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Altcoin season is a term used to describe a period in the cryptocurrency markets during which altcoins, or a significant percentage of them, rally and see their prices increase.

Altcoin itself is a sort of catch-all term that refers to cryptocurrencies aside from Bitcoin; they’re “alternate” coins, in other words. Since Bitcoin is the biggest and most popular crypto on the market, almost all other cryptos are seemingly in a classification of their own: Altcoins.

What Is Altcoin Season?

Altcoin season is a stretch in which altcoin appreciation outperforms Bitcoin, or a significant number of altcoins simultaneously see their prices increase. Or, put another way, altcoin season happens when there’s steady outperformance of tokens and coins that aren’t Bitcoin. They could last weeks, or even months.

How Altcoin Season Differs from Bitcoin Cycles

Cryptocurrencies tend to experience market cycles, similar to those seen in the broader economy and even in the stock market. That means that prices, productivity, or other metrics experience periods of expansion (value growth) or contraction (value decline). The same happens in the crypto markets.

Altcoin season, then, can happen when Bitcoin reaches the bottom of one of those cycles, effectively paving the way for altcoins to experience a period of expansion or growth.

However, there’s no guarantee that every runup in Bitcoin will turn into a downturn later, or that altcoins will start outperforming the original crypto. In fact, it’s not uncommon for all cryptos to rise together, as excitement about the sector grows. As such, there can be pros and cons to owning crypto.

The Role of Bitcoin Dominance in Market Trends

Bitcoin is the oldest and largest cryptocurrency. So, it tends to set the tone for the markets, and can move the currents and momentum within them, so to speak. When there is a big movement or change with Bitcoin, that is generally reflected in the markets, and that filters down to altcoins, which include different types of cryptocurrencies.

So, following a Bitcoin rally, it’s possible altcoins could also rally (though not guaranteed). They could both then see a staggered cooling period.

Why Do Altcoins Often Follow Bitcoin’s Price Movements?

There are a few different theories for why altcoin season happens, and why altcoins tend to follow Bitcoin’s price movements. Here are some of the most common.

Expectations of Future Growth

After a large runup of Bitcoin, crypto-holder’s projected growth in the price of other crypto assets might change.

The Altcoin Season Index: Your #1 Indicator

Remember this: You can’t determine altcoin season just by looking at the price of altcoins, Bitcoin, or any other cryptocurrency in isolation. Perhaps the best gauge is the Altcoin Season Index.

How This Key Indicator Works

The Altcoin Season Index is a crypto market indicator, similar to many other market-focused metrics out there, that helps market participants get a sense of whether or not altcoins are outperforming or seeing more appreciation than Bitcoin at any given time. It is, in other words, a tool to measure the prevailing winds of the crypto market.

The Index itself looks at the top altcoins on the market (with the exception of crypto’s stablecoins), measures their collective performance over a period of the previous 90 days, and produces an index score that reports the percentage of altcoins (altcoins tracked by the Index) that are or have performed better than Bitcoin during the tracking period.

How to Read the Index’s Signals

As noted, the Index produces a percentage that helps market participants gauge whether they’re witnessing an “altcoin season” play out. Depending on the percentage, or the signal, produced, the crypto market could be said to be either in a “Bitcoin season,” neutral, or in an “altcoin season.”

Specifically, here’s how those percentages break down:

•  0-25%: This means that less than a quarter of tracked altcoins are outperforming Bitcoin, putting the market in a “Bitcoin season.”

•  26-74%: A solid amount of altcoins are outperforming Bitcoin, but not an overwhelming amount. This is a “neutral” market.

•  75-100%: This indicates that the vast majority of altcoins are outperforming Bitcoin; the market is experiencing an “altcoin season.”

Where to Find the Live Index Data

Data related to the Altcoin Season Index can be found on a number of websites. A simple internet search should bring up plenty of places to access the live data.

3 Other Key Signs an Altcoin Season Might Be Starting

The Altcoin Season Index is a powerful tool to help crypto market participants gauge whether the market is, in fact, experiencing an Altcoin Season. But there are a few other key signs you can use to try and discern what’s happening.

Sign 1: Bitcoin’s Price Stabilizes After a Major Rally

One sign that may indicate an Altcoin Season is nigh is that Bitcoin starts to see a period of price stabilization, particularly after it rallies a bit. In the wake of the rally, Bitcoin prices may appreciate more slowly, or even fall or remain relatively stagnant. Altcoins, following the rally, could see a rally of their own, marking the beginning of an altcoin season.

Sign 2: New Narratives and Hype Cycles Emerge (e.g., DeFi, AI, GameFi)

Certain altcoins may see a period of appreciation that outperforms Bitcoin, too, if the market and news cycle is suddenly saturated with new, emerging narratives or hype cycles. These can take many forms, but may center around expanding or emerging AI or DeFI projects, among other things. Many of those projects may have their own related altcoins, which see value appreciation as a part of the hype cycle.

That enthusiasm may also spill over into other altcoins, sparking a rally.

Sign 3: Retail Interest and Social Media Buzz Explode

Similarly, there may be times when altcoin interest or hype takes flight among the general market or on social media. That can create hype cycles, and market participants may want to get in on the action as altcoins see price appreciation. Hype cycles can happen at any time, and seemingly for any reason, or sometimes no reason at all. And it can be difficult to tell if these will be brief hype bursts, or sustained, broad altcoin seasons.

What Happened in Past Altcoin Seasons?

There are examples of previous altcoin seasons, such as those that occurred during 2017, and again in 2021. Here’s a brief rundown of what happened.

2017

During 2017, there was a rapid and broad altcoin rally that was largely driven by speculative market participants, a slew of project launches, and piles of money entering the crypto markets.^[1]

Specifically, regulatory changes in Japan helped fuel the frenzy, and Ethereum took off as what looked like the next Bitcoin, becoming the second-largest crypto on the market. There were also many ICOs, or initial coin offerings that year, and Bitcoin’s price also reached a high point (which it would eclipse in later years).

Ethereum, Ripple, Litecoin, and Bitcoin Cash were some of the top-performing altcoins that year, too.

2021

Similarly, 2021^[2] saw another altcoin season and huge swell in interest in the crypto markets. There were several things happening, including a boom in NFTs and meme coins, much of which redirected capital and resources away from Bitcoin and into altcoins or other crypto-related projects.

This was all occurring during the pandemic, as well, which drove lots of speculative buying and selling all while the crypto ecosystem itself was becoming more sophisticated and entering the mainstream.

Some top performing altcoins in 2021 included Shiba Inu, Dogecoin, Solana, and Polygon.^[3]

Lessons Learned from Historical Rallies

What sorts of takeaways are to be had from previous altcoin seasons? There can be a lot to digest, and the history of Bitcoin prices — which in of themselves have been volatile — play a role. But perhaps the overriding lessons are that the crypto markets can be and often are driven by hype and intense speculation. There can be outside events that also play a factor (such as global health emergencies and softening government stances toward crypto), but by and large, the markets can be difficult to predict and make sense of.

With all of this in mind, it can be good to keep risk in mind. Over short time periods, assets, be they crypto holdings, stocks, or precious metals, can lose value. The market is volatile, and things are always changing.

How to Approach Altcoin Season

With all of this in mind, how can crypto market participants best approach altcoin seasons, assuming they feel that one is waiting in the wings? Here are a few things to help keep you grounded.

Avoiding the FOMO (Fear of Missing Out) Trap

While altcoins may be used as a tool for transactions, or as a store of value, or even as a means of generating passive crypto income, it’s dangerous to get lured into the assumption that they could continue to appreciate. That can lead to making poor decisions due to FOMO, or the fear of missing out. Cryptocurrencies prices are historically highly volatile, and that should be taken into account during altcoin seasons, as well.

Perhaps the best thing to do in these cases is to keep your head on your shoulders, remember that you have a financial plan (or may want to create one), and that any altcoins you may be considering holding are merely one element of that.

Separating Market Hype From a Project’s Real Utility

Similarly, you may be hearing or seeing a lot of crypto hype about altcoin seasons or related to a specific crypto project. It may be helpful to try and understand where it’s coming from. You may want to ask whether there’s really a “there” there, and do some research before deciding to buy, sell, or hold altcoins whose potential promise could be unfounded or that could even turn out to be a crypto scam or rug-pull.

Volatility

The crypto market is volatile, and that volatility can occur during any “season,” not just “altcoin season.” It can be a good idea to try and keep that in mind when navigating the crypto space.

The Takeaway

Altcoin season describes a time period when altcoins steadily outperform Bitcoin. There are a few ways to try to determine altcoin season, but it remains impossible to predict. Basically, you’ll usually know it when you’re in it. And when an altcoin season does occur, it’s important to navigate it carefully. Always researching options carefully can help ensure they align with your financial goals and risk tolerance.

Soon, SoFi members will be able to buy, sell, and hold cryptocurrencies, such as Bitcoin, Ethereum, and more, and manage them all seamlessly alongside their other finances. This, however, is just the first of an expanding list of crypto services SoFi aims to provide, giving members more control and more ways to manage their money.

FAQ

How can you tell if altcoin season has started?

There may not be a good or surefire way to determine if an altcoin season has started, at least not until some time has passed and there’s data to digest to help determine that. However, you can look for certain signs, such as a cooling Bitcoin rally, as a precursor or indicator that the altcoin market could rally.

How long do altcoin seasons usually last?

There’s really no telling for sure how long an altcoin season will last, but historically, they’ve lasted for one or two months, and perhaps a little longer.

Are all altcoins likely to rise during an altseason?

Depending on several factors, some altcoins are probably more likely to see value appreciation during an altcoin season than others.

What role does institutional investment play in altcoin seasons?

If institutional investors plow a project with a bunch of capital or make a huge investment in a particular altcoin, that could spark an altcoin season as interest rises in that altcoin, and also related ones. But there’s no guarantee that would necessarily happen.

Which indicators signal the end of an altcoin season?

One indicator that an altcoin season is near or at its end is a rally in Bitcoin prices, signalling Bitcoin may be returning to its dominant position.

Photo credit: iStock/Prostock-Studio

SOCRYP-Q325-088

Crypto and stocks may seem similar at first, but they are fundamentally different types of assets. There are key differences in terms of how they’re structured (one is digital, one has real-world value), how volatile they are (crypto’s swings can be more dramatic), how they’re stored, and more.

Crypto and stocks both have their pros and cons, and certain risks to consider. Here’s what you need to know.

Understanding What You Own

Before getting too granular in the differences between crypto and stocks, you may to solidify your understanding of what, exactly, each is.

Stocks

In the simplest terms, a stock is a share of ownership in a publicly-traded company. As a stockholder, you own part of the company.

So, when thinking about the difference between crypto and stocks, the first point to remember is that a share of stock may represent a percentage of ownership in a tangible business.

While stocks and whole sectors go in and out of fashion with investors, the stock itself still corresponds to a portion of a functioning company, with a price that’s tied to the underlying, fundamental value of that company. By contrast, cryptocurrencies are wholly digital, and that impacts their value, their real-world viability, and how they are traded.

Cryptocurrency

Cryptocurrencies are a speculative asset class that are created and stored digitally, using decentralized blockchain technology.

The main difference between crypto vs. stocks is that stocks are a share of ownership, while cryptocurrencies don’t have any intrinsic value – their value is largely determined by market sentiment, and supply and demand, which is one reason cryptocurrencies can be highly volatile.

It’s also important to know that most cryptocurrencies are not valued the way fiat currencies are. Fiat currency, like the U.S. dollar, is money that’s issued and backed by a central bank or government. Cryptocurrencies are wholly digital, and are not issued or overseen by a government, bank, or any other central authority.

And because they’re volatile, most types of cryptocurrencies aren’t currencies in the traditional sense. Their real-world value as a means of purchasing goods and services is often limited, although this is expanding as payment systems and retailers begin to accept certain cryptocurrencies, such as Bitcoin.

The value of a cryptocurrency reflects a variety of factors, including, as mentioned above, current supply and demand for that currency. In some cases, it also reflects a faith in the underlying technology that powers the currency, or a particular innovation that a certain crypto stands for.

7 Key Differences Between Crypto and Stocks

Knowing that both crypto and stocks are two different things, there are some further, more detailed differences that are important to parse out.

Regulation

In terms of regulation, the key difference between stocks and crypto is that stocks have an established oversight apparatus, while crypto regulation is still emerging and formulating.

For stocks, there are national agencies in the United States, such as the Securities and Exchanges Commission (SEC), which oversee stocks and stock markets, and the Financial Industry Regulatory Authority (FINRA), which regulates broker-dealers. The regulation provided by these groups helps create a certain level of transparency into publicly traded companies.

By contrast, cryptocurrencies have only begun being regulated by the federal government. Though there have been some regulatory frameworks introduced recently (The GENIUS Act, for example), the regulatory apparatus isn’t as robust as it is for stocks or other securities.

In the current U.S. market, cryptocurrency regulation is a collection of rules from multiple federal agencies and state-level laws, impacting buying, selling, and holding of the crypto assets, depending on the nature and use of the crypto asset. Current regulations may not apply directly to an individual’s personal use of their self-custody wallet, but they heavily govern the exchanges, platforms, and services an individual uses to buy, sell, or custody their assets in the U.S. financial system.

Volatility and Market Risk

Both crypto and stocks are or can be volatile and are subject to market risk. But stocks are, traditionally, subject to more moderate volatility, often driven by fundamental or economic factors, whereas crypto can experience extreme swings and volatility, driven by shifts in market sentiment perhaps more than anything.

Make no mistake: There is volatility and risk involved in buying both crypto and stocks. Both assets can go up or down in value, and it’s nearly impossible to time the market to know exactly the best time to buy or sell.

While the stock market has a well-earned reputation for volatility, the broader market has tended to go up over the course of decades. Since past performance is no guarantee of future returns, and public stocks must publicly report on their finances, investors have access to several sources of information to make decisions about purchasing those securities.

On the other hand, cryptocurrency is, or traditionally has been, more likely to undergo sudden, drastic changes in value, sometimes without warning.

Those swings can lead to potentially big wins for crypto users, but it can also create large losses, including total loss, in a very short period of time. While it is possible for public companies to go bankrupt and their shares to become worthless, they’re far less likely to lose all of their value than most cryptocurrencies are.

Trading Hours and Market Access

The stock markets are usually only open during business hours in their home country, Monday through Friday, and closed on holidays on weekends. By contrast, the crypto market runs around the clock, every day of the year.

The 24/7 availability of the crypto markets may be one reason why crypto is so volatile. As decades of research on the stock market has shown, some investors often succumb to emotional impulses that can drive their behavior. Time off may help restore a sense of control and order, giving participants a chance to cool down.

What Drives Their Value

Crypto and stock values may be driven by different factors, too. Stock values may increase after a strong earnings report, for instance, while crypto values may increase due to scarcity, speculation, or adoption trends, along with other variables.

There can also be associated costs to contend with, which may also hurt demand for one or the other.

For example, every time an investor buys or sells stocks, they may need to pay transaction fees, such as commissions, that eat into their returns. Even investors who purchase assets like low-fee index mutual funds, which are essentially baskets of stocks, have to pay fees that cover the costs of running the fund.

The costs of actively managed funds, and for trading through a brokerage account, may be higher.

Note that crypto exchanges also charge fees. And there are “gas fees,” which are the costs extracted by a network for various transactions on the blockchain. These fees vary widely from one form of crypto to another.

While costs are not the end-all-be-all that affect demand, it is something that’s in the mix, and that should be taken into account when considering any stock or crypto transaction.

Market Age and History

As noted, the concept of stocks and stock-trading has a long, established history going back centuries. The rules are solidified, oversight and regulation is in place, and investors or traders generally have a good idea of how the markets work.

Crypto markets, on the other hand, are very young, having been around for only around a decade-and-a-half. Until recently, they were largely unregulated, too, and the whole crypto space has had a “wild west” feel to it. That’s quickly changing, but its short history could also mean that there’s more risk involved, which some may not be comfortable with or have the capacity to take.

Liquidity (How Easily They Are Bought and Sold)

Stocks are liquid, meaning they’re fairly easy to buy and sell. Crypto, depending on the specific crypto at hand, can have variable levels of liquidity.

For more background: Smaller markets also affect the ability to trade in and out of your investments, whether they’re stocks or cryptocurrencies. That ability to trade an asset at will without substantially affecting its price is called liquidity. Investors typically consider stocks highly liquid, since there are so many active traders in the stock market.

With cryptocurrency, on the other hand, liquidity varies quite a bit from one form of crypto to another. Bitcoin is a more liquid asset than most cryptocurrency. That means there are more buyers and sellers who want to trade if you want to get in or out of that particular cryptocurrency.

Custody: Who Holds Your Assets?

The concept of custody is also important, and differs between cryptocurrencies and stocks.

In effect, brokerages hold stocks or other types of securities, acting as a custodian for investors. Additionally, to purchase and own stock, you typically need a brokerage account to handle the transaction. That account is verified by information like your address, Social Security number, signature, and more. This offers some protection in the event of identity theft or fraud.

That is not always the case with crypto, where crypto users themselves may be the custodians, and need to handle and store their assets accordingly. Some crypto users also keep their cryptocurrencies in their own personal (non-custodial) crypto wallets vs. a crypto exchange, which can be fully virtual or exist offline on a USB drive. That may create unique risks, such as forgetting your password and losing access to your account. Or you could misplace your USB drive, and lose all your crypto.

But there are instances in which exchanges may act as custodians, similar to brokerages. Crypto exchanges and certain other financial crypto platforms are subject to certain laws, meaning they must verify customers’ identities, as required by Know Your Customer (KYC) laws designed to help prevent illegal activities.

It’s also important to know that cryptocurrencies are not insured in the event of a financial institution’s failure as traditional brokerage assets are by the Securities Investor Protection Corporation (SPIC) and traditional bank deposits are by the Federal Deposit Insurance Corporation (FDIC).

The Takeaway

Stocks and cryptocurrency seem similar, but have some stark differences. Stocks offer investors a tangible piece of ownership in a company (even if it’s a tiny fraction of that company), whereas crypto assets don’t have intrinsic value. That said, both can offer different things for holders.

Soon, SoFi members will be able to buy, sell, and hold cryptocurrencies, such as Bitcoin, Ethereum, and more, and manage them all seamlessly alongside their other finances. This, however, is just the first of an expanding list of crypto services SoFi aims to provide, giving members more control and more ways to manage their money.

FAQ

Is crypto harder than stocks?

In some sense, crypto may be a bit more difficult to comprehend than stocks. Cryptocurrencies are bought and sold on crypto exchanges; the fees are unpredictable; and many types of crypto are so new they don’t have a track record, and it’s hard to establish their value. Exchange-traded stocks are well established and highly regulated securities that can be bought and sold via a traditional brokerage or app, in a variety of forms — including index funds and exchange-traded funds, and more.

Is crypto taxed more than stocks?

Crypto is treated as property by the IRS, the same as stocks, so the two are more or less taxed in the same way. Further, crypto could be taxed as ordinary income if it’s acquired through staking, mining, or received as payment.

What are the main differences in regulation between crypto and stocks?

Stocks are regulated under a well-established federal framework overseen by agencies like the SEC, and have been for a long time. Crypto regulation, conversely, is new and evolving, and until recently, almost non-existent in the U.S.

Can buying and selling crypto impact the stock market?

There isn’t a huge sample size at this time, but it seems that what happens in the crypto markets is at least somewhat correlated with what happens in the stock markets. Meaning, investors in each market seem to be behaving similarly.

Photo credit: iStock/ljubaphoto

SOCRYP-Q325-114

For first-time buyers — or anyone facing financial hurdles — getting an FHA loan can help make homeownership a reality. With insurance from the Federal Housing Administration, lenders can afford to offer loans with a lower down payment, lower closing costs, and less restrictive qualifying credit requirements.

But can you refinance an FHA loan? Yes, FHA loans are available for those looking to refinance an existing mortgage rather than take out a new one — whether or not that existing mortgage is itself an FHA loan. However, there are a variety of different ways to go about refinancing an FHA loan, and which is right for you will depend on your circumstances. Here’s what you need to know.

Understanding FHA Refinancing

Like any FHA loan, FHA refinancing loans are insured by the FHA — and therefore available with easier qualifying requirements and lower costs than other types of conventional loans may be. Refinancing your mortgage with an FHA refinance loan could help you save money on interest over time by scoring a lower rate, lowering your monthly payments, or even accessing cash by leveraging your home’s equity. And yes, you can refinance an FHA loan, or another type of existing home loan with an FHA refinancing loan. However, the specific FHA refinance requirements vary depending on your circumstances.

Why Homeowners Choose to Refinance FHA Loans

Homeowners may choose to refinance for one or more reasons. One common goal for refinancing is to obtain a lower interest rate (and thus lower your monthly payments). Some homeowners might want to change their loan term in a refinance, perhaps getting a lower rate and a shorter term so they can finish paying off their loan faster. “It’s important to understand that not every mortgage refinance will save you money on interest. For example, if you extend the repayment term, you may have smaller monthly payments, but you’ll end up paying more money over the course of the loan,” says Brian Walsh, CFP® and Head of Advice & Planning at SoFi.

It’s also common to refinance an FHA loan to get rid of the mortgage insurance that is required of FHA borrowers for the duration of their loan. And some homeowners do a refinance to pull equity from their home to use for renovations or other expenses. The type of refinance you choose depends largely on these goals.

Types of FHA Loan Refinancing

There are four main options when it comes to FHA loan refinancing: Simple refinancing, Streamline refinancing, cash-out refinancing, and 203(k) refinancing. Some people also refinance out of an FHA loan and into a conventional one. Which is right for you will depend on what kind of loan you have — and why you’re refinancing in the first place.

FHA Simple Refinance

FHA Simple refinancing is for those whose original home loan is an FHA loan. With an FHA Simple refinance, you’ll simply — as the name implies — refinance your home, using a new FHA loan to pay off the existing one, ideally with a lower monthly payment or interest rate to make it worth your while. You may also be able to switch between fixed and adjustable interest rates.

Unlike some other types of FHA refinancing, you won’t be able to access any cash using this type of refinance, so it’s not a viable option for homeowners attempting to leverage home equity to pay for other expenses. In addition, it has slightly stricter qualification requirements than FHA Streamline refinancing, which requires less credit documentation and underwriting. Although credit score requirements vary by lender, most FHA Simple refinance programs require a minimum credit score of 580.

FHA Streamline Refinance

The FHA Streamline refinance option also follows the logic of its name: The underwriting and qualification process is less intense than other types of FHA refinancing. In addition, unlike the FHA Simple refinance option, a home appraisal is not required. You can also take out up to $500 in cash against your home equity with an FHA Streamline refinance loan.

To qualify for FHA Streamline refinancing, your original home loan will also need to be an FHA loan, and payments must not be delinquent. The FHA also requires that the new loan result in a financial benefit for the borrower. Of course, you wouldn’t be going through the process and expense of refinancing if you had nothing to gain in the bargain.

FHA Cash-Out Refinance

FHA cash-out refinancing allows borrowers to leverage their home equity to take out cash that can be used for any purpose. To make this work, a new, larger loan is taken out, which is used to refinance the existing home loan — which need not be FHA insured — as well as to provide cash value.

Using an FHA cash-out refinance loan, homeowners may be able to lower their payments or interest rates while also accessing lump-sum cash that can be used for just about any purpose under the sun. Again, however, the underwriting and qualification process for FHA cash-out refinance loans may be more intense than Streamline loans — though a cash-out refi is still accessible to most borrowers with a credit score of 580 or higher and a debt-to-income ratio (DTI) of 43% or less.

FHA 203(k) Refinance

Finally, the FHA 203(k) loan, also known as a rehabilitation loan, allows homeowners to take out money for the purpose of restoring, rehabilitating, or repairing their home along with purchasing it. FHA 203(k) loans can be used for an original purchase or a refinance, and homeowners with a non-FHA loan can apply for 203(k) refinancing, and may find FHA-insured rates are lower than those of other home improvement loans.

FHA-to-Conventional Refinance

Some people with FHA loans prefer to refinance into a conventional loan. If you have more than 20% equity in your home, you can refinance into a conventional loan and you likely won’t have to pay a mortgage insurance premium (MIP) on top of your conventional loan payment. In the process, you’ll get rid of your FHA mortgage insurance. To obtain a conventional loan, you’ll likely need a credit score of at least 620.

Comparing FHA Refinance vs. Conventional Loan Refinance

Why choose to refinance with an FHA loan rather than a conventional one? Or vice versa? There are pros and cons to consider either way you go. For instance, although FHA refinance loans tend to come with more accessible qualification requirements, some types are only available for those with existing FHA loans — and all of them require an FHA mortgage insurance premium (MIP). The important thing is to consider all your options so you can make an informed decision. Let’s take a closer look.

Pros and Cons of Refinancing with an FHA Loan

While there are many benefits to mortgage refinancing with an FHA loan, there are some drawbacks to consider, too.

Differences in Requirements and Benefits

In addition to the pros and cons of FHA loan refinancing, there are also differences in the requirements and benefits for FHA versus conventional home refinancing loans. For instance, in most cases, FHA loans require a minimum credit score of just 580, whereas conventional loans might have a minimum credit score starting at 620 or higher.

And while FHA loans often come with lower interest rates, they always come with a mortgage insurance requirement — whereas conventional loans may not require private mortgage insurance (PMI) if you already own at least 20% of your home’s equity.

Finally, FHA refinancing loan options may be somewhat limited, depending on your existing home loan and your motivations for refinancing. Some types of FHA refinancing loans are only available to homeowners who already have an FHA-insured mortgage, which may make them inaccessible to other borrowers.

When to Consider Switching from FHA to Conventional

It might be worth refinancing from an FHA loan into a conventional loan if you have at least 20% equity in your home and can therefore avoid mortgage insurance with a conventional loan. But ideally you would also be in a position to lower your interest rate on your loan by undergoing a refinance. Another thing to consider is your credit score. If you have improved your score and are now over 620 — or have an even higher score — it could be time to run the numbers on a refinance to a conventional loan. Much will depend on current interest rates.

Eligibility and FHA Refinance Requirements

So, what does it take to secure an FHA home loan? While requirements vary by lender, here are some basic rules of thumb:

Qualifying Factors for Refinancing an FHA Loan

As mentioned above, certain types of FHA refinance loans are only available to those who already have an FHA-insured mortgage loan. In addition, only FHA loans that are not delinquent — i.e., you’re up to date on your payments — may qualify for refinancing.

Credit Score Guidelines

While FHA-insured loans tend to have lower minimum credit scores than conventional refinance loans, lenders do still have a minimum. In most cases, it’s 580—though specifics may vary by lender.

Loan-to-Value Ratio (LTV)

A home’s loan-to-value (LTV) ratio refers to what percentage of the home’s current market value you’re taking out a loan for. Ideally, those who are refinancing their homes have a lower loan-to-value ratio — meaning they owe less of their home’s total value than they did when it was first purchased. Still, the LTV is one factor lenders look at when qualifying borrowers for an FHA refinance loan; the lower your LTV, the better.

Employment and Income Verification

Lenders have a vested interest in making sure you’ll be able to repay your loan, so a lender will verify your employment situation and income before qualifying you for a new loan, whether you’re taking out an original mortgage or refinancing.

Debt-to-Income Ratio (DTI)

Your debt-to-income, or DTI, ratio refers to the proportion of your available income each month that goes toward existing debts. While FHA loans have a higher maximum DTI than other types — borrowers with DTIs as high as 57% may still qualify — some lenders may choose not to qualify borrowers with a DTI of 43% or more.

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

Specific Requirements for Streamline Refinance

For the FHA’s Streamline refinance program, certain specific requirements apply, including:

•   The existing mortgage must also be FHA-insured.

•   The refinance must result in a “net tangible benefit” to the borrower.

•   Only up to $500 may be taken out of the loan in cash.

•   In most cases, investment properties are ineligible.

Criteria for Cash-Out Refinance

In order to qualify for an FHA cash-out refinance, you’ll need:

•   To have lived in your home for at least 12 months

•   To own at least 20% of your home’s equity

•   A minimum credit score of 580

•   A debt-to-income (DTI) ratio of 43% or lower

FHA Seasoning Requirements for Refinancing

One other consideration you’ll have if you are thinking about refinancing an FHA loan is the seasoning requirement. “Seasoning” refers to the length of time that must pass between your obtaining the loan and your taking action to change it.

Seasoning time varies according to your loan type and the action you wish to take. For example, if you are refinancing to eliminate PMI, you may need to wait two years from your initial loan date. To do a Streamline refinance, borrowers must have made at least six payments on the FHA-insured mortgage that is being refinanced. At least six months must have passed since the first payment due date of the mortgage, and at least 210 days must have passed from the closing date of the mortgage being refinanced.

Benefits of Refinancing an FHA Loan

What are the specific benefits of refinancing with an FHA loan? Here are just a few of the reasons people choose to take this route when refinancing a mortgage.

Lower Interest Rate and Monthly Payment

For most homeowners, the primary motivator for an FHA mortgage refinance is to save money — either over the long term, by scoring a lower interest rate, or on a monthly basis by choosing a loan with a lower minimum monthly payment. In some instances, you may be able to achieve both goals with the same refinancing loan, particularly if your credit history has appreciably improved since you originally took out your mortgage.

New Loan Terms

Some borrowers refinance to give themselves more time to pay off their home loan with a longer term — or to accelerate their repayment process with a shorter term.

Equity Access with a Cash-Out Refinance

For most consumers, a home is the single most valuable asset they’ll ever purchase. Being able to access the value of that equity with a cash-out refinance option is another important motivator for those seeking to refinance, and FHA refinance loans can make that goal a reality whether or not your original loan is FHA-insured.

Avoid Private Mortgage Insurance (PMI)

For borrowers looking to avoid private mortgage insurance (PMI), take heed: Although FHA loans don’t require PMI, they do require mortgage insurance. The FHA-loan version is called MIP (mortgage insurance premium), and is required on all FHA loans.

Improve Financial Stability

For some borrowers, refinancing can improve overall financial stability by achieving any of the goals listed above — for example, freeing up more discretionary income each month with a lower monthly payment.

Ability to Consolidate Debt

Borrowers who do a cash-out refinance might use the cash provided by their refinance to pay off higher-interest debt, such as debt from a personal loan or credit card. Instead of making payments to multiple lines of credit each month, they essentially roll their debt payment into their mortgage payment, simplifying their finances.

Steps to Refinance an FHA Loan

Seriously considering an FHA refinance loan? Here are the steps it takes to turn your ideation into reality.

1. Review Your Current FHA Loan

1.    The first step in shopping for a new loan should always be to review your existing mortgage. After all, that’s the best way to understand what factors would make a new mortgage more favorable for your finances. If your original loan is not FHA-insured, note that you may not qualify for certain types of FHA refinancing loans.

2. Shop for Lenders and Offers

2.    Next up: The actual shopping part. In order to ensure you get the best deal available, it’s worth asking several lenders for refinancing quotes, including a full amortization schedule. That way, you’ll understand exactly how much money you stand to save — or not — by choosing a specific lender.

3. Submit an Application and Required Documentation

3.    Once you’ve settled on a lender, you’ll submit your application, including any required documentation (such as ID and income verification, including bank statements and tax forms). In most cases, this process can be done entirely online.

4. Go Through the Appraisal and Underwriting Process

4.    As part of most refinancing processes, you’ll need to have your home appraised so the lender understands its current market value — and can use that value to calculate important aspects of your application, like the LTV. An underwriter will assess your holistic financial profile to determine whether or not you qualify for the refinance loan.

5. Close the Refinance

5.    Finally, if the terms are favorable and you are approved, you’ll close the refinance loan. The new lender will repay your existing loan, and your new payments will be directed toward this new lender, using the new terms you’ve agreed to.

Tips and Considerations for FHA Loan Refinancing

Want to get the very best out of your FHA loan refinancing process? Here are some tips to help you get the most bang for your buck.

Evaluate Your Financial Situation

Refinancing isn’t right for everyone. In fact, in most cases, the FHA won’t even allow you to refinance with one of its loans unless it results in a net financial benefit for you, the borrower. You can take a few first steps to determine whether or not it will help before you ever get a lender involved.

Using a mortgage calculator, you can determine how much a lower interest rate would save you over time or how much a longer loan term would reduce your monthly payment. Keep in mind that refinancing isn’t free, so unless the savings are substantial enough to eclipse your closing costs, it may make more financial sense to keep your original loan.

Understand Closing Costs and Fees

Loans come with a variety of closing costs and fees, such as application fees, the cost of the appraisal, attorney fees, and more. These costs can add up to about 6% of your overall loan value, and though some of them may be able to be financed as part of your loan, they still have the potential to eat into any savings your refinancing loan might offer.

Time Your Refinance Strategically

When it comes to refinancing your mortgage, timing matters. For example, if interest rates are higher than when you took out your original loan, the timing might not be right. The same could be said if you’re planning on moving out of your home in the near future, in which case, you may not have enough time in the home left to break even on your closing costs.

Consider Your Break-Even Point

A key piece of advice when you’re refinancing any home loan is to compute the break-even point on the refinance. A refinance comes with closing costs, and you’ll want to divide the closing costs by the monthly savings from your new mortgage payment to get to your personal break-even point.

For example, imagine that refinancing causes a payment to decrease by $100 a month. If closing costs will be $2,500, it would take 25 months to recoup the costs and start to see savings. If you plan to sell the house in 18 months, refinancing may not be the right strategy. If you intend to stay long term, it may be an idea to explore.

Common Mistakes in FHA Loan Refinancing

Here are some common errors borrowers make when undergoing the FHA loan refinancing process.

Misunderstanding the Eligibility Criteria

Although FHA loans come with more accessible eligibility criteria than many conventional loans, they do still have standards. If your credit score is less than 580 or your payments are delinquent, you’re unlikely to qualify for an FHA refinancing loan.

Ignoring Closing Costs and Fees

As mentioned, closing costs and fees can really add up — so if you don’t take them into account when you’re considering a refinance, you may wind up with an unpleasant case of sticker shock.

Not Considering Long-Term Financial Goals

Refinancing your home, when done best, is all about saving money over time, which means having enough time for those savings to accrue. If you’re planning on selling your house and moving in three to five years, refinancing may actually end up being more expensive than staying with a higher-rate original loan. Additionally, if you’re refinancing primarily to lower your monthly payment and make ends easier to meet, don’t forget to keep your long-term finances in mind. It may not be worth the extra monthly money to pay thousands more in interest overall.

The Takeaway

FHA refinance loans are available for homeowners whose original loans are FHA-insured — as well as for those who have a conventional original mortgage. FHA loan requirements vary depending on which type of loan you’re considering, and may not be right for everyone. But if you can meet the qualifications and derive a solid financial benefit from an FHA refinance, it may be worthwhile to embark on the process.

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.

FAQ

Can you refinance an FHA loan without an appraisal?

Yes — but only if you qualify for an FHA Streamline loan, which requires your original loan also be an FHA-insured loan.

What happens if your home’s value has decreased?

Even if your home’s value has decreased, you may still be eligible for a refinance loan through the FHA Streamline program. It all depends on how much you owe on your home and your other qualifying factors. (Keep in mind, too, that this program requires that your original home loan also be an FHA one.)

Can you refinance an FHA loan if you’re behind on payments?

No. All FHA loan refinance programs require borrowers to be up-to-date on their loan payments, with most including provisions that there must not have been any payments more than 30 days late within the last six months.

How soon can you refinance an FHA loan?

How soon you can refinance your FHA loan will depend on what kind of refinance you’re planning. If you are doing an FHA Streamline refinance, at least 210 days must have passed from the closing date of the mortgage you’re refinancing, and certain other loan “seasoning” requirements may also apply. Moving from an FHA loan into a conventional loan usually requires at least six months of on-time payments since the loan’s closing.

What credit score is needed to refinance an FHA loan?

If you are refinancing from an FHA loan into another FHA loan, you will likely need a credit score of at least 580. Going from an FHA loan into a conventional loan will require a minimum score of 620.

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

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

SOHL-Q425-200

There are many steps to the home-buying process. If you’re taking out an FHA loan (a loan backed by the Federal Housing Authority) to buy a property, you’ll most likely need to get an appraisal to verify the value and condition of the home. Let’s take a closer look at how FHA appraisals work, what to expect from FHA loan inspection requirements, and how to prepare, particularly if you’re a first-time homebuyer and have never been through the process before.

Understanding FHA Appraisals and Inspections

An FHA loan appraisal is an in-person assessment performed by an accredited appraiser. The purpose of the appraisal is to evaluate how much a house is worth and determine if it meets minimum safety and livability standards. The appraisal is sent to the lender for further evaluation before a FHA loan can be approved. FHA appraisals are typically required whether the borrower is buying or refinancing a home with an FHA loan. A buyer might meet all the other FHA loan requirements but an FHA appraisal is still needed in order for a loan to get the green light.

FHA Inspections vs. Appraisals

The appraiser only factors in readily observable conditions. A home inspection, by comparison, is much more in-depth in its assessment of a property’s need for repairs. Does the FHA require inspection of the home by a home inspector? No. An FHA appraisal may pick up some problems an inspector might see. But many homebuyers still order a traditional home inspection alongside their FHA appraisal.

Besides the property value, the FHA appraisal requirements evaluated during an FHA appraisal include the safety, security, and soundness of a home. In other words, the home should be safe for occupants to inhabit, protect the security of the property, and not have physical deficiencies or conditions impacting the structural integrity and ability to market it for future sale.

Appraisers are required to describe the property conditions, including any renovations, necessary repairs, or deterioration. Minor issues, such as missing handrails, cracked windows, or worn countertops, do not require automatic repair.

Differences Between FHA and Conventional Appraisal

Whether a borrower is seeking an FHA loan or a conventional loan, a home appraisal estimates the fair market value of a home based on the property condition and nearby home values. But FHA loans must meet the minimum standards set by the U.S. Department of Housing and Urban Development (HUD). This means that FHA appraisal requirements also consider the health and safety of the property, while conventional appraisals focus on the property’s value and condition. So in a sense, while the process is technically an appraisal, there are FHA loan inspection requirements that must be met. FHA lenders may require that any health and safety hazards be addressed before approving the mortgage.

FHA appraisers follow HUD guidelines for minimum property standards. During the appraisal, they analyze and report a property’s physical and economic characteristics to provide an opinion of its value. HUD requires FHA appraisers to have state certification and meet the minimum certification criteria issued by the Appraiser Qualification Board.

How Do FHA Appraisals Work?

An FHA loan appraisal involves two steps. The appraiser will complete a site visit to inspect the property condition and perform market research for comparable homes in the area to estimate the market value of the home.

The appraiser will inspect the home’s interior and exterior to determine the property’s safety and soundness. The appraiser’s findings, plus information on the home like square footage and the year it was built, are cataloged in HUD’s Uniform Residential Appraisal Report.

To estimate the property’s value, the appraiser evaluates the selling prices for comparable homes in the same area that were recently sold. This information, combined with the property’s condition and characteristics, is used to estimate the market value.

Recommended: The Ultimate Home Inspection Checklist

What’s the Purpose of an FHA Appraisal?

FHA appraisals are required by lenders to ensure that the loan amount doesn’t exceed the market value of the property. The appraisal process is also used to determine that a property meets FHA standards for health and safety.

Safety and Structural Standards

In terms of occupant health and safety, the FHA appraisal looks out for exposure to hazardous materials, such as lead paint and asbestos. Mold, radon gas, and poor insulation are other potential safety risks that would be flagged in an appraisal. The overall property structure needs to be in sufficient condition to keep occupants safe. This means that damage to the foundation, structural decay, or anything that impacts the long-term integrity of the home would not meet FHA requirements.

Compliance with Minimum Property Standards (MPS)

FHA appraisals follow the Minimum Property Standards (MPS) set by HUD. The MPS establishes baseline conditions to cover aspects of a property that aren’t met by model building codes. For example, the MPS covers doors, gutters, and wall coverings to ensure the property value is not impacted by the quality of these components.

What to Expect from an FHA Appraisal

Being prepared for an FHA appraisal can help streamline the loan application and homebuying process. Here’s what to expect from FHA appraisal guidelines:

Appraisal Timeline and Duration

The duration of an FHA appraisal site visit varies by property size and condition, but plan for it to take between one and several hours to complete. The full appraisal report is usually complete within a week.

Common Issues That Can Affect the Appraisal Outcome

There are a number of issues and property conditions that the FHA requires to be remedied for loan approval. Some common FHA loan appraisal requirements that could trigger problems include:

•   Roof condition or damage

•   Exposed wires

•   Water heater temperature and pressure relief valve

•   Damaged foundation

•   Peeling paint (for homes built before 1978)

Conditions That Won’t Pass FHA Inspection

It’s important to know what won’t meet FHA loan inspection requirements. Any property conditions that impact the safety and health of occupants could need to be addressed in order to get FHA loan approval. Besides the common issues outlined above, hazards, nuisances, and obstructions to property access could fail to pass FHA inspection. For example, the level of traffic or proximity to a hazardous waste site could violate FHA standards.

Ultimately, the property valuation accounts for the home condition, square footage, any renovations, and the number of bedrooms and bathrooms. The appraiser must observe neighborhood characteristics and surrounding properties to make determinations that will be incorporated into the valuation of the property.

FHA Inspection Requirements Checklist

Sellers can plan ahead and fix what won’t pass FHA inspection to avoid delays and improve the marketability of their home. Here’s how to address some common issues that could cause a property to fail an FHA appraisal.

•   Roof repair: Fix leaks and consider a new roof if life expectancy is less than three years.

•   Chipped or peeling paint: Scrape and repaint peeling surfaces if property was built prior to 1978.

•   Water heater: Ensure the water heater has a pressure and temperature relief valve and sufficient piping.

•   Plumbing: Repair all toilets, showers, and sinks that aren’t in working order as leaky plumbing won’t pass FHA inspection.

Both the inspection and the home’s appraised value are critical to FHA loan approval. Sellers and their real estate agents are permitted to communicate with an appraiser to offer additional property information that can contribute to the valuation of the home. Gathering documentation beforehand on any home improvements can ensure the appraiser has everything needed for an accurate valuation.

Recommended: What Are the Most Common Home Repair Costs?

What Happens After an FHA Appraisal?

The FHA appraisal report will provide the estimated market value and outline any required repairs or alterations that need to be completed for FHA loan approval.

What to Do if the Home Sale Appraisal Comes Back Low

If an FHA appraisal comes back low, there are several possible scenarios. The seller can lower the sale price to accommodate the appraised value. Alternatively, the buyer can renegotiate to lower the price and potentially contribute a larger down payment to cover the portion of the home price that is not covered by the FHA loan. As a last resort, a buyer would be permitted to walk away from the deal if the FHA lender’s requirements can’t be met.

What to Do if the Refinance Appraisal Comes Back Low

If refinancing with a FHA loan and the appraisal comes back low, there are a few courses of action available to borrowers. First, review the appraisal report to see if an appraiser missed anything important. If so, providing the correct information to get another appraisal could result in a higher appraised value.

If disputing the appraisal isn’t an option or successful, borrowers can consider restructuring the loan to take less cash out. Finally, the loan can be denied if the terms are not beneficial to the borrower.

What to Do if the Appraiser Requests Further Repairs

The appraisal may identify repairs that need to be completed to close on the loan. Unless otherwise outlined in the purchase and sale agreement, sellers are typically on the hook for repairs. The sellers have up to 120 days to make necessary repairs and meet FHA standards if required by a lender.

Alternatively, buyers can pay for the repairs themselves. If the issues impact the health, safety, and livability of the property, they’ll need to be completed prior to closing. Other non-safety repairs can be completed after closing. Note that delayed repairs may require an extra escrow holdback for the estimated costs.

Once repairs and issues have been addressed, the property can be reassessed. Borrowers can consider a FHA 203(k) loan to finance both the purchase and rehabilitation costs through a single loan if the repairs are an obstacle to closing. Buyers might consider renegotiating their offer to reflect the repair costs being financed.

If appraisal-related issues are delaying closing, buyers can consider a mortgage rate lock to secure their interest rate for a set period. This can help buy more time for repairs to be made without losing out on favorable loan terms.

What to Do if the Appraisal Comes Back at or Higher Than the Expected Amount

The loan simply moves forward if the appraisal comes back at or higher than the expected amount, barring any request for further repairs.

FHA appraisals are valid for 180 days unless it’s updated. If updated, an appraisal can be good for up to one year.

Recommended: FHA Loan Closing Cost Calculator

Impact of FHA Appraisal on Loan Approval

The FHA appraisal influences loan approval in two key ways. First, the appraisal evaluates the property condition and identifies if any repairs or further inspections are required for loan approval. Second, the appraised value determines the total loan amount a buyer is approved for. If the appraised value is lower than the purchase price on the contract, either a price reduction or larger down payment could fill the gap to get loan approval.

Repairs aside, how long can you wait after the appraisal to close on an FHA loan? It helps to understand how long an FHA appraisal is good for. Once the borrower and lender receive a copy of the FHA appraisal, it’s valid for 180 days.

A conditional approval from the lender will outline the required repairs to be made in order to close. After the appraisal is approved in underwriting, the loan will most likely be cleared to close. Prior to closing, borrowers will receive a mortgage closing disclosure which outlines the total funds needed to close.

💡 Quick Tip: When house hunting, don’t forget to lock in your home mortgage loan rate so there are no surprises if your offer is accepted.

The Takeaway

FHA appraisals estimate a property’s value and assess its condition to determine if it meets safety and livability standards set by HUD. Understanding the conditions and issues that won’t pass FHA inspection is important for buyers and sellers alike.

SoFi offers a wide range of FHA loan options that are easier to qualify for and may have a lower interest rate than a conventional mortgage. You can down as little as 3.5%. Plus, the Biden-Harris Administration has reduced monthly mortgage insurance premiums for new homebuyers to help offset higher interest rates.

FAQ

How does the appraised value affect the loan amount?

With FHA loans, the appraised value of the property determines the loan amount a borrower can qualify for.

Can you contest an FHA appraisal?

Yes, you can contest an FHA appraisal and provide additional information to inform the property valuation. However, there’s no guarantee that the appraiser will change the valuation.

What happens if the property doesn’t meet FHA requirements?

If a property doesn’t meet FHA requirements, buyers can ask the seller to make the necessary repairs. Alternatively, buyers can consider other types of home loans, such as a conventional mortgage.

How do FHA appraisals impact refinance applications?

If a home appraises for less than its owner thought it was worth, this could affect the ability to refinance, or the available loan amount for the refinance. Ultimately, a refi plan could be thrown off course by an unexpectedly low appraisal.

Is an FHA appraisal different for a new-construction home?

A new-construction home still has to meet the FHA’s requirements and standards. A key difference in the FHA appraisal process for new homes: If the home is 90% or less completed, the lender must provide the appraiser with a copy of the floor plan and other documents necessary to determine the size and quality level of the house. If construction is more than 90% complete, the lender must provide a list of what will be installed or completed after the inspection date.

How long is an FHA appraisal good for?

An FHA appraisal is valid for 180 days unless it’s updated. If updated, an appraisal can be good for up to one year.

Can an FHA appraisal affect interest rates?

An FHA appraisal won’t directly affect the interest rate you are offered for an FHA loan; however, if the home you wish to purchase appraises for less than the sale price, then the appraisal may affect your ability to obtain an FHA loan.

How long do you have after appraisal to close an FHA loan?

An FHA appraisal is good for 180 days and can be extended under certain conditions. But buyers typically close within 30 to 45 days after the appraisal.

Photo credit: iStock/valentinrussanov

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.

SOHL-Q425-201

This just in: Houses are expensive. But some houses are really expensive. If you have your heart set on a luxurious oceanside mansion (or just a modest home in an ultra-high-cost city like New York or San Francisco), you may need to seek out a jumbo mortgage: one whose dollar amount surpasses the conforming loan limits set by the Federal Housing Finance Administration (FHFA) each year. In 2026, that limit is $832,750 in most cases, though in some high-cost areas the limit can range up to $1,249,125, and in two counties in Hawaii the limit is $1,299,500. Any mortgage that exceeds those amounts is considered a jumbo loan.

What Are Jumbo Loans?

Jumbo loans are those in which the mortgage total surpasses the conforming loan limits set by the FHFA. The conforming loan limits change annually. As noted above, in 2026, a jumbo loan is one whose total is more than $832,750 in most areas, though in select high-cost areas, the limit goes up to $1,249,125.

Your mortgage total is the amount of money you borrow in order to purchase a house — an amount that can be calculated by subtracting your down payment from the agreed home purchase price. (Keep in mind, though, that this figure isn’t the same as how much you’ll pay in full over the lifetime of the loan, since you’ll also owe interest to the bank that provides the loan. Still have questions? Check out our mortgage payment calculator with interest.)

Conventional loans are offered privately through banks, credit unions, and other financial institutions, unlike other loans which are supported by a government agency such as the USDA (U.S. Department of Agriculture). Conventional loans are easily the most common type of home loan.

If you’re wondering about jumbo loans vs. conventional loans, it’s important to understand that jumbo loans are a type of conventional loan. But whereas most conventional loans are also conforming loans and are available with a minimum down payment as low as 3% for qualified first-time homebuyers, jumbo loans are considered nonconforming and typically require a larger down payment — usually at least 10%. You’ll also likely need a very high credit score in order to be eligible to take out a jumbo loan.

Like other conventional loans, jumbo loans can be either fixed-rate loans or adjustable-rate mortgages (ARMs).

How Jumbo Loan Limits Are Calculated

As we’ve seen above, the specific jumbo loan limits where you live (or where you’re planning to buy a home) will vary depending on the area’s cost of living. The FHFA offers a convenient conforming loan limit map that allows you to see what the conforming loan limits (otherwise known as jumbo loan limits) are in your area, broken down by county.

The jumbo loan limit is determined each year by the FHFA using current housing price data. That way, the limits are tied to real information in the world about how much it actually costs to buy a home in a given area. Conforming loan limits — also known as the jumbo loan limits — change each year; new limits for the coming year are typically announced in late November.

What Is the Jumbo Loan Limit in 2026?

As mentioned above, in 2026, the jumbo loan limit for the vast majority of the U.S. is $832,750, and the highest conforming loan limit, in the most expensive places to live, is $1,299,500. To see exactly what the jumbo loan limits are in your area, visit the FHFA’s map.

2026 Conforming Loan Limits by Region

Conforming loan limits are not established by region but rather according to the county where a property is located. However counties with higher conforming loan limits tend to cluster in certain parts of the country, including the Pacific coast of California, parts of Colorado and Idaho, the Nashville area, and parts of Massachusetts, New York, New Jersey, and the Washington, D.C. area. Alaska and Hawaii also have especially high conforming loan limits. The FHFA conforming loan limit map shows these regions clearly.

High-Cost Area Considerations

Why do some counties have especially high conforming loan limits? The FHFA is required to adjust its conforming loan limits each year to reflect the change in the average U.S. home price. Some areas have especially high-priced homes. For areas in which 115% of the local median home value exceeds the baseline conforming loan limit value, the applicable loan limit will be higher than the baseline loan limit. No surprise, then, that counties such as New York County have higher conforming loan limits (in this case $1,209,750).

Jumbo Loan Requirements

Jumbo loans are, well, big — which means the qualification metrics for getting a home loan are pretty strict. (After all, that’s a whole lot of money the lender stands to lose if you default.) While every lender has its own specific algorithm for qualifying potential borrowers, here are some rules of thumb when it comes to jumbo loan requirements:

Credit Score Requirements

While there’s no specific credit score that guarantees you’ll qualify for a jumbo loan, most lenders will likely require a high one — after all, it’s a fairly risky prospect to lend that much money to someone. Credit scores range from 300 to 850. Scores of 670 to 739 are considered good; scores of 740 to 799 are considered very good, and scores of 800 and above are considered exceptional. You’ll likely need a score of at least 700 or 720 to qualify for a jumbo loan.

Down Payment Requirements

We touched on this briefly, but jumbo loan lenders often require their borrowers to provide a more substantial down payment than conventional loan lenders do. While a minimum of 10% is a good rule of thumb, some lenders may ratchet up the minimum to 25% or 30%.

Considering how large jumbo loans are already, that means you’ll probably need a significant amount of cash lying around in order to successfully apply for one — 10% of $900,000, a relatively small jumbo loan, is already $90,000.

Debt-to-Income Ratio Requirements

Your debt-to-income (DTI) ratio is a measurement of your existing debt burden expressed as a percentage. It’s calculated by totalling all your monthly debt payments and dividing that figure by your gross monthly income.

Conventional loans usually required a DTI ratio of 45% or lower. (Many lenders cut off qualification at lower percentages.) Again, while there’s no one advertised maximum DTI ratio for a jumbo loan, you’ll likely want to have as little debt as possible in order to qualify — not to mention in order to have the money on hand each month to make that massive mortgage payment.

Income and Asset Documentation

Jumbo loan lenders are, of course, primarily concerned with your ability to repay the loan. That means that, along with the above-mentioned factors, they’ll also want proof that you earn a reliable and high income — and in some cases that you’ve already stockpiled enough wealth that you’ll be able to make your payments for several months even if you lose your job. For this reason, qualifying for a jumbo loan can be especially challenging for a self-employed worker.

Advantages and Disadvantages of Jumbo Loans

So, now that you understand them better, is a jumbo loan right for you? Like any financial decision, taking out a jumbo loan has both benefits and drawbacks to carefully consider. Here are some of the pros and cons of jumbo loans.

Alternatives to Jumbo Loans

If you find yourself having trouble qualifying for a jumbo loan, you could look into other nonqualifying mortgages, such as bank statement loans — or potentially borrow a significant amount of money from family or friends. There is another alternative as well.

Piggyback Loans

One way to avoid taking out a jumbo loan is to borrow an amount below the conforming loan threshold (in most places, that would be less than $832,750 in 2026).

Then the borrower would take out a second “piggyback loan” to fund the rest of the purchase. These are often home equity loans and might have higher interest rates than a home mortgage loan. So being able to execute this strategy would depend on the borrower having another property to borrow against, such as a second home. Note: SoFi does not offer piggyback loans at this time.

If you know that you are coming into a large infusion of cash, such as from a bonus, inheritance, or the sale of another property that you own, the piggyback strategy might work because you will have funds to start paying off the second loan in the near future. However, if the home you’re vying for is that much of a stretch, it may make more financial sense to find something a bit more modest and apply for a conforming loan instead.

The Takeaway

Jumbo loans are large mortgages that don’t conform to the limits set by the FHFA — and therefore come with stricter qualification requirements. While jumbo loans can help those who qualify to access a high-value house, they can also be hard to keep up with unless your income is correspondingly high.

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

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

FAQ

How do I find my local jumbo mortgage limit?

Jumbo loan limits are set by the Federal Housing Finance Agency (FHFA) each year and are determined by county. The FHFA Conforming Loan Limit Values map shows every county in the U.S. and its limits for single-family and multi-unit properties.

What is the FHA jumbo loan limit?

The Federal Housing Administration (FHA) guarantees loans made by private lenders, and each year it sets maximum FHA loan amounts based on the median home prices for an area. Technically, the FHA does not have a “jumbo loan” designation, but would-be FHA loan borrowers can look up FHA mortgage limits on the U.S. Department of Housing and Urban Development site.

Why are jumbo loan limits necessary?

Most mortgage loans issued in the U.S. are guaranteed by Fannie Mae and Freddie Mac, which helps reduce risk for lenders and ensure that loans are affordable and available to homebuyers. But the guarantee has to stop somewhere, and conforming loan limits draw that line. This is why jumbo loans have more stringent borrower requirements than conforming loans — lenders who make jumbo loans don’t have Fannie Mae and Freddie Mac to fall back on if a jumbo borrower defaults.

What credit score do you need for a jumbo loan?

A jumbo loan will typically require a credit score of at least 700 or even 720, however this is only one of several requirements for this large loan, so a high score is no guarantee that a borrower will qualify.

Can jumbo loan limits change every year?

Conforming loan limits (also known as “jumbo loan limits”) do change annually. The Federal Housing Finance Agency typically releases new limits for the coming year each November.

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

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

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