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Renting out a room in your house can be a good source of extra income but generally isn’t something you want to do on a whim. From legal and financial considerations to aesthetics, there are lots of things to think about before offering the space to a potential housemate. Let’s take a look at some things to know before renting out a room in your home, so you can make a decision about renting with all the facts at your fingertips.

Is Renting Out a Room in Your House a Good Idea?

As more older Americans have decided to age in place instead of sell their home, there’s been a growth in the number of retirees interested in renting out a room in their home. Simultaneously, younger homebuyers (who came of age in the sharing economy) are facing higher purchase costs and may also be interested in taking in a tenant to help cover monthly mortgage payments. Indeed, for some homeowners renting out a room can be a good solution to financial challenges, provided an owner is willing to give up some privacy and convenience and can find a responsible renter.

What Are Some Room Rental Options?

Renting out a room in your house doesn’t have to mean having one long-term renter, although that’s certainly one way to go. Here’s a look at a few different rental options.

Short-term Rental

One option you might consider is offering short-term rentals through a service such as Airbnb or Vrbo. This could be a good choice if you live in an in-demand tourist area or have a home in an out-of-the-way locale that might attract someone looking for a place to relax and unwind. Some travelers prefer to stay in a home setting versus a hotel. Many local governments have taken steps to regulate these rentals, so check rules before proceeding.

Recommended: 25 Things to Know When Renting Out an Airbnb

Long-term Rental

Having a housemate who rents a room in your home for an extended period of time can be one way to have a steady income. It’s a good idea to have a formal rental agreement that clearly outlines expectations of both parties.

Furnished or Unfurnished Rental

Whether to offer a furnished or unfurnished space will probably be determined by the type of renter you’re looking for. If you live in a college town, prospective renters might not have any furnishings of their own, so will likely be looking for a furnished rental. As with a short-term rental mentioned above, a furnished rental will probably be a given. A potential long-term housemate, though, may have their own furnishings to bring to the space.

Financial Considerations When You Rent a Room in Your Home

For some people, the sole reason for renting a room in their house is to have extra income. With income, though, generally comes expenses.

Track Your Return on Investment

It’s not likely that a spare room is ready for a renter without some common home repair costs. Keeping a record of how much money you spend preparing the space will help you determine if you’re coming out ahead financially. It may take some time to recoup the money you spend before you make a profit. And it’s a good idea to have a record of any ongoing expenses you incur to make sure you’re charging enough rent to offset those costs. If you make upgrades to your property in preparation for a renter, try to focus on home improvements that increase value.

Recommended: What Is Considered a Good Return on Investment?

Don’t Forget Taxes

As you think about how to rent out a room, you’ll want to consider the tax implications. It’s wise to treat renting a room in your house as a business of sorts. The IRS considers the rental of part of your property, such as a spare room, as taxable income. And as with some business expenses, certain expenses related to this type of rental can be tax deductible. Any deductions claimed must be directly related to the portion of the home that is used for rental purposes.

If you deduct general household costs such as property taxes, the deduction is generally calculated as a percentage of the home’s total square footage. You may want to consult a tax professional who can answer detailed questions about rental income.

Setting Rent and Pricing Your Room

Looking at potential repair costs and tax liability will be important as you determine how much to charge for the space you are renting out. You’ll also want to look at similar rental offerings on local real estate sites. You may think the room in your home is worth about $1,500 a month, but if other listings are priced closer to $1,200, you may have to adjust your expectations.

Recommended: Cost to Repair a Plumbing Leak

Legal Considerations When Renting Out a Room in Your Home

It’s wise to look at your state’s landlord-tenant laws if you’re thinking about taking in a tenant. Some states are more landlord friendly, while other states have a wide range of protections for tenants, putting more limitations on landlords’ rights.

Even if you’re just renting out a room to an acquaintance, you’ll likely still need to adhere to regulations that apply to your situation. The Fair Housing Act protects potential tenants from discrimination except in limited circumstances. Shared housing is one of those circumstances because the government concluded that sharing one’s personal space has “significant privacy and safety considerations” in a U.S. Court of Appeals ruling.

Local Permits and Zoning Rules

Before you embark on your rental project, you’ll need to check your town’s rules around short- and long-term tenants. Some towns restrict short-term rentals, such as Airbnb, while others have rules around both short- and long-term tenants. While towns don’t typically prevent long-term rentals, they may have rent guidelines. Oregon and California have statewide regulations governing rent increases.

Other Rental Restrictions

It’s also a good idea to examine your neighborhood or homeowner’s association rules, if you have one. And if you rent your home or apartment, your lease may specify whether you’re allowed to sublease or if you’re restricted from doing so.

Your homeowner’s insurance policy may also include a clause related to leasing part of your home. Some companies may allow you to rent a room in your home without any change to your policy, while others may disallow it completely. There’s a chance you may see an increase in your premium, as well. To be on the safe side, it’s a good idea to let your insurance agent know of any change in your home’s occupancy. While you’re at it, check into what if any help you might get from your insurer if you encounter repairs related to your tenant. What is your plumbing issues coverage, for example?

Recommended: Condo vs. Townhouse

The Rental Agreement

Having a formal, written lease in place will go a long way in protecting both you and your renter. A thorough agreement might include:

•   The leasing period — it’s typical for a lease to be for one year, but if you’re renting a room to college students, you may consider a shorter lease for the duration of the school year. This section might specifically note the move-in and move-out dates.

•   Rent amount — including the due date, how you would like to collect it, and any late fees you might charge.

•   Security deposit — the amount and conditions for returning or withholding it at the end of the lease.

•   Utility costs — are they included in the monthly rent or will the renter be responsible for paying their share of the total bills?

•   Shared spaces — expectations around common areas like the kitchen, living room, and bathroom.

•   Guests — what if any restrictions do you want to put around guests, including overnight guests, and parties. Is there a maximum number of guests you will allow?

•   Pets — are they allowed or not, as well as policies about pet messes and noise.

•   Cleaning and maintenance — will the renter be responsible for regular house cleaning, including private and common areas, and home maintenance, inside or out?

•   Parking — if there is a parking space available, is it included in the rent or is it a separate charge?

Covering a wide variety of things in a rental agreement can go a long way in avoiding misunderstanding and miscommunication between you and your tenant. Having an attorney review the agreement is a good way to make sure you’re not missing important elements. Lease agreements are legally binding contracts when signed by both parties.

It’s also a good idea to do a walk-through of the room with the tenant before signing the lease and again before they move out. Any damage can be documented so it’s clear that the tenant isn’t responsible for that damage. (Some landlords require tenants to obtain rental insurance just in case.) A final walk-through can be done before the tenant moves out, during which any additional damage can be documented and accounted for.

What Are the Costs of Renting a Room in Your House?

You may encounter costs preparing a room to be rented as well as ongoing expenses related to having another person living in the home.

Preparing the Room for Rental

Safety for you and your tenant are important concerns. You may want to make sure doors and window locks are in good working order. Your tenant will likely want their room to be private, so a keyed lock on their door can go a long way to easing any concerns they might have about living in someone else’s home. Providing a combination safe for the tenant’s valuables might be a nice gesture.

Installing locks on doors to any areas you don’t want your tenant to have access to is another layer of safety you may want to consider.

Fixing loose railings, sticking doors or windows, flooring trip hazards, and doing other home maintenance that could mitigate safety issues is important in making your home and the individual room an attractive rental prospect for tenants.

You may want to make some cosmetic changes, too.

•   Painting the walls a neutral color may allow a prospective tenant to imagine their belongings in the room, instead of bright colors that might be a distraction to them. Using an easy-to-clean paint finish, like satin instead of flat, may also save you some effort after your tenant moves out.

•   If the room is carpeted, you might consider having the carpet cleaned, either professionally or using your own carpet cleaner. If the room is furnished with upholstered furniture, it can also be cleaned. Doing so will help the room look and smell fresh.

•   If you’re renting a furnished room, make sure the furnishings are clean and in good condition. Even used furniture can be presentable.

•   If the tenant will have a private bathroom space, the fixtures should be as modern as possible, but more importantly, clean and working. If the faucet drips, the bathtub leaks, or the toilet runs, make the repairs before renting the room.

•   Is the bathroom a shared space? Consider adding baskets or another type of storage for the tenant’s personal hygiene products. Making a cabinet available for their own use would be nice if there is space to do so.

•   Cleaning, decluttering, and updating other shared spaces such as the living room and kitchen can make your home look more inviting, possibly increasing your chances of finding a renter.

•   You might consider adding some storage space for a tenant’s use. It could be as simple as a stand-alone cabinet or a designated area in a basement or garage. The rental agreement could specify what isn’t allowed to be stored (e.g., no hazardous chemicals) and how much storage space is allotted. A prospective tenant might feel more comfortable storing belongings if the space is able to be secured.

Recommended: 20 Renter-Friendly House Updates

Increased Utility Costs

An extra person living in the house will likely increase utility usage. Costs for gas, electric, water, sewer, and other utilities will probably be more than you typically pay without an extra person in the house. You may want to calculate your average utility costs over the past year to have an idea what an extra person’s use might add to those costs.

Some landlords include the cost of utilities in the cost of rent, while others might require the tenant to cover a percentage of each monthly utility bill. When renting out a room in your house, it may not be convenient to have separate utility connections for a renter.

Covering the Cost of Making Your Room Rental Ready

Depending on how much work is needed, getting a room in your house ready for someone to rent could be a few hundred dollars or a few thousand dollars. You may be able to keep costs down by doing some of the work yourself, but you might want to hire a professional contractor for some tasks you feel comfortable doing on your own.

If you don’t have cash on hand to cover these costs, you could put the expenses on one or more credit cards. But because credit cards carry such high interest rates, you might want to avoid racking up a credit card bill you can’t pay down any time soon.

Financing options should be on your list of things to explore before renting out a room. Homeowners who have equity in their home might consider taking out a home equity financing such as a home equity line of credit (HELOC). These secured loans use your house as collateral. The application process can be lengthy and typically requires an appraisal of your home. Also, you risk losing your home if you don’t repay a home equity loan.

Another option is to apply for a personal loan. Personal loans are typically unsecured loans, which means you don’t have to put up any collateral to qualify for them. Many personal loans also have fixed interest rates. Home improvement loans are specifically designed for property upkeep and enhancements. For qualified borrowers, personal loans are usually approved and funded more quickly than home-equity-based financing, another plus.

Tips for Finding and Managing a Good Tenant

Finding the right person to share your personal space may take some time. You likely have certain things you’re looking for in a potential renter along with other things that might be deal-breakers. Maybe you’re looking for a non-smoker who has a solid rental history. A rental application is one tool that can help you find a housemate that fits the bill.

You may want to run a credit check and a background check on any applicants who are truly interested in renting a room in your house. These checks generally have fees associated with them, and it’s a good idea to specify in the rental application who will be responsible for paying for a credit and/or background check.

The applicant’s permission is required to run either of these checks and they are entitled to know if the results of either a credit or background check resulted in the denial of their rental application.

The Takeaway

From assessing your personal comfort level for sharing your space to formulating a rental agreement and making plans to pay for home improvements, there are lots of to-dos before you’re ready to rent out a room in your house. You can likely more than make up for upfront costs in rental income, but in the short term you’ll need to figure out a financing plan for your home repairs. A personal loan could provide the short-term infusion of cash you need to get a rental business off the ground.

Think twice before turning to high-interest credit cards. Consider a SoFi personal loan instead. SoFi offers competitive fixed rates and same-day funding. See your rate in minutes.

SoFi’s Personal Loan was named a NerdWallet 2026 winner for Best Personal Loan for Large Loan Amounts.

FAQ

Is renting out a room considered taxable income?

The money you receive from renting out a room is taxable income, according to IRS regulations. For this reason, it’s important to track both your revenue and your expenses associated with any rental property. Work with a tax advisor to make sure you capture any deductions you are eligible for, including depreciation and repair costs.

Do you need a lease agreement when renting a room?

Whether or not you need a formal lease agreement when renting out a room in your home will depend on your local or state regulations. But even if you aren’t required to have a lease when you rent out a room, it’s a good idea to have a legal document spelling out each party’s responsibilities in the arrangement. This protects you and your tenant and helps set clear ground rules for your landlord-tenant relationship.

How do you determine rent for a room in your house?

To set the rent for a room in your home, you’ll need to weigh your expenses associated with the home’s upkeep as well as the rental price of similar rooms in your local market. Ideally you will come away with a figure that is on par with market rates and that will cover your costs and allow for you to make some income on the deal.

Can you rent a room without being a landlord?

A landlord is defined as someone who rents out a room in a property that they own. So even if you are renting out a bedroom in a home where you live, you would be considered a landlord. If you are a renter and you sublease your room to someone else, you might not technically be a landlord (that would be the owner of the property with whom you signed a lease). But you’ll likely have obligations to the subtenant as well as to the building’s owner.

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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.

Tax Information: This article provides general background information only and is not intended to serve as legal or tax advice or as a substitute for legal counsel. You should consult your own attorney and/or tax advisor if you have a question requiring legal or tax advice.

Third Party Trademarks: Certified Financial Planner Board of Standards Center for Financial Planning, Inc. owns and licenses the certification marks CFP®, CERTIFIED FINANCIAL PLANNER®

This article is not intended to be legal advice. Please consult an attorney for advice.

SOPL-Q126-064

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When you purchase a home, you must pay closing costs, which include the fees the lender charges to recoup loan processing costs. These can add up to a hefty sum, typically 2% to 5% of your mortgage amount.

It is possible to take out a personal loan to cover closing costs and help you across the finish line, but it can be difficult, and borrowing money at this stage in the home purchase process could jeopardize your mortgage loan approval. Some buyers will choose to tap other funding sources for closing costs. Take a closer look at the pros and cons of using a personal loan for closing costs, plus the alternatives, so you can decide what’s best for your needs.

What Are Closing Costs?

Closing costs are fees paid to a lender and other professionals involved in the home purchase transaction.

•   Buyers: Buyers typically pay between 2% and 5% of the total loan amount in closing costs. Buyers must pay this amount out of pocket, so it’s important for them to have a plan for how they’ll access the money before they get to the closing table.

•   Sellers: If sellers contribute to closing costs (say, to negotiate a home sale), those fees usually get taken out from the sale proceeds.

Here’s an example: If you plan to buy a home with a $300,000 loan, as the buyer, you’ll need to bring between $6,000 and $15,000 to the closing table. If you were the seller, you’d see that amount taken out of the costs you’d pocket from the sale.

Fees Associated with Closing Costs

Closing cost fees may include:

•   Application fee: Lenders sometimes charge a one-time fee for borrowers to submit a loan application.

•   Credit report fee: A credit report or credit check fee covers the cost to dig into your credit report, which shows your credit history. Your lender uses the information it uncovers to decide whether to approve your loan and how much they’ll lend you.

•   Origination fee: You pay this fee to the lender to process the loan application.

•   Appraisal fee: A fee paid to a professional to appraise the home and determine its fair market value.

•   Title search: A title search looks into public records to determine who actually owns the property and who has liens on the property (for example, an unpaid contractor’s lien for work done on the home).

•   Title insurance: Title insurance protects you from financial loss and legal expenses in case the home has a bad title.

•   Underwriting fee: Underwriting is the process of reviewing your finances to determine the risk of offering you a mortgage, and the fees cover this process.

•   Property survey fee: Property survey fees cover the cost of checking the boundaries and easements of a property. This process shows exactly where the property’s perimeter is and what the property includes.

•   Attorney fee: You will probably need to hire a lawyer to review the terms in your purchase contract and handle your closing.

•   Discount points: Discount points, also called mortgage points, are a way to balance your upfront costs and your monthly loan payment. Each point you purchase reduces your interest rate by a certain percentage, meaning that you could pay less monthly and over your loan term.

•   Homeowners insurance premiums: Homeowners insurance provides financial protection if your home undergoes a disaster or accident. You must typically show your lender that you have purchased homeowners insurance.

•   Mortgage insurance: If you have a down payment of less than 20%, you will often have to pay mortgage insurance, a monthly fee that helps protect your lender if you were to default. You’ll also have to make a similar type of payment on Federal Housing Administration (FHA) and U.S. Department of Agriculture (USDA) loans. You may have to pay these insurance fees with your closing costs in addition to your monthly payments, particularly for the FHA and USDA loans.

•   Property tax: Homeowners pay property tax to state, county, and local authorities for schools, roads, and other municipal services. You may have to pay a portion of your property tax at closing.

•   Homeowners association (HOA) fees: If you’re buying into a neighborhood that has an HOA, or an organization that makes and enforces rules for a neighborhood, you may owe HOA fees at closing. The seller may pay these on a prorated basis.

•   Per-diem interest: Per-diem interest refers to the interest a lender charges for the days between a closing date and the first day of your billing period.

•   Transfer tax: State or local governments often charge real estate transfer taxes, meaning that they charge when properties transfer ownership.

•   Recording fee: State and local governments charge recording fees to legally record your deed, mortgage, and other home loan documents.

Note that this isn’t an exhaustive list of closing costs — you may be on the hook for other fees as well.

How Much Are Closing Costs Typically?

As noted above, closing costs tend to add up to 2% to 5% of your mortgage loan amount. They can vary according to your loan type, lender, and other factors. If you’re paying for a home with cash and not taking out a loan, you can still expect to have some costs associated with the closing. The total will likely be around 1% to 3% of the home purchase price.

Can You Use a Personal Loan for Closing Costs?

First, it’s important to understand how a personal loan works. It is usually funded by a bank, credit union, or online lender. You can typically use the money however you want — there aren’t as many restrictions on personal loans compared to, say, student loans. After you receive a personal loan, you pay it back with regular, fixed payments (with interest) over a specified term.

As mentioned above, you can use the cash as you see fit. So, yes, you can use a personal loan for closing costs. However, you can’t use it for a down payment, and you must tell your lender that you’re using a closing costs loan. The lender will include it in your debt-to-income (DTI) ratio, which is the amount of debt you have relative to your income.

Applying for a personal loan can involve prequalifying with several lenders and comparing their interest rate and terms, gathering required documents (ID, proof of address and income, Social Security number, and education history), filling out the loan application, and receiving your funds after approval. You may be able to get a personal loan in one to three days.

As you shop around for funds, you’ll likely want to consider what credit score you need for a personal loan at a given interest rate. Also consider the length of the loan term; this can typically range from one to seven years.

Why You Can’t Use a Personal Loan for a Down Payment

Borrowing money for a down payment is generally discouraged when purchasing a home. For one thing, it sends a signal to a potential lender that you are stretching your finances thin to make the home purchase. This is why some lenders, such as those offering conventional or FHA loans, forbid using personal loans for down payments.

How a Personal Loan Can Affect Mortgage Approval

A closing costs loan could result in a lender offering you a higher interest rate for your home mortgage loan. In some cases, financing closing costs could send a signal that you are having trouble making ends meet on the home purchase. A lender might decide not to approve your loan. This is why it’s important to discuss with a prospective lender the idea of financing your closing costs before you move forward.

Recommended: Guide to Personal Loans

Pros of Taking Out a Personal Loan for Closing Costs

Here are some potential benefits of taking out a personal loan for closing costs.

•   Collateral not required: Personal loans are often unsecured loans, meaning that you don’t have to put an asset up in order to receive the loan. Therefore, if you fail to repay the loan, your lender will not claim the asset to repay your debts.

•   Quick approval: It usually doesn’t take long to get a personal loan once you’ve been approved. After you submit your application and materials, it might take just a day to get the personal loan, though it could take longer.

•   Flexible repayment options: You can tap into flexible repayment plans, including no prepayment penalty, meaning that the lender won’t penalize you for paying off the loan early.

Recommended: How Personal Loans Impact Mortgages

Cons of Taking Out a Personal Loan for Closing Costs

Next, consider the downsides of using a personal loan to cover closing costs.

•   DTI ratio increase: Lenders will look at your overall debt under a microscope, so taking on a personal loan may factor into your overall debt. It may signal to the lender that you aren’t in a good financial position since an additional loan could raise your DTI ratio. It might keep you from being approved for a mortgage or could result in a higher mortgage interest rate.

•   Additional loan payment: You might find it tricky to repay a personal loan in addition to a mortgage payment. Consider whether you can comfortably make both payments every month.

•   High interest rates: There is the potential for high interest rates if you have poor credit. This can make it more challenging to afford a personal loan.

Recommended: Personal Loan Requirements

Alternatives to a Personal Loan for Closing Costs

You may have options you can turn to instead of getting a personal loan for closing costs. Consider how else you might handle those fees.

•   Roll them into your mortgage: You may be able to add your closing costs to your mortgage, but this means you’ll increase the principal balance of your loan. This will in turn increase the interest you’ll pay. But it will allow you to pay off your closing costs over the 10, 20, or 30 years of your home loan.

•   Ask for a waiver: Your lender may be willing to waive certain fees. For example, it may reduce certain processing fees. There’s no guarantee, but it can be worth asking. That might help chip away at your final closing cost amount.

•   Ask the seller to pay: As mentioned previously, sellers may pay for some of the closing costs if they’re eager to ensure that the property sale doesn’t fall through.

•   Tap into assistance programs: Many state and local governments offer down payment and closing cost assistance programs for moderate- to low-income home buyers. Look into your state’s housing finance agency, your city or county website, the U.S. Department of Housing and Urban Development (HUD), or check with your lender to learn more about your options.

•   Use gift money: Do you have a generous grandparent or parent who wants to help you cover your closing costs? Your state may have rules and regulations attached with gift money (especially ensuring that it’s an actual gift). Check with your lender to learn more.

•   Use savings: If you’re thinking about getting a loan for closing costs, perhaps you’ve already earmarked your savings for a down payment. If not, consider tapping savings to cover closing costs.

How to Decide if a Personal Loan for Closing Costs Is Right for You

Whether a personal loan is a suitable solution for closing costs is going to be based on your personal financial profile. If your DTI ratio is relatively low, taking out another loan on top of your mortgage may be doable. But ultimately you’ll want to confer with your lender so that seeking approval for a personal loan during the mortgage process doesn’t scuttle your entire deal.

The Takeaway

You may be able to use a personal loan to finance closing costs (the fees that can cost 2% to 5% of your home loan amount when you purchase a property). But while personal loans are a convenient source of funding, adding a personal loan to your monthly financial burden can also raise a red flag where mortgage lenders are concerned. It’s wise to carefully consider all the pros and cons, as well as alternative funding sources, when deciding whether to use a personal loan for closing costs.

Think twice before turning to high-interest credit cards. Consider a SoFi personal loan instead. SoFi offers competitive fixed rates and same-day funding. See your rate in minutes.

SoFi’s Personal Loan was named a NerdWallet 2026 winner for Best Personal Loan for Large Loan Amounts.

FAQ

Is it smart to finance closing costs?

Whether or not it’s smart to finance closing costs will depend on your personal situation. For those paying cash for a home and those who can handle the additional monthly loan payment, it may be a convenient move. On the other hand, getting a personal loan may increase your DTI ratio, which could lead a mortgage lender to charge you a higher interest rate or deny you a loan altogether.

Can I put closing costs on a credit card?

While you’ll usually use a cashier’s check, certified check, or wire transfer to pay for closing costs, you can put some closing costs on a credit card, such as attorney, appraisal, and survey fees. Check with your lender to learn more about which fees you can put on a credit card. (Also note that using your credit card in this way can raise your credit utilization rate and potentially lower your credit score.)

What is not an acceptable source of funds for closing?

Closing costs are typically paid by a cashier’s or certified check or by wire transfer. Funds for these could be acquired by such sources as a government program or a personal loan. Less frequently, credit cards, debit cards, and personal checks may be accepted for some closing costs.

Can you use a personal loan for closing costs on a refinance?

You might be able to use a personal loan for closing costs on a refinance, but whether it’s a good idea will depend on your overall debt load. It’s a good idea to speak with your prospective lender, who can give you a sense of whether using a personal loan in this way will compromise your refinance or increase the interest rate you’re offered.

When should you avoid using a personal loan for closing costs?

If you are already facing a debt-to-income ratio that is near the limit for a conventional mortgage (around 43% to 45%), you’ll probably want to avoid adding any new debt to your plate. Speak with your lender to learn whether a personal loan might result in an increased mortgage interest rate or might put your home loan approval at risk.

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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.

^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.
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Third Party Trademarks: Certified Financial Planner Board of Standards Center for Financial Planning, Inc. owns and licenses the certification marks CFP®, CERTIFIED FINANCIAL PLANNER®

SOPL-Q126-063

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The longer you live in your house, the more obvious it may become that you could use more living space — perhaps for a guest bedroom, home office, or workout space. Your first thought might be to build an addition, but the sticker shock may cause you to shelve that idea and instead consider an attic conversion.

Fortunately, an attic conversion is an idea that may be more economical than a complete home addition. Read on for a full breakdown of the cost to finish an attic.

Should You Convert Your Attic Space?

There are good arguments for converting an attic into usable space, including:

•  The space already exists in your home, making this choice both cost- and time-effective.

•  You don’t need to pour a foundation, again making it a viable and economical option.

•  Wiring is likely already in place and can be modified to suit your needs.

An attic conversion also allows you to use the entire envelope of your home, rather than wasting potential living space.

Before you fully commit to your attic remodel, though, make sure your attic has the potential to become a usable living space (more on that below).

Tips on Converting an Attic

One of the first things you might do before converting your attic is to see if your roof is being supported by W-shaped trusses in your attic. If so, building an addition might be a better choice. If your attic contains A-shaped rafters, though, that’s a plus; if there’s enough open space beneath the rafters, then you can potentially convert your attic into usable space.

Other steps to take before an attic remodel include:

•  Check your local building codes to make sure your remodel will fit. The rules vary by area, but a typical requirement is that the attic space must be at least 7.5 feet high and cover over 50% of the floor area. The thickness of the material will also factor into the final headroom and ceiling height. A sure way to add significant costs to your attic remodel is to be forced to change course mid-project because of a code violation.

•  Determine how you’ll get into the space. Will you need to add a staircase or expand the current one? Stairs that go straight up will need more floor space than, say, spiral staircases. Or perhaps your only option is a pull-down access point; this will limit the furniture and materials you can fit into your attic conversion and how utilitarian the new living space might be.

•  Consider whether you’ll need to add windows. If you’re creating an additional bedroom, codes may require an egress window in case of fire. But even if they aren’t required, you might consider adding windows or punching skylights that open to brighten the space with natural light.

•  Decide how much flooring needs to be reinforced, along with any electrical or plumbing issues. If you ultimately decide that your attic has what’s needed for a successful conversion, it’s time to think both practically and creatively to shape what may well become the most interesting — and potentially challenging — room in your house.

•  Consider your priorities and budget. Once you get a sense of costs (listed below) and what’s most important to you, you’ll want to come up with a budget and a plan for how you’ll pay for the upgrade. If you don’t have enough cash to cover the project, you may want to explore financing. Funding options for finishing an attic include using a credit card (generally a more expensive route), getting a home improvement loan (a type of unsecured personal loan designed for small to mid-sized home renovations), or applying for a home equity loan or line of credit (which uses your home as collateral for the loan).

•  Consult with a professional unless you’re already an experienced builder. Ask friends, family members, and building associations for recommendations and referrals, then request quotes from at least three contractors to understand the possibilities and associated costs. When you contact contractors, ask them for credentials. Compare bids, and, tempting as it may be, don’t automatically choose the lowest one. Make sure the contractor describes what will be provided as well as the estimated time frame.

How Much Does It Cost to Finish an Attic per Square Foot?

According to Angi, on average, you can expect to pay between $7,500 to $35,000 — or $30 to $200 per square foot — to refinish your attic. Converting your attic for storage would be cheaper than converting it for a living space.

Overall, costs vary depending on the overall square footage and the materials you use.

How Much Does It Cost to Finish an Attic per Task?

If you hire individual contractors for each aspect of your attic remodel, then it’s easy to see what each portion of the remodel is costing you. However, if you hire a contractor to manage the entire project, you likely won’t receive the project budget broken down into great detail.

What follows is a breakdown of common costs involved in an attic renovation.

Cost of Walls and Ceilings

New walls and ceilings can effectively transform an unfinished attic into a space that’s both comfortable and livable. Although prices vary depending on where you live, attic drywall can cost an average of $987 to $3,216 to install, with ceilings costing anywhere from $900 to $1,300 for a small bedroom.

Other aspects to consider: Will you paint the walls and ceilings? Add wallpaper? Do you need trim and crown molding? All of these features will incur additional costs and can quickly cause your project budget to skyrocket.

Cost of Flooring

Flooring is another important consideration, so first think about what’s located directly below the attic space. Do you need soundproofing? If a bedroom is located below the attic space, you’ll likely want some sound control. Insulation provides that to some degree, and carpeting adds even more dampening.

The cost of attic flooring will depend on the current state of the attic and what materials you choose. Replacing floor joists to beef up the strength will cost anywhere between $1,000 and $20,000, while installing subfloor typically runs between $900 and $3,000. Installing the flooring itself averages between $1,529 and $4,852, depending on material and square footage.

Cost of Windows and Skylights

If there currently are no windows in your attic, you may want to add an egress window, which will run you between around $700 and $9,500, as a safety precaution. You also might want windows or skylights to brighten the space with natural light. Expect to pay an average of $6,000-$25,000 for a dormer window and $1,011-$2,808 for a skylight.

Cost of Heating and Cooling

Your attic conversion might require additional heating and cooling. The average price to install an attic fan is $625, and a standard window AC costs about $138 to $527 per unit. A skillful contractor could also potentially tie in your current climate control system.

For heat, a baseboard heater costs between $200 and $1,100 on average, plus installation costs. If you need to add HVAC ductwork and vents to extend your home’s AC and central heating systems to the attic, you can expect to pay $10 to $25 per linear foot.

If your attic is difficult to access during the renovation period, contractors may tack on a surcharge. To get an idea of how much your attic renovation will cost, you may want to use an online home improvement cost calculator.

How Much Does It Cost to Finish an Attic Yourself?

It’s generally cheaper to go the DIY route than to hire a professional — though you will need some know-how. If you’re making minor improvements to your attic space (such as adding an attic fan and cleaning it up, you may be looking at an attic remodel cost as low as $300. However, if you’re looking to make a total transformation, your costs for materials could run as high as $50,000.

Though you’ll certainly save on labor costs, make sure to take into account the time involved if you decide to do it yourself as opposed to hiring a professional.

Recommended: Four Ways to Upgrade Your Home

How Much Does It Cost to Finish an Attic by Type?

How much it costs to finish an attic will also vary depending on the type of attic space you’re creating. Here’s a look at how much an attic remodel costs by attic type.

Cost of Finishing a Walk-Up Attic

The cost of finishing a walk-up attic generally ranges anywhere from $6,600 to $25,500. Large portions of the costs typically involve adding a staircase and installing flooring.

Finishing an Attic as a Storage Space

If you’re finishing an attic to serve as a storage space, your costs are generally a little lower as there isn’t as much polishing involved. Generally, the attic remodel cost for a storage space runs from $4,800 for a simpler setup to $22,000 if the space is larger and you opt for more elaborate storage systems.

Cost to Finish an Attic With a Dormer

Installing a dormer — a window that juts out vertically on a sloped roof — can add some ceiling height and natural sunlight to an attic. However, it will set you back. On average, a dormer conversion can run between $8,000 and $30,000.

Cost to Finish an Attic Above a Garage

The cost to finish an attic above a garage can vary widely depending on what’s involved, such as the installation of heating, insulation, or ventilation. You can typically expect to pay anywhere from $4,600 up to $24,000.

Recommended: Garage Conversion Ideas Worth the Effort

What Factors Influence the Cost of Finishing an Attic?

As you may have guessed from the wide-ranging estimates above, the cost of finishing an attic can vary a lot depending on the work involved and the materials used. Here’s a look at some major factors that can affect the cost of finishing an attic.

•  Square footage: How large your attic is will play a big role in the total costs involved in remodeling. The bigger the attic is, the more materials required and the more time it will take to finish it, which translates to additional labor costs.

•  Need for structural changes: You’ll also pay extra if your attic is an odd shape or difficult to access. These challenges could call for structural updates, such as the addition of height, the expansion of space, or the creation of a staircase.

•  Intended use: Your planned purpose for your attic will also influence cost. If you just want to add some additional storage space, you’ll pay a lot less than if you plan to install a full suite complete with a bedroom, bathroom, and closet.

•  Extra features desired: Unsurprisingly, the more features you want in your newly remodeled attic, the more it will cost you. Big-ticket items include windows, electricity, plumbing, and heating and cooling.

Of course, another factor that influences your cost is whether you need to get financing for the project, and, if so, what terms you’re able to secure.

The Takeaway

An attic conversion can be one way to create a unique room and add more usable space to your home. It also tends to be more economical than building an addition to your house. There are a lot of technical aspects to consider, and before getting started, it’s a good idea to check with your local building department if there are any building or permit requirements. You can then come up with a project wishlist and start soliciting bids from at least three contractors.

At the same time, you’ll want to determine if you’ll pay cash or finance all or some of the project. One financing option you might consider for an attic renovation is an unsecured personal loan. These are offered by banks, credit unions, and online lenders, and rates are typically lower than for credit cards. And unlike a home equity loan or home equity line of credit, you don’t need to use your home as collateral to qualify.

SoFi’s Personal Loan was named a NerdWallet 2026 winner for Best Personal Loan for Large Loan Amounts.

FAQ

How much does it cost to finish an attic?

Most attic conversions cost between $7,500 and $35,000, depending on the size of the space and the materials you choose. High‑end or specialized projects can cost more, especially if you add features like skylights, dormers, or upgraded HVAC.

What affects the total price of an attic renovation?

Costs vary based on square footage, structural needs, and the type of finishes you select. Adding insulation, flooring, ventilation, or windows can increase the overall price. Labor rates and regional construction costs also play a role.

Do I need a permit to finish my attic?

Many attic conversions require a building permit because they involve structural, electrical, or HVAC work. Local codes may also require minimum ceiling heights or egress windows. It’s wise to check with your local building department before starting.

Can finishing an attic increase my home’s value?

A finished attic can add usable square footage, which may boost your home’s value. Buyers often see finished attics as bonus rooms or flexible living spaces. The return depends on the quality of the renovation and your local market.

Is it possible to finish an attic on a budget?

Yes — focusing on essential improvements and avoiding major structural changes can help keep costs down. DIY work may reduce expenses, but electrical, HVAC, and structural tasks should be handled by professionals. Choosing cost‑effective materials also helps manage the budget.

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Photo credit: iStock/asbe

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.

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

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.

Financial Tips & Strategies: The tips provided on this website are of a general nature and do not take into account your specific objectives, financial situation, and needs. You should always consider their appropriateness given your own circumstances.

Third-Party Brand Mentions: No brands, products, or companies mentioned are affiliated with SoFi, nor do they endorse or sponsor this article. Third-party trademarks referenced herein are property of their respective owners.

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Guide. Supporter. Educator. A mortgage loan originator (MLO) wears many hats while finding a residential loan that will work for a borrower and steering the prospective homeowner or refinancer through the whole application process.

An MLO is the original point of contact for borrowers. Their role is regulated to prevent the kind of mortgage fraud that occurred during the housing crisis and financial meltdown of 2008.

Here’s what you should know about what MLOs do, how they’re regulated, and how they can help you get the right loan to the closing table.

What Is a Mortgage Loan Originator?

An MLO evaluates and recommends approval of residential loan applications on behalf of customers. Some work directly for a mortgage lender, while others, called mortgage brokers, are MLOs who offer options from several lenders.

MLOs might be paid a salary plus commission, but commission-only is far more common. They must be licensed in the states where they do business or under the umbrella of the bank, bank subsidiary, or credit union that employs them.

MLOs work to find a mortgage for each borrower’s unique situation. They must be excellent communicators since they guide people through the mortgage process. They educate the borrower about different kinds of mortgages, the application process, and how mortgages work, and they ensure legal compliance and completeness to close the loan.

Since MLOs often work on commission, it’s usually in their best interests to find a compatible loan for the borrower that will make it to the closing table. They don’t get paid if the loan falls through. To get your business, it’s also in their best interest to offer the most competitive terms possible.

What Is the Difference Between a Mortgage Loan Originator and a Mortgage Loan Officer?

Mortgage loan originator and mortgage loan officer are two names for the same role. The legal term used in federal statutes is loan originator, while individual financial institutions often use the job title loan officer. Regulators and some others refer to mortgage loan officers employed by financial institutions as mortgage loan originators.

A mortgage loan originator is anyone who negotiates or takes a residential mortgage application for a client with the expectation that they will be paid for their services.

What Does a Mortgage Loan Originator Do?

MLOs are responsible for taking a loan from application to closing. They may also negotiate terms of a residential mortgage on behalf of a client.

An MLO’s responsibilities may include:

•   Processing the customer’s application

•   Explaining the different types of mortgages available to a borrower

•   Asking for documents on the applicant’s background and financial information

•   Keeping track of documents

•   Submitting documents to underwriting

•   Relaying messages from underwriting

•   Scheduling a home appraisal

•   Addressing any home appraisal issues with the client

•   Asking for more documents as closing gets nearer

•   Scheduling the closing

•   Answering questions the borrower may have

•   Ensuring compliance with applicable laws

•   Developing relationships with real estate agents, builders, and individual clients

How to Become a Mortgage Loan Originator

Becoming a mortgage loan originator typically requires a bachelor’s degree and on-the-job training. Nonbank originators also need to be licensed.

Licensing

MLOs who are employed by banks, bank subsidiaries, or credit unions don’t have to obtain a loan originator license. All others must be licensed in the states they do business in and register with the NMLS.

General state licensing requirements include:

•   At least 20 hours of prelicensing education

•   Authorization to provide a credit report and criminal record

•   General character standards and demonstrated financial responsibility

•   A score of 75% or higher on the NMLS written test

•   Sponsorship by a company already registered with the NMLS

Licensing became required in 2008 following the housing collapse. It increases consumer protection and reduces mortgage fraud.

Average Salary

The median pay for mortgage loan officers in 2024 was $74,180 per year, according to the Bureau of Labor Statistics.

But because MLOs typically work solely on commission, earnings can vary widely based on the area, the number of closed loans, and the amount of the closed loans. The commission averages 1% of the loan amount.

Do I Need a Mortgage Loan Originator?

A mortgage loan originator is required when you need a new mortgage. Few mortgages are assumable by a buyer, so homebuyers will most likely need a new mortgage for their purchase or refinance and will need a mortgage loan originator.

How Do You Find a Good Mortgage Loan Originator?

A good MLO may be able to secure a loan that works for your situation and aptly guide you through the process. Want to know how to find a good loan originator? Here are a few tips.

Shop Around for a Mortgage

One of your most powerful tools for finding a good MLO is to shop around for a mortgage. Meet the people who will work with you on your mortgage and get loan estimates for the specific type of mortgage you’re looking for.

•   Ask for quotes from your bank or credit union: Your existing relationship with a bank may be valuable to them, and they may offer good terms.

•   Get recommendations from family or friends: Ask for advice from people who have been there and done that. You may find an originator that has great rates and is incredible to work with.

•   Conduct an internet search: You’ll find plenty of MLOs listed on the internet with a bounty of reviews. Try calling a few, and you may find a loan officer with competitive rates.

Compare a Direct Lender With a Mortgage Broker

When you’re looking for a good MLO, you’ll come across two main ways to find a mortgage for your home: mortgage brokers and direct lenders.

•   Direct lenders are the providers of the mortgage. When you go to a lender and apply for a loan, you’re working directly with the lender, which makes a decision without a middleman.

•   Mortgage brokers work for borrowers to find the best loans and terms for their individual situations. They may be able to point clients to a lender they wouldn’t have known about otherwise and save them money in the process. Lender commissions to brokers may span 0.50% to 2.75% of the loan amount, but lenders typically add the costs to the borrower’s loan. It’s a good idea to check credentials

with the NMLS.

Both can help get you a mortgage that may work for your situation, but you may find that you prefer one over the other when you’re looking for a good MLO.

If you apply for a mortgage with several lenders, it’s smart to compare the loan terms being offered in the loan estimate that you’ll receive.

Have an Idea of What Type of Mortgage You’re Looking For

Some lenders may specialize in a certain type of mortgage, so if you know what you’re looking for, you may be able to find a good loan originator more easily. If you’re looking for a renovation loan, for example, you might want to seek out a lender specializing in that type of loan.

Be Wary of Deals and Offers You See in Ads

Some lenders might advertise low payments or low interest rates, but those may not be what you’d end up getting. By law, lenders are required to disclose the loan terms to you on a standard form called a loan estimate after you’ve applied for a mortgage.

Using this form can help you compare loans fairly. It’ll list the mortgage APR, term, points, and all fees you’ll need to pay to engage the services of a particular lender.

Know What Questions to Ask

If you interview mortgage originators, certain questions can help you determine if you’ll be a match or not. Don’t know what to ask? Take a look at these mortgage questions.

The Takeaway

Finding a good MLO is worth the time it takes to explore your options and interview potential candidates. After all, getting the right mortgage, as an initial borrower or a refinancer, can mean significant savings — not just at origination but over the life of the loan.

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 questions will a mortgage loan originator ask?

A mortgage loan originator who is helping you prepare a home mortgage loan application will want to understand your income (how much you earn and how reliable your income stream is), your credit and work history, and your debts. Be prepared to answer questions about your salary, whether you are a W-2 employee or a freelancer, and how much you owe on any student loans, car payments, or other debts.

What documents should I prepare when working with a mortgage loan originator?

An MLO will ask for documents to verify your financial information, employment, and assets. Common documents include recent pay stubs, W-2 forms or 1099s/tax returns (if you’re self-employed), bank and investment statements, and photo identification. Having these readily available can help speed up your application and approval process.

Is a mortgage loan originator the same as an underwriter?

No, a mortgage loan originator (MLO) is not the same as an underwriter. An MLO, sometimes also called a mortgage loan officer, is a person or business that helps you apply for a mortgage loan. An underwriter is the person who reviews your loan application and decides whether or not to approve it and at what interest rate.

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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.

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.

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Loans have become an integral part of American financial life. We need a mortgage to buy our first home and an auto loan to purchase a car. More recently, people are turning to personal loans to pay surprise bills and avoid high-interest credit card debt. But just because you need a loan doesn’t mean a lender is going to give you the loan — and interest rate — you want.

If you’re struggling to qualify for a loan, a friend or family member may be able to help by becoming a co-borrower. By leveraging their income, credit score, and financial history, you may qualify for better loan terms. Let’s dive into the details.

Understanding Co-Borrowers

As you’re considering your options, a natural first question may be, what is a co-borrower? Essentially, a loan co-borrower takes on the loan with you, and their name appears on the loan alongside yours. They will be equally responsible for paying the loan back and have part ownership of whatever the loan buys. When you take out a mortgage with someone, the co-borrower will own half the home.

Spouses often co-borrow when buying property or taking out a personal loan for a home improvement or remodeling project. In other circumstances, two parties become co-borrowers so they can qualify for a larger loan or better loan terms than if they were to take out a loan solo.

Having a co-borrower can help two people who both want to achieve a financial goal — such as first-time homeownership or buying a new car — put in a stronger application than they might be able to do on their own. The lender will have double the financial history to consider, and two borrowers to rely on when it comes to repayment. Therefore, the loan is a less risky prospect for the lender, which may translate to more favorable terms.

Recommended: All About Variable Interest Rate Loans

Qualifying as a Co-Borrower

If you’re planning to have a co-borrower on your personal loan application, it helps to understand what criteria you both must meet in order to be accepted by the lender. Let’s take a closer look at common factors that lenders consider.

Credit Score

A credit score can have a significant impact on whether your loan application is approved and what terms you’re offered. There’s no magic number, but generally speaking, lenders prefer to see a score of 620 or higher. You and your co-borrower may want to check your credit scores at no cost before you apply.

Proof of Income and Employment

To help determine whether co-borrowers can afford loan payments, a lender will likely want to see proof of a stable income and employment. You may both be asked to provide recent pay stubs, tax returns, and bank statements. You might also be asked to show a letter from your employers verifying your employment status, how long you’ve both been employed, and your salaries.

Debt-to-Income Ratio

Debt-to-income ratio, or DTI ratio, is a comparison of your monthly debts to your gross monthly income (before taxes). Lenders use this information to help determine how risky it would be to loan money to a borrower. It can affect your ability to borrow money and the interest rate you’ll receive. Generally, lenders like to see a DTI that’s no higher than 36%, though there may be some wiggle room.

In addition to the above, lenders also usually consider:

•   Financial history. This includes recent bankruptcies, judgments, and liens.

•   Age. Many lenders have a minimum age for co-borrowers, typically 21 to 25 years of age.

•   Citizenship. Co-borrowers generally must be either citizens or permanent residents of the U.S.

Co-Borrower Process

If you’re applying for a loan with a co-borrower, the application process is fairly similar to the one you’d follow if you were applying alone.

A good first step is to reach out to your lender and start the prequalification process. If your co-borrower has a strong credit profile, that could improve your odds of qualifying for better rates and terms.

Next, you and your co-borrower will need to complete the loan application. You’ll also both undergo credit checks, and the lender will evaluate your finances. You may be asked to provide documentation such as pay stubs, bank statements, or tax forms.

Within a few days or so, you’ll find out if you’re approved and what your loan terms are. Once you agree to the terms, your loan funds will be disbursed, usually within a week. Your lender will also share details about how to make monthly payments.

Co-Borrower vs Cosigner

A cosigner plays a slightly different role than a co-borrower. A cosigner’s income and financial history are still factored into the loan decision, and their positive credit standing benefits the primary applicant’s loan application. But a cosigner does not share ownership of any property that the loan is used to purchase, and they will help make loan payments only if the primary borrower is unable to make them.

Cosigning helps assure lenders that someone will pay back the loan. Typically, a cosigner has a stronger financial history than the primary borrower. This can help someone get approved for a loan they might not qualify for on their own or secure better terms.

No matter which route you choose, there are potential credit implications to keep in mind. For example, when you apply for a loan, the lender will likely do a hard credit pull. This may cause credit scores to temporarily dip for you and your cosigner or co-borrower.

Both parties may also see a drop in their credit score if monthly payments are late or missed altogether. (And remember, cosigners will be on the hook for making loan payments if the main account holder can’t.) On the flip side, on-time payments can help boost or build credit scores.

When should you choose a cosigner vs. a co-borrower? The answer depends on your situation and goals. If you intend on sharing ownership of whatever you buy with the loan, then a co-borrower may be a good choice. If you simply need someone with a strong credit history to bolster your loan application, then consider using a cosigner.

Recommended: What Is Revolving Credit?

The Takeaway

Taking out a loan is a big decision, and doing so with a co-borrower carries additional risks. A co-borrower is a partner in the loan and any property the loan is used to purchase. If one borrower cannot make their payments, the co-borrower will be on the hook for the full amount. But if both parties can come to an agreement about how they’ll handle potential financial hardships, co-borrowing can have major benefits. By pooling their income and debt, borrowers may lower their debt-to-income ratio and qualify for a mortgage or personal loan with a lower interest rate and better terms.

Think twice before turning to high-interest credit cards. Consider a SoFi personal loan instead. SoFi offers competitive fixed rates and same-day funding. See your rate in minutes.

SoFi’s Personal Loan was named a NerdWallet 2026 winner for Best Personal Loan for Large Loan Amounts.

FAQ

Are co-borrowers equally responsible for a debt?

Co-borrowers are equally responsible for the debt. If one borrower cannot pay, the other must cover the entire amount.

Does a co-borrower increase your approval odds?

A co-borrower with a higher income or better credit score can help you qualify for a loan and potentially secure better interest rates.

Does a co-borrower have ownership rights?

A co-borrower typically has ownership rights to the asset being purchased. The co-borrower is a joint owner on the title and has a legal stake in the asset.

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Photo credit: Stocksy

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.

Disclaimer: Many factors affect your credit scores and the interest rates you may receive. SoFi is not a Credit Repair Organization as defined under federal or state law, including the Credit Repair Organizations Act. SoFi does not provide “credit repair” services or advice or assistance regarding “rebuilding” or “improving” your credit record, credit history, or credit rating. For details, see the FTC’s website .

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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