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Should You Use Your Roth IRA to Buy Your First Home?

Update: The deadline for making IRA contributions for tax year 2020 has been extended to May 17, 2021.

If you are a young professional, you most likely have multiple savings goals, including retirement and buying your first home. Saving for both can be challenging while also covering your monthly expenses.

When you factor in things like student loan payments and any other debt, not to mention a bit of wiggle room to actually live your life, you might find yourself struggling to balance it all. You don’t want to spread yourself thin with all of the different payments, so it is a good idea to get an understanding of how much home you can afford. You can get a good idea of how much you can afford by using our home affordability calculator.

On one hand, if you start saving early for retirement, your money has more time to grow with compound interest. On the other hand, saving for a down payment on a home in today’s market can take years depending upon the purchase price and loan program you choose. According to research by Zillow, it takes about seven years for home buyers to save a 20% down payment for the median value of a home in the U.S.

While 20% down is often thought of as the golden rule for mortgage down payments, these days it’s not required. In 2018, the median down payment on a home was around 5%, according to HousingWire.

There’s one tool of many that can help you reach both your home and retirement goals without requiring you to plan your entire life out before you turn 30: A Roth IRA.

While you’ve probably been told that you should never tap into your retirement money, using cash from a Roth IRA to fast-track your dream of home ownership can be a worthy exception.

Here are a few reasons you may consider leveraging a Roth IRA to become a first-time homeowner without having to delay your retirement goals, and some tips on how to go about it.

The Low-Down on a Roth IRA

IRAs are designed to help you save for retirement. However, a Roth IRA is different from other retirement accounts, such as 401(k)s and traditional IRAs. The main distinction is that you contribute after-tax dollars to a Roth IRA because contributions are not tax deductible.

Since you already paid taxes on the money before putting it into the account, the distributions you take when you retire can be withdrawn tax-free.

Compare that to traditional IRAs where you reap the tax benefits at the time of contribution (they’re deducted from your income on your tax return). The money is taxed when it is withdrawn in retirement, which according to IRS rules is after age age 59 ½.

Under certain circumstances, distributions can also be withdrawn tax free before retirement from a Roth IRA. So long as the account has been open for at least five years distributions can be withdrawn tax free; in the case of disability, if the distribution is made to a beneficiary after the account holder’s death, or in the case that the withdrawal fulfills the requirements for the first time home buyer exception.

But here’s the real game-changer: Unlike a traditional IRA, you can withdraw the money you contributed to a Roth IRA at any time without penalty.

Things get a little more complicated when it comes to your investment earnings. In very specific instances—buying your first home, for one—you are allowed to withdraw up to $10,000 of investment earnings from a Roth IRA with no tax or penalty. The only stipulations are that you must have had the account open for five years, and that the withdrawal is for your very first home.

Traditional IRAs also qualify for the first time home buyer exception. While this exception allows first time home buyers to avoid the 10% penalty, the withdrawal would still be charged income tax. By comparison, if you wanted to withdraw money from your 401(k), you would likely pay taxes and a penalty. Whichever retirement account you decide to go with, SoFi is here to help. Start contributing to your account today by opening a online ira.

Crunching the Numbers

The best way to explain how this all works is by running the numbers. Let’s say you open a Roth IRA in 2019, contribute $6,000 per year (the current maximum contribution allowed) for five years, and hypothetically earn 7% per year on that money.

After three years, you would have made $30,000 in contributions and earned about $4,500 on your investment. If you continue to save $6,000 for two more years, your contributions would climb to $42,000 and the investment earnings would be around $9,900.

After five years, you can withdraw all of your contributions and up to $10,000 of your investment earnings—but you might not have earned that much yet.

Because this withdrawal benefit is available only once in a lifetime, ideally, you might want to time it so that you only tap into your Roth after you’ve earned the full amount allowable.

One other important thing to keep in mind: Roth IRAs have contribution limits based on your income. For example, if you are single and make less than $122,000 in 2019 , the maximum Roth IRA contribution is $6,000 , even if you participate in a retirement plan through your employer.

If you make more than that, the benefit begins to phase out. If you make more than $137,000 as a someone who is filing single, you’re not able to contribute to a Roth IRA.For more information about IRA accounts and contribution, check out SoFi’s IRA calculator.

To recap, you can withdraw from the investment earnings in your Roth IRA to buy a house if:

•   You are a first time home buyer.

•   It has been at least five years since you first contributed to your Roth IRA (the five year mark starts on January 1st of the year you made your first contribution.)

•   You only withdraw up to $10,000 within your lifetime (pre-retirement).

•   You use the funds to purchase, build, or rebuild a home.

•   You can also use the money to help fund the purchase of a home for your child, grandchild, or parent who qualifies as a first time home buyer.

•   The funds must be used within 120 days of withdrawal.

You can withdraw from the contributions you have made into your Roth IRA at any time, for any reason. There is no tax or penalty, and you can use the money however you like.

Qualifying as a First Time Home Buyer

Even if you have owned a home in the past, you may still be able to qualify as a first time home buyer and withdraw money from your Roth IRA.

According to the IRS, you qualify as a first time home buyer if “you had no present interest in a main home during the 2-year period ending on the date of acquisition of the home which the distribution is being used to buy, build, or rebuild. If you are married, your spouse must also meet this no-ownership requirement.”

So if the acquisition date (the date you enter into a contract to purchase a home or start building a home) is at least two years later than the last date you had any ownership interest in a primary residence home, you can qualify as a first time home buyer under this program.

Things to Consider Before Withdrawing from Your Roth IRA

Although using money from your Roth IRA may seem like an easy source to fund a down payment to purchase your first home, it might not be the right decision for everyone. Before you cash out your Roth IRA, think about how it might broadly impact your financial future.

Where Will Your Money Work the Hardest?

Figure out where your money will be working harder for you. Keep market conditions in mind and compare your mortgage interest rate to the expected long term return you would earn by keeping your money in your Roth IRA.

It can be difficult to predict the stock market, but in the past 90 years, the average rate of return for the S & P 500 has hovered around 7%, and that’s adjusted for inflation. When money is withdrawn from the Roth IRA, the potential for additional growth is eliminated, as is the opportunity to benefit from compounding interest.

The housing market is also subject to fluctuation. Consider things like the location and housing market where you plan to buy. In addition, it’s worth factoring in things like current mortgage rates. Another factor that could influence your decision—mortgage interest is generally tax deductible up to $750,000.

There are a lot of moving pieces to consider when determining whether or not to use your Roth IRA to fund a down payment on a house. Consulting with a financial advisor or other qualified professional could be helpful as you weigh your options.

What Mortgage Options Are Available?

Conventional wisdom suggests a 20% down payment when buying a house. And generally, a larger down payment can mean improved loan terms and lower monthly payments.

But if it requires tapping into your retirement fund you may want to think twice. Before committing to a mortgage, explore your options—some mortgages, such as Fannie Mae’s 97% program, offer as little as 3% for a down payment.

How Will Your Retirement Goals Be Impacted?

Everyone’s financial journey is different. Financial and retirement goals are deeply personal, as are the amount of money an individual is able to save each month. For most people, taking money out of a retirement account early will hinder their progress.

Plus withdrawing the money early means you’ll miss out on the tax free growth offered by a Roth IRA. These negative impacts would need to be weighed against any market appreciation you may gain through homeownership.

How Will Your Retirement Goals Be Impacted?

Everyone’s financial journey is different. Financial and retirement goals are deeply personal, as are the amount of money an individual is able to save each month. For most people, taking money out of a retirement account early will hinder their progress.

Plus withdrawing the money early means you’ll miss out on the tax free growth offered by a Roth IRA. These negative impacts would need to be weighed against any market appreciation you may gain through homeownership.

Making This Strategy Work for You

In a perfect scenario, you wouldn’t choose to become a homeowner at the expense of draining your retirement nest egg. Instead, explore other options such as opening a Roth IRA and treat it almost like a savings account, with the intention of using it for your first home purchase five years (or more) from now.

Unlike other investment accounts, your investment returns are tax free, and—contrary to other retirement products—you wouldn’t even be taxed when it comes time to withdraw, as long as all Roth IRA requirements are met.

Ideally, at the same time, you would continue to fund other retirement accounts, such as the one offered through your employer. Even though home ownership is your immediate goal, you’d likely be working toward other longer-term financial goals (like retirement) as well.

And what if you don’t end up buying a home, or you come up with another source of down payment? A Roth IRA is still a win, since you can leave that money be and let it continue to grow for your retirement.

There are a few other circumstances in which you can likely avoid penalties on a withdrawal. These include qualified higher education expenses, some medical costs, and other hardships. Be sure to consult with your tax professional to clarify any of these exceptions before you move forward.

It’s also worth noting that traditional IRAs also qualify for a first time home buyer exception. This exception allows for up to $10,000 to be withdrawn from the IRA before the age of 59 ½, to purchase a house as a first time home buyer and avoid penalties.

In this case, income tax will likely need to be paid but qualifying withdrawals won’t be subject to the additional 10% early withdrawal penalty.

For most young adults with other financial obligations and an early career-level salary, using a Roth IRA to help save for a down payment will require an examination of personal priorities.

Getting Professional Advice

Only you can determine if using money from your Roth IRA to purchase your first home is a trade-off you are willing to make. As you’re starting to make these large life decisions, it can be very useful to seek out tools and resources to help you through the process.

SoFi offers an integrated platform where you can invest toward your financial goals and get personalized advice from qualified professionals.

With SoFi Invest®, you can set up an IRA or another investment vehicle and choose between active or automated investing, depending on your personal preference and financial goals.

Schedule a complimentary consultation with a SoFi Financial Planner to discuss your goals and develop a plan to help you reach them.

Learn more about SoFi Invest now, and start online investing smartly.


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Tax Information: This article provides general background information only and is not intended to serve as legal or tax advice or as a substitute for legal counsel. You should consult your own attorney and/or tax advisor if you have a question requiring legal or tax advice.
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Wedding Loans 101: Everything You Need to Know

If you’re currently in the process of planning a wedding, you’re likely enjoying the endless cake samples and making difficult decisions, like whether to have a donut bar or a candy station at the reception.

Unfortunately, wedding planning isn’t just about delicious dessert samples and seating arrangement logistics.

It can be stressful, especially when it comes to figuring out how you’ll pay for all those savory and sweet treats and gift bags for your guests—let alone the rest of it like, you know, a dress, the actual reception hall, a minister, food, and an open bar if you’re lucky.

According to The Knot’s 2018 Real Weddings Survey, the costs of planning a couple’s special day now averages $33,931, though this number can vary greatly depending on where you live.

Expensive, densely populated cities like New York and Chicago will likely be more expensive than hosting a wedding in a more rural locale.

While there are ways to save on wedding costs—like cutting back on pricey place settings, keeping the wedding parties smaller, opting for a cash bar, and doing a bit of do-it-yourself craft work on flower arrangements—more couples are finding that they need a little bit of extra cash to get them through the wedding planning process. This is especially true when every vendor seems to require an immediate deposit.

That’s why some turn to wedding loans as an alternative to funding their weddings upfront.

Find a venue right out of a Pinterest post, but need a $10,000 deposit by next week to secure it?

Try on the dress of your dreams, then discover it’s $2,500 more than you have in your checking account?

Want the band of your dreams to play but need to plunk down cash to get them?

If your savings are coming up short, an unsecured loan could be just what you need to keep your dream wedding from being derailed. Here’s some more information about the ins and outs of wedding loans to help you decide if it is the right choice for your big day.

What Is a Wedding Loan?

A wedding loan doesn’t come from a wedding fairy godmother with a wave of her wand—although that would make for a better story. Instead, a wedding loan is simply a personal loan that you use to pay for wedding expenses.

So, what’s a personal loan then? A personal loan is just as the name implies—a loan you take out for (almost) any personal reason at all. You could use a personal loan for everything from renovating your home, to consolidating high-interest credit debt, to paying for a vacation or a wedding.

Personal loans are typically given out as one lump sum. For example, a person could take out a $10,000 personal loan for their wedding. They’d receive this payment upfront and could use the cash immediately.

The lender and the recipient would agree upon a repayment plan as part of the terms of the loan. These specific terms will vary by lender but, typically unsecured personal loans are paid back within one to five years.

A personal loan can be either secured or unsecured. With an unsecured personal loan, a lender won’t require a collateral asset. With a secured loan, the lender could require collateral or could require a co-signer on the loan—like a house or other asset of value.

Most lenders also allow borrowers to pay off the loan early, regardless of the loan term. That means if you happen to get a lot of cash as a wedding gift, you could use it to pay on your loan in part or in full.

Consider reviewing the terms and conditions completely before borrowing any loan, while not all lenders do, some may charge a prepayment penalty.

Variable-rate loans may also help save money on interest in the short-term, but it could rise in the long run. Fixed-rate loans mean the interest will remain the same as when the borrower signed on the dotted line, even if other interest rates shoot up faster than the price of a good DJ on a Saturday in the summer.

Considering a Personal Loan for a Wedding?

Personal loans can be a good option for those who have budgeted to pay for their wedding expenses, but just don’t have the cash on hand to cover immediate deposits or a slew of bills at once.

Maybe your parents committed to helping out with wedding costs and promised to send a cash infusion next month, but the florist whose work looks like a living Instagram photo will go with another couple if you don’t book now.

Or maybe you and your betrothed are putting aside a certain amount each month for wedding expenses, but you don’t want to put the catering deposit on your credit card because all the travel rewards points in the world will not outweigh the interest you’ll be charged.

In other words, if you have a good plan for paying your personal loan back and you just need it to bridge the gap, then a personal loan for your wedding might be perfect for you.

However, if you don’t know how you will pay off your loan but you really want a little extra room in your budget to buy that Vera Wang dress, you might want to think twice before signing on the dotted line for a personal loan.

The last thing you want to do is start your marriage off knee-deep in debt you can’t pay back, even if the pictures look amazing.

Pros and Cons of Wedding Loans

Need a little help weighing your options? Here are a few pros to getting an unsecured personal loan to help pay for your big day.

•   Personal loans are typically fast, easy ways to get some extra cash when you have to pay for deposits or cover expenses quickly for a wedding.

•   Many lenders allow you to apply for a personal loan online, making it easy and efficient to secure funding if you qualify.

•   Funds may be available in as little as one business day, depending on the lender. That way you won’t have to wait around to start putting down deposits and checking things off your wedding to-do list.

•   Personal loan lenders typically charge less interest than credit cards. This could make it a more financially viable option for those looking to pay off their vendors without paying extra in interest.

•   Personal loans are one way that could help build your credit over the long-term, if you pay them back on time, which is an excellent gift to give both you and your spouse on your wedding day. But, like all good things in life, personal loans have many downsides. Here are a few cons to be wary of before signing on the dotted line.

•   Personal loans can tempt people to spend more than they can afford. If you take one out, remember you have to pay it all back—plus interest.

•   Some personal loan lenders have prepayment or origination fees. Make sure to check the fine print before agreeing to anything.

•   It’s always a better bet to save up for anticipated expenses rather than financing them. Try to budget and save first, see if your vendors are willing to work out a payment plan, and think about what you really need versus what you want at your wedding.

•   You might be paying off your party years later, with interest. If you still feel like you need extra cash to fund your big day, check to ensure your personal loan has a lower interest rate than credit cards before taking one out.

How Much Can You Borrow for Your Wedding?

To qualify for a personal loan with a competitive rate, you’ll likely need a good credit score and a well-paying job, among other important financial factors, or potentially a co-borrower who has both of those things. Many lenders consider a good credit score to be anything above 700 , though this may vary depending on the scoring model used by the lender.

You might be able to get a loan if your score is below that, though it’s possible you’ll have to pay more in interest or you might qualify to borrow less money.

Things like how much debt you currently have, including student loans or a mortgage, can also impact how much you can borrow. At SoFi, we offer personal loans up to $100,000.

But unless you’re planning a wedding at the Plaza Hotel in Manhattan complete with champagne towers and children dressed as cherubs, it’s unlikely you’ll need that much.

Getting the Funds You Need for Your Wedding Day

Just like any loan, you need to have all your financial information and documents in order before you apply. Be sure to have things like proof of income, bank statements, information about your other debt, your Social Security number, and your identification ready.

With most online lenders, you can get pre-qualified and then decide whether to move forward with the online application. From there, you typically choose your rate, answer any additional questions, send copies of the necessary documentation, and sign the loan agreement all within a day or two.

Again, while saving up for your wedding is probably preferable to taking on debt before you say “I do,” expenses can arise that you may not expect, so knowing what your options are for personal loans can be helpful.

Don’t forget to do your research and understand everything you should be looking for in a lender so that you don’t get stuck with a loan that’s about as appealing as that ugly set of grey serving platters your Aunt Ina bought you for your wedding shower.

Ready to say “I do” to a wedding loan? Check out your options with SoFi now.


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Joint vs. Separate Bank Accounts in Marriage

You might share a last name, a home, and commitment to one another, but are you ready to share a bank account? More and more these days, married couples are eschewing the “I do” when it comes to completely merging finances.

Instead, many opt to keep accounts separate. While that Millennial approach might be appealing, don’t forget that financial problems and money miscommunications are one of the top reasons one study found for divorce in America .

Before you spend hours worrying about making the “right” decision, we’ll let you in on a secret: there isn’t one.

Weigh the pros and cons below with your partner, and make the right decision based on your relationship. As long as everyone’s on the same page, who’s to say you need to be in the same account?

Joint Accounts

A joint bank account with your spouse means everything’s out in the open. Both of you will have access to the account, which means you’ll each get a debit card, checkbook, and the other typical benefits that come with a checking account. Since everything’s out in the open, there could be less verbal communication involved when it comes to checking in on everyday spending.

Having a checking account together can also come in handy when it comes to setting financial goals. It makes it easy for you and your spouse to see how much you’ve saved.

Or, if you already have a home, a joint account can make it easy to take care of mortgage payments, insurance, and other necessities. Simply put, sharing that account can oftentimes be more convenient for everyday shared expenses.

It might be the last thing you want to consider, but having a joint bank account also makes it easier to retain access to your partner’s money in the event of death or emergency. If you have a joint account, you won’t have to go through the courts to get access.

Joint accounts have their benefits, but they also have some drawbacks. In the event that you and your spouse call it quits, dividing the account can get messy. Both of you generally have the right to withdraw the funds and even close the account , oftentimes even without your spouse’s approval. Opening a joint account requires a lot of trust in a couple.

Merging accounts with your spouse might also make you feel like you’ve lost some independence. This might be from income disparity, from one of you might have more debt that then other, or perhaps just feeling a loss of personal freedom.

Your spending habits will become an open book. That means it’ll be harder to buy your partner a surprise birthday gift, and it will be near impossible to hide a charge you might’ve made on a non-spouse approved shopping spree.

While you don’t have to agree with every purchase they make, both of you will see it. A joint account can make managing your finances and shared goals easier, but it also means complete transparency with your spouse. Depending on the way you share your spending habits with your spouse, a joint account might be the right move for you.

Separate Accounts

You and your spouse probably agree on plenty of subjects, but perhaps the way you spend and save isn’t one of them.

Maybe you pour over spreadsheets obsessively, while your partner is more of a set it and forget it kind of person.

Maybe it’s not how you spend your money, but what you spend it on that riles up your spouse. In this case, separate accounts might be a more appealing option.

However, because you don’t have access to each other’s day to day spending, you’ll need to communicate more when it comes to saving for and achieving financial goals as a couple.

You will have to decide how to split and pay for all of your shared expenses, like rent, mortgage, utilities, groceries, and more. This might lead to more honest and open conversations about spending and saving.

Separate accounts might also be appealing if one of you has taken on major debt. This can protect the other spouse in the event that debt collectors show up, or regarding sole rights of survivorship in the event of an accident. And while no one wants to consider it, separate finances could also mean a simpler split down the line if worse comes to worst.

In addition, separate finances might make sense if you and your spouse both like to manage money. With a joint account, the responsibility might fall to one party, but if you keep your finances separate, no one needs to cede control.

Millennials are marrying later than previous generations, meaning you might already have well-established habits managing money on your own. And hey, if it’s not broke, why fix it?

When it comes to keeping separate accounts communication is key. But, that also means some independence for yourself, as well as safeguards in the event of debt or a split.

Hybrid Joint or Separate Accounts

It doesn’t have to be all or nothing when it comes to joint or separate accounts with your spouse. In fact, you could try a hybrid of the two.

Both of you can keep your separate accounts while contributing to a joint account to handle common expenses such as monthly bills and future financial goals. It’s not uncommon for a single person to have multiple bank accounts, so why not try it as a couple?

If you decide to go down this route, just make sure to be clear about what the account is used for. Since you and your partner will be juggling multiple accounts and financial priorities you may have to spell out responsibilities when it comes to monitoring the account.

One Size Won’t Fit All, But SoFi Could

Your relationship is unique, so why wouldn’t your bank account be the same? What matters most is that you and your partner are feeling good about your finances, with open and honest communication.

SoFi Money® makes opening a single or joint cash management account easy. With convenient online access and no account fees (variable and subject to change), you and your spouse can worry about bigger things, like what to binge-watch next, or if you’re ordering out for tacos—again.

Find out more about using SoFi Money to help you and your partner reach your financial goals.


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Should You Buy or Rent a Home? – Take The Quiz

For many people, buying a home is the biggest financial commitment they’ll ever make in their lifetime, so it makes sense to carefully consider some of the pros and cons of each choice. To help, we’ll share:

•   pros and cons of renting vs buying a home

•   a quiz to help you make your decision

•   tips to help you to determine if you’re ready to buy a home

Rent or Buy a Home: Pros and Cons

Advantages of renting include (but are not limited to):

•   Your landlord is typically responsible for repairs and maintenance, so your money can go elsewhere.

•   Your landlord may also pay some of your monthly utilities, and you aren’t responsible for paying things like property taxes.

•   When your lease is up (often a six-month or annual commitment), you can renegotiate or simply move somewhere else. You have flexibility.

•   You don’t need to make a big investment (such as the down payment and closing costs associated with home buying) when you move into the next place you rent.

Disadvantages of renting include (but are not limited to):

•   Your landlord may put restrictions on you that you don’t necessarily like, perhaps refusing to allow pets or to permit remodeling.

•   The rent you pay each month doesn’t give you any equity/ownership in a property. It just goes to the owner, unless you set up a lease with option to buy agreement.

•   You can still feel stuck in a house during the lease period.

•   If the owner decides to sell their home, you may need to quickly and unexpectedly move depending on the type of lease or where you occupy .

Advantages of buying include (but are not limited to):

•   As you make mortgage payments, and depending upon market conditions; you could be gaining equity in your home.

•   You have far fewer restrictions around things like remodeling, pet ownership, and so forth .

•   You have more stability. You can stay as long as you’d like (barring any unusual circumstances such as eminent domain), with no worries about an owner selling the property while you’re living there.

•   Sometimes, your mortgage payment can be cheaper than what you’d pay in rent.

Disadvantages of buying include (but are not limited to):

•   You typically need to make a down payment, and pay closing costs and so forth to get the home. It’s an investment.

•   You’re generally responsible for all repairs, maintenance, and utilities, plus homeowners insurance, property taxes, and other special assessments such as HOA dues.

•   If you decide to move, until your departing home is sold, you’re still responsible for its mortgage payments along with the housing expenses attached to the new place you’ll live.

Renting or Buying Quiz

This quiz may also help you in your quest to decide between these two choices.

Are You Really Ready to Buy?

The answer may already be clear to you. If not, SoFi has created a post to help you to decide if you’re ready for the responsibilities of homeownership, offering tips on how to prepare yourself if you’ve decided to buy.

Before you begin the home buying process, it might make sense to:

•   Do your research to ensure that you’re buying for the right reasons and are ready for a long-term commitment. If you’ve saved enough money for a down payment and know how much house you can afford, that’s a good sign

•   Consider if your line of work allows for job continuity with steady ongoing income—have you had this type of income for the past two years or more?

•   Although it is ideal to keep as much money as possible available when purchasing a home, if your current debt-to-income ratio appears too high for the loan program you would like to apply for, you may need to consider paying down some debt. Generally, in order to calculate your DTI ratio, divide your monthly ongoing debt payments (do not include things like utilities) by your monthly gross (pre-tax) income

•   Save money for a down payment, closing costs, and other fees, plus some funds for moving expenses and any remodeling/repairing you might need to do

•   Check your credit scores and work on improving them, if necessary

•   Do a gut check to see if you’re really ready to be your own landlord, meaning being responsible for your own home maintenance, inside and out

Even if you decide you’re not quite ready, that’s good info to keep in the back of your mind for when you are ready. You could also consider a rent to own home if you are almost ready to take the plunge. If you are ready for the big step of buying a home, check out mortgage options with SoFi.

Applying for a mortgage loan with SoFi is incredibly simple. You can complete the entire application online and, if you want one-on-one assistance, that’s available, too. Our mortgage loan officers (MLOs) and member specialists are standing by to help.

You can get pre-qualified without the hassle, and it takes just two minutes online. You can select a loan program among fixed and variable rate choices that best matches your financial goals—and, once your loan is complete, we’ll transfer funds, usually within 30 days.

Benefits of getting a mortgage at SoFi include:

•   Getting your dream home at a competitive rate

•   Putting down as little as 10% on loans up to $3 million

•   No PMI on Jumbo Loans

•   Never paying any hidden fees or prepayment penalties

•   Receiving exclusive member rate discounts

SoFi will be by your side from start to finish, making the mortgage process as quick and painless as possible. And, when you need them, you have access to our educational tools and resources.

Got two minutes? That’s all it takes to find your rate online.


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.
Disclaimer: Many factors affect your credit scores and the interest rates you may receive. SoFi is not a Credit Repair Organization as defined under federal or state law, including the Credit Repair Organizations Act. SoFi does not provide “credit repair” services or advice or assistance regarding “rebuilding” or “improving” your credit record, credit history, or credit rating. For details, see the FTC’s
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SoFi Loan Products
SoFi loans are originated by SoFi Lending Corp. or an affiliate (dba SoFi), a lender licensed by the Department of Financial Protection and Innovation under the California Financing Law, license # 6054612; NMLS # 1121636 . For additional product-specific legal and licensing information, see SoFi.com/legal.

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

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Creating an Investment Plan for Your Child

You just had a baby. In addition to important short-term decisions like whether to use cloth or disposable diapers, this is a great time to plan for your child’s financial future. Yay, you think, another thing added to my plate—but here’s a look at how investing for your baby now can help you set your child up for success.

Why Invest for Your Child?

Being a new parent is hard work. Sleepless nights, endless feedings, and reorganizing your life around nap schedules may leave you feeling like planning for anything but the immediate future is impossible.

Yet raising a child is expensive. There’s good reason to look ahead and consider making a child investment plan as soon as you can. The main reason to invest early is to have more time to take advantage of compounding interest.

Compound interest is an extremely powerful tool. It’s essentially the interest you earn on your interest. So, for example, if you make a principal investment of $100 with a 7% annual return, after one year you’ll have $107. Without adding anything to your principal, in the second year—if rates are the same—you’ll earn a return on this new sum, bringing your total to $114.49.

Of course, making additional investments speeds this process along, and the more time you can take advantage of compounding, the more money you could potentially make, riding the ups and downs of the market.

Starting a 529 Savings Plans

Saving for a child’s college education is often top of mind when parents think about planning for their kids’ futures. College isn’t cheap: The average cost of tuition and room and board at a private four-year college for the 2018–2019 academic year is $48,510 per year . Starting to save early with a 529 savings plan could be a smart way to cover this expense.

A 529 plan is a tax-advantage savings plan that encourages saving for education costs by offering a few key benefits. While contributions to the plan are made with after-tax dollars, the money invested inside the plan can grow and compound tax-free.

Withdrawals from the account to cover qualified educational expenses—including tuition, room and board, lab fees, and textbooks—can be made without incurring any tax.

All 50 states, as well as state agencies and educational institutions sponsor 529 plans . You do not have to choose the plan that is offered in your home state—you can shop around to find the plan that’s the best fit for you.

How to Fund a 529 Plan

Practically speaking, there aren’t really any yearly limits on how much you can save in a 529 plan. The simplest way to save may be to have even a small portion of your paycheck, say $25 a monthly, automatically contributed to the account. That way you’ll never miss a contribution, and with the money taken directly from your paycheck, you might never even notice that it’s gone.

You can contribute up to $15,000 tax-free for each child every year as a result of the government’s annual gift tax exclusion, and this could help manage college expenses for multiple children. Couples can contribute $30,000 tax-free per child. Federal rules also allow you to make a lump sum payment with a strategy called five-year gift tax averaging.

Individuals can contribute up to $75,000 in one year and couples can contribute $150,000 without incurring any gift tax. However, the strategy does use up your gift exclusion for the next five years, so if you’re planning to make other gifts, this may not be the right strategy for you.

You might want to plan to save only the amount you’ll need to cover education costs. Money in the plan can only be used for qualified educational expenses, so you don’t want to overfund the plan and end up having extra money and nothing to spend it on.

You could always transfer the account to a second child who can use the money. You could even use it yourself. But non-qualified withdrawals from 529 plans are subject to income tax and a 10% penalty on the earnings portion of the withdrawal.

As an added bonus, 529 plans aren’t only available to parents. Grandparents, other family members, or even close family friends can all open 529 plans for your child. If a plan accepts third-party contributions, they can even contribute to the 529 that you’ve already opened.

Considering a Custodial Investment Account

Another way to help jump-start your child’s investing is through a custodial investment account established by the Uniform Gifts to Minors Act (UGMA) or the Uniform Transfers to Minors Act (UTMA).

These accounts allow parents to transfer assets to a child and manage those assets until the child reaches the age of majority and can manage the accounts on their own. These accounts are a common way to save for college, but your child doesn’t necessarily have to use the assets to pay for school.

UGMA accounts only include securities, such as stocks and bonds, whereas UTMA accounts can include other types of property, like real estate or even fine art.

There are no limits on how much you money you place in a UGMA or UTMA, though parents may still want to keep the $15,000 gift tax exclusion in mind when making contributions each year.

While the parent controls assets inside custodial accounts, they irrevocably belong to the child. Parents can’t dip into them to buy things that directly benefit themselves, nor can they transfer assets between different children’s accounts. Income from the assets inside the account must be reported on a child’s income taxes and is subject to the child tax rate .

Thinking Ahead to Retirement Accounts

You can’t have a online retirement account until you have earned income, and your new baby likely won’t start working until he or she is a teenager at the earliest. However, it’s never too early to start planning for retirement.

It’s worth being aware that as soon as your child is working, you are able to open a custodial IRA . The assets inside the IRA belong to you child, but you have control over investing them until they become an adult.

When to Choose a Savings Account

Investing is a long-term proposition. Investing for long periods allows you to take advantage of compounding interest and helps you ride out whatever short-term volatility may occur in the stock market.

If you think you’ll need the money you’re savings for your baby in the next three to five years, consider putting it in a savings account, such as high-yield savings, which offers higher interest rates than traditional savings accounts. Or a hybrid account like SoFi Money that earns 0.20% APY.

You might also want to consider a certificate of deposit (CD) , which also offers higher interest rates than traditional saving vehicles.

The only catch with CDs is that in exchange for this higher interest rate, you essentially agree to keep your money in the CD for a set amount of time, like five years for example.

While these savings vehicles don’t offer the same high rates of return you might find in the market, they are a less risky option and can give you quicker access to your money.

Working With SoFi Invest

When saving for long-term goals for your child, you may choose to invest. When investing with SoFi, you have two options. An active investment account allows you to take a hands-on approach to investing, choosing the investments you want to buy.

If a hands-off approach is more your style, SoFi’s automated investing can build and manage a portfolio for you based on your goals without charging a SoFi management fee.

Learn more about how to invest your money and put it to work with SoFi Invest.


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.
SoFi Invest®
The information provided is not meant to provide investment or financial advice. Investment decisions should be based on an individual’s specific financial needs, goals and risk profile. SoFi can’t guarantee future financial performance. Advisory services offered through SoFi Wealth, LLC. SoFi Securities, LLC, member FINRA / SIPC . The umbrella term “SoFi Invest” refers to the three investment and trading platforms operated by Social Finance, Inc. and its affiliates (described below). Individual customer accounts may be subject to the terms applicable to one or more of the platforms below.

SoFi Money®
SoFi Money is a cash management account, which is a brokerage product, offered by SoFi Securities LLC, member FINRA / SIPC .
Neither SoFi nor its affiliates is a bank. SoFi Money Debit Card issued by The Bancorp Bank. SoFi has partnered with Allpoint to provide consumers with ATM access at any of the 55,000+ ATMs within the Allpoint network. Consumers will not be charged a fee when using an in-network ATM, however, third party fees incurred when using out-of-network ATMs are not subject to reimbursement. SoFi’s ATM policies are subject to change at our discretion at any time.

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