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A low-income home loan is designed to make it possible for borrowers with lower income levels to meet their goals of homeownership. Typically, low-income mortgage programs help borrowers overcome a variety of barriers. Alongside those with a low income, these programs can help if someone has a poor credit score, large amount of debt, or a small down payment.

This guide takes a closer look at such details as:

•   How home loans for low-income borrowers work

•   Examples of these programs

•   How to buy a home when someone has a low income.

What Is a Low-Income Home Loan?

When it comes to home loans with low income requirements, these programs tend to have more relaxed income, credit, and down payment requirements than conventional loans. Other advantages of these programs can include lower interest rates, discounted mortgage insurance, and reduced closing costs.

Many low-income loan programs actually have income limits that prohibit those with higher incomes from qualifying. These programs can make it much easier to qualify for a mortgage when someone has a lower income, but they do still need to be able to afford the cost of their monthly payments.

Some of these programs are specifically designed to help first-time homebuyers, and there can be grants, tax credits, and other types of assistance available to new homeowners.

An April 2024 SoFi survey of 500 would-be homeowners suggests that there is significant need for programs for low-income buyers, yet not enough people are aware of them: Respondents named home availability in their price range as their top concern, and one in five people (19%) said they were not at all optimistic that they would find a home in their budget within the next six months. Yet when asked about their awareness of financing options for buyers with lower incomes, there was widespread lack of knowledge, with one in eight buyers not aware of any of the programs.


💡 Quick Tip: SoFi Home Loans are available with flexible term options and down payments as low as 3%.*

Examples of Low-Income Home Loans

There are a few different types of home loans for low-income borrowers. Here are a few popular examples:

•   United States Department of Agriculture (USDA) loans. Even with a low income, it’s possible to qualify for a USDA loan if the borrower plans to buy a home in an eligible rural area. As a bonus, this program doesn’t require a down payment.

•   Federal Housing Administration (FHA) loans. These government-backed loans tend to come with lower credit score requirements than conventional loans and only require a 3.5% down payment, no matter what the buyer’s income level is.

•   Veterans Affairs (VA) loans. Active service members, veterans, and potentially surviving spouses can use a VA loan to buy a home without making a down payment.

How Do Low-Income Home Loans Work?

How low-income home loans work depend entirely on the specific loan program the borrower is applying to. For example, with FHA low-income home loans, borrowers must make a 3.5% down payment, but income levels don’t make borrowers ineligible for a loan.

VA loans on the other hand don’t require a down payment at all. It’s best for mortgage seekers to do careful research on each loan program to confirm if they qualify for a mortgage or not.


💡 Quick Tip: A VA loan can make home buying simple for qualified borrowers. Because the VA guarantees a portion of the loan, you could skip a down payment. Plus, you could qualify for lower interest rates, enjoy lower closing costs, and even bypass mortgage insurance.†

Pros and Cons of Low-Income Home Loans

Home loans for low-income families come with some unique advantages and disadvantages worth keeping in mind.

Pros of Low-Income Home Loans

First, consider the upsides:

•   Low to no down payment requirements

•   Easier to qualify for than conventional loans

•   Less strict credit score requirements

•   May have more favorable interest rates.

Cons of Low-Income Home Loans

Next, review the downsides of these loan programs:

•   May only work for specific applicants (like VA loans)

•   May require ongoing mortgage insurance

•   Can be harder to find low-income loan programs.

Are Low-Income Home Loans Worth It?

Low-income loan programs can be worth it if the math makes sense. It’s generally a good idea to shop around with different lenders to see which mortgage loan will be the most beneficial. It can be a good idea to compare different interest rates, mortgage insurance requirements, and fees to see which loan will cost the least.

Borrowers can research a variety of loan programs to see which may best suit their needs. For example, home loans for low-income single mothers, home loans for low-income seniors, or low-income home improvement loans are designed for different borrowers.

Steps for How to Buy a House With a Low Income

When a borrower has a low income, there are steps they can take to make buying a house easier.

•   Build one’s credit score. The higher someone’s credit score is, the easier it can be to qualify for a home loan. It’s a good idea for borrowers to check their credit score to see where they stand and if there are any mistakes on their credit report that might be harming their credit score. Consumers will want to consistently pay their bills on time if they want to help build their credit score before buying a home.

•   Pay off debt. Another technique that can help build a credit score is to pay off debt. This can be beneficial to one’s score, and the less debt someone has, the easier it can be to qualify for a home loan. Lenders take a borrower’s debt-to-income (DTI) ratio into account when deciding how much money to lend them and the lower this ratio is, the better.

•   Save for a larger down payment. The larger someone’s down payment is, the less money they need to borrow. When someone has a low income, it’s easier to qualify for smaller loans. Conventional wisdom may be that they will put down at least a 20% down payment, even if the low-income mortgage loan program doesn’t require that large of a down payment.

Recommended: What Is a HUD Home?

Low-Income Home Loan Tips

If someone is struggling to qualify for a low-income home loan, these are some steps they can take to make the process easier.

•   Find the right program. To start, finding a niche program designed to meet the applicant’s specific needs can help. For example, a single mother may want to look into low-income home loans for single mothers, as well as more general loan programs.

•   Use a cosigner. If someone’s credit score or income makes it challenging for them to qualify for a mortgage, they can apply with a cosigner who has the qualifications lenders are looking for. The cosigner needs to know they will be responsible for making payments if the main borrower defaults on the loan.

The Takeaway

While income is a major factor that mortgage loan lenders take into consideration, having a low income doesn’t need to disqualify someone from qualifying for a mortgage loan. There are low-income loan programs that can help consumers meet their goals of homeownership.

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

FAQ

Can I buy a house if I make $25k a year?

Whether or not someone can buy a house with only a $25,000 a year income depends on a few different factors. The overall cost of the house, their down payment amount, and the lender they choose to work with can all impact if their income will make it possible to qualify for a loan.

What’s the lowest score you can have to get a home loan?

Generally borrowers need to have a credit score of at least 620 to buy a home. All lenders and loan programs have different requirements though, so it’s worth researching the loan programs that work for each applicant’s credit score.

Is there an income limit for first-time homebuyers in California?

Some first-time homebuyer programs in California have income limits. These limits exist to stop buyers who have high-income from taking advantage of programs designed to support low-income buyers.

About the author

Jacqueline DeMarco

Jacqueline DeMarco is a freelance writer who specializes in financial topics. Her first job out of college was in the financial industry, and it was there she gained a passion for helping others understand tricky financial topics. Read full bio.

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

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

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

SOHL-Q324-107

The total number of homes for sale hit a record low in August 2023. That means home sellers may get several offers when they put their house on the market.

To help stand out from the pack, some buyers choose to write an offer letter. They may believe an offer letter could help personalize the negotiation and possibly make a connection with the seller. But writing an offer letter comes with potential risks buyers should be aware of.

Thinking about writing an offer letter? Read on to learn how to write an offer letter for a house, what to say in the letter, what to avoid, how long the letter should be, and the risks that may be involved.

What Is a House Offer Letter?

Offer letters have become more popular in recent years due to the high number of real estate bidding wars.

In an offer letter, a buyer, whether they’re a millennial homebuyer or any homebuyer, is trying to show the seller why they’re the ideal candidate for the house.

When writing a real estate offer letter, buyers often include certain details to help make a connection with the seller, such as:

•   Introductions. The potential buyer will want to say who they are, of course.

•   Contract details that might help. Buyers may want to briefly note that they’ve been pre-approved for a mortgage, are flexible with the closing date, or can otherwise meet the seller’s needs.

•   Compliments about the house. If there’s a well-tended garden or custom wall finishes, a buyer may want to note how much they like those things.

•   Points of connection. If a buyer noticed something in the house that could help them relate to the seller, like fishing gear in the garage or a piano in the living room, they might mention that they share those hobbies.

•   Explanation about their offer. A buyer could include the reason why they offered what they did for the house, but anyone who does this should be careful. Review it with your agent first to make sure you’re not saying something that might jeopardize the deal.

•   Thank them. Express gratitude to the seller for considering the offer.

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

How Does a House Offer Letter Work?

If a buyer does write an offer letter, it would typically be sent, along with the formal offer on the house, to the seller’s agent.

Recommended: How to Write a Letter of Explanation for a Mortgage

Is It Worth It to Write a Letter With a House Offer?

For that reason, your real estate agent may advise against writing an offer letter. Instead, they may suggest that you choose another strategy for making your offer on a house more attractive.

How Long Should a House Offer Letter Be?

What Should Not Be Included in a House Offer Letter

•   Overly saccharine statements. Sellers may get overwhelmed by buyers who are too profuse about their love for the property. Be complimentary, but don’t overdo it.

•   Letters that are too long. The seller doesn’t need to know everything you love about the house. Offer letters are more effective when they’re a page or less.

•   Too much personal detail. If you mention your partner or children, be aware that familial status is protected against discrimination under the Fair Housing Act. It’s wise not to share too much.

•   A picture of yourself or your family. This is another red flag. Race and gender, among other things, are protected against discrimination under the Fair Housing Act.

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

How Do You Write a Strong Offer Letter?

Then, when you sit down to write the letter, consider this: If you were having a conversation with your seller about the house, what would you want to tell them? Explain briefly why you love the home, and thank them for considering your offer. Keep the focus of the letter on the house, and avoid giving too many personal details. Use a friendly tone, and be genuine and sincere.

Keep the letter to one page or less.

Recommended: Guide on How to Save Money for a House

Tips for Buying a Home

Rather than an offer letter, you may want to consider one of the following strategies instead:

•   Submit a higher offer. Winning a bidding war often comes down to one factor: price. Offering a higher price for the house is an option to think about. You might also want to add an escalation clause, which can automatically increase your offer above other offers.

•   Offer all cash. That is, if you have the resources to do this. Data from Redfin suggests buyers who offer all-cash are two to four times more likely to be chosen.

•   Waive the financing contingency. Waiving this contingency could potentially increase your odds of winning the contract over other buyers, according to Redfin. Keep in mind, however, that waiving the financing contingency means you forfeit your earnest money if you can’t get financing before the contract deadlines.

And, finally, if you’re a first-time home buyer, you may want to look into first-time homebuyer programs that could be helpful to you in your quest to buy this particular home — or any home.

The Takeaway

Also, consider other options that might help improve your chances of becoming a homeowner. For instance, you may decide that offering a higher price on the house, getting preapproved for a mortgage, or being flexible about the closing date is a better way to go.

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

How do you write a strong offer on a house?

In addition to making a strong offer on a house, you can write an offer letter. To write a strong offer letter, focus on the property. Tell the seller why you love the home, and thank them for considering your offer. Use a friendly tone, be genuine and sincere, and keep the letter to one page or less.

How to write an offer letter for a house for sale by owner?

In a house that’s for sale by owner, you’re likely dealing directly with the seller. In that case, you can address the seller by name in the letter and tell them why you like the house. Also, if you know there’s something they’re looking for, like a quick transaction, you could indicate that you’re flexible with the closing date. And if you’re preapproved for a mortgage, you could mention that as well.

How do you write a good offer letter?

Be succinct, genuine, and sincere in your offer letter. Focus on the house and why you like it, and avoid giving personal details. Thank the owner for considering your offer.

Photo credit: iStock/Gorica Poturak

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

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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Annual percentage rate (APR) and annual percentage yield (APY) are finance terms that describe how interest accrues, but they don’t mean the same thing. APR represents the yearly borrowing cost of loans or lines of credit, while APY measures how much interest you could earn from savings or investments.

Understanding the difference between APR vs. APY can help you make more informed decisions about your money.

Understanding APR (Annual Percentage Rate)

Definition and Components

In relation to APR, an interest rate is the cost you pay to the lender to borrow on a loan or line of credit. It’s also expressed as a percentage.

APR is an annualized rate, meaning it measures the cost of borrowing yearly based on two factors:

•  Your interest rate

•  Fees

When thinking about APRs, you may wonder what a good interest rate on a loan is. The short answer is it’s probably the lowest rate you can get, based on your credit score and other qualifications. That rate will also vary depending on economic and global forces (for example, rates were slashed during the COVID pandemic to stimulate borrowing).

Fees included in APR can vary by loan type and lender. A personal loan, for instance, may have an origination fee while a mortgage loan may include discount points, which are fees you pay to buy down your interest rate. If there are no fees involved, there’s no difference between the APR vs. interest rate.

How APR Is Calculated

APR = [((Interest charges + fees) ÷ Loan principal amount) ÷ Number of days in loan term x 365] x 100

You may also see it simplified this way:

APR = (Periodic interest rate x 365) x 100

In the second formula, the periodic interest rate represents the sum of the interest and fees divided by the loan amount, which is then divided by the number of days in the loan term.

Here’s an example of how to calculate APR for a $10,000 loan, assuming a 12% interest rate, a 2% origination fee, and a four-year term.

•  First, calculate simple interest on the loan by multiplying the loan principal by the interest rate by the loan term: $10,000 x 0.12 x 4 = $4,800

•  Next, calculate the origination fee ($10,000 x 0.02), and add it to the interest charges: $4,800 + $200 = $5,000

•  Divide this sum by the principal: $5,000 / $10,000 = 0.5

•  Divide the result by the number of days in the loan term, then multiply by 365: 0.5 / 1,460 x 365 = 0.125

•  Multiply the result by 100 to get the APR: 0.125 x 100 = 12.5%

That’s quite a bit of work, but you can do it if you have all the numbers. If you’d like to make calculating APR easier, you can use an online calculator instead.

Understanding APY (Annual Percentage Yield)

Definition and Purpose

When you’re saving money, the APY tells you how much your money may grow. The higher the APY, the more interest you could earn on your savings over time.

Calculation Method for APY

APY = 100 [(1 + Interest/Principal)(365/Days in term) − 1]

You may also see this simplified as in a formula with r representing the nominal rate offered by the institution, while n is how often the interest compounds:

APY = (1 + r/n)ⁿ – 1

The frequency of compounding matters for APY calculations. Compounding happens when you earn interest on your interest and it gets added to the principal, which can help accelerate your money making you money. Say, for example, you deposit $10,000 into a CD with a 5% interest rate. The CD has a 12-month term.

If interest compounds…

•  Annually, the APY would be 5.00% and you’d end up with $10,500 at the end of the CD term.

•  Monthly, your APY works out to 5.116% and you’d have $10,511.62 when the CD matures.

•  Daily, the APY is 5.127% and your savings would grow to $10,512.67.

Is there a huge difference in the numbers? Not really. But these examples show how a frequency shift can affect your money’s growth potential. When you are talking about money that is on deposit for years or decades, the frequency of compounding interest on savings accounts can have a more significant impact.

If you don’t have time to do the math yourself, you can use an APY calculator to run the numbers.

Key Differences Between APR and APY

When APR Is Used

Loan Products

•  Mortgage loans, including home equity loans or reverse mortgages

•  Auto loans

•  Personal loans

•  Small business loans

•  Student loans

•  Personal and business lines of credit

One thing to note is that loan APRs may be fixed or variable. A fixed-rate APR means your loan rate won’t change. Variable APR loans, on the other hand, have rates that are attached to an underlying benchmark or index and will vary along with its fluctuations.

If the benchmark rate increases or decreases, your loan APR can also shift. That means your loan rate (and consequently your monthly payment) can change over time. An example of how benchmark rates can fluctuate over time: The highest Fed fund rate was 20% in March 1980 and the lowest was 0.00 to 0.25% from December 2008 to December of 2015 and again during phases of the Covid pandemic.

Credit Cards

•  Purchase APR, which applies to purchases you charge to your card

•  Balance transfer APR, if your card accepts balance transfers

•  Cash advance APR, if your card allows you to withdraw cash from your credit limit

•  Penalty APR, which may apply if you violate the terms of your card agreement

If your card has multiple APRs for different transaction types, they might all be different. For example, your purchase APR might be 19.99% while your cash advance APR could be 29.99%.

Credit card companies may offer low introductory APRs to entice you to open an account. For example, you might be offered a 0% APR on purchases and balance transfers for the first 12 months or a somewhat longer period.

Introductory offers can save money on interest, but it’s important to know when the promotional rate expires, which charges it applies to, and what the regular APR will be. Also, keep in mind that credit card APRs are most often variable and your credit card company can change your rate at any time as long as they give you proper notice first.

When APY Is Used

Savings Accounts

•  Traditional savings accounts

•  High-yield savings accounts

•  Money market savings accounts

•  Certificate of deposit, or CD, accounts

Each of these types of savings accounts can earn interest, though it’s up to banks to determine what APY to offer.

Except for most CDs (which are likely fixed-rate), savings account rates are subject to change. So the APY you earn on day one after opening your account may be higher or lower than the APY you earn on day 100 or 1,000. With CDs, your APY is usually locked in for a set period until the CD matures.

Investment Products

•  Annuities are insurance contracts that you purchase for a premium and receive payments from later on. These investment vehicles are designed to provide you with supplemental income in retirement. Fixed annuities can offer what is called either a payout rate or APY rate, which is likely similar to what you’d get with a CD, allowing for predictable growth.

•  Brokered CDs work like regular bank CDs, with a twist. You buy them through a brokerage, and they can offer potentially higher rates of return. For example, a 12-month bank CD might have a 4.50% APY while a 12-month brokered CD might offer 5.25% instead. That’s typically because they reflect a more competitive market, with the broker having invested a larger sum in CDs that earns a higher APY, which they then pass along to those who buy smaller increments.

•  Cash management accounts are another option. These are checking accounts offered at brokerages that can earn interest like a savings account. Some cash management accounts offer an APY that’s comparable with the top high-yield savings account rates.

Impact on Financial Decisions

For example, say that you’re planning to buy a new car. You have $20,000 in a high-yield savings account that’s earning a 4.50% APY compounded monthly. You’re thinking about buying a car for $20,000 and you’ve been preapproved for a three-year car loan at 7%.

You’re debating whether to finance the whole amount, use half of your savings for a down payment and finance the rest, or use all your savings to buy the car outright. Here, it would help to know:

•  How much interest you’d pay on the loan in each scenario

•  How much interest you’d earn on your savings in each scenario

For example, take a look at how these scenarios could play out:

1.   Say you use all your savings to buy a car. You won’t pay any interest since you won’t have a car loan. However, you won’t earn any interest either since your savings balance is $0.

2.   What if you go half and half? Assuming you take the full three years to pay off the loan, you’d pay around $1,116 in interest. If you don’t add anything to the $10,000 you have left in savings and you maintain the same 4.50% APY over the three years, by calculating savings account interest, you’d see that you’d earn about $1,442. By doing the math of $1,445 minus $1,116, you’d come out $329 richer.

3.   If you keep your savings in the bank and finance the whole amount (in reality, you’d likely need to make a down payment, however), you’d pay $2,232 in interest on the loan and earn $2,885 on your savings. So you would net $653.

These examples assume you don’t refinance your car loan at any point or add anything to savings, and that your savings APY stays the same. But they offer insight into how APR and APY affect you financially.

Recommended: How to Write a Check

The Takeaway

If you’re looking for a home for your savings where your money can grow, see what SoFi offers.

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.

FAQs

Which is typically higher, APR or APY?

APR tends to be higher if you’re comparing loans or credit card rates to savings account rates. As of late 2024, it’s common to find credit cards with APRs in the 20% or higher range but high-yield savings account APYs are typically in the 4.00% to 5.00% range.

Why do banks use APY for savings accounts and APR for loans?

Banks use APY for savings accounts and APR for loans because they measure two different things. When you open a savings account, the bank pays interest to you. The APY tells you how much you could earn per year, with compounding taken into effect. When you get a loan or line of credit, you pay interest to the bank. The APR tells you how much the bank charges for you to borrow, with fees included.

How does compound interest affect APY?

Compounding affects APY based on frequency. The more often interest accrues and gets added to the principal (say, weekly vs. monthly), the more interest you can earn over time, and the higher the APY will be. Using an online calculator can give you an idea of how much interest you could earn from a savings account.

About the author

Rebecca Lake

Rebecca Lake has been a finance writer for nearly a decade, specializing in personal finance, investing, and small business. She is a contributor at Forbes Advisor, SmartAsset, Investopedia, The Balance, MyBankTracker, MoneyRates and CreditCards.com. Read full bio.

SoFi Checking and Savings is offered through SoFi Bank, N.A. Member FDIC. The SoFi® Bank Debit Mastercard® is issued by SoFi Bank, N.A., pursuant to license by Mastercard International Incorporated and can be used everywhere Mastercard is accepted. Mastercard is a registered trademark, and the circles design is a trademark of Mastercard International Incorporated.

Annual percentage yield (APY) is variable and subject to change at any time. Rates are current as of 12/23/25. There is no minimum balance requirement. Fees may reduce earnings. Additional rates and information can be found at https://www.sofi.com/legal/banking-rate-sheet

Eligible Direct Deposit means a recurring deposit of regular income to an account holder’s SoFi Checking or Savings account, including payroll, pension, or government benefit payments (e.g., Social Security), made by the account holder’s employer, payroll or benefits provider or government agency (“Eligible Direct Deposit”) via the Automated Clearing House (“ACH”) Network every 31 calendar days.

Although we do our best to recognize all Eligible Direct Deposits, a small number of employers, payroll providers, benefits providers, or government agencies do not designate payments as direct deposit. To ensure you're earning the APY for account holders with Eligible Direct Deposit, we encourage you to check your APY Details page the day after your Eligible Direct Deposit posts to your SoFi account. If your APY is not showing as the APY for account holders with Eligible Direct Deposit, contact us at 855-456-7634 with the details of your Eligible Direct Deposit. As long as SoFi Bank can validate those details, you will start earning the APY for account holders with Eligible Direct Deposit from the date you contact SoFi for the next 31 calendar days. You will also be eligible for the APY for account holders with Eligible Direct Deposit on future Eligible Direct Deposits, as long as SoFi Bank can validate them.

Deposits that are not from an employer, payroll, or benefits provider or government agency, including but not limited to check deposits, peer-to-peer transfers (e.g., transfers from PayPal, Venmo, Wise, etc.), merchant transactions (e.g., transactions from PayPal, Stripe, Square, etc.), and bank ACH funds transfers and wire transfers from external accounts, or are non-recurring in nature (e.g., IRS tax refunds), do not constitute Eligible Direct Deposit activity. There is no minimum Eligible Direct Deposit amount required to qualify for the stated interest rate. SoFi Bank shall, in its sole discretion, assess each account holder's Eligible Direct Deposit activity to determine the applicability of rates and may request additional documentation for verification of eligibility.

See additional details at https://www.sofi.com/legal/banking-rate-sheet.
*Awards or rankings from NerdWallet are not indicative of future success or results. This award and its ratings are independently determined and awarded by their respective publications.

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.

This content is provided for informational and educational purposes only and should not be construed as financial advice.

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Regional banks are midsized financial institutions that typically serve a certain geographical area, such as a state or a particular region of the country. They occupy a middle ground between smaller community banks and large national banks and can offer a personalized approach, as well as a relatively large number of financial products and services.

While regional banks may not have a national footprint, they can offer a number of benefits that can make them an appealing option for both individuals and businesses, though they may not always have the services customers are looking for. Here are key things to know about regional banks.

What Is a Regional Bank?

As defined by the Federal Reserve, regional banks are those that have between $10 billion and $100 billion in total assets. This makes them larger than community banks, which have assets under $10 billion, but smaller than national banks, which can have assets in the trillions.

Regional banks typically operate within a specific geographic region, which might be one or two states, several states, or a defined area like the Midwest or East Coast. For example, Prosperity Bank, headquartered in Houston, serves customers in two states (Texas and Oklahoma), while Zions Bank, based in Salt Lake City, serves what is known as the Intermountain West.

Unlike national banks, which often have a presence across the entire country, regional banks tend to focus on serving customers in their designated region or regions. They typically offer a variety of financial services, including checking accounts, savings accounts, personal and business loans, and sometimes investment products, and often serve as an important financial resource for local companies and industries.

Recommended: APY Calculator

Characteristics of Regional Banks

Regional banks have some distinct features that separate them from other types of banks:

•   Geographic focus: Regional banks often limit their operations to a specific geographic area. They may have branches across multiple states but generally do not extend their reach nationwide.

•   Asset size: Regional banks hold more assets than community banks but less than national and international banks, usually ranging from a few billion to one hundred billion dollars.

•   Range of services: Regional banks offer a broad array of financial services, including checking and savings accounts, loans, mortgages, credit cards, and business banking services. They may also provide investment products, though these offerings are usually not as extensive as those of larger banks.

•   Local expertise: Regional banks tend to have a strong understanding of the economic conditions and needs of the areas they serve. This allows them to offer financial solutions tailored to local businesses and customers.

•   Moderate branch networks: While regional banks have more branches than small community banks, their networks are usually less extensive than those of large national banks, averaging around 100. However, online and mobile banking allow customers to access their accounts from any location.

How They Differ From National and Community Banks

Banks generally fall into three size categories — community, regional, and national. While all three offer many of the same services, there are some key differences between them.

•   Community banks are the smallest, with assets under $10 billion. They are typically chartered at the state (rather than the national) level. These banks focus on serving local communities and have a limited geographic footprint compared to regional and national banks. In addition, their product offerings may be less extensive and digital banking capabilities might not be as advanced as larger banks. However, community banks are known for their strong commitment to customer service and local engagement.

•   Regional banks are larger than community banks, usually with between $10 billion and $100 billion in assets, and offer a broader array of products and services. They typically operate in multiple states but generally don’t have a national presence. Regional banks may be chartered at the state or federal level, depending on their size and operations.

•   National banks operate under a federal charter regulated by the Office of the Comptroller of the Currency and are generally the largest banks in the U.S. These financial institutions usually have more than $100 billion in assets. They typically have extensive networks of branches across the country and offer a wide range of services, enabling them to meet the diverse needs of individuals, businesses, and institutions. National banks tend to be well-known names like JPMorgan Chase, Wells Fargo, and Bank of America.

Recommended: How to Combine Bank Accounts

The Role of Regional Banks in the Financial System

Regional banks play a key role in the financial system by bridging the gap between community banks and large national institutions. They may provide a level of customized service that is often missing from big banks. At the same time, they offer a diverse range of financial products to meet the needs of individuals and businesses located within their region.

Crucially, regional banks often bring banking services to small towns and rural areas where larger financial institutions might not operate.

Services Offered by Regional Banks

Regional banks typically provide a variety of financial services for consumers and businesses and enable you to have multiple bank accounts under one roof. Here are some of products and services you can often find a regional bank:

•   Checking accounts

•   Savings accounts

•   Money market accounts

•   Credit cards

•   Personal loans/credit lines

•   Auto loans

•   Mortgages

•   Home equity loans

•   Business banking

•   Commercial loans

•   Individual retirement accounts (IRAs)

•   Taxable brokerage accounts

As you see, regional banks can offer a wide variety of financial products and services.

Advantages of Regional Banks

Regional banks can offer several benefits to their customers. Here are some to consider:

•   Local expertise: Regional banks tend to have a strong understanding of the economic conditions and financial needs of their communities. This local knowledge can allow them to make more informed lending decisions and offer products that are well-suited to the area.

•   Personalized service: Whether you need help opening a bank account or applying for a mortgage, regional banks often provide a level of personalized service that larger banks may lack. Customers can often build relationships with their bankers, who understand their financial history and needs.

•   Competitive rates: Regional banks may offer more favorable interest rates on loans and savings accounts to compete with national banks.

•   Digital and mobile banking: Like larger banks, regional banks typically provide digital and mobile banking options, allowing customers to manage their accounts, make payments, and transfer money between banks.

•   Support for local businesses: Regional banks can play a crucial role in financing small and mid-sized businesses, which are essential for local economic growth. They often provide loans, credit lines, and other financial services to help businesses expand and create jobs.

•   Community involvement: Many regional banks actively support local communities by sponsoring events, donating to charities, or offering financial education programs. This community involvement can help strengthen the bank’s relationship with its customers.

•   FDIC insurance: Regional banks can benefit from the same Federal Deposit Insurance Corporation (FDIC) insurance that protects cash deposits at larger banks. This means your money is insured up to $250,000 per depositor, per account category, per insured institution in the very rare event of bank failure.

Recommended: Does Switching Banks Affect Your Credit Score?

Challenges Faced by Regional Banks

Despite their advantages, regional banks also face several challenges:

•   Competition from national and online banks: Regional banks often compete with larger national banks that have more resources, larger branch networks, and a broader range of services. In addition, online banks are often able to offer better rates and fees, as well as more sophisticated digital banking options. This competition can make it difficult for regional banks to attract and retain customers.

•   Limited reach: Regional banks often only serve a specific geographic area. This can be limiting for people who travel often, have multiple residences, or are relocating (which could lead to someone closing a bank account at a regional institution).

•   Regulatory pressure: Due to the surprising recent failures of three regional banks (Silicon Valley Bank, Signature Bank, and First Republic Bank), U.S. bank regulators have stepped up their scrutiny and financial oversight of regional banks to help ensure that failures don’t happen again in the future. These occurrences are quite rare, and the government keeps a watchful eye to ensure the stability of U.S. banks.

•   Technological advances: As digital banking continues to grow, regional banks may struggle to keep up with the technological innovations of larger banks and fintech companies. Limited resources can make it difficult to invest in advanced digital platforms and services.

•   Economic vulnerability: Because they focus on specific regions, regional banks may be more vulnerable to economic downturns or sector-specific challenges within their service area. This can impact their financial stability. However, as noted, regional banks insured by the FDIC are safe places to keep your money up to the insurance limits.

The Impact of Regional Banks on Local Economies

Regional banks offer loans and credit to small and midsize businesses, helping to fuel local economic growth and job creation. In fact, regional banks serve as the source of nearly one-third of small business bank lending in the U.S, according to the Bank Policy Institute.

Many regional banks also reinvest in the communities they serve, whether through charitable donations, sponsorship of local events, or support for community development projects. This involvement helps strengthen local economies and fosters a sense of community that can help attract and retain both businesses and residents.

The Takeaway

Regional banks play an important role in the banking industry. They offer many, if not most, of the products and services you might find at a national bank but can provide a more personalized experience due to their midsize scale.

That said, regional banks may not offer every financial product or service you need. They also have smaller footprints than national banks, making them less practical if you travel frequently or may need to relocate in the near future.

If you’re considering opening a new bank account, also see what online banks offer.

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 large is a typical regional bank?

Regional banks are banks with $10 billion to $100 billion in assets, typically making them larger than community banks but smaller than national banks. Regional banks usually operate within a defined geographic area, covering multiple states or a particular region of the country. They may offer more products and services than a community bank but generally not as many as you would find at a national bank.

Are regional banks FDIC-insured?

Yes, regional banks are typically insured by the Federal Deposit Insurance Corporation (FDIC). This means your deposits are protected up to the legal limit, which is $250,000 per account owner (co-owners of joint accounts are each insured up to $250,000), per account category, per insured institution. If you have money in an FDIC-insured bank account and the bank fails (a very rare occurrence), the agency reimburses you for any losses you incur, up to the insured limit.

Can I use a regional bank if I move out of the area?

Yes, you can generally still use a regional bank if you move out of the area. Regional banks typically offer online and mobile banking services, allowing you to manage your accounts and make payments from any location. However, access to physical branches may be limited or unavailable outside the bank’s primary service area. If in-person banking is important to you, it might be challenging to continue using a regional bank after moving out of the area.

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.

SoFi Checking and Savings is offered through SoFi Bank, N.A. Member FDIC. The SoFi® Bank Debit Mastercard® is issued by SoFi Bank, N.A., pursuant to license by Mastercard International Incorporated and can be used everywhere Mastercard is accepted. Mastercard is a registered trademark, and the circles design is a trademark of Mastercard International Incorporated.

Annual percentage yield (APY) is variable and subject to change at any time. Rates are current as of 12/23/25. There is no minimum balance requirement. Fees may reduce earnings. Additional rates and information can be found at https://www.sofi.com/legal/banking-rate-sheet

Eligible Direct Deposit means a recurring deposit of regular income to an account holder’s SoFi Checking or Savings account, including payroll, pension, or government benefit payments (e.g., Social Security), made by the account holder’s employer, payroll or benefits provider or government agency (“Eligible Direct Deposit”) via the Automated Clearing House (“ACH”) Network every 31 calendar days.

Although we do our best to recognize all Eligible Direct Deposits, a small number of employers, payroll providers, benefits providers, or government agencies do not designate payments as direct deposit. To ensure you're earning the APY for account holders with Eligible Direct Deposit, we encourage you to check your APY Details page the day after your Eligible Direct Deposit posts to your SoFi account. If your APY is not showing as the APY for account holders with Eligible Direct Deposit, contact us at 855-456-7634 with the details of your Eligible Direct Deposit. As long as SoFi Bank can validate those details, you will start earning the APY for account holders with Eligible Direct Deposit from the date you contact SoFi for the next 31 calendar days. You will also be eligible for the APY for account holders with Eligible Direct Deposit on future Eligible Direct Deposits, as long as SoFi Bank can validate them.

Deposits that are not from an employer, payroll, or benefits provider or government agency, including but not limited to check deposits, peer-to-peer transfers (e.g., transfers from PayPal, Venmo, Wise, etc.), merchant transactions (e.g., transactions from PayPal, Stripe, Square, etc.), and bank ACH funds transfers and wire transfers from external accounts, or are non-recurring in nature (e.g., IRS tax refunds), do not constitute Eligible Direct Deposit activity. There is no minimum Eligible Direct Deposit amount required to qualify for the stated interest rate. SoFi Bank shall, in its sole discretion, assess each account holder's Eligible Direct Deposit activity to determine the applicability of rates and may request additional documentation for verification of eligibility.

See additional details at https://www.sofi.com/legal/banking-rate-sheet.
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SOBNK-Q424-012

Budgeting on a fixed income can involve carefully reviewing your income and expenses and managing spending to stretch your dollars.

Typically, older adults are the ones living on a fixed income, meaning they receive Social Security payments and/or a pension or rely on retirement savings. They generally receive the same amount each month, though payments may fluctuate slightly due to benefit adjustments or other changes. If you’re living on a fixed income, budgeting can help you avoid overspending and prepare for unexpected expenses. Here are smart strategies to consider.

Understanding Fixed Income Budgeting

Living on a fixed income means you know exactly how much money you’re bringing in each month. While your income may be predictable, expenses can be unexpected. You might need, say, a roof repair or want to help with a grandchild’s summer camp costs one year. That’s why a budget for seniors on fixed income can be so important.

Creating a budget will give you a comprehensive understanding of the money you have coming in and going out of your checking account. You can track your spending, set aside money for emergencies, and monitor your monthly bills.

You might also identify areas where you can cut back to cover an unforeseen expense or keep up with inflation.

Assessing Your Financial Situation

Making a budget allows you to assess your financial situation. Along with tracking your income, you’ll want to make a record of all your expenses.

This component of your budget might include:

•  Housing costs (rent or mortgage)

•  Utilities

•  House, car, and health insurance

•  Medical costs

•  Transportation

•  Groceries and dining out

•  Debt payments

•  Subscriptions and services

•  Clothing

•  Travel

•  Savings

•  Gifts and charitable donations

Some of these expenses may fall into the essential category (housing, food, and health insurance, for example), while others may be considered discretionary (such as clothing and travel). If you’ve found yourself financially overextended, consider whether there are any areas where you could cut back.

You might also explore specific types of budgeting methods, such as the 50/30/20 approach to budgeting. This strategy involves allocating 50% of your after-tax income to needs, 30% to wants, and the remaining 20% to savings or additional debt payments.

To help you with this budgeting technique or another one, you could use a spreadsheet, work with an online calculator, download a budgeting app, or create your own budget planner to track your expenses.

Recommended: 50/30/20 Budget Calculator

Creating a Detailed Income Statement

An important step in this budgeting process is delving into your monthly income. Your sources of fixed income could include:

•  Social Security benefits (you may sometimes hear this referred to as OASDI, or Old-Age, Survivors, and Disability Insurance payments)

•  Supplemental Security Income

•  Pension benefits

•  Withdrawals from a 401(k) or 403(b) account

•  Withdrawals from a traditional or Roth IRA

•  Withdrawals from brokerage or other investment accounts

•  Interest and/or dividends from assets

•  Passive income from a rental property or another source

In addition, you may have some earnings from work you do, such as a seasonal or part-time job. Factor that in, too.

Take note of how your income might change, as well. A couple of points to consider:

•  Government benefits like Social Security, for example, undergo an annual cost-of-living adjustment. Also, if you are claiming Social Security benefits but are younger than full retirement age, you might also receive a lower benefit if you’re earning income above the yearly limit (in 2024, it was set at $22,320).

•  If you’re withdrawing money from investment accounts, the amount may fluctuate depending on the performance of the stock market. Although these changes are unpredictable, they’re worth tracking and recording in your budget plan so you can respond as needed.

One of the most common budgeting mistakes is not adjusting the cost of your expenses, so make sure to update your budget as you go. Rent, health insurance premiums, food costs, and more can shift, and it can be important to stay attuned to that.

Cutting Costs and Saving Money

About 40% of older Americans receive income solely from Social Security in retirement, and the average benefit is currently $1,784 per month. This amount can be challenging to live off of, especially when costs are rising due to inflation.

If you’re looking to reduce your spending, here are a few steps you can take:

•  Downsize your home: About half of seniors move into smaller homes after they retire. Downsizing could significantly decrease your housing costs and utility bills.

•  Reevaluate your transportation needs: If you’re spending a lot on car payments and insurance, consider whether you can switch to a less expensive vehicle or swap your car for public transportation.

•  Limit discretionary spending: Shopping, travel, eating out, and streaming services can add up. Review your discretionary expenses to see if you can limit your spending or cut out some costs entirely.

•  Seek out senior discounts: From groceries to movies to museums, find out if you can save with a senior discount. You may be pleasantly surprised to find that some discounts begin well before age 65.

•  Look for assistance programs: If you’re facing financial hardship, you might qualify for assistance. The government may help cover medical costs via Medicaid, for instance, while patient assistance programs can help out with prescription medications. The Supplemental Nutrition Assistance Program (SNAP) program offers assistance for groceries. This BenefitsCheckUp tool from the National Council on Aging can help you find other programs that offer assistance and benefits.

Building an Emergency Fund

After years of saving for retirement, you might think your savings days are behind you. However, having an emergency fund can be a crucial lifeline if you run into a big surprise expense, especially when you’re living on a fixed income.

Consider setting up a high-yield savings account and automating the deposit of a portion of your income into it each month. With a high-yield bank account, your savings will be accessible when you need to withdraw them and earn a competitive interest rate when you don’t.

Planning for the Future

Although you may be living on a fixed income, it’s wise to keep an eye on how your financial needs can shift. Those who are retired or semi-retired may want to consider the following:

•  Long-term financial planning: The specific amount of income you receive could rise or fall in the years ahead. Consider how adjustments to your cost of living might impact your Social Security benefits, for example, or how much longer you plan to work if you have a part-time job.

•  Healthcare considerations: If your expenses increase due to healthcare needs or other factors, consider whether you can take larger withdrawals from your retirement account or set up another income source. Investors may look into rebalancing their portfolios to ride out a volatile stock market.

•  Estate planning basics: Estate planning may also be top of mind as you get important documents in order and consider how your assets will be handled in future years. All of this planning can become complex, so you might consider working with a financial advisor.

The Takeaway

Budgeting on a fixed income can help you stabilize your finances and achieve peace of mind. By tracking your income and expenses, you’ll have a clear understanding of the money you have coming in and going out each month. You might also identify areas where you can cut costs, as well as monitor your progress toward building an emergency fund, paying off debt, or reaching another financial goal.

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 can I save money on a fixed income?

Learning how to make a budget can help you save money when living on a fixed income. You can use your budget to identify your recurring expenses and cut any non-essentials you find. You might also consider downsizing your home, swapping out your car for a less expensive vehicle or public transportation, and seeking out senior discounts and deals.

What if my fixed income doesn’t cover all my expenses?

If your fixed income doesn’t cover all your expenses, you can try reducing your spending, increasing your income, or both. You might also explore assistance programs from the federal government, your state, or a local organization.

Are there government assistance programs for fixed income individuals?

There are government assistance programs for fixed income individuals on both the federal and state level. The Supplemental Security Income program provides payments to disabled, blind, or elderly individuals, for example, while the Low Income Home Energy Assistance Program (LIHEAP) can help low-income individuals pay for heating and cooling their homes. The SNAP program offers grocery assistance to low-income individuals.

Photo credit: iStock/Ridofranz

SoFi Checking and Savings is offered through SoFi Bank, N.A. Member FDIC. The SoFi® Bank Debit Mastercard® is issued by SoFi Bank, N.A., pursuant to license by Mastercard International Incorporated and can be used everywhere Mastercard is accepted. Mastercard is a registered trademark, and the circles design is a trademark of Mastercard International Incorporated.

Annual percentage yield (APY) is variable and subject to change at any time. Rates are current as of 12/23/25. There is no minimum balance requirement. Fees may reduce earnings. Additional rates and information can be found at https://www.sofi.com/legal/banking-rate-sheet

Eligible Direct Deposit means a recurring deposit of regular income to an account holder’s SoFi Checking or Savings account, including payroll, pension, or government benefit payments (e.g., Social Security), made by the account holder’s employer, payroll or benefits provider or government agency (“Eligible Direct Deposit”) via the Automated Clearing House (“ACH”) Network every 31 calendar days.

Although we do our best to recognize all Eligible Direct Deposits, a small number of employers, payroll providers, benefits providers, or government agencies do not designate payments as direct deposit. To ensure you're earning the APY for account holders with Eligible Direct Deposit, we encourage you to check your APY Details page the day after your Eligible Direct Deposit posts to your SoFi account. If your APY is not showing as the APY for account holders with Eligible Direct Deposit, contact us at 855-456-7634 with the details of your Eligible Direct Deposit. As long as SoFi Bank can validate those details, you will start earning the APY for account holders with Eligible Direct Deposit from the date you contact SoFi for the next 31 calendar days. You will also be eligible for the APY for account holders with Eligible Direct Deposit on future Eligible Direct Deposits, as long as SoFi Bank can validate them.

Deposits that are not from an employer, payroll, or benefits provider or government agency, including but not limited to check deposits, peer-to-peer transfers (e.g., transfers from PayPal, Venmo, Wise, etc.), merchant transactions (e.g., transactions from PayPal, Stripe, Square, etc.), and bank ACH funds transfers and wire transfers from external accounts, or are non-recurring in nature (e.g., IRS tax refunds), do not constitute Eligible Direct Deposit activity. There is no minimum Eligible Direct Deposit amount required to qualify for the stated interest rate. SoFi Bank shall, in its sole discretion, assess each account holder's Eligible Direct Deposit activity to determine the applicability of rates and may request additional documentation for verification of eligibility.

See additional details at https://www.sofi.com/legal/banking-rate-sheet.
*Awards or rankings from NerdWallet are not indicative of future success or results. This award and its ratings are independently determined and awarded by their respective publications.

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