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The housing market is rising in some areas of America and falling in others. If you find yourself in a hot seller’s market, it can be challenging to buy a house, but doing so, even with a low down payment, is possible.

Lenders are willing to approve low-down-payment mortgages if you qualify and are comfortable with paying mortgage insurance.

Read on for advice on navigating the real estate market if you have a small down payment but a fair amount of competition from other prospective buyers.

What Is Considered a Low Down Payment?

While many people believe you need at least a 20% down payment to buy a house, the average down payment on a house at the end of 2023 was 8%.

Given the wide range above, what’s actually considered a low-down payment? Popular mortgage programs out there may require as little as 3% down, and a couple of more specific home loan programs allow 0% down.

The reason why that 20% down payment figure keeps popping up is that any amount less than that will likely entail some form of mortgage insurance, an ongoing fee charged by most lenders.


💡 Quick Tip: You deserve a more zen mortgage. Look for a mortgage lender who’s dedicated to closing your loan on time.

Challenges of Buying in a Seller’s Market When You Have a Small Down Payment

There’s truth to the saying “cash is king,” and that continues to be evident in a seller’s market, where real estate investors who pay all cash frequently outbid prospective first-time homebuyers.

Be ready for these potential challenges if you intend to buy a home with a small down payment.

Longer Closing Time

Closing on a home with a mortgage-contingent offer to buy takes longer than closing with a cash offer. There’s often more paperwork, and underwriters may take longer to ensure that your financials are in order before green-lighting your mortgage.

Lenders May Disagree With Mortgage Minimums

Just because a mortgage loan program allows for a 3% minimum down payment doesn’t mean the lender will accept it. Lenders have wide latitude to dictate their own terms, and it’s fairly common for them to set their own minimum down payment requirement somewhere above what the stated minimum for the program is.

Home Sellers May Be Nervous About Your Ability to Close

While it’s true that all funds from your down payment and mortgage transfer to the seller at closing, many sellers still buy into the old “bird in hand” adage when it comes to accepting offers. A higher down payment signals a buyer’s financial capacity and is, therefore, more attractive in the eyes of the homeowner.

If sellers accept a bid with a low down payment, they may run an increased risk of the buyer being rejected at the last minute by their mortgage lender.

In a deal involving a mortgage backed by the Federal Housing Administration (FHA), if the home is appraised for less than the agreed-upon price, the sellers must match the appraised price or the deal will fall through.

And FHA guidelines require home appraisers to look for certain defects. If any are found, the sellers may have to repair them before the sale.

Recommended: Private Mortgage Insurance (PMI) versus Mortgage Insurance Premium (MIP)

Tips for Buying With a Small Down Payment

If you’re trying to score a home with a small down payment, there are some ways you can approach it to increase your odds of buying the home of your dreams.

One way is to select a government-backed mortgage program — FHA, or the US Department of Agriculture or Veterans Affairs — that allows for a low down payment. The government guarantee makes them more palatable for mortgage lenders and easier for a homebuyer to afford.

Some specialized mortgage programs allow qualified buyers to put as little as 0% down; others, from 3% to 5% down. Some of the most popular low-down-payment mortgage programs are:

•   VA loans (0% down)

•   USDA loans (0% down)

•   FHA loans (3.5% down)

•   Fannie Mae HomeReady (3% down)

•   Conventional 97 loan (3% down)

•   Conventional mortgage (5% down)

Another option is to apply for down payment assistance. Many governments and nonprofits offer down payment assistance programs for first-time homebuyers — those who have not owned a principal residence in the past three years — in the form of loans or grants. Some lenders can even assist you in qualifying for these programs to help offset the upfront costs of homebuying.

Finally, you can also ask a family member, or sometimes a domestic partner, close friend, or employer, to help with the down payment by contributing gift money. The money can’t come with any strings attached, and a gift letter will likely be required. This is a popular option for parents and in-laws who want to help their children buy a first home.


💡 Quick Tip: Not to be confused with prequalification, preapproval involves a longer application, documentation, and hard credit pulls. Ideally, you want to keep your applications for preapproval to within the same 14- to 45-day period, since many hard credit pulls outside the given time period can adversely affect your credit score, which in turn affects the mortgage terms you’ll be offered.

Pros and Cons of Using a Low Down Payment

There are both benefits and disadvantages to submitting a small down payment on a home. Here are a couple of points to think about.

Pros of Using a Low Down Payment

•   Gets you in a home faster than waiting to save for a bigger down payment.

•   Start building equity earlier and avoid spending money on rent.

•   Preserve cash for other investments, opportunities, and emergencies.

•   Take advantage of current low mortgage rates, theoretically saving you money over the long run.

Cons of Using a Low Down Payment

•   You’ll have to pay private mortgage insurance, or a mortgage insurance premium, which could add 0.5% to 1.5% of the loan amount to your annual housing costs.

•   Your monthly mortgage payment will likely be larger, as the amount you borrow will increase the less you put down.

•   Your lender may penalize you with a higher mortgage rate to offset the higher risk of a lower down payment.

•   You run a greater risk of your home loan being underwater, should home values drop.

Recommended: Home Affordability Calculator

Tips for Managing a Seller’s Market

So what’s a prospective homebuyer to do if they find themselves in a seller’s market or a tight market and feel the cards are stacked against them?

One way to get a leg up on the competition is to get the ball rolling on financing early and make sure you have everything in place by the time you even submit an offer on a home.

Make sure you’re prequalified (which is when lenders have an idea of your income and assets before you start home shopping, so you have an idea of how much you can afford). Then, it can be smart to get preapproved, which is when you receive a letter from a lender stating that you qualify for a certain loan amount and rate. These steps can ensure that you’ll be ready to roll the second you find the right home.

Once you’ve submitted an offer on a house, make sure you’re ready when it comes to all documents and information requested by your chosen lender.

Another thing you can do is to find a good real estate agent who’s been through the homebuying process countless times and can advise you effectively.

Recommended: How to Buy a House in 7 Steps

The Takeaway

Buying a home with a small down payment, even in a seller’s market, is possible. With preparation and the right mortgage lender, you may be able to land a starter home or your dream home with a low down payment.

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

SoFi Mortgages: simple, smart, and so affordable.

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Photo credit: iStock/sturti

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

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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.

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

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

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

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

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You may wonder if it’s possible to open a bank account for someone who is in prison. The answer is, yes, it may be possible to start a bank account for a prisoner, provided it’s allowed by the Department of Corrections in the state where the individual is incarcerated. (Worth noting: It may also be a challenge to find a bank that offers this kind of account.)

Opening an account can be a positive step. Being imprisoned can limit someone’s ability to pay bills, grow savings, and generally manage their finances. Opening accounts for inmates at external banks can help them to earn interest on savings while saving money on fees. And it can potentially make their reentry into society easier upon release.

While inmates may have access to prison accounts, those can come with high fees, and they typically don’t pay interest. A prison account is a special type of account that allows an inmate to store funds which can be used to pay for hygiene items and other necessities while they’re incarcerated. It doesn’t impact their lives when released.

So, let’s take a closer look at this topic:

•   Whether it’s legal to open a bank account while in prison

•   How to apply for a bank account while in prison

•   What documentation is required to start an account

•   What kinds of accounts are available, including whether joint accounts are a possibility

Let’s start learning about accounts for inmates.

Is It Legal to Open a Bank Account While in Prison?

It’s legal to open a bank account while in prison, unless state law or correctional facility policy specifically prohibits it. The best way to find out whether opening accounts for inmates is allowed is to check with the Department of Corrections in the state where the person is incarcerated.

In Texas, for example, the Department of Criminal Justice encourages inmates to open accounts at an external bank of their choice. They can then link this bank account to their prison account. This can be used to replenish their account for items bought while in prison. Excess funds in their prison account can also be transferred to their external bank account.

The state of New York, on the other hand, prohibits inmates from opening outside bank accounts. Specifically, prisoners are not allowed to open:

•   Checking accounts

•   Savings accounts

•   Stock accounts

•   Mutual fund accounts

•   Money market accounts

•   Certificate of deposit (CD) accounts

•   “In trust for” accounts

Inmates in New York are also barred from receiving distributions from any U.S. savings bonds they might own. Prisoners who enter the system with existing checking accounts or other bank accounts are required to close them.

So, if you are thinking of opening a savings account for an inmate, whether or not you can will depend on where they’re imprisoned. If you’re able to open some kind of savings account for an inmate, the next challenge may be finding a bank that will allow you to do so. Let’s look at that issue in a bit more detail next.

Why Banks Might Refuse to Help Prisoners

Not all banks are willing to open accounts for prisoners. Financial institutions can establish their own policies for when opening accounts for inmates is or isn’t allowed. If you’re trying to figure out how to open a bank account for an inmate and you’re hitting a brick wall with banks, it could be due to one of the following:

•   The bank requires a valid ID for the inmate, which you don’t have.

•   You have not been granted power of attorney (POA) for the inmate.

•   The inmate has a negative ChexSystems report (which is a reporting system for the banking industry) or previous issues with managing a bank account.

•   The bank is concerned that funds deposited to the account might be seized by a government entity.

•   The bank is concerned that the account may be used to conduct illegal activity.

It’s also possible that banks may be worried about running afoul of any rules or regulations established by their state’s Department of Corrections or Criminal Justice. In that scenario, it may be easier for the bank to simply not offer accounts for inmates to avoid any issues.

Applying for a Basic Bank Account for an Inmate

Let’s say that it is legal in the inmate’s state for them to hold a bank account, and you have found a financial institution that is willing to open an account. The next step would be to begin the account.

Keep in mind that opening accounts for inmates isn’t exactly the same as opening a checking account or savings account for yourself. In terms of how to open a savings account for an inmate, there may be one of three possibilities you can pursue. Again, the options you’re able to choose from could depend on what’s allowed by the inmate’s correctional facility and/or state.

Option 1: Specific Prison/Bank Arrangement

Correctional facilities may allow inmates to have outside bank accounts if they open them at an approved financial institution. For example, in Wisconsin inmates are allowed to open interest-bearing accounts at a bank that’s approved by the Department of Corrections.

If you’re trying to open a bank account for an inmate, you could check with the Department of Corrections or Criminal Justice to find out which banks are approved. The Department of Corrections should also be able to tell you what restrictions or requirements apply when opening accounts for inmates.

Recommended: How Much Money Do You Need to Open a Bank Account?

Option 2: Applying to Bank of Choice

While some correctional facilities require inmates to open external accounts at approved banks, others give you some leeway in deciding where to bank. As noted, Texas encourages prisoners to open accounts at the bank of their choice if they like.

If you’re trying to open a savings account for an inmate, the hard part may be finding a bank that will allow you to do so. You can start by checking at your current bank to see if it’s an option. If not, you can then try contacting other banks in the area to see which ones offer inmate accounts.

Recommended: How Many Bank Accounts Should You Have?

Option 3: Wait Until Release

Though not ideal, an inmate could simply wait until they’re released to open a savings account. This may be easier said than done, however, if the inmate isn’t able to meet the bank’s requirements for account opening.

What kind of requirements exactly? That could mean providing a valid ID and proof of address. And again, something like a negative ChexSystems report could lead the inmate to be denied a bank account. Unpaid balances or suspected fraud are other red flags that may result in an application for a new bank account being rejected.

Can Prisoners Be a Part of a Joint Bank Account?

You might be wondering how to open a joint bank account with an inmate or if it’s even possible. Whether a prisoner can open a joint bank account with someone else can depend on the bank’s policies. If you’re opening a joint bank account and the bank requires you to do so in person, for example, you may need to provide documentation showing why the joint account owner cannot be present.

Required documentation can include having power of attorney granting you legal authority to act on behalf of the inmate. The rules for establishing power of attorney and the scope of powers granted can vary from state to state.

If the bank allows you to open joint accounts online, then you may not be asked for this document. You will, however, likely need to provide the following for a joint account:

•   The inmate’s name

•   Their date of birth and Social Security number

•   A current address, phone number, and email address

If you’re missing any of those pieces of information, you may not be able to proceed with opening a joint account online. You could call the bank to ask how you can finish the account setup if you run into issues.

Keep in mind that managing a joint bank account — one shared with an inmate before they’re incarcerated — may be handled differently. As mentioned, New York requires inmates to close existing accounts before entering prison. But other correctional systems may allow those accounts to remain open.

If you have a joint account with an inmate, it’s important to note whether any court orders exist or are likely to be filed that would allow for seizure of account assets for repayment of a nondischargeable debt, such as back child support, past due tax bills, and federal student loans. Keep in mind that co-borrowers for joint loans are equally responsible for shared debts, even if one person is incarcerated.

Required Documents to Open a Bank Account

Banks typically have a standard list of documents they require to open a bank account. The list can include:

•   Valid government-issued ID

•   Proof of address

•   Social Security number

•   Birth certificate when other forms of ID are unavailable

Opening bank accounts for inmates can require additional documentation if the bank needs a power of attorney form. An attorney can help you complete a power of attorney for an inmate, which may require a visit to the correctional facility if state law prohibits digital signatures. State law can also dictate whether a power of attorney for an inmate needs to be notarized in order to be legally valid.

Types of Bank Accounts for a Prisoner

The types of bank accounts you can open for a prisoner will generally be governed by Department of Corrections policy. But if you’re able to open a bank account for an inmate, you might be able to choose from these options:

•   Checking accounts

•   Savings accounts

•   Money market accounts

•   Certificate of deposit accounts

These options may also be available once an inmate is released. If a former inmate is having trouble getting a regular checking account after release, they might consider second chance checking or a prepaid debit card instead. These can be easier to access and provide support for day-to-day banking in a way that can be very helpful.

•   Second chance checking is designed for people who have been denied a checking account in the past. Usually offered at online or smaller, local banks, these accounts can help people to develop good banking habits so they can upgrade to regular checking later. They may not offer the full array of bells and whistles, and they may involve higher fees.

•   Prepaid debit cards, meanwhile, allow you to load funds onto the card, which you can then use to pay bills, make purchases, or withdraw cash at ATMs. A prepaid debit card is not a bank account but it can provide a formerly incarcerated person with a way to manage their money until they can get an account at a bank.

The Takeaway

Having a bank account can be a positive experience for inmates, but opening a bank account for a prisoner can be quite challenging. Not all states allow inmates to start accounts, and not all banks are willing to have prisoners as customers.

Whether you’re opening accounts for inmates while they’re incarcerated or after they’re released, choosing the right place to bank matters. Specifically, it’s important to find a bank that offers the best combination of features and benefits for inmates and former inmates and makes it possible for you to open that account before the prisoner is released.

Interested in opening an online bank account? When you sign up for a SoFi Checking and Savings account with direct deposit, you’ll get a competitive annual percentage yield (APY), pay zero account fees, and enjoy an array of rewards, such as access to the Allpoint Network of 55,000+ fee-free ATMs globally. Qualifying accounts can even access their paycheck up to two days early.

Better banking is here with SoFi, NerdWallet’s 2024 winner for Best Checking Account Overall. Enjoy up to 4.60% APY on SoFi Checking and Savings.

FAQ

Can an incarcerated person open a bank account?

Whether an incarcerated person can open a bank account will depend on the policies set by the Department of Corrections in their state. Some correctional facilities allow inmates to have external bank accounts, while others limit inmates to having prison accounts only.

Can ex-prisoners have a bank account?

Yes, ex-prisoners can open bank accounts. However, their banking options may be limited if they have a negative ChexSystems report. Former inmates may consider second chance checking accounts if they’re unable to meet the requirements for a regular checking account.

How much money can a federal inmate have in their account?

The Bureau of Prisons (BOP) does not specify an upper limit on how much money a federal inmate can have in their prison account. Inmates can receive funds at a BOP-managed facility, which are deposited into their commissary accounts, by MoneyGram, Western Union, or U.S. Postal Service.

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SoFi members with direct deposit activity can earn 4.60% annual percentage yield (APY) on savings balances (including Vaults) and 0.50% APY on checking balances. Direct Deposit means a deposit to an account holder’s SoFi Checking or Savings account, including payroll, pension, or government payments (e.g., Social Security), made by the account holder’s employer, payroll or benefits provider or government agency (“Direct Deposit”) via the Automated Clearing House (“ACH”) Network during a 30-day Evaluation Period (as defined below). Deposits that are not from an employer or government agency, including but not limited to check deposits, peer-to-peer transfers (e.g., transfers from PayPal, Venmo, etc.), merchant transactions (e.g., transactions from PayPal, Stripe, Square, etc.), and bank ACH funds transfers and wire transfers from external accounts, do not constitute Direct Deposit activity. There is no minimum Direct Deposit amount required to qualify for the stated interest rate.

SoFi members with Qualifying Deposits can earn 4.60% APY on savings balances (including Vaults) and 0.50% APY on checking balances. Qualifying Deposits means one or more deposits that, in the aggregate, are equal to or greater than $5,000 to an account holder’s SoFi Checking and Savings account (“Qualifying Deposits”) during a 30-day Evaluation Period (as defined below). Qualifying Deposits only include those deposits from the following eligible sources: (i) ACH transfers, (ii) inbound wire transfers, (iii) peer-to-peer transfers (i.e., external transfers from PayPal, Venmo, etc. and internal peer-to-peer transfers from a SoFi account belonging to another account holder), (iv) check deposits, (v) instant funding to your SoFi Bank Debit Card, (vi) push payments to your SoFi Bank Debit Card, and (vii) cash deposits. Qualifying Deposits do not include: (i) transfers between an account holder’s Checking account, Savings account, and/or Vaults; (ii) interest payments; (iii) bonuses issued by SoFi Bank or its affiliates; or (iv) credits, reversals, and refunds from SoFi Bank, N.A. (“SoFi Bank”) or from a merchant.

SoFi Bank shall, in its sole discretion, assess each account holder’s Direct Deposit activity and Qualifying Deposits throughout each 30-Day Evaluation Period to determine the applicability of rates and may request additional documentation for verification of eligibility. The 30-Day Evaluation Period refers to the “Start Date” and “End Date” set forth on the APY Details page of your account, which comprises a period of 30 calendar days (the “30-Day Evaluation Period”). You can access the APY Details page at any time by logging into your SoFi account on the SoFi mobile app or SoFi website and selecting either (i) Banking > Savings > Current APY or (ii) Banking > Checking > Current APY. Upon receiving a Direct Deposit or $5,000 in Qualifying Deposits to your account, you will begin earning 4.60% APY on savings balances (including Vaults) and 0.50% on checking balances on or before the following calendar day. You will continue to earn these APYs for (i) the remainder of the current 30-Day Evaluation Period and through the end of the subsequent 30-Day Evaluation Period and (ii) any following 30-day Evaluation Periods during which SoFi Bank determines you to have Direct Deposit activity or $5,000 in Qualifying Deposits without interruption.

SoFi Bank reserves the right to grant a grace period to account holders following a change in Direct Deposit activity or Qualifying Deposits activity before adjusting rates. If SoFi Bank grants you a grace period, the dates for such grace period will be reflected on the APY Details page of your account. If SoFi Bank determines that you did not have Direct Deposit activity or $5,000 in Qualifying Deposits during the current 30-day Evaluation Period and, if applicable, the grace period, then you will begin earning the rates earned by account holders without either Direct Deposit or Qualifying Deposits until you have Direct Deposit activity or $5,000 in Qualifying Deposits in a subsequent 30-Day Evaluation Period. For the avoidance of doubt, an account holder with both Direct Deposit activity and Qualifying Deposits will earn the rates earned by account holders with Direct Deposit.

Members without either Direct Deposit activity or Qualifying Deposits, as determined by SoFi Bank, during a 30-Day Evaluation Period and, if applicable, the grace period, will earn 1.20% APY on savings balances (including Vaults) and 0.50% APY on checking balances.

Interest rates are variable and subject to change at any time. These rates are current as of 10/24/2023. There is no minimum balance requirement. Additional information can be found at https://www.sofi.com/legal/banking-rate-sheet.

SoFi® Checking and Savings is offered through SoFi Bank, N.A. ©2023 SoFi Bank, N.A. All rights reserved. Member FDIC. Equal Housing Lender.
The SoFi Bank Debit Mastercard® 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.

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.

Our account fee policy is subject to change at any time.
Third-Party Brand Mentions: No brands, products, or companies mentioned are affiliated with SoFi, nor do they endorse or sponsor this article. Third-party trademarks referenced herein are property of their respective owners.

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Living frugally means spending less than you earn; it can involve elements of simplicity and eco-friendliness.

You already know the advice about not signing up for every streaming platform under the sun and not having a fancy coffee every day. Fortunately, living a frugal life doesn’t have to feel like you must sacrifice your favorite things. By adopting some basic money-saving moves, you can stash cash without much effort.

Read on to learn eight easy tips that will help you streamline your spending and perhaps enjoy more peace of mind.

8 Essential Frugal Living Tips

Here are eight tips on how to be more frugal and save money — without giving up all the fun and the little rewards in your life.

1. Reform Fixed Expenses

Regardless of what specific items might appear on a budget, they all come in two general varieties: fixed expenses vs. variable expenses.

Fixed expenses are, as the name suggests, those bills that are fixed and consistent each month, such as rent, insurance payments, and student loans. Variable expenses, on the other hand, are those whose amounts aren’t fixed… but that doesn’t mean all variable expenses are optional (or “discretionary”). For example, your electric bill probably varies from month to month, but you still know you’re going to have to pay it.

Let’s hone in on those fixed expenses first, though — because cutting down on regular, consistent costs can lead to regular, consistent savings. There are a variety of ways to do this, some more radical than others.

For example, moving to a less expensive neighborhood or splitting bills with a roommate might cut your rent in half; deciding to forgo a car can eliminate not only the car payment and insurance cost, but also variable expenses like parking, maintenance, and gas. These kinds of global lifestyle changes can take a lot of effort to set up at the start. However, the payoff is months or years of significant savings without too much ongoing effort.

However, there are plenty of ways to cut fixed expenses without making such seismic shifts to daily life. For instance, switching to a less expensive cell phone carrier can lower the monthly burden, as can ditching a gym membership in favor of hiking or cutting back on streaming service subscriptions. (Even those low per-month amounts can really add up when there are three or four of them!)

Recommended: Building a Line Item Budget

2. Gear Up Your Grocery Game

Groceries count as a variable expense, but they’re certainly not optional. That said, there’s an incredible margin for savings when it comes to stocking up on food each month.

So how to go about saving money on food and other grocery store items?

•   One easy way to start is to choose discount grocers and chains that are known for their low prices. Aldi, Lidl, Trader Joe’s and WinCo, for example, all have well-founded reputations for their frugal choices, particularly when compared to upscale grocery chains like Whole Foods. Shopping at a cheaper store can take some of the footwork out of saving; you may be able to spend less on the exact same grocery list. But it’s also possible to take the project even further.

•   Coupon clipping might not be the most glamorous activity, but those deals can create substantial savings, particularly for practiced couponers. These days, apps like Ibotta and Checkout 51 make it easy to score savings on the items you’re already shopping for.

•   Additionally, aiming to make cheaper meals can stretch each grocery store dollar even further. Relying on inexpensive staples like rice, which can be dressed up and filled out in many different ways, can help keep both bellies and wallets full.

3. Decide to Do It Yourself

Buying things is one thing. But maintaining them is a whole ‘nother can of worms — and it can be a downright expensive one. For instance, going in for an oil change vs. doing it yourself can be a pricey undertaking. And calling in a plumber when the sink or toilet is clogged can be expensive compared with going into DIY mode.

All of which is to say: honing some handiness skills could easily help save money over the course of a lifetime. And thanks to the fact that we live in the digital age, it’s relatively easy to become a Jack or Jill of all trades. YouTube is full of free video tutorials that can walk you through everything from fixing a dishwasher that won’t drain to rotating your own tires.

Other high-cost services to consider DIYing: mani/pedis, facials, pet grooming, landscaping, moving, and more. Basically, anytime you could spend money on hiring a professional, think seriously about whether you actually need the help.

Recommended: Pros and Cons of Online and Mobile Banking

4. Enjoy Free Entertainment

While some events are worthy splurges — like a once-in-a-lifetime concert — it’s also important to consider all the free forms of entertainment at our fingertips. For example, your local library may offer streaming movies along with books and audiobooks (or try services connected to libraries, like Kanopy and Hoopla), and many museums offer cost-free admissions on specific days of the week or month.

Even the national parks offer free admission from time to time. Free national park entrance days vary slightly from year to year, but generally include the first day of National Park Week in late April and National Public Lands Day, which falls on the in late September, along with Veterans Day and the birthday of Martin Luther King, Jr.

5. Take Frugalism With You Wherever You Go

Speaking of national parks: Travel is another big ticket item as far as discretionary expenses are concerned. Seeing the world can be enriching — and it doesn’t have to strip away all your riches, either.

Finding ways to be a frugal traveler, such as choosing budget-friendly destinations and scoring the cheapest flights possible, can mean saving money without sacrificing this major life experience. You might even try a home swap or being a house-sitter in a foreign country to make your journey as affordable as possible.

💡 Quick Tip: If you’re creating a budget, try the 50/30/20 budget rule. Allocate 50% of your after-tax income to the “needs” of life, like living expenses and debt. Spend 30% on wants, and then save the remaining 20% towards saving for your long-term goals.

Reuse and Recycle

The idea of reusing and recycling can go in many directions. It can mean buying a reusable water bottle and filling at home and at filling stations around town vs. buying pricey bottled water and contributing to the global single-use plastic problem.

It can mean offloading your gently used items (laptop, clothing, kitchenware) and making a little bit of spending money. It can mean also buying items from your local thrift shop or picking them up for free if you have a town swap spot.

Not only is this planet-friendly, but it can help your wallet, too.

7. Split the Cost

One good way to be frugal is to share the expenses of daily life. For instance, you might get a roommate or move in with a friend to take your rent down a notch. You and a friend might shop at warehouse clubs and split the mega sizes of food and enjoy the lower costs.

8. Use Credit Sparingly

It’s no secret that credit card debt is high-interest debt, and you likely don’t want to be wasting money on major interest charges. Follow your budget, and try to pay in cash or with your debit card whenever possible. Work hard to pay off your complete credit card bill every month so you don’t have snowballing interest.

💡 Quick Tip: Want to save more, spend smarter? Let your bank manage the basics. It’s surprisingly easy, and secure, when you open an online bank account.

Benefits of a Frugal Lifestyle

Need more encouragement and incentive to live frugally? Consider these upsides.

Eco-Friendly

When you live frugally, you often minimize waste. You plan your meals and don’t toss as many leftovers and unused ingredients as you would otherwise. You might walk rather than take an Uber. You might reuse shopping totes vs. paying for a bag every time you go shopping.

Save Money

Living frugally is all about saving cash. You can bring down such major costs as rent, food, utilities, and transportation when living this way.

You can also learn how to rein in your discretionary spending. Instead of spending a couple of hundred dollars on an arena rock-concert ticket, perhaps there’s great live local music at a town park or a local bar.

Pay Down Debt

When you live frugally, it can give you the means to pay down debt, especially the high-interest kind. That means more money is freed up to spend as you like and/or apply towards big-picture personal and financial goals.

Live on a Small Budget

Living frugally means you have a budget that is working and helping to keep your finances on track. You likely know your spending limits well, have a handle on your debt, and a clear plan to hit your longer-term goals. You don’t have loads of expenses and credit lines to wrangle. This can enhance your peace of mind.

Is Frugal Living Sustainable Over the Long Term?

Frugal living can be sustainable over the long term. Learning how to stick to a modest budget can help you live more minimally and avoid lifestyle creep (when your expenses rise along with your salary over time). By not always upgrading to a bigger house, fancier car, or more lavish summer vacation, you can enjoy the balance and security of frugal living.

What Does Frugal Mean for Your Money?

Here’s another angle on how being frugal can impact your money:

•   Adopting frugal habits and creating a savings plan can be ways to improve your financial health. Cutting back on day-to-day living expenses can mean more money set aside for retirement as well as major life milestones, like owning a home or having a baby.

•   One of the most important first steps toward frugality is getting organized, financially speaking. Having a budget and tracking your finances are valuable moves. How often to monitor your bank accounts is a personal decision, but a couple of times a week can help you see how your money is coming in and going out.

•   Living frugally can also mean more money goes towards realizing your long-term financial goals and building wealth. Whether that means saving for a child’s college education or for retirement, by cutting back on spending now, you can help ensure a better future.

The Takeaway

Living frugally can be a way to trim your expenses, stay out of debt, and put more money towards your personal goals and long-term financial aspirations. It also can be a lifestyle that simplifies your daily habits and respects the planet. With frugality, you may find that some of your money stress decreases, too.

It’s wise to find a banking partner who can help you manage your money well if you choose to live in this cost-effective and simple style.

Interested in opening an online bank account? When you sign up for a SoFi Checking and Savings account with direct deposit, you’ll get a competitive annual percentage yield (APY), pay zero account fees, and enjoy an array of rewards, such as access to the Allpoint Network of 55,000+ fee-free ATMs globally. Qualifying accounts can even access their paycheck up to two days early.

Better banking is here with SoFi, NerdWallet’s 2024 winner for Best Checking Account Overall. Enjoy up to 4.60% APY on SoFi Checking and Savings.

FAQ

What does frugal actually mean?

Frugal means simple and inexpensive. So if you are living frugally, you are probably sticking to a budget, saving for future goals, and not indulging in too many luxuries.

What’s the best example of frugal living?

An example of frugal living could be someone who has roommates to share costs with, plans meals to minimize food expenses, grows some of their own produce, and walks or bikes when possible vs. using a car.

Why is frugal living more popular these days?

Frugal living is more popular these days for a few reasons. One is the importance of living in an eco-friendly way; others may be that with inflation still a factor and high interest rates, people are looking for ways to reduce their expenses and live more simply.

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SoFi® Checking and Savings is offered through SoFi Bank, N.A. ©2023 SoFi Bank, N.A. All rights reserved. Member FDIC. Equal Housing Lender.
The SoFi Bank Debit Mastercard® 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.

SoFi members with direct deposit activity can earn 4.60% annual percentage yield (APY) on savings balances (including Vaults) and 0.50% APY on checking balances. Direct Deposit means a deposit to an account holder’s SoFi Checking or Savings account, including payroll, pension, or government payments (e.g., Social Security), made by the account holder’s employer, payroll or benefits provider or government agency (“Direct Deposit”) via the Automated Clearing House (“ACH”) Network during a 30-day Evaluation Period (as defined below). Deposits that are not from an employer or government agency, including but not limited to check deposits, peer-to-peer transfers (e.g., transfers from PayPal, Venmo, etc.), merchant transactions (e.g., transactions from PayPal, Stripe, Square, etc.), and bank ACH funds transfers and wire transfers from external accounts, do not constitute Direct Deposit activity. There is no minimum Direct Deposit amount required to qualify for the stated interest rate.

SoFi members with Qualifying Deposits can earn 4.60% APY on savings balances (including Vaults) and 0.50% APY on checking balances. Qualifying Deposits means one or more deposits that, in the aggregate, are equal to or greater than $5,000 to an account holder’s SoFi Checking and Savings account (“Qualifying Deposits”) during a 30-day Evaluation Period (as defined below). Qualifying Deposits only include those deposits from the following eligible sources: (i) ACH transfers, (ii) inbound wire transfers, (iii) peer-to-peer transfers (i.e., external transfers from PayPal, Venmo, etc. and internal peer-to-peer transfers from a SoFi account belonging to another account holder), (iv) check deposits, (v) instant funding to your SoFi Bank Debit Card, (vi) push payments to your SoFi Bank Debit Card, and (vii) cash deposits. Qualifying Deposits do not include: (i) transfers between an account holder’s Checking account, Savings account, and/or Vaults; (ii) interest payments; (iii) bonuses issued by SoFi Bank or its affiliates; or (iv) credits, reversals, and refunds from SoFi Bank, N.A. (“SoFi Bank”) or from a merchant.

SoFi Bank shall, in its sole discretion, assess each account holder’s Direct Deposit activity and Qualifying Deposits throughout each 30-Day Evaluation Period to determine the applicability of rates and may request additional documentation for verification of eligibility. The 30-Day Evaluation Period refers to the “Start Date” and “End Date” set forth on the APY Details page of your account, which comprises a period of 30 calendar days (the “30-Day Evaluation Period”). You can access the APY Details page at any time by logging into your SoFi account on the SoFi mobile app or SoFi website and selecting either (i) Banking > Savings > Current APY or (ii) Banking > Checking > Current APY. Upon receiving a Direct Deposit or $5,000 in Qualifying Deposits to your account, you will begin earning 4.60% APY on savings balances (including Vaults) and 0.50% on checking balances on or before the following calendar day. You will continue to earn these APYs for (i) the remainder of the current 30-Day Evaluation Period and through the end of the subsequent 30-Day Evaluation Period and (ii) any following 30-day Evaluation Periods during which SoFi Bank determines you to have Direct Deposit activity or $5,000 in Qualifying Deposits without interruption.

SoFi Bank reserves the right to grant a grace period to account holders following a change in Direct Deposit activity or Qualifying Deposits activity before adjusting rates. If SoFi Bank grants you a grace period, the dates for such grace period will be reflected on the APY Details page of your account. If SoFi Bank determines that you did not have Direct Deposit activity or $5,000 in Qualifying Deposits during the current 30-day Evaluation Period and, if applicable, the grace period, then you will begin earning the rates earned by account holders without either Direct Deposit or Qualifying Deposits until you have Direct Deposit activity or $5,000 in Qualifying Deposits in a subsequent 30-Day Evaluation Period. For the avoidance of doubt, an account holder with both Direct Deposit activity and Qualifying Deposits will earn the rates earned by account holders with Direct Deposit.

Members without either Direct Deposit activity or Qualifying Deposits, as determined by SoFi Bank, during a 30-Day Evaluation Period and, if applicable, the grace period, will earn 1.20% APY on savings balances (including Vaults) and 0.50% APY on checking balances.

Interest rates are variable and subject to change at any time. These rates are current as of 10/24/2023. There is no minimum balance requirement. Additional information can be found at https://www.sofi.com/legal/banking-rate-sheet.

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

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

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If you’re running a business, you probably know that managing cash is critical to your success — so let’s share some tips on doing that even better. Solid cash flow is vital to keep a business thriving, whether you’re a sole proprietor or the head of a larger enterprise. Even businesses with strong earnings can struggle with cash flow. That’s why cash flow can be a sure sign of how healthy a business is — or is not.

So let us help you optimize that cash flow. We’ll share some smart insights and helpful tips on:

•  What cash management for business is

•  Why it’s so important

•  Ways you can improve your business cash management

Let’s get started.

What is Business Cash Management?

Simply put, business cash management is basically the way you track and manage the money coming into and going out of your business – usually on a cash flow statement. Positive cash flow means more money is coming in through revenues or borrowing than is being used to pay expenses, such as payroll and rent.

That said, good cash management also means not having too much cash on hand. In that scenario, business owners, while cautious, may be missing out on future earnings growth when they neglect to invest cash back into the business.

Here’s another way to frame this principle: Take a look at your business’s balance sheet and check the ratio of current liquid assets to liabilities. A ratio that’s greater than one indicates good health (you’re not losing money), but if that ratio gets too high, you could be holding onto too much cash or other assets that could better be invested elsewhere.

💡 Quick Tip: Help your money earn more money! Opening a bank account online often gets you higher-than-average rates.

The Importance of Cash Management for Businesses

Cash flow is the essence of all businesses. Without cash, a business will struggle to meet expenses, pay suppliers, repay any investors, and, often most importantly, grow the business through marketing and/or new opportunities.

Strong cash management strategies can help business owners avoid taking on debt. It also gives them more control over everyday activities, decisions, and growth opportunities. What’s more, smart cash management is the best way for owners to fulfill their vision for their enterprise while meeting both their short, intermediate and long-term needs. There’s certainly a lot riding on cash management, so let’s dive into ways to optimize it.

6 Tips for Managing Cash Flow

Cash management can be especially challenging for entrepreneurs and small business owners. Yet it is one of the most important financial strategies business owners must master. These six tips can help.

1. Learning Your Cash Flow Cycle

A cash flow cycle is the time it takes to purchase your supplies and materials (or prepare the work that goes into providing a service), transform them into a product, sell your offering, and collect payment that can go into your business bank account. Sounds simple but a lot can go haywire during that process.

That’s why it’s important for business owners to constantly update and monitor their balance sheets and profit and loss statements. Ideally, you want to know at any given time what happened in the cash-flow cycle last month. Also important: Knowing your projections for what’s going to happen next month.

Understanding your cash flow cycle can help identify and address inconsistencies such as a late-paying customer or a build-up of inventory. If your business is seasonal or cyclical, you want to be well-prepared for both the intensely busy times…and the lulls.

Recommended: How to Track Your Monthly Expenses: Step-by-Step Guide

2. Getting Payments on Time

Reminding customers to pay on time is one of the easiest but most necessary ways to manage cash flow. Late payments are a fact of life; common, even. Having receivables come in even a day or two past the due date can wreak havoc with your cash flow cycle and your bank account.

Consider setting up email reminders to all customers ten days, seven days, and two days before payment is due. Technology today makes it a snap to pre-schedule email blasts. If the payment is still late or only a partial payment was made, don’t hesitate to follow up with a personal note or phone call.

This simple solution can really work. Customers will pay more attention to timely payments when they know you are paying close attention.

3. Turning Over Inventory Quickly

Having an abundance of inventory on hand at a given time means that a bundle of cash is tied up in that unsold stock. That could be an issue, because those funds might otherwise be working to pay for operations and expenses. What’s more, if all of that inventory bought upfront doesn’t sell as expected, it could mean losses on top of that lack of cash. That could hurt your growth and business valuation.

Many small business owners have learned that, in terms of cash, it’s better to turn inventory more quickly. Of course, this will vary widely depending on your business – perhaps your product is handmade jewelry, perhaps its reconditioned air conditioners. As an example, you might want to boost inventory turn-over from twice a year to five times. More targeted marketing could contribute to this acceleration.

That said, finding the right inventory management to fit with your cash flow cycles takes some time and experience. Recent supply chain issues have shown how challenging inventory management can be. Again, constant monitoring of the cash flow cycle can help guide how you tweak things.

Recommended: How Much Does It Cost to Start a Business?

4. Understand Invoice Financing

Let’s say you hit a cash management hitch. If you do find yourself in a position where you have too much inventory on hand and you need cash to cover expenses, there is a path forward. Invoice financing companies will advance a full or partial amount of your outstanding invoices. You repay that amount plus interest after the invoice is paid.

This generally should only be considered as a stop-gap measure. Like credit cards, interest payments on invoice financing can add up fast and quickly get out of control. Consider the fact that annual percentage rates for invoice financing products can reach as high as a jaw-dropping 64%.

5. Cutting Costs

Monitoring and cutting costs on expenses is another tool for managing cash flow. After all, if less cash goes to pay overhead, more can be invested in the business. A few suggestions: Relying on online marketing efforts that can be less costly than traditional methods, outsourcing tasks that take too much time and money in-house, and reducing energy costs. You might also want to renegotiate outdated contracts and prices with suppliers. These are all areas business owners can consistently monitor to keep costs low.

💡 Quick Tip: Are you paying pointless bank fees? Open a checking account with no account fees and avoid monthly charges (and likely earn a higher rate, too).

6. Comparing Loans

Sometimes, a business could use a helping hand to smooth out its cash flow. Let’s say you have outstanding accounts receivable — in other words, you know money is due but you don’t have it yet — and you need the cash now. In this situation, taking a business loan can be an option to help bridge the gap.

Cash flow loans (like invoice financing explained above) are short-term loans or lines of credit. These are often used to cover expenses or to take advantage of opportunities that can increase revenue.

A working capital loan is another option that can be used to finance everyday business operations such as rent, payroll, or restocking inventory. These loans are not designed to finance long-term assets or investment. Companies with seasonal or cyclical sales often rely on working capital loans to provide relief during slow periods.

One caveat: Working capital loans are often tied to your personal credit, so missed payments or defaults will affect your credit score. Consider that carefully before you sign on.

In addition, there are a variety of small business loans available that are used to finance long-term expenses such as real estate, equipment purchases, or business expansion. These include SBA loans, business lines of credit, and term loans.

Whatever type of loan you choose, be sure to compare your options carefully. Look at terms, APR, and how much lending you qualify for among several lenders before taking on any short or long-term debt. Spending some time and energy on research will help ensure you get the right form of financing.

The Takeaway

Cash flow management is an essential part of running a successful business of any size. Carefully monitoring cash flow, and learning some simple strategies to maximize it can take your small business to the next level.

Whether your business is a full-time job or just a side gig, it’s important to keep your business cash flow separate from your personal cash flow. In both cases, you’ll want to find a bank account that pays a competitive rate, charges no or low fees, and makes it easy to access your money.

Interested in opening an online bank account? When you sign up for a SoFi Checking and Savings account with direct deposit, you’ll get a competitive annual percentage yield (APY), pay zero account fees, and enjoy an array of rewards, such as access to the Allpoint Network of 55,000+ fee-free ATMs globally. Qualifying accounts can even access their paycheck up to two days early.

Better banking is here with SoFi, NerdWallet’s 2024 winner for Best Checking Account Overall. Enjoy up to 4.60% APY on SoFi Checking and Savings.

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Photo credit: iStock/AlexSecret

SoFi members with direct deposit activity can earn 4.60% annual percentage yield (APY) on savings balances (including Vaults) and 0.50% APY on checking balances. Direct Deposit means a deposit to an account holder’s SoFi Checking or Savings account, including payroll, pension, or government payments (e.g., Social Security), made by the account holder’s employer, payroll or benefits provider or government agency (“Direct Deposit”) via the Automated Clearing House (“ACH”) Network during a 30-day Evaluation Period (as defined below). Deposits that are not from an employer or government agency, including but not limited to check deposits, peer-to-peer transfers (e.g., transfers from PayPal, Venmo, etc.), merchant transactions (e.g., transactions from PayPal, Stripe, Square, etc.), and bank ACH funds transfers and wire transfers from external accounts, do not constitute Direct Deposit activity. There is no minimum Direct Deposit amount required to qualify for the stated interest rate.

SoFi members with Qualifying Deposits can earn 4.60% APY on savings balances (including Vaults) and 0.50% APY on checking balances. Qualifying Deposits means one or more deposits that, in the aggregate, are equal to or greater than $5,000 to an account holder’s SoFi Checking and Savings account (“Qualifying Deposits”) during a 30-day Evaluation Period (as defined below). Qualifying Deposits only include those deposits from the following eligible sources: (i) ACH transfers, (ii) inbound wire transfers, (iii) peer-to-peer transfers (i.e., external transfers from PayPal, Venmo, etc. and internal peer-to-peer transfers from a SoFi account belonging to another account holder), (iv) check deposits, (v) instant funding to your SoFi Bank Debit Card, (vi) push payments to your SoFi Bank Debit Card, and (vii) cash deposits. Qualifying Deposits do not include: (i) transfers between an account holder’s Checking account, Savings account, and/or Vaults; (ii) interest payments; (iii) bonuses issued by SoFi Bank or its affiliates; or (iv) credits, reversals, and refunds from SoFi Bank, N.A. (“SoFi Bank”) or from a merchant.

SoFi Bank shall, in its sole discretion, assess each account holder’s Direct Deposit activity and Qualifying Deposits throughout each 30-Day Evaluation Period to determine the applicability of rates and may request additional documentation for verification of eligibility. The 30-Day Evaluation Period refers to the “Start Date” and “End Date” set forth on the APY Details page of your account, which comprises a period of 30 calendar days (the “30-Day Evaluation Period”). You can access the APY Details page at any time by logging into your SoFi account on the SoFi mobile app or SoFi website and selecting either (i) Banking > Savings > Current APY or (ii) Banking > Checking > Current APY. Upon receiving a Direct Deposit or $5,000 in Qualifying Deposits to your account, you will begin earning 4.60% APY on savings balances (including Vaults) and 0.50% on checking balances on or before the following calendar day. You will continue to earn these APYs for (i) the remainder of the current 30-Day Evaluation Period and through the end of the subsequent 30-Day Evaluation Period and (ii) any following 30-day Evaluation Periods during which SoFi Bank determines you to have Direct Deposit activity or $5,000 in Qualifying Deposits without interruption.

SoFi Bank reserves the right to grant a grace period to account holders following a change in Direct Deposit activity or Qualifying Deposits activity before adjusting rates. If SoFi Bank grants you a grace period, the dates for such grace period will be reflected on the APY Details page of your account. If SoFi Bank determines that you did not have Direct Deposit activity or $5,000 in Qualifying Deposits during the current 30-day Evaluation Period and, if applicable, the grace period, then you will begin earning the rates earned by account holders without either Direct Deposit or Qualifying Deposits until you have Direct Deposit activity or $5,000 in Qualifying Deposits in a subsequent 30-Day Evaluation Period. For the avoidance of doubt, an account holder with both Direct Deposit activity and Qualifying Deposits will earn the rates earned by account holders with Direct Deposit.

Members without either Direct Deposit activity or Qualifying Deposits, as determined by SoFi Bank, during a 30-Day Evaluation Period and, if applicable, the grace period, will earn 1.20% APY on savings balances (including Vaults) and 0.50% APY on checking balances.

Interest rates are variable and subject to change at any time. These rates are current as of 10/24/2023. There is no minimum balance requirement. Additional information can be found at https://www.sofi.com/legal/banking-rate-sheet.

SoFi® Checking and Savings is offered through SoFi Bank, N.A. ©2023 SoFi Bank, N.A. All rights reserved. Member FDIC. Equal Housing Lender.
The SoFi Bank Debit Mastercard® 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.

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.

Our account fee policy is subject to change at any time.
Third-Party Brand Mentions: No brands, products, or companies mentioned are affiliated with SoFi, nor do they endorse or sponsor this article. Third-party trademarks referenced herein are property of their respective owners.

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It is possible to get a home loan while on maternity leave. The process may involve your lender verifying your “temporary leave income,” if any; your regular income; and your agreed-upon date of return. Anyone on a standard temporary leave is considered employed, whether the absence is paid or unpaid.

Read on to learn more about buying a home while pregnant and how this will impact your ability to get a mortgage.

Buying a House While Pregnant

Hey, why not take on two of the biggest life stressors at once? Sometimes it just happens this way, with parents preparing for a baby and a new home and mortgage.

First, consider if you can wait a bit to buy a home. It may lead to less stress overall during the pregnancy. Plus, the added pressure of a deadline may lead to hasty decision-making that buyers could regret.

And unless an employer is covering moving expenses, add that sizable cost to all the rest.

But if the move can’t be avoided because of a job relocation or other circumstances, it may be important to find a home before the baby arrives. Which does have a silver lining: Saving for a down payment could interfere with goals like saving for a child’s college tuition.

Another possible benefit to buying a house while pregnant is that the relocation could lead to a better school district or area to raise a child.

Ultimately, the decision to buy a house while pregnant is personal.


💡 Quick Tip: Want the comforts of home and to feel comfortable with your home loan? SoFi has a simple online application and a team dedicated to closing your loan on time. No surprise SoFi has been named a Top Online Lender in 2024 by LendingTree/Newsweek.

What Is the FMLA?

The Family and Medical Leave Act, or FMLA, gives eligible employees job protection and up to 12 weeks of unpaid leave a year in the event of:

•   Childbirth

•   Adoption or foster child care

•   Care for a spouse, child, or parent with a serious health condition

•   A personal serious health condition

•   Qualifying exigencies arising from covered active duty or “call to covered active duty status”

The FMLA guarantees that the employee can return to their job or an equivalent one and that they’ll receive health care benefits during their leave.

Employees are eligible if they work for a company that has 50 or more staffers and have completed at least 1,250 hours of work in the previous year.

In addition to the FMLA’s 12 unpaid weeks off, more and more states are enacting paid family leave laws. Currently, 13 states plus the District of Columbia have made this mandatory. And your employer may cover your pregnancy, childbirth, and recovery thanks to short-term disability insurance. Your benefit would be a percentage of your normal earnings.

Recommended: How Much Does it Cost to Adopt a Child?

How Maternity Leave Impacts a Mortgage

Before diving into the nuances of maternity leave and its impact on qualifying for a mortgage, here’s a quick refresher course on the home-buying process.

Mortgage approval from a lender primarily hinges on two factors:

•   Creditworthiness. How likely is the borrower to pay back the loan, based on their credit history?

•   Ability to pay. Does the borrower generate enough income, and have a certain debt-to-income ratio, to make the monthly mortgage payments?

The lender may contact an employer to verify a borrower’s employment status and income.

Why could getting loans for pregnant women prove a challenge? Income. Consider these points:

•   As long as the lender can verify that the borrower is employed — and remember, someone on temporary leave is considered employed — and generates enough income to cover the mortgage, that could be enough.

•   Expectant borrowers aren’t legally required to disclose their pregnancy to a lender. However, the employer can tell the lender about impending maternity leave when they call to verify employment status.

•   If a borrower is going on unpaid leave, they may need to disclose it to the lender. That’s because the period without pay may qualify as a financial hardship, which a borrower is required to inform a lender of.

•   The lender can’t assume the mother-to-be won’t return to work after maternity leave. Lenders consider that the mother will return to work after maternity leave and continue bringing home paychecks.

•   Before approval, the lender will ask the borrower for written notice of her intent to return to work, and may ask for an expected return date.

•   The mortgage lender may request a tax slip from the last calendar year if the borrower is a salaried employee.

•   A lender may approve the mortgage if your employer verifies in writing that you will return to your previous position or a similar one after your maternity leave. The lender will also consider the timing of the first payment.

•   If the borrower will have returned to work when the first mortgage payment is due, the lender can consider regular income in qualifying for the mortgage.

•   If the borrower will return to work after the first mortgage payment due date, the lender must use the borrower’s temporary leave income (if any) or regular employment income, whichever is less, and then may add available liquid financial reserves.

•   VA loans don’t count temporary leave income towards qualifying for a mortgage, however.

💡 Quick Tip: Want the comforts of home and to feel comfortable with your home loan? SoFi has a simple online application and a team dedicated to closing your loan on time. No surprise SoFi has been named a Top Online Lender in 2024 by LendingTree/Newsweek.

Should I Buy a Home While on Maternity Leave?

For those who qualify for a mortgage while on maternity leave, the question may be, “Should I buy a house while on maternity leave?” not “Can I buy a house while on maternity leave?”

As mentioned, moving can be an incredibly stressful process, pregnancy or no pregnancy. And even if you made a budget for a baby, life has a way of throwing in surprises.

Homeownership can also come with financial surprises. The majority of homeowners reported paying for an unexpected repair within the first year.

Having a child and buying a home both require saving some significant cash. By budgeting, doing the two simultaneously is possible. So it’s your call. Not taking the double plunge could give you time to review what you need to buy a house.

Recommended: First-Time Homebuyers Guide

Home Loans With SoFi

Pregnancy is not a legal limiting factor in a mortgage lender’s eyes, but getting a home loan while on maternity leave will depend on your income, savings, work return date, and credit history.

Whether you’re on a temporary leave or not, it can be worthwhile to take a look at your home loan options.

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

SoFi Mortgages: simple, smart, and so affordable.

FAQ

Does being on maternity leave affect getting a mortgage?

It can, but only in the sense that maternity leave can affect a homebuyer’s reported income. If buyers anticipate an unpaid maternity leave, they may need a sizable savings account.

Should you buy a home on maternity leave?

Buying a home while on maternity leave depends on your family’s needs and finances. But moving can be stressful, and adding infant care can be a lot to handle.

Who does FMLA cover?

The Family and Medical Leave Act provides 12 weeks of unpaid, job-protected leave per year for eligible employees in the case of the birth or adoption of a child or placement of a foster child, and for other reasons.

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Photo credit: iStock/FatCamera

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

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 for more information.

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

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

External Websites: The information and analysis provided through hyperlinks to third-party websites, while believed to be accurate, cannot be guaranteed by SoFi. Links are provided for informational purposes and should not be viewed as an endorsement.

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