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A jumbo loan is a home mortgage loan that exceeds maximum dollar limits set by the Federal Housing Finance Agency (FHFA). Loans that fall within the limits are called conforming loans. Loans that exceed them are jumbo loans.

Jumbo mortgages may be needed by buyers in areas where housing is expensive, and they’re also popular among lovers of high-end homes, investors, and vacation home seekers.

What Is a Jumbo Loan?

To understand jumbo home loans, it first helps to understand the function of Freddie Mac and Fannie Mae. Neither government-sponsored enterprise actually creates mortgages; they purchase them from lenders and repackage them into mortgage-backed securities for investors, giving lenders needed liquidity.

Each year the FHFA sets a maximum value for loans that Freddie and Fannie will buy from lenders — the so-called conforming loans.

Jumbo Loans vs Conforming Loans

Because jumbo home loans don’t meet Freddie and Fannie’s criteria for acquisition, they are referred to as nonconforming loans. Nonconforming, or jumbo, loans usually have stricter requirements because they carry a higher risk for the lender.

Jumbo Loan Limits

So how large does a loan have to be to be considered jumbo? In most counties, the conforming loan limits for 2026 are:

•  $832,750 for a single-family home

•  $1,066,250 for a two-unit property

•  $1,288,800 for a three-unit property

•  $1,601,750 for a four-unit property

The limit is higher in pricey areas. For 2026, the conforming loan limits in those areas are:

•  $1,249,125 for one unit

•  $1,599,375 for two units

•  $1,933,200 for three units

•  $2,402,625 for four units

Given rising home values in many cities, a jumbo loan may be necessary to buy a home. Teton County, Wyoming, for instance, has an average home value of $2,142,499 and a conforming loan limit of $1,249,125.

Recommended: The Cost of Living By State

Qualifying for a Jumbo Loan

Approval for a jumbo mortgage loan depends on factors such as your income, debt, savings, credit history, employment status, and the property you intend to buy. The standards can be tougher for jumbo loans than conforming loans.

The lender may be underwriting the loan manually, meaning it’s likely to require much more detailed financial documentation — especially since standards grew more stringent after the 2007 housing market implosion and during the pandemic.

Lenders generally set their own terms for a jumbo mortgage, and the landscape for loan requirements is always changing, but here are a few examples of potential heightened requirements for jumbo loans.

•  Your debt-to-income (DTI) ratio. This ratio compares your total monthly debt payments and your gross monthly income. The figure helps lenders understand how much disposable income you have and whether they can feel confident you’ll be able to afford adding a new loan to the mix.

To qualify for most mortgages, you need a DTI ratio no higher than 43%. In certain loan scenarios, lenders sometimes want to see an even lower DTI ratio for a jumbo loan, or they may counter with less favorable loan terms for a higher DTI.

•  Your credit score. This number, which ranges from 300 to 850, helps lenders get a snapshot of your credit history. The score is based on your payment history, the percentage of available credit you’re using, how often you open and close accounts such as credit cards, and the average age of your accounts.

To qualify for a jumbo loan, some lenders require a minimum score of 700 or higher for a primary home, or up to 760 for other property types. Keep in mind that a lower score doesn’t mean you won’t be able to get a jumbo loan. The decision depends on the lender and other factors, such as the loan program requirements, your debt, down payment amount, and reserves.

•  Down payment. Conforming mortgages generally require a 20% down payment if you want to avoid paying private mortgage insurance (PMI), which helps protect the lender from the risk of default.

Historically, some lenders required even higher down payments for jumbo mortgages, but that’s not necessarily the case anymore. Typically, you’ll need to put at least 20% down, although there are exceptions: SoFi requires just 10% down for jumbo loans.

A VA loan can be used for jumbo loans. For borrowers with full entitlement, the Department of Veterans Affairs will insure any size loan. For those with partial entitlement, it will insure the part of the loan that falls under conforming loan limits minus anything still owed to the VA. The loan may be available from some lenders with nothing down and no PMI. VA loans have a one-time “funding fee,” though, which is a percentage of the amount being borrowed.

•  Your savings. Jumbo loan programs often require mortgage reserves, money or assets borrowers could use to cover their housing costs. The number of months of PITI house payments (principal, interest, taxes, insurance), plus any PMI or homeowner association fees, needed in reserves after loan closing depends on many factors. For a jumbo loan, some lenders may require reserves of six to 24 months of housing payments.

You don’t necessarily need to have all the money in cash. Part of mortgage reserves can take the form of a 401(k), stock portfolios, mutual funds, money market accounts, and simplified employee pension accounts.

Also, depending on the loan program, a lender may be comfortable with lower cash reserves if you have a high credit score, low DTI ratio, a high down payment, or some combination of these things.

•  Documentation. Lenders want a complete financial picture for any potential borrower, and jumbo loan seekers are no exception. Most lenders operate under the “ability to repay” rule, which means they must make a reasonable, good-faith determination of the consumer’s ability to repay the loan according to their terms. Applicants should expect lenders to vet their creditworthiness, income, and assets.

Jumbo Loan Rates

You might assume that interest rates for jumbo loans are higher than for conforming loans since the lender is putting more money on the line.

But jumbo mortgage rates fluctuate with market conditions. Jumbo mortgage rates can be similar to those of other mortgages, but sometimes they are lower.

Because the absolute dollar figure of the loan is higher than a conforming loan, it is reasonable to expect closing costs to be higher. Some closing costs are fixed, such as a loan processing fee, but others, such as title insurance, are tiered based on the purchase price or loan amount.

Pros and Cons of Jumbo Loans

Benefits

Because a jumbo loan is for an amount greater than a conforming loan, it gives you more options for ownership of homes that are otherwise cost-prohibitive. You can use a jumbo loan to purchase all kinds of residences, from your main home to a vacation getaway to an investment property.

Drawbacks

Due to their more stringent requirements, jumbo loans may be more accessible for borrowers with higher incomes, strong credit scores, modest DTI ratios, and plentiful reserves.

However, don’t assume that jumbo loans are just for the rich. Lenders offer these loans to borrowers with a wide variety of income levels and credit scores.

Lender requirements vary, so if you’re seeking a jumbo loan, you may want to shop around to see what terms and interest rates are available.

The most important factor, as with any loan, is that you are confident in your ability to make the mortgage payments in full and on time over the long term.

How to Qualify for a Jumbo Loan

To qualify for a jumbo loan, borrowers need to meet certain jumbo loan requirements. You’ll likely need to show a prospective lender two years of tax returns, pay stubs, and statements for bank and possibly investment accounts. The lender may require an appraisal of the property to ensure they are only lending what the home is worth.

Is a Jumbo Loan Right for You?

You’ll need to come up with a large down payment on a property that merits a jumbo loan, and some of your closing costs will be higher than for a conventional loan. But depending on where you wish to buy, the cost of the property, and the amount you wish to borrow, a jumbo loan may be your only choice for a home mortgage loan. It’s a particularly attractive option if you have good credit, a low DTI, and a robust savings account. And sometimes jumbo home loans actually have lower interest rates than other loans.

What About Refinancing a Jumbo Loan?

After you’ve gone through the mortgage and homebuying process, it could be helpful to have information about refinancing. Some borrowers choose to refinance in order to secure a lower interest rate or more preferable loan terms.

This could be worth considering if your personal situation or mortgage interest rates have improved.

Refinancing a jumbo mortgage to a lower rate could result in substantial savings. Since the initial sum is so large, even a change of just one percentage point could be impactful.

Refinancing could also result in improved loan terms. For example, if you have an adjustable-rate mortgage and worry about fluctuating rates, you could refinance the loan to a fixed-rate home loan.

Recommended: Guide to Buying, Selling, and Updating Your Home

Jumbo Loan Limits by State

The conforming loan limits set by the Federal Housing Finance Agency can vary based on the county where you are buying a home.

In most areas of the country, the conforming loan limit for a one-unit property increased to $832,750 in 2026 (the amount rises for multiunit properties). The chart below shows exceptions to the $832,750 limit by state and county.

The Takeaway

What’s the skinny on jumbo loans? They’re essential for buyers of more costly properties because they exceed government limits for conforming loans. Luxury-home buyers and house hunters in expensive areas may turn to these loans, but they’ll have to clear the higher hurdles involved.

SoFi can help you save money when you refinance your mortgage. Plus, we make sure the process is as stress-free and transparent as possible. SoFi offers competitive fixed rates on a traditional mortgage refinance or cash-out refinance.

FAQ

What are jumbo loan requirements?

Jumbo loans typically require a credit score of at least 700, a low DTI, and a down payment of at least 20%, although there are always exceptions.

What is the difference between a jumbo loan and a regular loan?

A jumbo loan is a home mortgage loan that exceeds maximum dollar limits set by the Federal Housing Finance Agency. Jumbo loans are typically used by buyers in regions with higher-priced housing but are also popular among luxury homebuyers and investors.

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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FICO® Scores, issued by the Fair Isaac Corporation, are one of the most popular types of credit scores. FICO Scores were first introduced in 1989, and there are currently 16 distinct FICO versions in use today. FICO Score 8 and FICO Score 9 are two of the more popular versions (or models).

Keep reading to learn more on FICO Score 8 and FICO Score 9, including how each works, how they differ, and which score lenders use the most.

What Are FICO Scores?

A FICO Score is a type of credit score produced by the Fair Isaac Corporation. They list five factors that can affect your FICO score:

•   Payment history (35%)

•   Amounts owed (30%)

•   Length of credit history (15%)

•   Credit mix (10%)

•   New credit (10%)

Your FICO Score is a three-digit number that ranges from 300 to 850, and can help lenders decide how much of a credit risk you might be. Lowering your credit card utilization is one way that you may be able to build your credit score.

Recommended: 10 Strategies for Building Credit Over Time

Why There Are Different FICO Score Versions

While the Fair Isaac Corporation does share the broad information that makes up a FICO Score, they do not share exactly what goes into a FICO Score. The same is true of other companies that produce credit scores. When you look at VantageScore vs. FICO Scores, for example, you may find that the same person has varying scores, though they’re usually fairly close across all scoring companies.

FICO is constantly tweaking its model to make it as predictive as possible, which is why there are multiple FICO Score versions used.

How Different FICO Score Versions Are Used

Different FICO Score versions are used depending on the type of loan and the lender’s preferences. Here’s a breakdown:

FICO Score 8 (Most Common)

•   Widely used for credit card approvals, auto loans, and personal loans

•   Known for being sensitive to high credit card utilization

FICO Score 9 (Improved Model)

•   Used by some lenders for personal loans and credit cards

•   More lenient on medical debt and paid collection accounts

•   Incorporates rent payment history, if reported

FICO Score 2, 4, and 5 (Mortgage Scores)

•   Specifically used in mortgage lending

•   Required by Fannie Mae and Freddie Mac for home loans

•   Older models that focus heavily on payment history and derogatory marks

FICO Auto Score 8 & Auto Score 9

•   Tailored for auto loan approvals

•   Gives more weight to auto loan payment history

FICO Bankcard Score 8 & Bankcard Score 9

•   Used for credit card approvals

•   Score ranges from 250 to 900

•   Places more emphasis on credit card behavior and revolving credit usage

FICO Score 10 and 10T (Newest Versions)

•   Not yet widely adopted

•   FICO 10T incorporates trending data, which looks at credit usage patterns over time

•   More predictive and accurate, but lenders are slow to switch due to compatibility issues

Lenders choose specific versions based on the type of risk they want to assess and the industry standards they follow.

Key Features of FICO Score 8

FICO Score 8 is one of the most widely used credit scoring models by lenders to assess a borrower’s creditworthiness. It places a strong emphasis on payment history and credit utilization, with late payments and high credit card balances significantly impacting the score.

Additionally, FICO Score 8 does not differentiate between paid and unpaid collection accounts. This model is favored for its balanced approach to evaluating risk while helping lenders make more accurate lending decisions.

Key Features of FICO Score 9

FICO Score 9 introduces several enhancements over FICO Score 8, offering a more refined assessment of creditworthiness. It disregards paid collection accounts, which can positively impact borrowers who have settled past debts. Additionally, it reduces the negative impact of medical collections compared to other types of debt.

The model also incorporates rental payment history when reported, providing an opportunity for renters to build credit. These improvements aim to provide a fairer and more accurate reflection of a consumer’s financial behavior, helping lenders make better-informed decisions.

Which Do Lenders Use More: FICO Score 8 or FICO Score 9?

Lenders predominantly use FICO Score 8 for most credit decisions, as it’s the most widely adopted version of the FICO Score. FICO Score 9 is newer and includes some improvements. As of now, though, many lenders still rely on FICO Score 8 because it has been in use longer and has a more established track record.

Major Differences Between FICO Score 8 and FICO Score 9

FICO Score 8 and FICO Score 9 are two different models of the FICO Score credit score model. Here’s a look at the major differences between FICO Score 8 and FICO Score 9:

Medical Debt:

•   FICO Score 8: Treats medical debt the same as other types of debt, potentially lowering your score.

•   FICO Score 9: Excludes medical debt from the score if it’s paid off, making it less impactful once paid.

Collection Accounts:

•   FICO Score 8: Does not differentiate between types of collections, meaning both paid and unpaid collections can harm your score.

•   FICO Score 9: More lenient on paid collection accounts, which won’t negatively impact the score once they’re settled.

Rent Payment History:

•   FICO Score 8: Does not consider rent payments when calculating the score.

•   FICO Score 9: Includes rent payment history if it’s reported, which can benefit renters with a positive payment history.

Authorized User Accounts:

•   FICO Score 8: Considers authorized user accounts as part of the score, even if the primary account holder is not using the card responsibly.

•   FICO Score 9: De-emphasizes authorized user accounts to avoid inflating scores based on potentially inactive accounts.

Credit Utilization:

•   FICO Score 8: Focuses on credit utilization ratios, especially for credit cards, to assess creditworthiness.

•   FICO Score 9: Similar in its approach to credit utilization, but may calculate this slightly differently to reflect more accurate borrower behavior.

Overall, FICO Score 9 offers a more updated approach to certain types of debt and credit behaviors compared to FICO Score 8, but FICO Score 8 is still more commonly used.

How to Check Your FICO Scores

You have a few options to check your credit report and score, including ways to check your credit score without paying. Here are some ways to check your FICO Scores:

•   Check with your credit card issuer: Many credit card companies, like Discover and American Express, offer free FICO scores to customers.

•   Visit MyFICO.com: The official FICO website provides access to multiple score versions for a fee.

•   Use free credit monitoring services: Platforms like Experian offer free access to your FICO Score.

•   Contact your bank or credit union: Some banks and credit unions provide FICO scores as part of their customer benefits.

Recommended: Free Credit Score Monitoring with SoFi

The Takeaway

FICO scores, produced by the Fair Isaac Corporation, are one of the more popular types of credit scores used by 90% of lenders. FICO Score 8 and FICO Score 9 are two different versions of the FICO score model.

According to the Fair Isaac Corporation, FICO Score 8 is still the most widely used version of the FICO score, and FICO Score 9 is also still widely used by lenders, even though both models have been available for over a decade.

Take control of your finances with SoFi. With our financial insights and credit score monitoring tools, you can view all of your accounts in one convenient dashboard. From there, you can see your various balances, spending breakdowns, and credit score. Plus you can easily set up budgets and discover valuable financial insights — all at no cost.

FAQ

Is FICO 8 or FICO 9 better?

FICO 9 is considered an improvement over FICO 8, as it reduces the impact of medical debt, disregards paid collections, and includes rental payment history if reported. However, FICO 8 remains widely used by lenders, so its relevance depends on the lender’s preference and the borrower’s financial situation.

What is a good FICO 8 score?

A good FICO 8 score typically falls between 670 and 739. This range indicates that a borrower is considered low-risk by lenders, which can lead to better loan terms and interest rates. Scores above this range are considered very good or excellent, further enhancing borrowing opportunities and financial benefits.

Which FICO score is most important?

The different FICO score models are similar, and none is considered to be more important than any others. Different lenders may use different FICO score models depending on which model they find most advantageous for their purposes.

Is FICO score 8 still used?

Yes, even though FICO Score 8 was first introduced in 2009, it is still widely used in the lending industry. However, over time, lenders will likely start migrating to newer FICO scoring models, such as FICO Score 9, FICO Score 10, and FICO Score 10T.

Is a FICO score of 8 good to buy a house?

It is important to understand that FICO Score 8 refers to the eighth version of the FICO credit scoring model, and not to an actual FICO Score of 8. FICO scores have a minimum of 300, so it is impossible to have a FICO Score of 8. To buy a house with a mortgage, you will likely need to have a FICO Score in the good range (meaning a score of at least 670), though requirements vary by lender.

Do any lenders use FICO 9?

Yes, some lenders use FICO Score 9, especially for personal loans and certain types of credit evaluations. However, FICO Score 8 remains the most widely used version. FICO 9 enhances rental payment reporting and reduces the impact of medical debt, making it appealing for specific lending situations.

Photo credit: iStock/milorad kravic

SoFi Relay offers users the ability to connect both SoFi accounts and external accounts using Plaid, Inc.’s service. When you use the service to connect an account, you authorize SoFi to obtain account information from any external accounts as set forth in SoFi’s Terms of Use. Based on your consent SoFi will also automatically provide some financial data received from the credit bureau for your visibility, without the need of you connecting additional accounts. SoFi assumes no responsibility for the timeliness, accuracy, deletion, non-delivery or failure to store any user data, loss of user data, communications, or personalization settings. You shall confirm the accuracy of Plaid data through sources independent of SoFi. The credit score is a VantageScore® based on TransUnion® (the “Processing Agent”) data.

*Terms and conditions apply. This offer is only available to new SoFi users without existing SoFi accounts. It is non-transferable. One offer per person. To receive the rewards points offer, you must successfully complete setting up Credit Score Monitoring. Rewards points may only be redeemed towards active SoFi accounts, such as your SoFi Checking or Savings account, subject to program terms that may be found here: SoFi Member Rewards Terms and Conditions. SoFi reserves the right to modify or discontinue this offer at any time without notice.

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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A flex loan is a line of credit that is unsecured (meaning no collateral is required). It allows you to withdraw funds as needed up to a predetermined limit. As you pay down the balance, you can continue to borrow from the credit line, similar to a credit card.

While flex loans are usually easier to qualify for than more traditional lending products, they typically come with higher annual percentage rates (APRs) and fees. (Note: SoFi does not offer flex loans, but we do offer personal loans.) Here’s what you need to know about flex loans, including how they work, how much you can borrow, and the pros and cons of using a flex loan for fast cash.

What Is a Flex Loan?

Despite the name, a flex loan isn’t actually a loan — it’s an unsecured personal line of credit. Most commonly, you can find flex loans through cash advance companies, though some select credit unions, banks, and online lenders offer them.

Flex loans allow you to withdraw funds from a credit line up to a preapproved limit. You can use the funds in any way you wish. As you pay down the balance, you can continue to borrow from the credit line, similar to a credit card.

Because flex loans typically don’t require a credit check, they can be an attractive option for those who have a poor or limited credit history. But keep in mind: Because lenders assume additional risk by not checking credit, flex loans typically have higher APRs than other lending products, including personal loans, personal lines of credit, and credit cards. For this reason, you may struggle to make payments if interest and fees continue to accumulate.

How Do Flex Loans Work?

A flex loan works similar to a credit card in that it’s a revolving line of credit. Once approved, you’re given a certain credit limit and can borrow up to that amount. As the balance is paid down, that money is once again available to be borrowed.

You’ll receive regular statements showing how much you’ve borrowed and the interest owed, and typically need to make minimum monthly payments. Like a credit card, you may choose to pay only the minimum, or you can pay more. The more you pay each month, generally the less interest you’ll accrue.

Some flex loan lenders charge fees in addition to interest. This may include a flat fee when you take out the loan, as well as periodic fees, which may be daily, monthly, or each time you draw funds from the loan.

How Much Can You Get With a Flex Loan?

The exact amount you’ll be approved for will depend on the lender, as well as where you live, since state laws regulate credit limit amounts. You may be able to borrow anywhere from $100 to several thousand dollars with a flex loan.

Borrowers often turn to flex loans to cover immediate financial needs, emergencies, or hardships, but you can use the loan funds for almost any reason. However, due to the high APRs, it’s generally a smart idea to draw funds from a flex loan only when necessary.

Will a Flex Loan Hurt My Credit?

Getting a flex loan may not require a credit check so applying for one won’t necessarily affect your credit score. But lenders assume extra risk when they don’t do a credit check, so they might charge higher interest to make up for that.

A flex loan may hurt your credit if you don’t manage it responsibly. As with other types of debt, making late payments or missing payments on a flex loan may adversely affect your credit score. It’s a good idea to budget carefully to ensure you’re not borrowing more than you afford to pay back.

Recommended: Personal Loan Calculator

Benefits of Flex Loans

Flex loans may be beneficial for some borrowers. Here’s a look at some of the advantages of flex loans.

Application Process

•   In many cases, you can apply for a flex loan and receive a lending decision within minutes, especially if you apply online.

Access to Funds

•   You may receive access to your funds on the same day as your flex loan approval. Once approved, you can then make withdrawals from your credit line as needed. Funds are typically directly deposited into your bank account.

Credit Score

•   Most flex loan lenders won’t subject you to a credit check, making it less burdensome to qualify for a flex loan even if you don’t have good credit.

Requirements

•   In many cases, flex loans have more lenient requirements compared to other types of loans. In addition to giving the lender your personal details, you may only have to provide proof of employment and income.

Flexible Payment Terms

•   Each month or billing cycle, you can pay the minimum due or more. There are typically no penalties for paying down your debt faster.

Recommended: Typical Personal Loan Requirements Needed for Approval

Dangers of Flex Loans

Flex loans may be an attractive borrowing option because even those with poor credit can borrow money quickly. However, flex loans can present potential dangers.

Interest Rates

•   Flex loans typically carry much higher APRs than traditional lending products like personal loans and credit cards. If you can get a flex loan through a credit union, APRs can range from 24% to 28% or higher. If you get one from a cash advance company, the APR on a flex loan can reach triple digits.

Minimum Payments

•   You have the option to pay only the minimum payments on your flex loan. But if that’s all you pay, fees and interest will continue to grow your debt, making it increasingly harder to pay off the entire balance.

Excessive Debt

•   It can be tempting to borrow money repeatedly with a flex loan, but doing so can come at a high cost. If you continue to borrow money and don’t have a plan to pay down the amount you owe, a flex loan can lead to a cycle of debt that can be hard to break out of.

Risk of Predatory Lending Practices

•   It’s worth noting that some lenders can charge what are considered predatory interest rates, as high as 280% APR vs. an interest rate of, say, 20% you might pay on a credit card. This means borrowers run the risk of being mired in fast-rising debt.

Pros and Cons of Flex Loans

Here’s how the pros and cons look in chart form:

When Should You Take Out a Flex Loan?

A flex loan may be worth considering if you need quick access to cash and don’t want to go through a lengthy application process or can’t qualify for more traditional lending options. A flex loan may also be an option for those who want to have a backup source of funds in case of an emergency, like an unexpected car repair or dental bill.

However, because of the high APRs and added fees, you generally want to consider a flex loan only after exhausting other borrowing options, such as personal loans.

When to Apply for a Flex Loan

There may be other ways to get needed cash without paying interest rates as high as flex loans tend to offer. But if you’ve exhausted all other options, even a loan from a pawn shop, and you have a plan to repay the loan at the lowest possible cost to you, it may be an option you could pursue.

Emergency Expenses

Unfortunately, emergency situations can be part of life. Perhaps you need a major car repair or get hit with a huge dental bill. Or your home’s heating system conks out in the middle of winter. If you don’t have enough in an emergency fund to cover this kind of expense and other financing isn’t available, a flex loan might be an option.

Temporary Cash Flow Gaps

There are times when you may have issues with money coming in and going out. Perhaps you are in between jobs, or you are a seasonal worker and it’s the off-season. In these situations, you may want to access a flex loan to cover bills that need paying.

Alternatives to Flex Loans

Before applying for a flex loan, you may want to consider the following alternatives.

Personal Loan

Even if you have a limited credit history or bad credit, you may still qualify for a personal loan, albeit with a higher interest rate than those with solid credit would likely be offered. It can be worthwhile to see what terms various lenders offer you in this scenario.

Credit Cards

Like flex loans, credit cards are a form of revolving credit you can draw from on a recurring basis. While interest charges for credit cards can be high, they tend to be lower than flex loans. Depending on the card, you may also have an annual fee and other fees based on your use of the account.

Other Options

Here are a couple of other alternatives to a flex loan:

•   Personal line of credit: If you have healthy credit, a personal line of credit may be a worthy alternative because of its typically lower interest rates. However, you will be subject to a credit check, and the application process may take longer compared to a flex loan.

•   Personal loan with a guarantor: If you’re unable to qualify for an unsecured personal loan due to a poor or limited credit history, you might consider asking a friend or family member to help you get a guarantor loan. A guarantor is legally responsible for the repayment of the loan if the borrower defaults, but has no legal claim to any property the funds were used to purchase.

•   Payday alternative loans (PALs) are offered by federal credit unions and may provide an option for a small amount of short-term funding. Interest rates are typically capped at 28%.

Also explore if your employer offers any programs to advance your pay, whether cash advance apps could help, or if a buy now, pay later purchase could help you through a time when money is tight. One last consideration: You might ask a friend or family member for a loan.

Recommended: What Are Hardship Loans?

The Takeaway

Before taking out any type of loan, you’ll want to consider the benefits versus the costs. If you need cash for an emergency, it can be a good idea to look at all your borrowing options before settling on a flex loan due to the high interest rates and fees associated with these loans. (Note: SoFi does not offer flex loans, but we do offer personal loans.) Shopping around is a good way to see what you may qualify for and help you find a lender you feel comfortable working with.

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

FAQ

What is a flex loan?

A flex loan is a form of revolving credit that allows you to withdraw funds up to a certain credit limit. As you pay down your balance, the funds become available to borrow again.

How much can you get with a flex loan?

Borrowing limits for flex loans will depend on the lender and where you live, since state laws regulate credit limit amounts. You may be able to borrow anywhere from $100 to several thousand dollars with a flex loan.

Will a flex loan hurt my credit?

Applying for a flex loan typically won’t affect your credit because lenders typically don’t do a credit check when you apply for the loan. However, lenders may report your borrowing activity to the major consumer credit bureaus. As a result, any late or missed payments could negatively affect your credit.

When should you avoid a flex loan?

There are a few scenarios when it can be wise to avoid a flex loan. One case is when the interest rates are excessively high; this can lead to getting deeper in debt. Also be cautious if you feel you don’t have good self-control when it comes to spending. A flex loan could be a path to owing more rather than repaying your debt.

Are there better alternatives to flex loans?

There can be better alternatives to flex loans. You might see what interest rate you are offered for a personal loan or how much it would cost to use a credit card. Or you could investigate payday alternatives loans (PALs), which are offered by federal credit unions at more favorable rates. Cash advance apps, employer paycheck advances, family loans, a personal loan with a guarantor, and buy now pay later purchasing can also be helpful options.

Photo credit: iStock/PeopleImages

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.

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For those who earn an income that makes them ineligible to contribute to a Roth IRA, a mega backdoor Roth IRA may be an effective tool to help them save for retirement, and also get a potential tax break in their golden years.

Only a certain type of individual will likely choose to employ a mega backdoor Roth IRA as a part of their financial plans. And there are a number of conditions that have to be met for mega backdoor Roth to be possible.

Read on to learn what mega backdoor Roth IRAs are, how they work, and the important details that investors need to know about them.

What Is a Mega Backdoor Roth IRA?

The mega backdoor Roth IRA is a retirement savings strategy in which people who have 401(k) plans through their employer — along with the ability to make after-tax contributions to that plan — can roll over the after-tax contributions into a Roth IRA.

But first, it’s important to understand the basics of regular Roth IRAs. A Roth IRA is a retirement account for individuals. For tax year 2025 (filed in 2026), Roth account holders can contribute up to $7,000 (or $8,000 for those 50 and older) of their after-tax earnings. For tax year 2026 (filed in 2027), they can contribute up to $7,500 (or $8,600 for those 50 and older) of their after-tax earnings.

Individuals can withdraw their contributions at any time, without paying taxes or penalties. For that reason, Roth IRAs are attractive and useful savings vehicles for many people.

But Roth IRAs have their limits — and one of them is that people can only contribute to them if their modified adjusted gross income (MAGI) is below a certain threshold.

In 2025, the limit is up to $150,000 for single tax filers (those earning from $150,000 to $165,00 can contribute a reduced amount); for married people who file taxes jointly, the limit is up to $236,000 (those earning from $236,000 to $246,000 can contribute a reduced amount).

In 2026, the limit is up to $153,000 for single tax filers (those earning from $153,000 to $168,000 can contribute a reduced amount); for married people who file taxes jointly, the limit is up to $242,000 (those earning from $242,000 to $252,000 can contribute a reduced amount).

💡 Quick Tip: Did you know that you must choose the investments in your IRA? Once you open a new IRA and start saving, you get to decide which mutual funds, ETFs, or other investments you want — it’s totally up to you.

How Does a Mega Backdoor Roth Work?

When discussing a mega backdoor Roth, it’s helpful to understand how a regular backdoor Roth IRA works. Generally, individuals with income levels above the thresholds mentioned who wish to contribute to a Roth IRA are out of luck. However, there is a workaround: the backdoor Roth IRA, a strategy that allows high-earners to fund a Roth IRA account by converting funds in a traditional IRA (which has no limits on a contributors’ earnings) into a Roth IRA. This could be useful if an individual expects to be in a higher income bracket at retirement than they are currently.

The mega backdoor Roth is a strategy that allows individuals, particularly high-income earners who exceed standard Roth IRA income limits, to make additional, large after-tax contributions to a 401(k) plan and then convert those funds to a Roth IRA for tax-free growth.

The process takes advantage of a loophole in retirement plan contribution rules and typically involves a two-step process: maximizing regular pre-tax 401(k) contributions, making additional after-tax contributions, then converting the after-tax funds into a Roth account.

For example, people who have 401(k) plans through their employer — along with the ability to make after-tax contributions to that plan — can potentially roll over up to $46,500 in 2025, and $47,500 in 2026, in after-tax contributions to a Roth IRA. That mega Roth transfer limit has the potential to boost an individual’s retirement savings.

Example Scenario: How to Pull Off a Mega Backdoor Roth IRA

The mega backdoor Roth IRA process is pretty much the same as that of a backdoor Roth IRA. The key difference is that while the regular backdoor involves converting funds from a traditional IRA into a Roth IRA, the mega backdoor involves converting after-tax funds from a 401(k) into a Roth IRA.

Whether a mega backdoor Roth IRA is even an option will depend on an individual’s specific circumstances. These are the necessary conditions that need to be in place for someone to try a mega backdoor strategy:

•   You have a 401(k) plan. People hoping to enact the mega backdoor strategy will need to be enrolled in their employer-sponsored 401(k) plan.

•   You can make after-tax contributions to your 401(k). Determine whether an employer will allow for additional, after-tax contributions.

•   The 401(k) plan allows for in-service distributions. A final piece of the puzzle is to determine whether a 401(k) plan allows non-hardship distributions to either a Roth IRA or Roth 401(k). If not, that money will remain in the 401(k) account until the owner leaves the company, with no chance of a mega backdoor Roth IRA move.

If these conditions exist, a mega backdoor strategy should be possible. Here’s how the process would work:

Open a Roth IRA — so there’s an account to transfer those additional funds to.

From there, pulling off the mega backdoor Roth IRA strategy may sound deceptively straightforward — max out 401(k) contributions and after-tax 401(k) contributions, and then transfer those after-tax contributions to the Roth IRA.

But be warned: There may be many unforeseen hurdles or expenses that arise during the process, and for that reason, consulting with a financial professional to help navigate may be advisable.

Who Is Eligible for a Mega Backdoor Roth

Whether you might be eligible for a mega backdoor Roth depends on your workplace 401(k) retirement plan. First, the plan would need to allow for after-tax contributions. Then the 401(k) plan must also allow for in-service distributions to a Roth IRA or Roth 401(k). If your 401(k) plan meets both these criteria, you should generally be eligible for a mega backdoor Roth IRA.

Contribution Limits

If your employer allows for additional, after-tax contributions to your 401(k), you’ll need to figure out what your maximum after-tax contribution is. For 2025, the standard 401(k) contribution limit for employees to a 401(k) is $23,500. Those age 50 to 59 or 64-plus are able to contribute up to $31,000; those 60 to 63 are able to contribute up to $34,750.

For 2026, the standard 401(k) contribution limit for employees to a 401(k) is $24,500. Those age 50 to 59 or 64-plus are able to contribute up to $32,500; those 60 to 63 are able to contribute up to $35,750.

In 2025, the IRS allows up to $70,000 ($77,500 for those 50 and up, and $81,250 for those 60-63) in total contributions, including employer and after-tax contributions, to a 401(k). In 2026, the total limits are $72,000, $80,000, and $83,250, respectively.

So how much can you contribute in after-tax funds? Here’s an example. Say you are under age 50 and you contributed the max of $23,500 to your 401(k) in 2025, and your employer contributed $8,000, for a total of $31,500. That means you can contribute up to $38,500 in after-tax contributions to reach the total contribution level of $70,000. For 2026, you would be able to contribute up to $40,500.

Is a Mega Backdoor Roth Right For Me?

Given that this Roth IRA workaround has so many moving parts, it’s worth thinking carefully about whether a mega backdoor Roth IRA makes sense for you. These are the advantages and disadvantages.

Benefits

The main upside of a mega backdoor Roth is that it allows those who are earning too much to contribute to a Roth IRA a way to potentially take advantage of tax-free growth.

Plus, with a mega backdoor Roth IRA an individual can effectively supercharge retirement savings because more money can be stashed away. It may also offer a way to further diversify retirement savings.

Downsides

The mega backdoor Roth IRA is a complicated process, and there are a lot of factors at play that an individual needs to understand and stay on top of.

In addition, when executing a mega backdoor Roth IRA and converting a traditional IRA to a Roth IRA, it could result in significant taxes, as the IRS will apply income tax to contributions that were previously deducted.

The Future of Mega Backdoor Roths

Mega backdoor Roths are currently permitted as long as you have a 401(k) plan that meets all the criteria to make you eligible.

However, it’s possible that the mega backdoor Roth IRA could go away at some point. In prior years, there was some legislation introduced that would have eliminated the strategy, but that legislation was not enacted.

The Takeaway

Strategies like the mega backdoor Roth IRA may be used by some investors to help achieve their retirement goals — as long as specific conditions are met, including having a 401(k) plan that accepts after-tax contributions.

While retirement may feel like far off, especially if you’re early in your career or still relatively young, it’s generally wise to start thinking about it sooner rather than later.

Prepare for your retirement with an individual retirement account (IRA). It’s easy to get started when you open a traditional or Roth IRA with SoFi. Whether you prefer a hands-on self-directed IRA through SoFi Securities or an automated robo IRA with SoFi Wealth, you can build a portfolio to help support your long-term goals while gaining access to tax-advantaged savings strategies.

FAQ

Are mega backdoor Roths still allowed in 2025?

Yes, mega backdoor Roths are still permissible in 2025.

Is a mega backdoor Roth worth it?

Whether a mega backdoor Roth is worth it depends on your specific situation. It may be worth it for you if you earn too much to otherwise be eligible for a Roth IRA and if you have a 401(k) plan that allows you to make after-tax contributions.

Is a mega backdoor Roth legal?

Yes, a mega backdoor Roth IRA is currently legal.

Are mega backdoor Roths popular among Fortune 500 companies?

A number of Fortune 500 companies allow the after-tax contributions to a 401(k) that are necessary for executing a mega backdoor Roth IRA.

What is a super backdoor Roth?

A super backdoor Roth IRA is the same thing as a mega backdoor Roth IRA. It is a strategy in which people who have 401(k) plans through their employer — along with the ability to make after-tax contributions to that plan — can roll over the after-tax contributions into a Roth IRA.

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