What Are the Different Types of Homes?

Guide to Different Types of Homes

If someone asked you to describe your “dream home,” what picture would pop into your mind? A single-family home with a big backyard, or a high-rise condo with a view? Maybe you’ve always longed to live on a houseboat.

Only you can decide which of the many house types out there is best for you or your family. But this guide to the different types of homes available to buyers could help narrow your search.

Common Types of Homes

As you think about where you’d like to live or what you need to buy a house, you can probably rule out a few of these home types on Day One. But from there it may help to look at the pros and cons of some home types side by side to help you narrow your search.

1. Apartments

The definition of an apartment can get a bit complicated because it can change depending on where you live. When someone talks about how to buy an apartment in New York City, for example, they might be referring to a condo or co-op.

Generally, though, an apartment is one of several residential units in a building owned by one person or company, and the owner rents each unit to individual tenants.

There are some pluses to that arrangement, especially if you take advantage of amenities like a gym or swimming pool. And monthly costs for utilities and insurance may be low. But because it’s a rental, you can’t build any equity. Also, if you want to stay or go, or make some changes to the apartment, you’re typically tied to the terms of your lease.

Pros and Cons of Renting an Apartment

Pros

Cons

Don’t have to come up with a big down payment May have to come up with a large security deposit
Repairs usually aren’t the tenants’ responsibility Tenants don’t build equity (so there’s no return on investment)
Lower monthly bills (especially if rent includes utilities) Tenants can lose their deposit if they break their lease
May have shares amenities Can’t make changes without permission

2. Condos

If you like some of the upsides of apartment living but you want a chance to build equity with each payment, you may enjoy owning a condo. Condo living isn’t for everyone — a house vs. condo quiz could help you decide between those types of homes — but a condo is a good choice for some.

You’ll share walls with other residents but will own your unit. That means you’ll be in charge of the repairs and upkeep on the interior, but you won’t have to worry about lawn maintenance, cleaning and fixing the pool, or exterior repairs. (You’ll likely pay a monthly or quarterly fee to cover those costs, though).

When you purchase a condo, you’ll have a chance to build equity over time as you make your home loan payments, but if the homeowners association (HOA) is poorly managed, your condo may not increase in value the way a home you care for yourself might.

Pros and Cons of Buying a Condo

Pros

Cons

Owners often can build equity Owners pay for interior maintenance
Mortgage may be less expensive than that of a single-family home Less privacy than a single-family home
Less maintenance than a single-family home Condo fees add to monthly payment
Shared amenities Single-family homes may increase in value faster

3. Co-ops

When it comes to condos vs. co-ops, it’s important to understand the differences if you’re shopping for a home or plan to.

The main difference is the ownership arrangement: When you buy into a co-op, you aren’t purchasing your unit; you’re buying shares of the company that owns the property. The market value of your unit determines the number of shares you own. Your shares determine the weight of your vote in what happens in common areas, and you’ll also split maintenance costs and other fees with your fellow residents based on how many shares you own.

Because co-op residents don’t actually own the units they live in, it can be challenging to find financing. Instead of a mortgage, you may have to get a different type of loan, called a co-op loan or share loan. And because of co-op restrictions, it may be difficult to rent out your unit.

Still, buying into a co-op may be less expensive than a condo, and you may have more control over how the property is managed.

Pros and Cons of Buying into a Co-Op

Pros

Cons

Often less expensive than a similarly sized condo May be difficult to find financing
Shareholders have a voice in how the property is managed May require a larger down payment than a condo purchase
Partners may have a say in who can purchase shares Co-op restrictions can make it tougher to buy in, and to rent your unit

4. Single-Family Homes

When someone says “house,” this is the type of structure most people probably think of — with a backyard, a garage, maybe a patio or front porch. Even if the yard is small, the house sits by itself. That can mean more privacy and more control over your environment.

Of course, that autonomy can come with extra costs, including higher homeowner’s insurance, taxes, maintenance and repairs, and maybe HOA fees.

The down payment and monthly payments also can be challenging, but buyers usually can expect the value of their home to increase over time.

And if you need money down the road — for a child’s education or some other planned or unexpected expense — you may be able to tap into home equity. Or you might plan to pay off the mortgage in 20 or 30 years and live rent-free in retirement.

Pros and Cons of Buying a Single-Family Home

Pros

Cons

Privacy and control Single-family homes tend to cost more than condos
Build equity if housing prices increase Maintenance and repairs can get expensive
Change or update your house in any way you choose (following HOA rules, if they apply) Property taxes (and HOA fees if applicable) can add to homeownership costs
Rent out your house if you choose, or renovate and sell for a profit
May have shared amenities as part of an HOA Putting in and maintaining a pool or gym may be up to the homeowner

5. Tiny Houses

Tiny homes, which usually have 400 square feet of living space or less, have a huge fan base. Some tiny houses are built to be easily moved, giving the owner physical freedom. Some are completely solar-powered and built to be eco-friendly. Many can be constructed from kits.

One downside is finding a place to legally park the tiny home. In most parts of the country, they are classified as recreational vehicles, not meant to be lived in full time, and usually only allowed in RV parks or campgrounds.

Another challenge is tiny house financing. A traditional mortgage is a nice thought, but just that, for a true tiny house. Options include a personal loan, builder financing, a chattel mortgage (a loan for a movable piece of personal property), and an RV loan if the tiny house meets the Recreational Vehicle Industry Association’s definition of an RV: “a vehicular-type unit primarily designed as temporary living quarters for recreational, camping, or seasonal use.”

A not-tiny consideration is making use of such a small space. Many people may not last long in a tiny home.

Pros and Cons of Buying a Tiny House

Pros

Cons

Low costs all around Limited legal parking locations
Environmentally efficient Financing can be a challenge
Easy to relocate if on wheels It’s tiny!

6. Townhomes

A townhome or townhouse can look and feel a lot like a detached house, in that it has its own entrance and may have its own driveway, basement, patio or deck, and even a small backyard. But these row houses, which are often found in cities like New York, San Francisco, and Washington, D.C., and usually have multiple stories, share at least one common wall with a neighboring home.

Those shared walls can make buying a townhouse more affordable than a comparable detached home. And owners who belong to an HOA with neighboring homes generally don’t have to worry about exterior upkeep, although owners of townhouses classified as fee simple are responsible for exterior maintenance of their structure and sometimes the surrounding yard.

The HOA also may offer some amenities. But that monthly or quarterly HOA fee will add to overall costs, and may rise over time.

And you may not have as much privacy as you’d like.

Pros and Cons of Buying a Townhome

Pros

Cons

May cost less than a similar single-family home HOA fees may be high
Little or no outdoor maintenance HOA restrictions
Shared amenities Multiple levels may be a problem for some
Several mortgage options Less privacy, more noise from neighbors

7. Modular Homes

It might be hard for the average person to answer “what is a modular home?” off the top of their head.

A modular home is made up of sections that are built in a factory, transported to a homesite, and assembled on a foundation there. This makes them different from traditional stick-built homes, which are constructed completely on-site. But both types of houses are held to the same local, state, and regional building codes.

Because the assembly-line part of the process is cost-effective, a modular home may be less expensive. Also, because weather isn’t a factor for part of the work, you can probably expect fewer delays.

Most modular homes are sold separately from the land. So if you already own a piece of property or like the idea of building outside a traditional neighborhood, a modular home might be a good choice.

Many people who choose a modular home use a construction loan for the build or a construction to permanent loan. A personal loan or use of home equity from an existing home are other options.

Pros and Cons of Buying a Modular Home

Pros

Cons

Can be less expensive than a similar stick-built home Land, site prep, and other costs are separate on new modular homes
May experience fewer construction delays Future buyers may prefer stick-built homes
Quality is as high or higher than a site-built home Financing can be tricky

8. Manufactured Homes

Manufactured homes, formerly known as mobile homes, are built completely off-site and then transported to the homesite and placed on a temporary or permanent foundation.

Manufactured homes are not held to the same local, state, and regional standards as stick-built or modular homes. Instead, they must conform to construction and installation standards set by the U.S. Department of Housing and Urban Development, and local land use and zoning regulations restrict where they can be placed.

Of course, there are plenty of communities that are designed just for manufactured homes, although the land in many of these “parks” is rented, not owned.

A growing number of lenders are providing conventional and government-insured mobile home financing. The loans, backed by the Federal Housing Administration (FHA) or U.S Department of Veterans Affairs (VA), are offered by approved lenders. agencies.)

The most common method of financing is an installment contract through the retailer. Depending on your situation, a personal loan or chattel loan could provide a shorter-term path to financing a manufactured home, generally less expensive than other types of detached homes.

Pros and Cons of Buying a Manufactured Home

Pros

Cons

The entire home is built off-site, so no weather delays Financing may be more challenging
More affordable than other detached homes Lot fees may be high and rising
May be able to move the home from one site to another You own the home but not the land under it

9. Cabins

Most people tend to think of a cabin as a cozy second home that’s made of logs or covered in cedar shakes. But there’s no reason a cabin can’t be your primary residence.

Just as with any other type of property, the price of a cabin can vary based on size, age, location, and amenities. If there’s an HOA, those fees can add to the cost.

If you’re considering a cabin because you’re buying a vacation home — aka a second home — know that loans for second homes have the same rates as primary homes. A 20% down payment is typical.

Pros and Cons of Buying a Cabin

Pros

Cons

You’re buying your very own getaway A second home could mean two loan payments and two sets of bills
You’re buying a rental property You might have to do repairs at inconvenient times
Could become your primary home in the future, or a legacy for future generations Maintenance can get expensive

10. Multi-Family Homes

Investors know the difference between single-family vs. multi-family homes.

For owners, the big advantage of a multi-family home is that it offers flexibility. Homeowners can buy a home with multiple units and rent out the spaces for extra income. Or an adult child or parent might decide to move into that secondary space.

These properties can be a good investment.

Do accessory dwelling units make a property a multi-family? It depends. Fannie Mae says a property may be classified as a two-unit property or single family with ADU based on the characteristics of the property.

Pros and Cons of Buying a Multi-family Home

Pros

Cons

Can share costs with others (renters or family members) May be more expensive than a single-family home
Keeps multigenerational family members close but gives them their own space Managing renters could be stressful
Can be a good investment Lack of privacy

11. Houseboat or Floating Home

Living in a home that’s actually on the water — not just near it — can be a dream come true … or a challenge.

Some “floating homes” are as big as a small house — and are built to be lived in in the same way — only on a floating foundation. Houseboats or liveaboards are typically much smaller than floating homes and more mobile, and they may not have the amenities a larger home can offer.

There are also substantial differences in what it can cost to buy and maintain these water residences. A floating home may cost much more upfront than a houseboat, but the insurance, taxes, and day-to-day costs of keeping a houseboat operating can run higher. And there may be more loan options available, including traditional mortgages, for those buying a floating home.

Comparing House Types

Whether you’re thinking about buying a single-family home, condo, tiny home, houseboat, or townhome, it’s important to keep your priorities in mind. Here are a few things to consider:

Finding Your Fit

If privacy is a priority, you might consider a …

•   Single-family detached home

•   Tiny home (on a large lot)

•   Modular or manufactured home

•   Cabin

If space is a priority, you might consider a …

•   Single-family detached home with an open floor plan

•   Larger condo, townhome, or co-op

•   Larger floating home

If affordability is a priority, you might consider a …

•   Smaller single-family home

•   Condo, co-op, or townhome

•   Tiny house

•   Modular or manufactured home

•   Cabin

•   Houseboat

If a sense of community is a priority, you might consider a …

•   Single-family home with community amenities

•   Condo, co-op, or townhome

•   Floating home or houseboat

•   Multi-family home

If uniqueness is a priority, you might consider a …

•   Tiny home

•   Cabin

•   Floating home or houseboat

If schools are a priority, you might consider …

•   Any home in a neighborhood that’s conducive to families with young children

If public transportation is a priority, you might consider a …

•   Condo, co-op, townhome, multi-family home, or single-family home in a larger town or city

The Takeaway

Understanding the different types of homes before you begin your search for a place to live can help you find your dream home more quickly, and free you up to take on other homebuying tasks. Besides choosing the type of home you want, you’ll also have to decide how to finance this important purchase if you’re not paying cash. A good way to start is to shop and compare rates.

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 type of house is cheapest?

Condos, co-ops, townhomes, and manufactured homes all tend to be less expensive than single-family homes. Among new single-family homes, modular homes tend to be the least expensive because they are made in a factory and assembled on-site.

Is it a good idea to buy a condo?

If you don’t mind sharing walls with your fellow condo complex residents, and you don’t want to have to deal with exterior upkeep, a condo might be a good fit for you. Condos are also often less expensive than freestanding, single-family homes.

Photo credit: iStock/CatLane


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.
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.
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.

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.

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Purchase-Money Mortgage: Definition and Example

Purchase-Money Mortgage: Definition and Example

With a purchase-money mortgage, the seller finances part or all of the property for the buyer, who usually does not qualify for traditional financing.

Keep reading to learn about the benefits and drawbacks of a purchase-money mortgage.

What Is a Purchase-Money Mortgage?

A purchase-money mortgage is also known as owner financing. The seller extends credit to the buyer to purchase the property. This can be a portion of the sales price or the full price.

In other words, the buyer borrows from the seller instead of from a traditional lender. The seller ultimately determines the interest rate, down payment, and closing costs. Both parties sign a promissory note.

They record a deed of trust or mortgage with the county. The seller usually retains title until the financed amount is paid off.

A purchase-money mortgage is a nontraditional financing method that may be needed when the buyer cannot obtain one of the other different mortgage types for purchasing the property.

The promise to pay is secured by the property, so if the buyer stops paying, the seller can foreclose and get the property back.

Recommended: How to Buy a Foreclosed Home the Simple Way

Purchase-Money Mortgage Example

Not all buyers have financial situations that make it easy for them to get a conventional mortgage. Even diligent shopping for a mortgage may not help them get the home loan they need.

If a buyer has a profitable business, for example, but doesn’t have two years of tax returns to prove steady cash flow, most mortgage lenders won’t take on the risk.

Enter a purchase-money mortgage. With the right property, seller, and situation, a buyer could finance the home with a purchase-money mortgage. The seller would offer terms to the buyer — usually a higher interest rate and a short repayment term, with a balloon mortgage payment at the end — and the buyer would enter into the agreement. The seller would hold title until the loan payoff.

Buyers and sellers who work with seller financing often intend for the purchase-money mortgage to be refinanced into a traditional mortgage with a lower mortgage payment at a later date.

Types of Purchase-Money Mortgages

Purchase-money mortgages can come in several forms.

Land Contract

A land contract (also called a contract for deed) is simply a mortgage from the seller. The buyer takes possession of the property immediately and pays the seller in installments.

Land contracts are often for five years or less, ending with a balloon payment.

Lease-Purchase Agreement

In a lease-purchase agreement, the buyer agrees to rent the property for a specified amount of time and then enter into a contract to purchase the property at a price that’s the current market value or a bit higher.

For this and a lease-option agreement, the seller typically requires a substantial upfront fee, an above-market lease rate, or both. Part of the monthly rent payment goes toward the purchase price.

Lease-Option Agreement

A lease-option agreement is similar to a lease-purchase agreement in that the buyer agrees to first rent the property for a specified amount of time. But with this agreement, the buyer has the option to purchase the property instead of making a commitment to purchase it.

Benefits of Purchase-Money Mortgages for Buyers

•   Buyers, including first-time homebuyers, may be able to obtain housing sooner than if they were to wait to qualify for a traditional mortgage through a lender.

•   The down payment may be more flexible for a purchase-money mortgage.

•   Requirements may be more flexible.

•   No or low closing costs.

Benefits of Purchase-Money Mortgages for Sellers

•   The seller may be able to get the full list price from a buyer who needs the seller’s help to obtain a mortgage.

•   The seller may be able to make some money by acting as the lender, including asking for a down payment and a higher interest rate.

•   Taxes may be lower as the amount is financed over time.

Recommended: How to Navigate the Mortgage Preapproval Process

Weighing the Pros and Cons of Seller Financing

If you have the option of financing with a purchase-money mortgage, you will want to look at all the angles. It may also be useful to use a mortgage calculator tool to help you determine what a potential payment on a purchase-money mortgage might be.

Pros

Cons

Buyer may be able to obtain the home with a purchase-money mortgage when other types of financing would be denied Buyer will not have full title until the total amount borrowed is paid off
Flexible financing allows the seller to help the buyer purchase the property Buyer may have little negotiating power when forging the deal
Increased equity may allow buyer to refinance into a traditional mortgage at the end of the purchase-money loan term Seller is able to determine the rate, term, and down payment
Seller can foreclose if the buyer does not meet contractual obligations

The Takeaway

If you’re able to secure financing from a seller, a purchase-money mortgage may be a good fit — if you have an exit plan in a few years. It’s smart for both buyers and sellers to know the risks and rewards of a purchase-money mortgage.

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

Who holds the title in a purchase-money mortgage?

The seller controls the legal title; the buyer gains equitable title by making payments.

Can a bank issue a purchase-money mortgage?

Yes, but it is not common. A buyer might pay for a house with a bank mortgage, cash, and a property seller mortgage. When the bank is aware of the amount financed by the seller, both the mortgage issued by the third-party lender and the seller financing are considered purchase-money mortgages.

Does a purchase-money mortgage require an appraisal?

Not if the seller does not require one. With owner financing, the seller sets the terms, which may not include an appraisal.


Photo credit: iStock/MicroStockHub

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.

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.

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

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Chattel Mortgages: How They Work and When to Get One

Chattel Mortgages: How They Work and When to Get One

Looking to buy a manufactured home, a boat, or a piece of equipment for your business? You may need a chattel mortgage.

Chattel mortgages are used to finance movable assets separately from the land they occupy. They come with a higher cost than a traditional mortgage, so manufactured home dwellers who qualify for a standard mortgage will save money by choosing that route.

Here’s what you need to know about how chattel loans work and when you might want to look for alternative financing.

What Is a Chattel Mortgage?

First of all, a chattel mortgage is used for personal property, not real property. Real property includes land and property that cannot be easily removed from the land.

When a chattel mortgage is used for a large, movable asset like a manufactured home — called a mobile home before June 15, 1976 — or a piece of equipment (the “chattel”), the asset is held as collateral on the loan. If the borrower defaults on the loan, the lender can recoup costs by selling the asset.

A chattel loan may have a lower interest rate than an unsecured personal loan but a higher rate than a traditional mortgage.

Note: SoFi does not offer chattel mortgages at this time. However, SoFi does offer conventional loan options.

How Does a Chattel Mortgage Work?

Chattel mortgages are used in two main instances: when an asset can be moved or when the land the asset sits on, or will, is leased. (In fewer cases, a chattel loan may be used when a borrower doesn’t want to encumber their owned land with a loan, as when land is owned jointly in a trust.)

Applying for a chattel loan is similar to applying for other types of loans, such as home equity loans and personal loans. The lender will look at your creditworthiness and ability to repay the loan before making a decision.

Chattel loans are typically small, with relatively short terms, but usually require no appraisal, title policy, survey, or doc stamps (the documentary stamp triggers a tax in certain states).

Recommended: First-Time Homebuyer Guide

What Are Chattel Loans Used For?

Here are some of the most common applications for chattel loans.

Manufactured Homes

Manufactured homes are built in a factory on a permanent chassis and can be transported in one or more sections. Formerly known as mobile homes, they’re designed to be used with or without a permanent foundation, but must be elevated and secured to resist flooding, floatation, collapse, or lateral movement.

Many are titled as personal property. Manufactured housing that is titled as personal property or chattel is only eligible for chattel financing.

When a manufactured home is titled as chattel, you’re also going to pay vehicle taxes to the Department of Motor Vehicles instead of property taxes.

Many consumers may encounter a chattel loan at the sales office of a manufactured home builder. They’re convenient with quick closing times, but come with a higher interest rate and a shorter term than most traditional mortgages.

This makes the financing cost of the manufactured home high, even if the payment is low thanks to the lower cost of a manufactured home compared with a site-built home. Around 42% of loans for manufactured homes are chattel loans, according to the Consumer Finance Protection Bureau.

When you own a manufactured home and rent the land it occupies, such as in a mobile home park, you will need a chattel mortgage, except when an FHA Title I loan is used.

Tiny Houses

A chattel mortgage may be used for tiny house financing when the tiny house is not affixed to a permanent foundation and/or when the land is leased.

Tiny houses are usually too small to meet building codes for a residential home, so even if the home is on a foundation and on owned land, a traditional mortgage is almost always out of the question. Even if Fannie Mae or FHA allows the property, the lender won’t.

Tiny houses on foundations are usually classified as accessory dwelling units.

Vehicles

A chattel loan may finance assets that are not permanently affixed to the property, such as vehicles. Dump trucks and construction vehicles may qualify.

Equipment

A chattel loan can be used to purchase large equipment for a business, such as a forklift or a tractor. Even livestock can be purchased with a chattel loan.

How Much Does a Chattel Mortgage Cost?

Chattel mortgages are more expensive than many other different mortgage types. The Urban Institute concluded that chattel loans were substantially more expensive than non-chattel loans. Owners of manufactured homes would spend thousands more per year in interest compared with a traditional mortgage.

These types of mortgages are not being purchased by Fannie Mae or Freddie Mac on the secondary mortgage market. When a conventional mortgage is purchased by one of these entities, the loan originator obtains more liquidity and can provide more loans to more people. This drives the cost of the mortgage down.

A chattel mortgage, on the other hand, must stay on the books of the lender, making the loan riskier and more expensive.
If you qualify, you might want to consider refinancing your chattel mortgage into a traditional mortgage.

Recommended: Home Loan Help Center

Chattel Mortgage vs Traditional Mortgage

To qualify for a conventional or government-backed mortgage instead of a chattel mortgage, you must own the land your home sits on, the home must be permanently affixed to a foundation, and it must have at least 400 square feet of living space (600 for Fannie Mae’s conventional loan for manufactured homes).

Mobile homes built before June 15, 1976, will not qualify for a mortgage loan. A personal loan is about the only option.

You must also meet all other requirements set forth by the lender to qualify for a traditional mortgage. A mortgage calculator tool can help with this.

For some types of assets, a chattel mortgage may be a good option to consider. Take a look at the major differences.

Chattel Loan

Traditional Mortgage

For movable property only Includes the land and all attached structures
May have a lower interest rate than an unsecured personal loan Usually has a lower interest rate than a chattel mortgage
Shorter terms (e.g., 5 years) Longer terms (e.g., 15 years, 30 years)
Lower origination fees Higher loan fees
Shorter close time Longer close time
Lender holds the title, which is only given to the buyer when it is paid off Lender holds a lien on the property, not title

Pros and Cons of a Chattel Mortgage

A chattel mortgage is more expensive than a traditional mortgage, so anyone who can qualify for a traditional mortgage may wish to pursue that option first. It’s not all bad news for chattel mortgages, though, especially for other types of property where a chattel loan is desirable.

Pros

Cons

Lender only has a security interest in the movable property, not the land If you default on the loan, the lender can take your asset. Also, the lender owns the asset until the loan is paid off
Taxes may be lower on property titled as “chattel” rather than “real” property Higher-cost loan than a traditional mortgage
Possible faster close and lower loan fees than a standard mortgage Fewer consumer protections. Chattel loans are not covered by the Real Estate Settlement Procedures Act or CARES Act
Lower interest rate than a personal loan Higher interest rate than a traditional mortgage
Pays down more quickly than a traditional mortgage Shorter term may create higher payments
Interest paid is tax deductible Interest paid is also tax deductible with a traditional mortgage

Consumer Protection and Chattel Mortgages

Chattel mortgages on manufactured homes are a special concern to the Consumer Financial Protection Bureau because that type of housing:

•   Serves an important role in low-income housing

•   Is typically taken on by financially vulnerable people

•   Has fewer consumer protections

Manufactured home sellers often have an on-site lender where borrowers can walk away with a chattel loan the same day as the home purchase. In certain scenarios, though, better financing options might be available.

The Takeaway

Buying a manufactured home or a piece of heavy equipment? A chattel loan could be the answer. If, though, you are buying a manufactured home and own the land, a traditional mortgage makes more sense than a chattel mortgage.

FAQ

Where can I get a chattel loan?

Lenders specializing in chattel or manufactured housing loans will offer this type of loan.

How much does a chattel mortgage cost?

The interest rate of a chattel mortgage could be several percentage points higher than that of a standard mortgage loan.

What happens at the end of a chattel mortgage?

When a chattel mortgage is paid off, the borrower receives legal title to the property or asset borrowed against. It’s also possible for landowners with permanently affixed manufactured homes to refinance into a traditional mortgage to end their chattel loans.

Is a chattel mortgage tax deductible?

A chattel mortgage qualifies for the same tax deductions that a traditional mortgage does. This includes a deduction on mortgage interest paid throughout the tax year.


Photo credit: iStock/MicroStockHub

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.

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.

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Personal Loan for Closing Costs

When you purchase a home, you must pay closing costs, which are the fees the lender charges to recoup loan processing costs. These can add up to a hefty sum, typically 3% to 6% of your mortgage amount.

Typically, you can take out a personal loan to cover those closing costs and help you across the finish line of a property purchase. You can often tap other funding sources as well. 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 processing fees that you pay to your lender, either as the buyer or seller in a real estate transaction:

•   Buyers: Buyers typically pay between 3% and 6% 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 $9,000 and $18,000 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 based on an evaluation to 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 are a way to balance your upfront costs and your monthly payment. If you use points to pay more upfront, you’ll likely have a lower interest rate, 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 paid homeowners insurance.

•   Mortgage insurance: If you have a down payment of less than 20%, you will often have to pay mortgage insurance, a fee per month that protects your lender if you were to default. You’ll also have to pay a version of mortgage insurance 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 plan to move to 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.

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’ll go this route and borrow to pay the closing costs. 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 them, 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.

Recommended: Guide to Personal Loans

Pros of Taking Out a Personal Loan for Closing Costs

Here are some of the key 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.

Cons of Taking Out a Personal Loan for Closing Costs

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

•   DTI 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 vs. 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 increase both the principal and the interest you’ll pay over your loan term and also translates to higher monthly payments.

•   Ask for a waiver: Your lender may be willing to waive certain fees. For example, they may reduce certain processing fees. There’s no guarantee, but it can be worth asking. That might help you out with 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.

The Takeaway

You can typically use a personal loan to pay for closing costs, the fees that can cost 3% to 6% of your home loan amount when you purchase a property. While this can be a convenient source of funding that is typically unsecured (meaning no collateral is required), it can raise your DTI and add to your monthly financial burden. 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. Checking your rate takes just a minute.


SoFi’s Personal Loan was named NerdWallet’s 2024 winner for Best Personal Loan overall.

FAQ

Is it smart to finance closing costs?

Whether it’s smart to finance closing costs depends on your personal situation. For example, for some people who can handle the additional monthly payment, it may be a convenient move. On the other hand, getting a personal loan may increase your DTI, so your mortgage lender might charge you a higher interest rate or deny you the 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.


Photo credit: iStock/jacoblund

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 .

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

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

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How Long It Takes to Buy a House: Purchase Timeline

Not counting the reams of time you probably will spend looking for a house, both virtually and IRL, it takes and average of 30 to 60 days to get from an accepted offer on a house to the closing if you’re financing the purchase.

Here’s the scoop on how long it takes to buy a house and get the keys in your hand.

How Long Does It Take to Buy a House In 2024?

Once you’ve homed in on a home you love, the mortgage process — from application to closing — takes an average of 30 to 60 days.

So yes, a life-changing event can happen within a month or two.

But closing times vary. A cash buyer might be able to close on a house within days. An applicant with an iffy credit history and unpredictable income may need 90 days or longer.

Before You Start Looking for Your Next Home

It’s a good idea to get your head in the game before the hunt begins.

Organize Your Finances

If you’re asking yourself “How much of a mortgage can I afford?” you can get an estimate easily.

A home affordability calculator will give you a feel for a home price limit and monthly payments. Getting prequalified will also give you a quick ballpark estimate.

Pulling a down payment together to buy a house in many parts of the country isn’t as hard as many people think. The average down payment on a house is less than 20% (though putting less than 20% down on a conventional loan usually triggers mortgage insurance).

Conventional loans may call for just 3% down for first-time homebuyers; FHA loans, as little as 3.5% down; and VA and USDA loans, nothing down. (With government loans, mortgage insurance or fees come along for the ride.)

Low- and moderate-income borrowers can sometimes get down payment assistance through a state or local agency.

Figure Out Where You Want to Live

You might know exactly what neighborhood, school zone, and vibe you want. Then your search can zero in on that area.

But looking at the cost of living by state can be eye-opening.

And narrowing things down, you might want to check out market trends by city and neighborhood.

Gain home-buying insights
with the latest housing
market trends.


Determine Your Must-Haves

Do you want to buy a house that has been completely updated, or will a dowdy abode or fixer-upper do? The cost of any renovations or repairs must be factored in, of course, and may be funded with a home improvement loan.

If only new construction will do, that can mean a tract home, spec home, or custom home.

What size range can you live with? Maybe you need more space, or maybe you’re financially downsizing.

Is a low-maintenance condo or townhouse more your style, or do you need a single-family home with room for a swimming pool or garden?

Five Steps to Buy a House

Ready? This timeline assumes you’re about to start seriously shopping for a house.

Step 1: Get Mortgage Preapproval (Minutes to Days)

Unlike prequalification, mortgage preapproval means one or more lenders have vetted your finances, usually with a hard credit inquiry. Once your offer on a home is accepted, if your chosen lender is one of these, it has a big head start on your final approval.

An online application might take about 20 minutes to complete if you have all of the documentation in hand, including two years of W-2s and/or 1099s, two years of tax returns, recent pay stubs, a list of fixed debts, and two months’ worth of account statements.

Lenders will look at your credit scores and credit history.

They will look at income, debts (including student loans), assets, proof of employment, rental history, divorce, bankruptcy, and gift funds for a down payment.

Depending on the lender, preapproval could be nearly instantaneous or it could take days.

If you’re shopping for a mortgage, know that multiple credit inquiries by lenders are counted as a single inquiry for 14 days and sometimes more, so try to put in your preapproval requests with various lenders within the same week.

What Is a Pre-approval Letter?

A preapproval letter from a lender states that you’ve been tentatively approved to borrow up to a specific amount. It lets sellers know that you are likely to be able to get financing. The letter will have an expiration date of 30 to 90 days.

What Is a Verified Approval Letter?

This is the term used by some lenders for a preapproval letter, to make clear the difference between prequalification and preapproval. A hard credit inquiry will have been performed, and an underwriter will have examined your preapproval application and additional documents.

Step 2: Make an Offer on a House (a Day to a Few Days)

Once you find a house you want to call your own, it might take up to five days to make an offer and come to an agreement with the seller on price and contingencies in the purchase contract. A closing date will be in the purchase agreement.

Usually when you make an offer, you will provide an earnest money deposit to the escrow company, ​​typically 1% to 2% of the purchase price.

Step 3: Secure the Mortgage (30 to 60 Days on Average)

Now you can make a full mortgage application with as many lenders as you wish, and not just lenders that preapproved you.

It’s smart to look at more than rates — one of the different types of mortgage loans might be a better fit than the others.

You’ll need to choose a mortgage term as well. Thirty years is the most common.

Once you apply, you will receive official loan estimates, allowing you to compare mortgage APRs (annual percentage rates) and more. Choose a lender. Check at the top of Page 1 of the loan estimate to see whether your rate is locked, and until when.

Step 4: Prepare for Closing

Appraisal and Title Search

Your lender will order an appraisal of the home. A property valuation that comes back lower than the purchase price could hinder loan approval.

The appraisal may be performed from 14 to 45 days before closing.

A title search of the property also will be ordered, resulting in a preliminary title report.

Underwriting

This is mostly a waiting period for the buyer. Credit reports are ordered, and the application information is verified.

Mortgage underwriting focuses on the three C’s:

•   Capacity (will your income and debt load allow you to make the mortgage payments each month?)

•   Credit

•   Collateral (did the appraisal show that the home price and value are aligned?)

Your mortgage loan officer may come back to you with questions. Once you receive final loan approval, a mortgage contingency can be lifted.

Home Inspection

A home inspection is optional but widely recommended.

Closing Disclosure and Cash to Close

Your lender is required to send you a closing disclosure at least three business days before the closing. It should match your loan estimate or come close.

You’ll need to send a wire transfer for cash to close one to two business days before closing. The closing disclosure will tell you how much money you need to wire. If you don’t wire the money, you’ll need to prepare to take a certified check or cashier’s check to the closing table.

Cash to close is closing costs (unless you chose a no-closing-cost mortgage) plus your down payment minus your earnest money deposit and any seller credits.

An option: Prepare to take a certified check or cashier’s check to the closing table.

Final Walk-Through

Your real estate agent will schedule a final walk-through within 24 hours of closing. This is a chance to be sure the home is in the condition you agreed to under the purchase terms.

Step 5: Close on Your Loan (an Hour or Two)

The lender will send your closing documents to the closing attorney or title company.

You’ll sign a river of documents in person or remotely.

The deed will be recorded with the appropriate county to transfer title to the new owner, you. Then you’ll receive the house keys.

The Takeaway

How long does it take to buy a house? An uncomplicated mortgage and closing process could take about 30 to 60 days from the time your offer is accepted. That’s a quick close on a new beginning.

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

SoFi Mortgages: simple, smart, and so affordable.

FAQ

How many months does it take to buy a house?

If you are financing your purchase with a home loan, and you have a steady income and good credit, you could get from an accepted offer to the closing table in one to two months. If you have a complex financial profile, or if negotiations with the seller become complicated, expect to add time to the process.

How long does it take to get preapproved for a mortgage?

The evaluation process for a mortgage preapproval can take around 10 days. If your financial picture is clearly documented and in good shape, it could take less time. You’ll need to fill out an application with your chosen lender and agree to a credit check, plus provide information about your income and assets.

How fast can you buy a house?

A cash buyer could purchase a home in a matter of days. If you require a home loan, expect the homebuying process to take one to two months from the point that you have an accepted offer.


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

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