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While enjoying more protections in recent years, LGBTQ+ couples may face unique legal situations and other scenarios that can leave them financially vulnerable. Taking a proactive approach can help ensure that you and your partner are prepared for the future.

Here are essential financial tips to help LGBTQ+ couples make informed decisions and develop a plan that supports their personal and financial goals.

Unique Financial Challenges

Due to discrimination, legal limitations, and varying access to financial benefits, LGBTQ+ couples (which encompasses those who are lesbian, gay, bisexual, transgender, and queer or questioning) can encounter a number of financial hurdles. These issues may impact savings, career advancement, and even financial security, making proactive financial planning particularly crucial.

Legal Considerations

Legally speaking, LGBTQ+ couples have reasons to celebrate as well as causes for concern. Amid the legal landscape for LGBTQ+ rights, the Supreme Court’s legalization of same-sex marriage in 2015 is often noted as a highlight. This ruling gave LGBTQ+ couples access to legal protections and financial benefits that are only available for legally married couples.

Other key milestones include:

•   In 2020, the high court barred discrimination in employment decisions in relation to a person’s sexual orientation or gender identity. A 2021 executive order from President Biden further expanded these protections.

•   In 2021, the Consumer Financial Protection Bureau (CFPB) clarified that the Equal Credit Opportunity Act (ECOA) includes protections for LGBTQ+ people, making it illegal for lenders to discriminate on the basis of gender identity or sexual orientation.

Despite progress, there is still a lot of work to be done to safeguard LGBTQ+ couples’ economic security. Many states have not put antidiscrimination laws in place that affect health care, housing, and access to credit, according to the Movement Advance Project (MAP), an independent, nonprofit think tank. And some fear that existing protections might be rolled back in the future.

Discrimination and Financial Impact

Because certain LGBTQ+ rights, like marriage and workplace protections, have only been granted in recent years, many members of the community have likely been disadvantaged from decades of living without them. LGBTQ+ individuals may also face barriers to career advancement, which can limit their earning potential.

Indeed, LGBTQ+ workers earn, on average, 90 cents for every dollar a non-queer worker earns, according to a recent analysis by the Human Rights Campaign. The gap widens further for LGBTQ+ people of color, transgender women and men, and non-binary individuals, who earn even less when compared to the typical worker.

Data also indicates that LGBTQ+ people generally carry more student loan debt and have saved less for retirement compared to their cisgender/heterosexual peers.

At the same time, LGBTQ+ couples often face higher living expenses, due to a desire to live in welcoming communities (often cities with a high cost of living). They also tend to face higher health care costs, particularly if they or someone in their family seeks gender-affirming medical care.

Creating a Solid Financial Foundation

Establishing a strong, shared financial base can be the first step toward long-term security. This process involves open communication, assessing your bank accounts, setting goals, and establishing a budget that can help you achieve your shared objectives.

Setting Joint Financial Goals

As with any partnership, it’s important to sit down as a couple and consider goals that reflect your values and aspirations. These could include saving for a home, planning for retirement, starting a family (and a college fund), or preparing for potential health care costs.

Once you have a list of goals, you’ll want to discuss how much money you will need, a timeline, and steps you’ll take to achieve your goals. Strategies might include cutting back on nonessential expenses and/or transferring a set amount into a joint savings account each month.

Since your goals, as well as your income and expenses, will likely change over time, it’s a smart move to have regular check-ins. This allows you to assess your savings, budget, and cash flow and make any necessary adjustments in how you manage your money to help stay on track. Find a cadence that suits you: Monthly or quarterly might work well, but no less than annually. It’s a good idea to reassess your situation when there are any big life changes, such as a new job, a new baby, or buying a home, as all of these can impact your budgeting.

Legal Protections and Documentation

Securing proper legal protections and documentation can be essential for LGBTQ+ couples, as laws around partnership rights can vary. The documents listed below can protect both partners.

•   Wills: A will ensures that your assets are distributed according to your wishes. If you die without one, your assets will likely be distributed according to the state’s default plan, which usually directs the assets to a legal spouse or, if none exists, to your blood heirs.

•   Financial power of attorney: This document enables your partner to make financial decisions on your behalf if you’re incapacitated. Without it, they would need to obtain a court order in order to take over your financial accounts in an emergency. This is the case even if you are married — without a power of attorney, spouses can only control joint bank accounts and joint brokerage accounts.

•   Health care directives: A health care directive (also known as a medical power of attorney) specifies your wishes regarding medical treatment if you cannot communicate them. It ensures your partner can make decisions aligned with your preferences. This document is particularly important for unmarried LGBTQ+ couples. Should one of you experience a medical emergency, your partner could be bypassed at the hospital and a relative would be contacted instead about what could potentially be life-or-death decisions.

Marriage and Domestic Partnership Considerations

While LGBTQ+ couples are now legally able to get married, some may choose not to. This is a personal decision that also has implications on financial planning. Here’s a look at how marriage vs. domestic partnership impact your finances.

Marriage: Getting married can provide access to numerous financial, tax, and legal benefits, including spousal benefits through Social Security, pensions, and work. Marriage also allows partners to pass money and assets back and forth without worrying about gifting limits, and it gives each partner inheritance rights. One downside, however, is the so-called “marriage penalty.” This is the tax increase that many couples face once they combine their incomes and file as married filing jointly. (However, as noted above, there are tax benefits to marriage, such as additional deductions, which may offset this.)

Domestic partnership: A domestic partnership is an alternative to marriage and may provide you with some of the benefits that married couples receive. For example, your employer may allow your partner to receive benefits like health insurance. However, domestic partners are not considered “family” by law and are not recognized by most states. Also, while married couples automatically inherit each other’s assets upon death (and without incurring taxes), this is not the case for domestic partners. You can inherit your partner’s assets through a will, but you’ll be subject to taxes.

Retirement Planning for LGBTQ+ Couples

Members of LGBTQ+ community often have unique needs in retirement. Many look to retire in more accepting parts of the country, which tend to be cities with high housing and other costs, making retirement generally more expensive. Here are some factors to keep in mind as you plan for retirement.

•   Social Security benefits: Married couples in which one spouse earned significantly more than the other may be able to use spousal benefits to maximize their combined Social Security income. Married or not, it’s important for LGBTQ+ couples to understand how Social Security benefits work and consider the timing of their claims. You can get an estimate of your monthly payout and how it’s impacted by the age you start to claim your benefits at SSA.gov.

•   Pension plans: A pension plan is a retirement account provided by an employer that pays out a fixed amount of money to the employee after they retire, providing a steady stream of passive income for life. Certain pensions provide spousal benefits upon death, but these may only be accessible to married couples. Check with your employer to understand the details and consider how this might impact your retirement savings strategy.

•   IRAs and 401(k)s: Individual retirement accounts and employer-sponsored retirement plans are critical components of retirement planning. Both partners will want to contribute as much as possible to their retirement accounts, and at least enough to get the full employer match (if offered). Once you’ve maxed out your 401(k), you might each consider contributing to a Roth IRA, if you’re eligible.

Recommended: Savings Goal Calculator

Family Planning and Financial Preparation

For LGBTQ+ couples, family planning may involve additional costs, especially if it includes adoption, surrogacy, or fertility treatments. For example, adoption can run anywhere from $20,000 to $70,000, depending on whether it’s done domestically or internationally. IVF can cost $13,500 to $21,000 or more, while surrogacy can range between $60,000 to $250,000-plus.

Since insurance often does not cover most of these costs, creating a financial plan that accounts for these expenses can be crucial. This plan should include saving for baby costs, as well as the ongoing expenses related to raising children.

Insurance Needs for LGBTQ+ Couples

Insurance provides an essential financial safety net for couples. Below are three kinds of insurance that can help protect your family.

•   Health insurance: Health insurance is vital for all couples, so you’ll want to make sure you are both covered either through employer plans, the Affordable Care Act marketplace, Medicare, Medicaid, or private options. When choosing a health care plan, carefully review coverage details, including any potential limits for LGBTQ+-specific health care needs. Though most health insurers cover medically necessary gender-affirming care, some states allow private health plans to deny coverage to transgender people for certain health care services.

•   Life insurance: Life insurance protects your partner in case of your untimely death by replacing lost income. This can be particularly important if you have children. Life insurance offers a safety net by ensuring the loss of income doesn’t disrupt your children’s daily life, education, and future opportunities. Keep in mind that you don’t have to be married to get life insurance — you can each purchase an individual policy and name the other as the beneficiary.

•   Long-term care insurance: This type of insurance helps cover expenses for long-term care that aren’t typically covered by health insurance or Medicare. LGBTQ+ seniors may face added costs if they lack family support (as can be the case for any couple that doesn’t have children). Long-term care insurance can be a worthwhile investment in this scenario. An alternative option is to self-fund your future needs.

Estate Planning Strategies

Estate planning is essential for LGBTQ+ couples to ensure assets are transferred to the right individuals and that financial protections are in place for the surviving partner. This is particularly important if you are not married, as your assets would not likely go to your partner without a well-defined estate plan. The following protections can help.

•   Trusts: Unlike wills (which can be successfully challenged), trusts cannot be contested by others. Putting some assets into a trust can be especially helpful for LGBTQ+ couples, as it can help you to avoid potential legal disputes with non-supportive family members. Assets in a trust may also be able to pass outside of probate, which can save time, court fees, and (potentially) estate taxes.

•   Beneficiary designations: Certain assets, like savings accounts and life insurance policies, can pass to the beneficiary on file without the need for a will and without going through probate. Whoever is listed as beneficiary will get those assets regardless of what a will might state. For this reason, it’s important to regularly review and update beneficiary designations on your accounts, especially if you set these accounts up years ago.

•   Titling: Another way to protect your estate is to make sure the title to your assets, particularly property, is coordinated with your will. For example, if your shared home is titled “joint tenants with rights of survivorship,” it will pass directly to the surviving owner when an owner dies, rather than through your will. Assets titled in an individual’s name (absent a beneficiary designation) or as “tenants in common,” on the other hand, will pass according to your will. You may want to discuss asset protection options with an estate planning attorney who understands the specific needs of LGBTQ+ couples to ensure you are both protected.

Recommended: Financial Planning for Young Adults

Building a Support Network

A strong support network can be invaluable for LGBTQ+ couples navigating unique financial and personal challenges. Community support can provide resources and guidance, along with a sense of belonging.

Community Resources and Support Groups

Many LGBTQ+ organizations and support groups offer financial assistance programs, legal resources, and planning guidance. Consider seeking out organizations or LGBTQ+-friendly financial advisors who understand the needs and challenges faced by LGBTQ+ couples.

A sampling of resources you might tap:

•   The Center for LGBTQ Economic Advancement & Research provides access to financial workshops, counseling, and self-help resources targeted to LGBTQ+ individuals and couples.

•   CenterLink focuses on strengthening, supporting, and connecting LGBTQ+ community centers nationwide.

•   Rainbow Families offers education, resources, and peer support groups for LGBTQ+ parents, families, and parents-to-be.

•   SAGE offers supportive services and consumer resources to older LGBTQ+ people and their caregivers.

The Takeaway

Financial planning is essential for everyone, but LGBTQ+ couples often face unique challenges and considerations. From navigating legal protections to managing potentially higher family-planning costs, these complexities can make proactive financial planning even more critical. By delving into these issues, LGBTQ+ couples can create a plan that protects their rights, and helps them build wealth over time.

Interested in opening an online bank account? When you sign up for a SoFi Checking and Savings account with eligible 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.

FAQ

How does marriage equality affect financial planning for LGBTQ+ couples?

Marriage equality gives LGBTQ+ couples access to financial benefits that are limited to legally married couples, which can simplify and enhance financial planning. This access can include spousal Social Security benefits, joint tax filing, inheritance rights, and health insurance coverage through a partner’s employer. These benefits can help reduce taxes, provide more retirement benefits, and offer financial security if one partner passes away. However, marriage can also come with new tax considerations, so couples might want to consult a financial advisor to optimize financial planning.

Are there specific estate planning considerations for LGBTQ+ couples?

Yes, estate planning is particularly important for LGBTQ+ couples to ensure their wishes are honored and to avoid potential family disputes. This may involve creating or updating wills, establishing durable powers of attorney, and designating health care directives to protect each partner’s wishes. In addition, they may want to establish trusts (for added control over asset distribution and to protect their estate from taxes) and update beneficiary designations on financial accounts.

What financial resources are available specifically for LGBTQ+ individuals and couples?

LGBTQ+ individuals and couples can access a number of specialized financial resources, including LGBTQ+-friendly financial advisors, legal services, and community-based support organizations. Organizations like the Center for LGBTQ Economic Advancement & Research provide access to financial workshops, counseling, and self-help resources targeted to LGBTQ+ individuals and couples, while SAGE offers resources for LGBTQ+ seniors. There are also a number of nonprofit groups and community centers that offer financial assistance to LGBTQ+ individuals and families facing financial challenges.

About the author

Julia Califano

Julia Califano is an award-winning journalist who covers banking, small business, personal loans, student loans, and other money issues for SoFi. She has over 20 years of experience writing about personal finance and lifestyle topics. Read full bio.

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SOBNK-Q424-051

Investing in single-family homes is often a good way to build wealth and generate monthly cash flow.

Real estate has proven to be an economic bulwark when stocks and bonds experience downturns. Even in late 2024, with the average sales price of homes in the U.S. slightly down from its 2022 historic high, the average price is almost $100,000 above where it stood at the start of this decade, according to the Federal Reserve Bank of St. Louis, which tracks the data.

Single-family rental homes have lots of upsides for an investor, but there are also a few reasons to look before you leap.

What Is a Single-Family Home?

The popular image of a single-family home is a stand-alone, one-dwelling structure with its own utilities, entrance, exit, and access to the street. The owners own both the building and land it sits on, so condos do not count.

Some government agencies expand this definition to include properties of up to four units, such as duplexes, as well as townhouses.

Why Invest in Single-Family Homes?

Buying investment property offers two key benefits to long-term investors:

•   the potential for capital appreciation

•   immediate cash flow

Let’s walk through some of the key motivators for investing in single-family homes.

Financing

Single-family homes are typically easier to obtain financing for than multifamily homes of five or more units.

A multifamily property meeting that criterion requires a commercial loan, which usually has a higher interest rate and shorter term than a residential mortgage. (Note: SoFi does not offer commercial loans; it does provide loans for residential investment properties of four or fewer units.)

Lenders often require at least 20% down for an investment property. It could be higher, depending on the borrower’s credit score and savings. Then again, there are creative ways to buy a multifamily property with no money down.

Less Volatility

The market for single-family homes is relatively stable and tends to grow more smoothly over the long run compared with other types of homes.

Unlike commercial real estate and apartments, the demand for single-family homes tends to remain relatively strong at all stages of the economic cycle.

Steady Income

Single-family homes may be rented out for longer terms than apartments and usually sit vacant for less time thanks to the steady demand for single-family housing.

Some contend that single-family rentals feel more like proper homes for tenants and therefore are better cared for than apartments.

You’re also more likely to find more families renting single-family homes than individuals. Families may be more likely to extend the lease if they end up loving the neighborhood and schools, as in a coveted suburb.

Tangible Asset

Many people seek to diversify portfolios with different types of investments. Unlike stocks and bonds, which represent shares of ownership and rights to dividend payments from a company, real estate is a tangible asset.

The tangible factor gives you something physical to hold on to that’s unlikely to disintegrate over the long term. Stocks, bonds, and other intangible investments require the underlying company to remain a going concern.

Inflation Hedge

Inflation is the creeping impact of price increases, and when there are concentrated bouts of it over a short period of time, it can rapidly erode the purchasing power of your assets.

Housing has often been touted as an inflation hedge because it has historically held its real value during inflationary markets. This could be because of the following reasons:

1.    Most homebuyers lock in their purchase price through a mortgage.

2.    Rental agreements typically last one or two years, which allows homeowners to gradually raise rents to keep pace with inflation.

3.    Home values typically appreciate over the long run thanks to the intrinsic value of the house and land.

Return on Investment

Thanks to steady demand, single-family homes can match or even exceed the return on investment (ROI) of bigger multifamily properties, with lower volatility than stocks or bonds.

Potential ROI across different real estate properties can be compared using a capitalization rate (cap rate) calculation: net operating income divided by current market value.

Net operating income is your gross annual income from the property minus operating expenses (like repair costs, groundskeeping, property taxes, insurance, utilities not paid by tenants, and any property management fees). Home mortgage loan payments are not included in the net operating income formula.

Diversification

Single-family homes could be a good addition to a portfolio of stocks and bonds, but why does portfolio diversification matter anyway? Because by diversifying assets, you may offset a certain amount of risk and improve returns. When stocks or bonds fall, real estate prices can take much longer to follow.

Things to Know Before Investing in Single-Family Rentals

Because of the high acquisition cost of single-family homes, you’ll want to conduct proper due diligence on your local housing market and target property before you buy. As with all investments, be cautious when investing a significant portion of your cash in one place.

Your Numbers

While the projected rental income on a property looks attractive at a glance, bear in mind that maintenance costs and surprises should be factored in. Vacancy rates, legal issues with tenants, and unexpected repairs can sap your returns over time.

It’s smart to factor in a cash buffer to ensure that money is available on short notice.

Your Target Rental and Housing Market

While the rental income streams of New York and California offer much higher revenue potential, keep in mind that the costs of owning real estate in those areas is enormous as well.

Income is only one side of the rate of return calculation, so make sure you have a good handle on the expenses as well. You can only do that by thoroughly investigating your target housing market and relying on the home appraisal.

The local job market, its dominant industries, and the dependability and growth of local businesses also will shed light on how stable a given market will be over time. Good schools, safe cities, and proximity to workplaces and attractions matter to many renters.

If you’re looking to use the property as a short-term rental, check out the local ordinances, which may prohibit you from doing so.

The 1% and 50% Rules

The 1% rule is a back-of-the-envelope calculation to estimate whether your rental income strategy will be profitable. If the estimated rental income on the property is at least 1% of its purchase price, you should theoretically be able to generate cash flow. If your purchase price was $300,000, for example, the monthly rent should be at least $3,000, according to the rule.

The 50% rule states that you should expect the expenses on your real estate investment to make up approximately 50% of the gross income generated. That’ll give you a quick and dirty estimate to help you start ballparking your net returns.

Obviously, the exact numbers are more complicated. When you have time, you’ll want to run a full comparison of revenues vs. potential costs of your venture.

Your Strategy

This one’s a little more nuanced, as it depends on your goal amount, the time horizon, and your risk tolerance.

Are you looking to build a rental home empire or are you just looking for a little extra income to supplement your retirement?

Do you intend to tap home equity to buy one or more investment properties? Do you plan to flip or hold the home?

How to Invest in Single-Family Homes

If you’re confident that buying a single-family home is the right choice for you, there are a few ways you can invest:

Buy It Yourself

This is the most capital intensive and least liquid route. Buying a single-family home in the neighborhood of your choice will net you reward as well as the risk that comes with any property.

If you’re handy, you can buy a fixer-upper or a HUD home (bidding opens to investors after owner-occupants are given a chance) and renovate it into turnkey condition.

The expense of any contractors or property managers will need to be factored in.

Invest Through a Crowdfunding Platform

If you don’t have copious amounts of capital, you can still fund real estate investment projects through online crowdfunding platforms like Fundrise. These allow you to diffuse risk while taking part in more aggressive investments than you might have been willing to by yourself.

Keep in mind that you’ll need to share the benefits with all investors who partake in the process. Another shortcoming is that your funds may be tied up for an extended period of time, which varies by project.

Invest in a Real Estate Investment Trust

REITs are corporate entities that specialize in purchasing and financing pools of real estate investments on behalf of their clients. They sell shares that are publicly traded and can specialize in any number of sectors or strategies.

The big benefit of REITs is that they’re one of the most liquid real estate investments out there, as you can buy or sell your shares at almost any time on the open market. However, the market value of each share will fluctuate daily.

In the realm of investment opportunities, REITs often provide better returns than fixed-income assets like bonds, but REITs carry higher risk.

There are REITs that specialize in buying and operating single-family rentals. These REITs pay out a major portion of their cash earnings to shareholders.

The Takeaway

When done right, your single-family home investment can offer growth and income and diversify your portfolio. You can start with lower levels of capital by investing in REITs or crowdfunding platforms, but any gains will be diluted. It may be easier to obtain a mortgage for a one-family home, or a property that is four units or fewer, than for a larger multiunit property.

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

FAQ

Is renting out a single-family home worth it?

It can be. Appreciation and rental income have made single-family homes attractive to investors. Multifamily properties provide more rental income streams but also require more property and tenant management.

How do you value a single-family home rental?

There are a few ways. One is to look at recent comparable sales. Another is to calculate the capitalization rate (net operating income divided by property price or value). A third is to use the gross rent multiplier approach (property price divided by gross rental income).

How fast does the value of single-family homes appreciate?

It depends on the market. Lately, appreciation has decelerated. But the median sales price of a house in the last quarter of 2024 was still about $100,000 more than it was five years before.

Photo credit: iStock/Phynart Studio

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SOHL-Q125-022

A hard money loan is a nontraditional, secured loan provided by an investor to a buyer of a “hard asset,” usually real estate, whose creditworthiness is less important than the value of the asset.

Hard money loans are more common for real estate investments — purchasing a rental property or flipping a house, for instance — and can get you money quickly.

Individual investors or investment firms offer these loans. They typically have high interest rates and short repayment terms and can be risky.

Note: SoFi does not offer hard money loans at this time.

Common Reasons to Get a Hard Money Loan

People typically look for hard money loans when they are interested in investing in real estate that needs repairs.

Amateur real estate investors who may not have another way of securing financing — or who may just need money fast and don’t have time for a lengthy mortgage process — rely on hard money loans for:

•   Purchasing real estate to fix up and rent out

•   Buying a home to upgrade and flip for a profit

Business owners sometimes take out hard money loans to purchase commercial real estate as they expand their business.

Finally, some homeowners who have poor credit but who possess equity in a home may apply for a hard money loan to avoid foreclosure.

Recommended: How to Buy a Foreclosed Home

How to Get a Hard Money Loan

Unlike lenders of personal loans or traditional mortgage loans, hard money lenders aren’t all that interested in your credit scores. Instead, they care about the value of the investment — if you default on the loan, they’ll have made money on the interest and have legal claim to the investment.

That makes getting a hard money loan easier than a traditional loan. But how do you find hard money lenders if they’re not traditional direct lenders? Finding them could be as simple as asking a real estate agent or an industry friend (like another local landlord or house flipper) for a recommendation.

Hard money lenders are also online and accessed through mortgage brokers. It’s always a good idea to find trusted reviews of a lender before signing.

Hard Money Loan Requirements

Hard money lenders are less concerned about your credit scores than traditional lenders are, though they may check your credit and verify your income. Instead, there are three basic hard money requirements:

A Valuable Asset

The investment firms and financing companies that grant hard money loans are mainly interested in the value of the investment itself. A hard money loan is based on the after-repair value of a property.

Experience

Hard money lenders may want to know that you’re capable of completing the renovations you’re envisioning for your rental property or house flip. Being able to provide a portfolio of previous work may help your cause.

A Large Down Payment

Typically, hard money lenders require a down payment of 20% to 35%.

Hard Money Loan Rates and Terms

Hard money loans come with higher interest rates and shorter terms than traditional mortgage loans. This can make them a higher risk for some borrowers.

•   Rates: Interest rates can range from 9.00% to 15.00%. This is higher than the typical 30-year fixed-rate mortgage.

•   Terms: In general, hard money loans come with short repayment periods. While most homebuyers choose a mortgage term of 30 years, hard money loans are often for six months to three years.

Recommended: How Inflation Affects Mortgage Interest Rates

Pros and Cons of Hard Money Loans

So what are the advantages and disadvantages of hard money loans? Let’s break it down in easy terms:

Hard Money Loan Alternatives

Hard money loans aren’t your only option if you want to start investing in real estate, though the condition of the property will be a factor, as will the size: Any multifamily property of five or more units requires commercial financing.

It’s important to consider every avenue and understand how it will affect your finances and the likelihood of getting an offer approved.

Traditional Mortgage

Properties that need significant repairs usually do not qualify for a conventional loan, but otherwise it could be possible to use a residential conventional loan for a property with up to four units if one unit will be owner occupied for at least a year.

The same is true for qualified borrowers of an FHA loan or VA loan.

Banks, credit unions, and mortgage companies also may offer commercial real estate loans to qualified borrowers.

Home Equity Loan or Cash-Out Refi

If you have significant equity in your home, you may be able to purchase an investment property by tapping your home equity with a home equity loan, home equity line of credit (HELOC), or cash-out refinance. Interest rates are typically lower than those for a personal loan, but your home serves as the collateral on the loan.

Personal Loan

Depending on the cost of the investment property, you may be able to cover the price with an unsecured personal loan — or a personal loan and cash reserves you may have.

Borrowers, depending on their credit score, may be able to secure financing for a lower rate than they’d get with a hard money loan.

A home improvement loan could also come in handy if you qualify.

The Takeaway

Hard money loans offer fast funding and don’t require a strong credit score, making them tempting for investment properties. But these loans — which are not available through traditional lenders — typically have high interest rates and short terms.

FAQ

What is a hard money loan example?

Borrowers often seek out hard money loans for real estate investments. They may be interested in renovating a property to rent out or they may want to do a quick upgrade or more extensive rehab, then flip the home for a profit.

What are typical terms for a hard money loan?

Hard money loans typically require a down payment of 20% to 35%, come with an interest rate of 9.00% to 15.00%, and must be paid off within six months to a few years. This makes them high risk for some borrowers, but the fast funding and de-emphasis on credit history can be appealing.

Do hard money lenders run your credit?

Some hard money lenders may check your credit and verify your income, but in general, they are not as concerned with your credit scores as a traditional lender is. Instead, they want to see a large down payment, a history with rental properties, and an asset worth investing in, which serves as collateral for the loan.

Photo credit: iStock/Prostock-Studio

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

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

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A mortgage loan officer, also called a mortgage loan originator, helps borrowers determine if they qualify for a home loan, and, if so, aids homebuyers in finding the right type of mortgage and best interest rate and terms for them.

Throughout the home-buying process, your mortgage loan officer will review your information, collect necessary documentation, and track important milestones leading up to closing.

Mortgage loan officers typically work for a specific bank, credit union, or mortgage company.

In this piece, we’ll discuss what a mortgage loan officer is and does, how to find a mortgage loan originator, the differences between a mortgage broker and a loan officer, and the qualifications of a mortgage loan officer.

What Is a Mortgage Loan Officer?

The mortgage loan process can be nerve-wracking, even if it’s not your first go-around.

A mortgage loan officer serves as a guide to home loans. This individual, sometimes licensed and certified, helps potential homebuyers determine if they qualify for a loan and, if so, which type of home loan is right for them.

A mortgage loan officer is a type of mortgage loan originator (MLO), a regulatory term. An MLO may also refer to a company that does mortgage originations, like a mortgage broker.

What Does a Mortgage Loan Officer Do?

A mortgage loan officer has two main responsibilities:

1.    Accept and review mortgage loan applications from prospective homebuyers

2.    Work with borrowers to determine loan terms, including interest rates

Of course, mortgage loan officers’ day-to-day duties include much more than these two tasks. In a given week, they might meet with potential borrowers to review their options and explain basic loan definitions, work with underwriters to process loan applications, coordinate with home appraisers to ensure a house is worth what a borrower is offering, and monitor important deadlines for various clients to ensure everything is moving along correctly ahead of closing.

Mortgage loan originators charge a fee for their services. Homebuyers can typically expect to pay this fee as part of their closing costs.

Recommended: How Inflation Affects Mortgage Interest Rates

How to Find a Mortgage Loan Originator

Do you need a mortgage loan officer for a home purchase or refinance? Here are some tips for finding a mortgage lender and loan officer, whether you’re an experienced or first-time homebuyer.

Reading Reviews

Reading about other borrowers’ experiences with particular loan officers and lenders can help weed out the ones you should avoid. Sites like the Better Business Bureau are good resources for customer reviews.

Asking Family and Friends

Online reviews aren’t your only source for feedback. You can talk with friends and family who have recently purchased a home to see if they would recommend their loan officer. If you belong to special groups on social media, like a neighborhood group, you can survey a larger group for recommendations for a mortgage loan originator near you.

Talking with Your Real Estate Agent

Real estate agents work closely with a wide range of loan officers. Your agent may be able to recommend a mortgage loan officer with a good reputation.

Shopping Around

Whether you’re interested in a local bank or an online lender, you have multiple options available. Researching multiple lenders online can help give you an idea of the right mortgage loan originator for you.

Interviewing Multiple Mortgage Loan Officers

When you have narrowed down your list, it’s a good idea to interview a few mortgage loan officers. If you let them know that you’re considering multiple options, they may even feel incentivized to offer you a better deal.

Checking Their License

In some cases, mortgage loan officers must receive formal education, register with the government, pass a licensing test, and take continuing education classes to maintain their license.

You can check a license number through the Nationwide Multistate Licensing System & Registry (NMLS) consumer access site.

Mortgage loan officers at covered financial institutions (those that are highly regulated) are not required to be licensed; they only need to be registered.

Mortgage Broker vs. Direct Lender

If you’re thinking about mortgage shopping, you’ll want to understand the difference between a mortgage broker vs. a direct lender.

A loan officer typically works for a specific bank or lender and can thus only offer you loan options from that institution. At bigger banks, you may only be able to access their loan options through their own mortgage loan officers. Working directly with a loan officer may yield discounts on closing costs or access to better rates.

A mortgage broker, on the other hand, does not directly lend you money. Instead, for a fee, brokers shop around to find you the best deal given your financial situation (credit score, down payment, income, etc.).

Because brokers aren’t tied to a specific lender, they might be able to find you a better deal. But brokers do not have access to every lender, so you still might be missing out on the best deal available.

The fees charged by mortgage brokers may be higher than those charged by direct lenders. If you’re deciding whether to work with a broker or direct lender, ask about all the fees associated with loan generation.

Recommended: Can You Roll Closing Costs Into Home Loans?

What Are the Qualifications to Become a Mortgage Loan Originator?

MLOs may follow multiple career paths, each of which may require different levels of education and licensure.

Education

At a minimum, MLOs need to be at least 18 years old with a GED. Many officers at least obtain a bachelor’s degree, often in business, finance, or mathematics.

License vs. Registration

If you wish to work independently, for a broker, or for a nonbank, you must obtain licensure. A license is also a value proposition to potential homebuyers: It tells them that you have passed a difficult test and commit to continuing education.

If you work for a “covered financial institution,” you will not be required to obtain a license. You’ll simply need to register every year. The financial institution that employs you will likely coordinate this.

To earn your MLO license, you will need to:

•   Complete 20 hours of courses, as required by the NMLS.

•   Take and pass a state license test.

•   Pass the SAFE MLO test. (SAFE stands for the Secure and Fair Enforcement Act, which established guidelines for MLOs after the subprime mortgage debacle, which contributed to the global financial crisis in 2008.)

•   Keep up with NMLS requirements, including registration and continuing education.

Characteristics

Beyond the registration or license, a good mortgage loan officer will typically need the following qualities:

•   Good with numbers

•   Interpersonal skills

•   Strong decision-making and organization

•   An eye for detail

The Takeaway

A mortgage loan officer helps potential homebuyers find a fitting mortgage, apply for the loan, and meet deadlines. You can interview several mortgage loan originators to see what they offer.

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

FAQ

What are the job responsibilities of a mortgage loan officer?

A mortgage loan officer reviews mortgage loan applications and determines which loans and rates to offer potential homebuyers. The officer works with underwriting on loan approval, then helps the homebuyer through the process until closing.

What is the difference between a loan officer and mortgage broker?

A loan officer, aka mortgage loan originator, typically works for a lender and has access to the best deals of that particular lender. A mortgage broker helps homebuyers shop for the best deal, though they don’t have access to every possible loan.

How do you find a mortgage lender?

To find a mortgage lender, it’s a good idea to read online reviews, ask friends and family for recommendations, talk to your real estate agent about a referral, and shop around online.

Photo credit: iStock/Paperkites

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

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

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