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Once you’ve found a home to buy, it’s natural to want to close the deal quickly. As of mid-2022, the average closing time was 48 days after acceptance of an offer, down slightly from 51 the year before.

All-online mortgage options make lending faster, and borrowers are enthusiastic about an online mortgage process, ICE Mortgage Technology has found. Most home sales can be buttoned up in 20 to 30 days. Still, delays can happen.

Here’s what you need to know in order to belly up to the remote or real closing table.

How Long Does Closing on a House Take?

If you’re paying cash for a house, you’ll typically be able to close quickly.

But let’s assume a mortgage will be part of the process. You’ve jumped through the initial hoops of the mortgage loan process, including making an offer on a home you like.

If accepted, you’ll provide an earnest money deposit and sign a purchase contract. The price and any contingencies — conditions that must be met for the deal to proceed — are included in the purchase agreement.

This begins the due diligence period. It includes a title search to verify ownership and look for any liens that need to be paid off to ensure clear title to the new home. Most but not all issues will be reflected in a preliminary title report.

A typical contingency period is 30 to 60 days, though something like the inspection could be required within 10 days or less. Buyers can ask for extensions in writing.

Here are four common contingencies:

Financing Contingency

The mortgage contingency nullifies the deal if you can’t procure a mortgage within a certain time. The contingency language may be specific about the type of loan, down payment, and interest rate.

Getting pre-approved for a mortgage is standard, but it’s not a guarantee. After your chosen home is under contract, your mortgage still has to go through underwriting.

Recommended: How Does the Mortgage Pre-Approval Process Work?

Home Sale Contingency

You need to sell your current house to complete the purchase. You’ll typically be given 30 to 60 days to do so. In a competitive market, many sellers won’t even consider the offer with a home sale contingency.

But some sellers may employ a kick-out clause, which allows them to keep showing their home and “kick out” the contingent buyers if the sellers receive an offer without a home sale contingency.

Appraisal Contingency

An appraisal is usually required when a home is being financed. If the property valuation is less than your offer, you may walk away from the deal. You could also cough up the difference or ask the sellers to lower the price.

How long after the appraisal to close? About two weeks.

By the way, you can put an offer on a house that’s contingent.

Home Inspection Contingency

A home inspection is generally not mandatory for any loan type but will help ensure that the home is free of issues that may result in expensive repairs. In a seller’s market, many properties are sold as is, meaning sellers won’t negotiate for repairs after the inspection.

In a buyer’s market, sellers might agree to pay for some repairs and also slightly reduce the home’s price.

How a Mortgage Closing Works

You’ve qualified for a mortgage and chosen a lender.

After you’ve supplied income, asset, and other documentation, all of the contingencies have been satisfied, and your mortgage has received final approval from underwriting, it’s time to prepare for closing.

This will be the big day, when signing the closing documents legally transfers ownership from the sellers.

Sign Documents

Three days before your closing date, your lender will provide you with a closing disclosure that outlines the final closing costs and terms of your home loan. You can compare this five-page form with the loan estimate you received after applying for the mortgage.

Paperwork (lots of it) will have been prepared for you, including the deed of trust or mortgage and the settlement statement.

In some cases, everyone gathers in one place to sign closing paperwork. Other times, buyers sign separately from sellers. And more and more states are allowing remote online notarization or a hybrid.

Pay Closing Costs

The lender will usually tell you the amount needed for closing several days before the event. A wire transfer may be arranged a day or two before closing. Or you can present a cashier’s check or certified check that day.

Cash to close includes closing costs (unless you opted for a no closing cost mortgage) and your down payment minus your earnest money deposit and any seller credits.

Transfer the Home Title

After signing a mountain of documents, the closing attorney, escrow officer, or title company representative will record the house deed, and you will be given the house keys.

Recommended: First-Time Home Buying Guide

The House Closing Process, Step By Step

Here are the basics.

1.    Seller signs the purchase agreement.

2.    Buyer may order a home inspection.

3.    Buyer applies for the mortgage (and considers asking to lock in the rate).

4.    Lender orders a home appraisal and conducts credit underwriting.

5.    Mortgage is approved.

6.    Buyer provides proof of homeowners and title insurance.

7.    Buyer receives the closing disclosure; notice of closing time, date and location; and what to present at closing, like a photo ID and cashier’s check or proof of wire transfer for cash to close.

8.    Buyer takes a final walk-through, verifying that sellers have made any required repairs and that nothing in the purchase agreement was removed. The buyer can check for leaks, turn on heating and air conditioning, and so forth.

What Causes Delays When Closing on a House?

A buyer and seller agree to a target closing date in the purchase contract, but the closing doesn’t always happen on or before that date.

Financing, appraisal, inspection, and other issues can delay a closing. Here’s a taste of what may cause a postponement:

Lender wants more documentation. Even if buyers were pre-approved, received their mortgage commitment, and were cleared to close, lenders will review credit and bank statements one last time within a few days of closing. Any abnormalities can delay the closing.

The mortgage is denied. Even after pre-approval, a home loan may be denied for lots of reasons, sending buyers back to the starting block.

Interest rates surge unexpectedly. This can affect qualification if the loan is not locked.

The appraisal comes in low. A home may appraise for less than the purchase offer. Buyers can request a second appraisal, ask the sellers to renegotiate the price, put more down, pay the difference, or walk away if they have an appraisal contingency.

The inspection reveals that major repairs are needed. If it’s an as-is sale, buyers can walk away if they had an inspection contingency in the contract. They could still try asking the sellers to make certain repairs, request a decrease in the sale price based on the cost of repairs, or ask for a home warranty.

The title is not clear. A contractor’s lien, for example, can cause a closing delay if the contractor can’t be found to settle it.

Buyers can’t sell their house in time. If sellers agreed to a home sale contingency, the clock is ticking. If the buyers’ home doesn’t sell in time, the deal could fall through.

Instrument survey issues. Boundary line encroachments or disputes can hang up a closing.

Unrealistic closing date. Any complication can cause a deadline to fail. An extension must be approved by each party.

The Takeaway: Closing Day Preparation Pays Off

How long does it take to close on a house? The average closing takes place 48 days from the time an offer is accepted, but the timeline varies. Getting to the closing table, in person or remotely, is an accomplishment. It means you qualified and persevered.

If you’re shopping for a mortgage, it pays to get pre-qualified and pre-approved.

SoFi offers low fixed rate mortgages and low down payments. If you’re in the market for a primary home, investment property, conforming loan, jumbo loan, refinance, or home equity loan, see what SoFi can do for you.

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

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

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

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Not counting the reams of time you probably will spend ogling homes and yard-shaming virtually and IRL, it could take as little as a month to make an offer on a house and close 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 2022?

Once you’ve homed in on a home you love, the mortgage process — from application to closing — may take 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 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 pre-qualified will also give you a quick ballpark estimate.

Getting 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; 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.

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 Pre-approval (Minutes to Days)

Unlike pre-qualification, mortgage pre-approval 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, pre-approval 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.

What Is a Pre-approval Letter?

A pre-approval 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 pre-approval letter, to make clear the difference between pre-qualification and pre-approval. A hard credit inquiry will have been performed, and an underwriter will have examined your pre-approval 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. 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.

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 pre-approved 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 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.

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? It could take about 30 to 60 days from the time your offer is accepted. That’s a quick close on a new beginning.

Are you ready to buy a house? Time is of the essence. First look into the fixed-rate mortgages SoFi offers with low down payments. Then get a rate quote.

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

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

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

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A 5/1 ARM — whose interest rate is fixed for the first five years and then adjusts once a year — can be a good choice for a short-term homeowner.

While most borrowers will opt for a conventional 30-year fixed-rate mortgage, some buyers are drawn to the low teaser rate of an ARM.

Here’s a closer look at adjustable-rate mortgages and the 5/1 ARM in particular.

Adjustable-Rate Mortgages, Defined

An adjustable-rate mortgage typically has a lower initial interest rate — often for three to 10 years — than a comparable fixed-rate mortgage.

Then the rate “resets” up (or down) based on current market rates, with caps dictating how much the rate can change in any adjustment.

With most ARMs, the rate adjusts once a year after the initial fixed-rate period.

Recommended: Fixed Rate vs. Adjustable Rate Mortgages: Key Differences to Know

What Is a 5/1 ARM?

Adjustable-rate mortgages come in the form of a 3/1, 7/1, 10/1, 10/6 (the rate adjusts every six months after 10 years), and more, but the most common is the 5/1 ARM.

With a 5/1 ARM, the interest rate is fixed for the first five years of the loan, and then the rate will adjust once a year — hence the “1.” Adjustments are based on current market rates for the remainder of the loan.

Because borrowers may see their rate rise, they need to be sure they can afford the larger payments if they don’t plan to sell their house, pay off the loan, or refinance the loan.

How 5/1 ARM Rates Work

An ARM interest rate is made up of the index and the margin. The index is a measure of interest rates in general. The margin is an extra amount the lender adds, and is constant over the life of the loan.

Caps on how high (or low) your rate can go will affect your payments.

Let’s say you’re shopping for a 5/1 ARM and you see one with 3/2/5 caps. Here’s how the 3/2/5 breaks down:

•   Initial cap. Limits the amount the interest rate can adjust up or down the first time the payment adjusts. In this case, after five years, the rate can adjust by up to three percentage points. If your ARM carries a 4.5% initial rate and market rates have risen, it could go up to 7.5%.

•   Cap on subsequent adjustments. In the example, the rate can’t go up or down more than two percentage points with each adjustment after the first one.

•   Lifetime cap. The rate can never go up more than five percentage points in the lifetime of the loan.

When Does a 5/1 ARM Adjust?

The rate will adjust annually after five years.

Pros and Cons of 5/1 ARMs

Borrowers should be aware of all the upsides and downsides if they feel a call to ARMs.

Pros of a 5/1 ARM

A lower interest rate up front. The initial five-year rate is usually lower than that of a fixed-rate mortgage. This can be an advantage for new homeowners who lack the cash needed to furnish the home and pay for landscaping and maintenance. And first-time homebuyers may gravitate toward an ARM because lower rates increase their buying power.

Could be a good fit for short-term homeowners. Some buyers may only need a home for five years or less: those who plan to downsize or upsize, business professionals who think they might be transferred, and the like. These borrowers may get the best of both worlds with a 5/1 ARM: a low interest rate and no risk of higher rates later on, as they’ll likely sell the home and move before the rate adjustment period kicks in.

A 5/1 ARM borrower may be able to save significantly more cash over the first five years of the loan than they would with a conventional home loan.

Modern ARMs are less dicey. The risky ARMs available before the financial crisis that let borrowers pay just the interest on the loan or choose their own payment amount are no longer widely available.

Potential for long-term benefit. If interest rates dip or remain steady, an ARM could be less expensive over a long period than a fixed-rate mortgage.

Cons of a 5/1 ARM

Risk of higher long-term interest rates. The good fortune with a 5/1 ARM runs out after five years, with the likelihood of higher interest rates. Rising inflation affects mortgage rates indirectly. The loan could reset to a rate leading to mortgage payments the borrower finds uncomfortable or downright unaffordable.

Higher overall home loan costs. If interest rates rise with a 5/1 ARM, homeowners will pay more over the entire loan than they would have with a fixed-rate mortgage.

Refinancing fees. You can refinance an ARM to a fixed-rate loan, but expect to pay closing costs of 2% to 6% of the loan. A no closing cost refinance offers no real escape: The borrower either adds the closing costs to the principal or accepts an increased interest rate.

Possible negative amortization. Payment caps limit the amount of payment increases, so payments may not cover all the interest due on your loan. The unpaid interest is added to your debt, and interest may be charged on that amount. You might owe the lender more later in the loan term than you did at the start. Be sure you know whether the ARM you are considering can have negative amortization, the Federal Reserve advises.

Possible prepayment penalty. Prepayment penalties are rare now, but check for any penalty if you were to refinance or pay off the ARM within the first three to five years.

Comparing Adjustable-Rate Mortgages

When you take out a mortgage, you choose a mortgage term. Most fixed-rate mortgage loans, and ARMs, are 30-year loans.

5/1 ARM vs 10/1 ARM

A five-year ARM has a five-year low fixed rate followed by 25 years with an adjustable rate. A 10-year ARM offers 10 years at a fixed rate, then 20 years of adjustments.

In general, the shorter the fixed-rate period, the lower the introductory rate.

5/1 vs 7/1 ARM

Same song, different verse. The 7/1 ARM has a seven-year fixed rate instead of five for the 5/1 ARM. The initial interest rate on the 7/1 probably will be a little higher than the 5/1.

Is a 5/1 ARM Right for You?

Is a 5/1 ARM loan a good idea? It depends on your finances and goals.

In general, adjustable-rate mortgages make sense when there’s a sizable interest rate gap between ARMs and fixed-rate mortgages. If you can get a great deal on a fixed-rate mortgage, an ARM may not be as attractive.

If you plan on being in the home for a long time, then one fixed, reliable interest rate for the life of the loan may be the smarter move.

An ARM presents a trade-off: You get a lower initial rate in exchange for assuming risk over the long run.

Your best bet on ARMs? Tips from the Fed:

•   Talk to a trusted financial advisor or housing counselor.

•   Get information in writing about each ARM program of interest before you have paid a nonrefundable fee.

•   Ask your mortgage broker or lender about anything you don’t understand, such as index rates, margins, and caps. Ask about any prepayment penalty.

•   If you apply for a loan, you will get more information, including the mortgage APR and a payment schedule. The annual percentage rate takes into account interest, any fees paid to the lender, mortgage points, and any mortgage insurance premiums. You can compare APRs and terms for similar ARMs.

•   It’s a good idea to shop around and negotiate for the best deal.

The Takeaway

A 5/1 ARM offers borrowers a low initial rate but risk over the long run. Tempted by a sweet introductory rate? It’s a good idea to know how long you plan to stay in the home and to be clear about rate adjustments.

If one low fixed rate from here to eternity — well, up to 30 years — sounds good, check out SoFi Mortgages. SoFi offers fixed-rate home loans, mortgages for second homes and investment properties, and refinancing.

Get your rate in a flash with no obligation.

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

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

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

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Plumbing leak repairs can be a huge drain on your budget. Smaller issues that are caught right away can run just $200, not counting cleanup. But hidden pipe failures that take longer to discover can easily lead to thousands of dollars in water damage.

The best way to keep plumbing repair costs down is to be alert to potential problems and to fix even minor leaks quickly. We’ll discuss different levels of plumbing leaks and the typical cost of cleanup and repairs.

Common Types of Plumbing Problems

Water leaks can happen anywhere in the home — not just the bathroom or kitchen. That’s because plumbing systems can be as complex as a spider’s web. Plumbing leaks can cause damage ranging from the minor to the calamitous, with repair costs to match. Supply chain issues and inflation can drive the cost up even further.

Recommended: How to Pay for Emergency Home Repairs

Smaller Plumbing Leaks

Leaking sinks are the most obvious and least damaging kind of plumbing issue. If you’re lucky, a trickling noise will alert you before the flood waters rise. The leak itself typically can be fixed for $90 to $130.

However, hidden leaks can spread quickly and easily erode your cabinetry. Leaks that occur around the base of your faucet can also damage your countertop. Surface or cabinet repairs can cost $250 to $500 — not including the price of new materials.

Garbage disposals can spring a leak in a number of places. Depending on the scale of the issue, it might be possible to DIY the repair. But if the garbage disposal needs to be replaced, you’ll pay about $250 including parts and labor, according to Home Advisor.

Larger Plumbing Leaks

Leaks behind the walls can go undetected for some time. Contrary to what homeowners like to believe, many leaks don’t cause any change in water pressure or visible wall stains. (Plumbing issues are just one reason why the cost of a home inspection is worth it.)

Leaks stemming from water-using fixtures can also travel through walls to any room in the house. Eventual signs may include a lingering musty smell, mold, and dampness of the surrounding flooring or drywall.

The real doozy with repairing this kind of leak is that you usually have to cut into your wall to fix it, with wall incision and repair amounting to most of the cost. While the actual leak repair will often run to several hundred dollars, when you add in the diagnosis (made after carving into your wall) and wall repair, it can all add up to $1,000.

Water heater leaks can damage the foundation of a house and ruin any property kept in the lowest level of your home. Beyond the damage that the leak itself may cause, the reason for the leak can also prove costly. If your water heater is damaged, often through sediment buildup in the tank, it may need to be replaced. A new water heater can cost around $1,200 for a tank-based unit and labor.

Disaster Plumbing Leaks

Slab leaks are the 1906 Earthquake of plumbing situations. This type of leak occurs when the pipes under the foundation start to leak. Repairs for a slab leak can be costly if you have to remove flooring and jack-hammer through the foundation.

Homeowners should keep an eye out for a decrease in water pressure, warped hardwood floors, warm flooring, and moist patches. Slab leaks can be pricey to diagnose and pricier to fix, costing up to $4,000.

Washer leaks are another common-yet-costly water problem. The water leading to your washing machine is constantly running, so any leaks will continually push water into your walls and flooring and flood your home fast.

To appreciate the total cost of a major basement flood, you’ll want to consider water removal, cleanup, ventilation, and decontamination, as well as any building and structural repairs. There may also be costs associated with the replacement or cleaning of personal property and mechanical equipment. Final price tags vary greatly but can be as much as $15,000.

Fixing the Leak

While there are no guarantees, homeowners can help avert plumbing disasters by staying on top of regular maintenance, being alert to the signs of hidden leaks, and responding rapidly if they suspect a problem. Learn more about the most common home repair costs.

As mentioned above, a gradual decrease in water pressure can indicate a leak or buildup in the pipes. Another red flag is a sudden increase in your water bill.

While minor leaks in accessible areas can be fixed by a competent homeowner, it can pay to call in the pros for an assessment. Get tips for how to find a contractor.

Financing a Plumbing Leak

Homeowners dread plumbing problems due to the widespread damage they can inflict. Caught early, a simple under-the-sink leak can set you back just $200. But major leaks and floods can end up costing many thousands of dollars in professional water removal, cleanup, decontamination and mold remediation, wall and floor restoration, and property replacement. Even experienced DIYers may feel more comfortable having a plumbing pro evaluate the situation and fix it right the first time.

With a SoFi Personal Loan to cover your bills, you can stop worrying about having to cut corners or postpone an important repair. Borrow from $5,000 to $100,000 at a low fixed rate, with no fees required. Our personal loan calculator can show you how much you qualify for.

Compared with high-interest credit cards, a SoFi Personal Loan is simply better debt.

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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.

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

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

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

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Investing in real estate can be a lucrative endeavor, especially in today’s hot real estate market. But if you don’t have hundreds of thousands of dollars saved in cash to put toward a property, using a credit card to secure a real estate investment might be an option.

There are ways to execute this investment approach. However, there are also serious caveats to consider before moving forward with using a credit card to invest in real estate.

Can You Buy Real Estate With a Credit Card?

You can’t purchase a physical real estate property outright with a credit card the way you would when using a credit card to buy lunch or a new television. One reason for this is because a typical consumer credit card likely doesn’t offer a credit line large enough to cover the entire home price.

Even if you do qualify for a credit line to cover all or a significant portion of the home price, you’ll face another challenge. The title company or real estate agency that’s facilitating the deal requires that payment is provided using bank-certified funds — such as a cashier’s check, certified bank check, or wire transfer — to finalize your investment transaction. Given what a credit card is, it won’t meet those standards.

Recommended: Does Applying For a Credit Card Hurt Your Credit Score

How to Finance Real Estate Investments With a Credit Card

While you can’t swipe your credit card to purchase real estate, there are ways that you can leverage your credit card to help fund your real estate investments.

Recommended: When Are Credit Card Payments Due

Through a Cash Advance

If you have a high enough credit limit, a viable way to buy real estate with a credit card is by getting a cash advance against your card. By doing this, the funds you borrow from your credit card will become quickly available for use on a real estate investment, which might be helpful if you’re buying real estate in a red-hot market.

Keep in mind that fees typically apply for cash advances. Typically, you’ll pay a fee in the range 3% to 5% of the transaction amount, depending on your particular card.

Also know that cash advances typically come with interest rates that are higher than the card’s standard annual percentage rate (APR). Plus, interest begins to accrue immediately rather than at the end of the grace period like it does on regular credit card purchases.

Recommended: What is the Average Credit Card Limit

For Related Real Estate Costs

Some investors also use credit cards to invest in real estate by using their card for renovation project expenses. If you purchased a low-cost investment property and want to update it for passive rental income, for example, you might be able to invest in your property by putting charges for contractors and materials on your credit card.

Recommended: What is a Charge Card

By Using Credit Card Rewards

Another unconventional approach to buying real estate with credit cards is directly redeeming earned rewards as cash. Cash redemption values are typically lower compared to redeeming rewards toward travel, for example, but this approach can still unearth the capital you need to invest in your next property.

This strategy is particularly effective if you’ve already amassed years of rewards through a business credit card, and are willing to pool earned rewards from your personal credit card rewards programs, too.

Recommended: Can You Buy Crypto With a Credit Card

Advantages of Using a Credit Card to Invest in Real Estate

Although buying real estate with a credit card is an unconventional approach, there are some benefits in doing so. In particular, the advantages include that:

•   You can invest faster: If you don’t have a lump sum of cash savings ready, it might take years to save up enough capital to get your foot into real estate investing. Using a credit card to invest in real estate can help you realize your investment goals faster.

•   You’ll have fewer costs at closing: Since you’re not financing through a mortgage lender, there are fewer fees to worry about. Unlike when buying a home as your primary residence through a mortgage loan, costs like origination fees, appraisals, and escrow fees aren’t a required part of a real estate investment transaction done in cash.

•   You might earn rewards in the process: Most card issuers don’t let you earn credit card rewards from cash advances. However, you can accelerate your rewards earnings by using your card for spending associated with your property investment. For example, materials and contractor costs for renovation projects, like a kitchen update or a room addition, can help you rack up rewards faster.

Downsides of Using a Credit Card to Buy Real Estate

There are major disadvantages to using a credit card to invest in real estate. If you’re considering how to buy rental property with credit cards, keep in mind the following drawbacks:

•   You’ll have a hard time using credit cards directly to invest in real estate: A notable downside to buying real estate with credit cards is that you’ll likely be unable to throw a credit card onto the table to close a real estate transaction. You’ll have to undergo the extra step of getting a credit card cash advance. But be aware that card issuers might set a lower available limit for cash advances and will impose a higher APR. Plus, you’ll pay cash advance fees.

•   You’ll face high interest rates: If you have to draw a cash advance against your credit card to buy real estate, you’ll face expensive APRs, compared to other financing sources, like a personal loan. According to the latest Federal Reserve data, the average credit card rate across all account types is 15.13%. By comparison, the average personal loan rate for a 24-month term is 8.73%.

•   You’re taking on a lot of risk: How credit cards work is that they let you purchase goods and services, even if you don’t have the cash to cover the full amount, immediately. The caveat, however, is that you’ll need to repay the amount either in a lump sum when your statement is due or over time.

   If you successfully buy real estate with a credit card, you’re legally liable for that debt and must repay it based on the rate and terms of your credit card agreement. This holds true regardless of whether your investment turns a profit. Plus, if you choose to pay back the funds you borrowed over many months, you’ll incur exorbitant interest charges in addition to the principal balance.

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Factors to Consider Before Using Your Credit Card to Invest in Real Estate

After assessing the pros and cons of investing in real estate using a credit card, also consider the following factors that might impact your investment:

•   Whether you’ll need additional funding sources: If your credit card doesn’t provide a sufficient amount for your real estate investment, you’ll need to seek funds elsewhere.

•   What the local real estate market is like: Whether your goal is buying a property to flip and sell, or buying rental real estate, do your homework. This includes finding a desirable neighborhood and a suitable property, as well as assessing renovation projects and other repairs necessary to set your investment up for profitability.

•   If you can repay your credit card bill: At best, consider your credit card as a short-term loan tool. Plan to put profits you’ve earned toward paying down your debt ASAP.

Alternatives to Buying Real Estate With Credit Cards

If you don’t have hard cash stowed away for your next real estate investment, but aren’t ready to leverage your credit cards for the investment, you have a couple of other options:

•   Personal loans: A personal loan is another financing option, particularly if you have strong credit. It offers a higher borrowing limit and longer repayment timeline compared to a credit card. Also, as mentioned earlier, personal loan interest rates are generally lower than credit card APRs.

•   Personal savings: Another option is using cash and avoiding credit cards and other methods of borrowing altogether. If you have personal savings that you can tap into or are willing to hold off on investing in real estate until you’ve built up enough savings, you can potentially avoid costly finance charges.

The Takeaway

Tread carefully when using a credit card (i.e. borrowed money) to fund any investment, including real estate. Adhering to important credit card rules — like staying on top of your credit utilization and paying your credit card statements in full — can help you avoid going into debt for your investment.

If you’re looking for a possible real estate investment card, a SoFi Credit Card lets you earn rewards from eligible purchases.

The SoFi Credit Card offers unlimited 2% cash back on all eligible purchases. There are no spending categories or reward caps to worry about.¹

Take advantage of this offer by applying for a SoFi credit card today.

FAQ

How can I buy rental property with a credit card?

If done strategically, you can use a credit card to buy rental property either through a credit card cash advance or by using the credit card to finance renovations on an investment property flip.

Can I use a business credit card to buy real estate?

Yes, you may be able to use a business credit card to invest in real estate. Doing so separates the debt from your personal credit profile, so the high credit utilization on the business credit card doesn’t affect your personal credit score.

Is it a good idea to buy real estate with a credit card?

Whether buying real estate with credit cards is a good idea depends on your investment risk tolerance. A credit card might work as a short-term funding option, but plan on repaying the debt with your profits quickly to avoid an underwater investment.

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Photo credit: iStock/SDI Productions

¹Members earn 2 rewards points for every dollar spent on purchases. No rewards points will be earned with respect to reversed transactions, returned purchases, or other similar transactions. When you elect to redeem rewards points into your SoFi Checking or Savings account, SoFi Money® account, SoFi Active Invest account, SoFi Credit Card account, or SoFi Personal, Private Student, or Student Loan Refinance, your rewards points will redeem at a rate of 1 cent per every point. For more details please visit the Rewards page. Brokerage and Active investing products offered through SoFi Securities LLC, member FINRA/SIPC. SoFi Securities LLC is an affiliate of SoFi Bank, N.A.

¹See Rewards Details at SoFi.com/card/rewards.

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.

The SoFi Credit Card is issued by SoFi Bank, N.A. pursuant to license by Mastercard® International Incorporated and can be used everywhere Mastercard is accepted. Mastercard is a registered trademark, and the circles design is a trademark of Mastercard International Incorporated.

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