, origination fees may be negotiable. You could ask a lender to simply lower the fee or offer you a credit to offset at least a portion of the fees. They might also agree to lower the fees if you pay a higher interest rate.

To minimize the sting of loan origination fees, research your loan options. Compare how much you’d pay overall for different loan offers, factoring in the term of the loan, the interest rate, and any fees.

One way to effectively compare and contrast different loan options is to check each loan’s annual percentage rate (APR), an important mortgage basic to understand. A loan’s APR provides a more complete view of the cost you’ll incur over the life of the loan. This is because the APR factors in the fees and costs associated with the loan, in addition to the loan’s interest rate.

The Truth in Lending Act requires lenders to disclose an APR for all types of consumer loans. Along with the APR, you’ll also see any fees that a lender may charge listed, including prepayment penalties.

Recommended: FHA Loans

How Much Are Loan Origination Fees?

How much a lender charges and what the fee is called varies based on the type of loan and the lender.

An origination fee is traditionally a percentage of the loan amount — and that percentage depends on the type of loan. For a mortgage, for instance, an origination fee is generally 0.50% to 1%. Origination fees for personal loans, on the other hand, can range from 1% to 10% of the loan amount, depending on a borrower’s credit score as well as the length, amount, and, sometimes, the intended use of the loan.

There are various other origination fees that lenders may charge, and these can be flat charges rather than percentages of loan amounts. Other fees that lenders may charge to originate a loan could be processing, underwriting, administration, or document preparation fees.

Can Loan Origination Fees Affect Your Taxes?

Loan origination fees, categorized by the IRS as points, may be deductible as home mortgage interest. This can be the case even if the seller pays them. Borrowers who can deduct all of the interest on their mortgage may even be able to deduct all of the points, or loan origination fees, paid on their mortgage.

To claim this deduction, borrowers must meet certain conditions laid out by the IRS. They’ll then need to itemize deductions on Schedule A (Form 1040), Itemized Deductions.

The Takeaway

Loan origination fees are important to consider when shopping for a loan during the home-buying process. Lenders charge these fees to help cover their costs of processing and closing a new loan application. While many lenders charge origination fees, not all do, and some may be willing to negotiate.

Origination fees are just one reason it’s important to shop around and compare home loans. With a SoFi Home Loan, for instance, qualified first-time homebuyers can make a down payment as low as 3%.

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

Are origination fees negotiable?

Some lenders may be willing to negotiate. They may agree to lower a fee, offer a credit, or reduce the fees if you pay a higher interest rate.

Is it better to pay an origination fee or not?

It depends on the loan offers you receive. The APR is one way to compare loans effectively, as it factors in the fees and costs associated with a loan.

Are loan origination fees tax-deductible?

Some origination fees may be deductible. The IRS has laid out conditions limiting deductions for the costs of obtaining a mortgage.

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

SoFi 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 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.
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.
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.

SOHL-Q126-106

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Insured by the Federal Housing Administration (FHA), FHA 203(b) and FHA 203(k) loans are both types of mortgages with more flexible credit and income requirements than conventional mortgages. While the FHA 203(b) loan is the flagship loan program for homebuyers, 203(k) loans can help you buy a fixer-upper in need of significant repair by rolling repair costs into the mortgage amount. Learn more about FHA 203(b) vs 203(k) and their key similarities and differences.

Note: SoFi does not offer FHA 203(b) or FHA 203(k) loans at this time.

FHA 203(b) Loans

Often simply referred to as FHA loans, FHA 203(b) loans are mortgages for homebuyers. Current homeowners can also use FHA 203(b) loans to refinance their home loans.

What Is an FHA 203(b) Loan?

FHA 203(b) loans are insured by the FHA and may be more accessible to borrowers with less-than-stellar credit or a high debt-to-income ratio than conventional mortgages.

Here are some of the main points about these loans:

•   You can use one to purchase a single-family home or a property with up to four units that you use as your primary residence.

•   Whatever type of property you choose, it must pass the FHA’s appraisal and inspection standards. Basically, the home must be in good condition and not require major repairs or renovations.

•   FHA 203(b) loans come with both upfront and annual mortgage insurance premiums (MIPs). The upfront cost is 1.75% of your loan amount and is collected at closing, while the annual costs vary depending on your loan-to-value ratio and other factors.

•   You’ll pay the MIP for 11 years if your down payment is 10% or higher. If your down payment falls below 10%, you’ll pay MIP for the life of the loan.

Eligibility Requirements

While FHA 203(b) loans are insured by the FHA, you’ll have to apply for one through a participating lender, such as a bank or credit union. Here are the eligibility requirements borrowers must meet:

•   Credit score of 500 or higher: You can qualify with a credit score as low as 500 if your down payment is at least 10%. If your down payment is lower, you generally need a credit score of 580 or higher.

•   Down payment of at least 3.5%: You must provide a minimum down payment for an FHA loan of 3.5%, but a down payment of 10% or higher can mean a lower credit score requirement and fewer years of MIP payments.

•   DTI ratio no higher than 43%: Your DTI compares your monthly debt with your income. In order to get a 203(b) loan, your debt shouldn’t exceed 43% of your monthly gross income.

•   Loan size that falls within FHA limits: The limits vary by property size but currently fall between $541,287 and $1,249,125 for one-unit properties.

Property Requirements

You won’t need an inspection to obtain an FHA loan, but before a lender can issue you an FHA 203(b) loan, an official appraiser needs to check that the property meets FHA standards for safety, security, and soundness. The appraiser will check the interior and exterior of the home and look for features such as:

•   Functional home systems and appliances

•   A well-ventilated basement or crawl space

•   Working plumbing with hot and cold water

•   A roof with at least two years of life left

•   A durable foundation with sufficient drainage

The home must meet the FHA’s minimum property standards in order to be eligible for FHA loan financing. It should also adhere to FHA flipping rules, which are designed to prevent borrowers and lenders from falling prey to fraud.

Found a home that needs significant work? Then you might be better off with an FHA 203(k) loan.

FHA 203(k) Loans

The FHA 203(k) loan program is geared toward fixer-uppers that need major repairs. Here are the details of FHA 203(k) loans, including how they work and their eligibility requirements.

What Is an FHA 203(k) Loan?

FHA 203(k) loans help you finance the purchase of a home and the costs of its repairs in a single mortgage. There are two types: the limited 203(k) loan and the standard 203(k) loan.

The limited 203(k) loan lets you finance up to $75,000 in your mortgage for repairs and upgrades. The standard 203(k) loan doesn’t specify a maximum limit, but it’s designed for major repairs that will cost at least $5,000. The total property value and cost of repairs, however, must still fall within the FHA’s maximum mortgage limits.

Some projects that a 203(k) loan could cover include:

•   Fixing the roofing, siding, and weatherproofing

•   Performing electrical repairs

•   Repairing or replacing major appliances

•   Performing structural repairs

•   Adding accessibility features

Eligibility Requirements

The eligibility requirements for an FHA 203(k) loan are similar to those of an FHA 203(b) loan. You’ll need a credit score of at least 500 or 580, depending on your down payment size, and a DTI ratio no higher than 43%. The minimum down payment requirement is 3.5%, and the loan comes with upfront and annual MIP costs.

Property Requirements

If you apply for a 203(k) loan, an official appraiser will check out the property and gather details on its interior and exterior structure. The home must be in need of at least $5,000 in repairs to qualify for the standard 203(k) loan. As of November 2024, you generally need to complete the work within 12 months for the standard loan and nine months for the limited 203(k) loan.

Recommended: Home Loan Help Center

Comparing FHA 203(b) and FHA 203(k) Loans

You’ll see a lot of similarities between the FHA 203(b) and 203(k) loans. Both are insured by the FHA and have less strict credit and DTI requirements than conventional mortgages. Plus, they require only a 3.5% down payment, making them accessible to homebuyers with limited funds upfront.

However, 203(b) loans are meant to help you buy a turnkey house that is more or less move-in ready. The home must meet the FHA’s minimum property standards and not have any major structural issues or damage.

A 203(k) loan, meanwhile, can be used to finance a fixer-upper that needs work. This type of loan lets you roll the repair costs into the mortgage so you don’t have to pay for them out of pocket. However, you’ll need to finish the work within a certain time frame.

Deciding Between FHA 203(b) and FHA 203(k)

A 203(b) loan is the more common choice among FHA loans. It could be a good fit if you want to buy a home or invest in a property that’s in relatively good condition. An FHA 203(k) loan could make sense if you’re looking to buy a home in need of repair. Keep in mind, though, that you’ll end up paying interest on any repair costs that you roll into the mortgage. Plus, FHA 203(k) loans can have slightly higher interest rates than their 203(b) counterparts, around 0.75%-1% more.

Recommended: Tips To Qualify for a Mortgage

Applying for FHA 203(b) and FHA 203(k) Loans

If you’ve studied an FHA loan guide and think this type of loan is for you, you can apply for an FHA 203(b) or 203(k) loan with a lender that issues these types of loans. It’s a good idea to explore your options for both FHA loans and conventional mortgages to determine which type of financing would be most affordable for you.

Lender Requirements

The lender has to abide by FHA criteria, but they may set even higher requirements. Some companies, for example, will only consider potential FHA borrowers with a credit score of at least 580. It could be worth shopping around to find a lender with requirements for credit score, DTI ratio, and other financial factors that you can meet.

Required Documentation

As with any type of mortgage, you’ll need to provide documentation to get an FHA loan. This may include:

•   Income tax returns

•   W-2s or 1099s

•   Pay stubs

•   Bank account statements

•   Identification

The lender will also run a credit check to review your credit.

Application Process

You’ll need to fill out an application for your FHA loan with your personal and financial details, as well as information on the property and your down payment amount. After submitting the application, you’ll likely encounter the following steps:

•   Schedule an appraisal: An FHA-approved appraiser will evaluate the property and determine its market value.

•   Wait for loan underwriting: The lender will verify your information and process your loan. You may be asked to submit additional information or documentation during this time.

•   Close on your loan: Once everything goes through, you can close on your loan, provide your down payment, and move forward with purchasing your new home.

If you’re applying for an FHA 203(k)h loan, you may need to work with a consultant, who will estimate repair costs for the home. Working with a licensed contractor who understands the 203(k) loan requirements may also be part of the process. Once the work is finished, the consultant will evaluate the project to ensure it meets FHA standards.

The Takeaway

FHA loans can be a useful financing option for homebuyers who may not be able to meet the credit and DTI ratio requirements for a conventional mortgage, though they do come with mortgage insurance premiums that can increase the cost of borrowing. A 203(b) loan can help you purchase a move-in-ready home, while a 203(k) loan can be used to finance renovations and repairs.

SoFi offers a wide range of FHA loan options that are easier to qualify for and may have a lower interest rate than a conventional mortgage. You can put down as little as 3.5%, making an FHA loan a great option for first-time homebuyers.

Another perk: FHA loans are assumable mortgages!

FAQ

Can I use an FHA 203(k) loan for a new-construction home?

No, an FHA 203(k) loan isn’t eligible for a brand-new construction home. This is because the program is specifically designed to help homebuyers finance the purchase and necessary major repairs of an existing fixer-upper property, which must be at least one year old.

Are there limits on the renovation costs for an FHA 203(k) loan?

With a limited FHA 203(k) loan, homebuyers can finance up to $75,000 in their home loan to repair their home. A standard 203(k) loan, meanwhile, can finance major rehabilitation and repairs as long as the costs are at least $5,000. The total cost of the loan and renovation cannot exceed the FHA Maximum Loan Limit, which was $541,287 in 2025 for a single-family home in most places.

Are interest rates different for 203(b) and 203(k) loans?

FHA 203(k) loans typically have interest rates that are about 0.75% to 1% higher than standard FHA loans, according to The Mortgage Reports. You should also consider that you’ll be paying interest on the full amount, which includes the repair and renovation costs that are rolled into the 203(k) mortgage.

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Photo credit: iStock/andresr

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

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

*SoFi requires Private Mortgage Insurance (PMI) for conforming home loans with a loan-to-value (LTV) ratio greater than 80%. As little as 3% down payments are for qualifying first-time homebuyers only. 5% minimum applies to other borrowers. Other loan types may require different fees or insurance (e.g., VA funding fee, FHA Mortgage Insurance Premiums, etc.). Loan requirements may vary depending on your down payment amount, and minimum down payment varies by loan type.
^¹FHA loans are subject to unique terms and conditions established by FHA and SoFi. Ask your SoFi loan officer for details about eligibility, documentation, and other requirements. FHA loans require an Upfront Mortgage Insurance Premium (UFMIP), which may be financed or paid at closing, in addition to monthly Mortgage Insurance Premiums (MIP). Maximum loan amounts vary by county. The minimum FHA mortgage down payment is 3.5% for those who qualify financially for a primary purchase. SoFi is not affiliated with any government agency. Financial Tips & Strategies: The tips provided on this website are of a general nature and do not take into account your specific objectives, financial situation, and needs. You should always consider their appropriateness given your own circumstances.
Third-Party Brand Mentions: No brands, products, or companies mentioned are affiliated with SoFi, nor do they endorse or sponsor this article. Third-party trademarks referenced herein are property of their respective owners.
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.

SOHL-Q126-120

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A due-on-sale clause — also known as an alienation clause — is commonly found in the fine print of a mortgage agreement. It allows lenders to enforce repayment of the balance of a home loan when the property is sold or, in some instances, transferred to another owner. That’s a simple explanation, but there’s more to it, so let’s dig a bit deeper.

What Is a Due-on-Sale Clause?

Understanding how home loans work is an important part of the home-buying process. Here’s what to know about a due-on-sale clause before you sell or purchase a home:

Definition and Purpose

A mortgage due-on-sale clause requires that your loan be repaid in full when the home is sold. You may have heard that assumable mortgages are becoming more popular as a way for buyers to sidestep higher interest rates by taking over a seller’s mortgage at a lower-than-typical rate. The due-on-sale clause prevents a homeowner’s mortgage from being assumed by whoever purchases the house from them.

Lenders began using due-on-sale clauses in the 1970s as interest rates spiked, and buyers often assumed the seller’s loan instead of applying for a new one with a higher rate. While homeowners won several court battles against this rule during that time, the U.S. Supreme Court ultimately ruled in favor of the banks. Congress formally legalized the due-on-sale clause for mortgages with the Garn-St. Germain Federal Depository Institutions Act in 1982.

Where It’s Found in Mortgage Documents

A due-on-sale clause should be located in your loan agreement. If you can’t find it in your paperwork, it’s worth calling your lender, especially if you plan to sell your house soon. Most, if not all, conventional loans are not assumable, meaning there should be a due-on-sale clause in place.

Some mortgages are assumable, and don’t have this type of clause in the loan agreement. Assumable loans include:

•   FHA loans backed by the FHA

•   VA loans backed by the U.S. Department of Veterans Affairs

•   U.S. Department of Agriculture loans

Remember, though, that even if a loan is assumable, the new borrower still needs to qualify for it. In many situations, however, they don’t have to go through the whole mortgage process. They simply get to assume the existing mortgage from the original owner. Also note that there are unique FHA flipping rules that you may need to be aware of if purchasing a home that has been owned by the seller for a brief time is a part of your plan.

Recommended: Choosing a Mortgage Term

How the Due-on-Sale Clause Works

Now that you understand what a due-on-sale clause is, find out how it works so you can avoid lenders invoking this part of your loan agreement.

Triggering Events

Lenders are notified when ownership of a property securing a loan is transferred. If the seller doesn’t automatically pay off the loan balance at closing, the lender may exercise the due-on-sale clause.

There are a few other situations that could trigger the due-on-sale clause. These include:

•   Transferring the property to a family member without a death or divorce

•   Transferring the property into an irrevocable trust

•   Transferring the property into a lease of more than three years

•   Changing ownership from a personal property to an LLC or vice-versa

Lender Rights and Actions

If this happens, the lender can foreclose on the home if the original borrower is unable to provide the remaining mortgage balance. In these situations, refinancing the property or possibly modifying the original loan are also possibilities. (To see how much your monthly payment would likely be after a refinance, use a mortgage calculator.)

Impact on Property Transfers

The due-on-sale clause makes it more difficult to transfer properties to new owners. Based on the Supreme Court ruling, the recipients of the property must meet certain criteria. Plus, even if they do meet the criteria, they must still qualify for the loan.

Exceptions to the Due-on-Sale Clause

There are exceptions in which the due-on-sale clause does not apply. These are:

•   Divorce: If the original borrower loses the house in a divorce settlement, the due-on-sale clause should not go into effect.

•   Inheritance: Should the primary borrower die, then their children or surviving spouse can inherit the house without triggering the due-on-sale clause. With the average mortgage length being 30 years, it’s understandable that unique rules had to be put in place to account for buyers who die before their mortgage is fully paid.

•   Joint tenancy: If two or more people jointly own a property, then the death of one owner doesn’t trigger the due-on-sale clause. Instead, the portion of the property owned by the deceased borrower transfers to the remaining borrowers.

•   Living trust: When a property is transferred to a living trust, there are no legal ramifications. A living trust is established by a property owner to manage an estate.

Implications for Buyers and Sellers

If you’re the seller, the due-on-sale clause simply means that whatever money you make in the sale of your house must be adequate to satisfy your remaining loan balance. If it doesn’t, you have to be able to pay off your remaining mortgage obligations with other funds.

For the buyer, the implication of the due-on-sale clause is that the seller must receive a minimum price before they can sell the home. The original lender must receive the amount due, or the house will not be eligible for sale.

Fortunately, the desire to transfer an existing mortgage to a new borrower who is unrelated to the seller doesn’t happen very often.

Legal Aspects and Enforcement

It’s important to remember that there are situations where the due-on-sale clause cannot be invoked. As noted above, a title transfer resulting from divorce or death usually forbids lenders from seeking immediate repayment. And even if lenders are within their rights, they must still provide ample notice before invoking the due-on-sale clause.

Recommended: Active Contingent in Real Estate: What You Need to Know

The Takeaway

The due-on-sale clause (or alienation clause) limits who can assume a homeowner’s existing mortgage and essentially establishes a minimum sale price, ensuring lenders receive any remaining balance when a home is sold.

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

SoFi Mortgages: simple, smart, and so affordable.

FAQ

Can I transfer my property without triggering the due-on-sale clause?

It depends on the situation, but there are some situations where it can be done, depending on the original loan agreement. For example, it’s often possible to transfer a property during a divorce or to transfer the property to an immediate family member after the death of the primary borrower.

What happens if I violate the due-on-sale clause?

If you violate the due-on-sale clause, your lender can demand immediate full repayment of your outstanding loan balance. If you are unable to pay, then you are at risk of foreclosure, which can damage your credit score for seven years.

Are there any mortgages without a due-on-sale clause?

It’s rare to find a conventional mortgage without a due-on-sale clause because it’s in the lender’s best interest. However, FHA, VA, and USDA loans typically don’t contain this clause.

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Photo credit: iStock/Perawit Boonchu

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

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

*SoFi requires Private Mortgage Insurance (PMI) for conforming home loans with a loan-to-value (LTV) ratio greater than 80%. As little as 3% down payments are for qualifying first-time homebuyers only. 5% minimum applies to other borrowers. Other loan types may require different fees or insurance (e.g., VA funding fee, FHA Mortgage Insurance Premiums, etc.). Loan requirements may vary depending on your down payment amount, and minimum down payment varies by loan type.
Financial Tips & Strategies: The tips provided on this website are of a general nature and do not take into account your specific objectives, financial situation, and needs. You should always consider their appropriateness given your own circumstances.
Third-Party Brand Mentions: No brands, products, or companies mentioned are affiliated with SoFi, nor do they endorse or sponsor this article. Third-party trademarks referenced herein are property of their respective owners.
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. ^¹FHA loans are subject to unique terms and conditions established by FHA and SoFi. Ask your SoFi loan officer for details about eligibility, documentation, and other requirements. FHA loans require an Upfront Mortgage Insurance Premium (UFMIP), which may be financed or paid at closing, in addition to monthly Mortgage Insurance Premiums (MIP). Maximum loan amounts vary by county. The minimum FHA mortgage down payment is 3.5% for those who qualify financially for a primary purchase. SoFi is not affiliated with any government agency. ^†Veterans, Service members, and members of the National Guard or Reserve may be eligible for a loan guaranteed by the U.S. Department of Veterans Affairs. VA loans are subject to unique terms and conditions established by VA and SoFi. Ask your SoFi loan officer for details about eligibility, documentation, and other requirements. VA loans typically require a one-time funding fee except as may be exempted by VA guidelines. The fee may be financed or paid at closing. The amount of the fee depends on the type of loan, the total amount of the loan, and, depending on loan type, prior use of VA eligibility and down payment amount. The VA funding fee is typically non-refundable. SoFi is not affiliated with any government agency. This article is not intended to be legal advice. Please consult an attorney for advice.

SOHL-Q126-118

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