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It’s no secret that the price tags of single-family homes — the ideal dwelling in terms of space, independence, and resale value — have spiked, and many current homeowners have been reluctant to let go, but a buyer whose heart is set on a single-family home may be able to follow a playbook to find their prize.

Buying a single-family home isn’t dramatically different from purchasing another type of property, but the process has a few variations. Here are some guidelines.

What Is a Single-Family Home?

The definition would seem easy enough, but it does vary according to real estate experts and government sources. The U.S. Census Bureau says single-family homes include fully detached and semi-detached homes, row houses, duplexes, quadruplexes, and townhouses. Each unit has a separate heating system and meter for public utilities, and has no units above or below.

According to other definitions of a single-family home, the building has no shared walls; it stands alone on its own parcel of land. In some places, the number of kitchens the home has informs the definition.

Unlike a multi-family property, a single-family home is meant for one person or household. Among the types of houses out there, including condos, co-ops, townhouses, and manufactured homes, the single-family home remains the holy grail for many Americans.

💡 Quick Tip: When house hunting, don’t forget to lock in your home mortgage loan rate so there are no surprises if your offer is accepted.

Benefits of Purchasing a Single-Family Home

While condos and townhouses may come with shared amenities and lower maintenance, traditional detached single-family homes come with different perks. When people buy a single-family home, they’re looking for benefits specific to this property type.

Spacious, Quiet, and Intimate

A single-family home is typically larger than a condo or townhome. Moreover, since the property is often on its own lot without shared walls, a single-family home offers more space and more privacy inside and outside the home.

Possibly No HOA

A co-op association or a condo or townhouse homeowners association sets and enforces rules and collects fees to pay for shared amenities. Anyone who buys into an HOA community must live by the CC&Rs: the covenants, conditions, and restrictions. They can be lengthy, and the ongoing fees can constantly rise.

You may be able to buy a detached single-family home with no HOA and paint your mailbox, or house, pink or purple — unless you live in a city like Palm Coast, Florida, that allows only earth tones and light or pastel hues but no colors that are deemed “loud, clashing, or garish.”

Then again, HOAs are becoming more common for detached single-family homes in planned communities. In fact, about 65% of single-family homes built in 2020 were in an HOA, Census Bureau data shows.

Single-Family Home Appreciation

Generally, single-family homes are in higher demand than multi-family or other properties. Because of both the building and demand, when a person buys a single-family home, the value may increase faster.

Possibilities for Renovation and Expansion

When people buy single-family homes, they’re buying into the potential to expand or renovate extensively. If the lot is big enough, single-family homeowners could put an addition on the property.

Single-family homes can be an attractive buy simply because of the option to expand in the future, unlike properties with shared lots or walls.


💡 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 to Buy a Single-Family Home

Ready to buy a single-family home? Anyone from a first-time buyer to a seasoned investor may find appeal in a single-family home.

Recommended: First-Time Homebuyers Guide

1. Draw Up Your Financial Priorities

First, it’s important to look at finances. Your credit scores can have a significant impact on getting approved for a mortgage. To get a clear read on credit, but not scores, buyers can request free credit reports from the three major credit bureaus.

Additionally, it can be helpful for a qualified first-time homebuyer — who can be anyone who has not owned a principal residence in three years, some single parents, and others — to look into specialty mortgages to see if they qualify for them.

A loan from the Federal Housing Administration (FHA) may allow a down payment as low as 3.5%. A USDA loan (from the United States Department of Agriculture) requires nothing down, and a VA loan (from the Department of Veterans Affairs) also usually requires nothing down. Some conventional lenders allow qualifying first-time buyers to put just 3% down.

It’s important to know, though, that all FHA loans require an upfront and annual mortgage insurance premium, regardless of the down payment size. VA loans require a one-time “funding fee.” And borrowers with conventional conforming loans who put down less than 20% will pay private mortgage insurance until their loan-to-value ratio drops to 80% and they request removal, or to 78%, when it falls off.

2. Decide on Your Preferred Type of Housing

No two houses are alike, just as no two homebuyers are. Everyone has different tastes and priorities about where they want to call home.

Before hitting every open house in town, consider deciding on must-haves for a single-family detached home, including privacy, proximity to businesses, size, and style. This could help determine if a single-family home is the right fit.

3. Arrive at Your Price Point

Armed with an understanding of the type of house, it’s time to think about the price point. In addition to thinking about the down payment, buyers will want to calculate a monthly mortgage payment and total loan costs.

Figuring out a price point before looking at homes can take the emotion out of the process. That way, buyers have a budget in mind and a “do not exceed” amount before they fall for a home.

4. Search for a Good Real Estate Agent

Buying a single-family home can be fun, stressful, and fast-paced. Working with a trusted real estate agent can make the process a little easier.

To find a real estate agent, you might consider:

•   Reaching out to friends for referrals

•   Checking out local real estate association websites

•   Using an agent selling homes in the area you want to buy in

You might want to interview more than one agent, asking about their experience, availability, and philosophy. The choice of agent will likely come down to a combination of personality match and experience.

5. Find Your Neighborhood

Armed with an agent and budget, it’s time to dive deeper into neighborhoods. Once again, the choice of where to search will come down to the buyer; there’s no one “right” place to buy a single-family home.

As buyers explore neighborhoods, they might prioritize the following:

•   School district

•   Walkability

•   Proximity to workplace

•   Community resources

•   Budget

An experienced agent can help buyers distill their priorities and even point them in the right direction. Typically, buyers will have to balance the above elements, as it might not be possible to check all the boxes in a single neighborhood.

6. Tour Homes With Your Agent

Once buyers decide what neighborhoods they want to buy a single-family home in, it’s time to start touring properties.

When touring a single-family home with an agent, try to allot between half an hour to an hour. In the case of open houses, prospective buyers can walk in at any time, but private home tours require a buyer’s agent to gain access to the property.

When buying a single-family home, everyone will have their own checklist of what they want, which might include:

•   Listing price

•   Number of bedrooms and bathrooms

•   Storage space

•   Floorplan

•   Plot of land

•   Deck and porch

•   Garage and driveway

It could help to take photos or notes while touring a home to refer to them long after you’ve left the property.

7. Choose a House and Bid

Found a place and ready to make an offer? Time to get a home loan in order. Luckily, buyers will have a good idea of what they can offer on a property based on their finances with the upfront legwork.

Your agent can help with negotiating a house price.

How to make an offer? It pays to understand comps and the temperature of the market, and then:

•   Figure out the offer price

•   Determine fees

•   Budget for an earnest money deposit

•   Craft contingencies

With an offer drawn up, it’s time to submit it to the seller and wait for the next steps.

8. Review the Process and Get Ready to Move

Buying a single-family home isn’t a done deal once an offer is submitted. Typically there will be a back and forth, perhaps over offer price or contingencies.

Once everything is agreed on, and the inspection is resolved, it’s time to tally moving expenses and pack up.

9. Head to Closing and Move Into Your New Property

The final part of buying a single-family home is closing day. During closing, the buyer and seller meet with their agents to go over paperwork, and settle any outstanding costs, and formally turn over property ownership.

Next, it’s just moving everything in and settling in. Even after closing, homeownership may feel overwhelming, but there are plenty of resources to make it easier.

Ready to Buy a Home Quiz

The Takeaway

Ready to buy a single-family home? The process before you may seem daunting, especially if it’s your first home purchase. But if you break it down to small steps and keep your budget and dream-house priorities top of mind, home sweet home may be closer than you think.

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

SoFi Mortgages: simple, smart, and so affordable.

FAQ

How much does it cost to buy a single-family home?

Zillow put the typical value of a single-family home at $354,000 in April 2024. New construction costs more. The median sales price of new houses sold in February 2024 was $400,500, according to the U.S. Census Bureau.

Can you buy a single-family home with no money down?

If a buyer qualifies for a mortgage backed by the Department of Veterans Affairs or Department of Agriculture, or one issued directly by those agencies, they may be able to purchase a home with no down payment.

What are the most important things to consider when buying a house?

Location (including property tax rate, quality of schools, walkability, crime rate, access to green space, and the general vibe), your ability to cover all the costs, duration of your stay, and square footage may be important.

How much should you have in savings to buy a single-family house?

You’ll need to have enough to cover a down payment, closing costs, and moving fees while ideally preserving an emergency fund.

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Photo credit: iStock/jhorrocks

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

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

*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.

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

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

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

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

^¹FHA loans are subject to unique terms and conditions established by FHA and SoFi. Ask your SoFi loan officer for details about eligibility, documentation, and other requirements. FHA loans require an Upfront Mortgage Insurance Premium (UFMIP), which may be financed or paid at closing, in addition to monthly Mortgage Insurance Premiums (MIP). Maximum loan amounts vary by county. The minimum FHA mortgage down payment is 3.5% for those who qualify financially for a primary purchase. SoFi is not affiliated with any government agency.
^†Veterans, Service members, and members of the National Guard or Reserve may be eligible for a loan guaranteed by the U.S. Department of Veterans Affairs. VA loans are subject to unique terms and conditions established by VA and SoFi. Ask your SoFi loan officer for details about eligibility, documentation, and other requirements. VA loans typically require a one-time funding fee except as may be exempted by VA guidelines. The fee may be financed or paid at closing. The amount of the fee depends on the type of loan, the total amount of the loan, and, depending on loan type, prior use of VA eligibility and down payment amount. The VA funding fee is typically non-refundable. SoFi is not affiliated with any government agency.

SOHL-Q224-1842723-V1

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Getting a personal loan? It’s not as simple as walking into a bank and asking for a check — there’s some paperwork involved.

Your personal loan agreement is the document that contains everything you need to know about the deal you’re making with your lender, including your rights and responsibilities as well as theirs. It’s a fairly long and complex form, but breaking it down can make it easier to understand.

Here, take a closer look at personal loan agreements.

What Is a Private Personal Loan Agreement?

A personal loan agreement, as mentioned above, is a document that details exactly what is being agreed to on both sides of a personal loan — lender and borrower. At the very least, it will state how much money is being loaned and the terms and conditions of the borrower’s repayment responsibilities.

But what about a personal loan that is not with a traditional lender? Private lenders can be individuals or organizations that make loans to individuals, sometimes without the qualification requirements of traditional lending institutions. A private personal loan agreement, specifically, is drafted as part of a private personal loan — one made between a private lender and a borrower.

Any personal loan agreement is a legally binding document, so it’s important to understand it in full before you apply your signature.


💡 Quick Tip: Before choosing a personal loan, ask about the lender’s fees: origination, prepayment, late fees, etc. One question can save you many dollars.

Why Is a Loan Agreement Needed?

A personal loan agreement is essentially a protective document. It protects both the lender and the borrower by laying out, in clear terms, exactly what is being agreed to. If either party fails to uphold the agreement, action can be taken — such as the lender seizing any assets offered as collateral or sending the account to collections — both of which, obviously, would be bad for the borrower.

But the document works both ways. Lenders, too, are subject to lender liability and can be taken to court if they fail to uphold their end of the loan agreement. Although these cases are far less common than borrower default, the loan agreement is a document that can be used for the borrower’s protection as well.

How to Write a Personal Loan Agreement

Here are the usual steps to writing a personal loan agreement.

Decide Whether to DIY It or Hire a Lawyer

Depending on the specifics of your loan and situation, you could write up a simple agreement by hand or draft it on your computer and then print it out for signing. Or you might download a template from a reputable site, which can be a popular option. These are often free or are sometimes available for a small fee.

However, if the loan is complicated or you don’t want to handle the agreement yourself, you could look into hiring a lawyer to draw up the paperwork. Either way, a personal loan agreement will be a legally binding arrangement. Hiring a lawyer will likely be a costlier proposition.

Gather the Necessary Personal Details

You will need the legal names and addresses of both parties. This ensures the lender can’t ask you for anything beyond the borrowed principal (plus interest, which will also be listed).

Agree to and Spell Out the Loan Terms

The loan agreement should list the payments that will be expected each month and the expected date of the conclusion of the loan term.

The interest rate for the personal loan should also be on the personal loan agreement, likely expressed as an APR, which shows what percentage of the loan principal you’ll end up paying back in the course of one year including interest and any additional fees that may be packaged into the loan.

The interest rate will vary based on your credit score and other financial factors. If you have decent credit, you’ll likely be able to qualify for a personal loan. But generally speaking, the higher your score, the lower your rate.

Recommended: APR vs. Interest Rate

List Payment and Legal Details

A personal loan agreement should also include the following:

•   The loan agreement may list which types of payment are acceptable, such as check, bank transfer, or credit card.

•   The personal loan contract should also list specific repayment conditions, including when payment is due and whether or not additional principal can be applied without penalty.

•   A complete personal loan agreement should include details on how any disputes will be handled between the parties involved.

•   Some personal loan documents may include the option to change your loan’s term (the period over which the loan is repaid).

•   Personal loan contracts in the United States should stipulate which state’s laws will be used to govern and interpret the agreement if the borrower lives in a different state than the lender is headquartered.

•   Severability is a clause that states that even if one part of a contract is found to be unenforceable or otherwise rendered null and void, the remainder of the agreement will still hold.

•   Penalties associated with the personal loan, such as any late fees that may be assessed, at what point the loan will go into arrears or default, or other scenarios, should be listed in the contract as well.

Sign the Document

Finally, the contract for loaning money must be signed by the borrower and the lender in order to be made legally binding.


💡 Quick Tip: Swap high-interest debt for a lower-interest loan, and save money on your monthly payments. Find out why credit card consolidation loans are so popular.

Does a Personal Loan Agreement Need to Be Notarized?

Personal loans are a type of contract, and contracts do not need to be notarized to be legally binding. All it needs is your signature. Be sure to read all the fine print in detail before you uncap that pen.

Recommended: Comparing Personal Loans vs Business Loans

Other Personal Loan Documents

Along with the signed personal loan agreement, other typical personal loan requirements include the following:

Proof of Identity

Your driver’s license or some equivalent form of photo ID will likely be necessary in order to verify your identity.

Income Verification

Lenders will consider your income when qualifying you for a loan — after all, they have good reason to be interested in whether or not you’ll be able to repay the debt. Along with asking you to list your annual income, verifying documents such as tax returns may also be required.

Proof of Address

In order to prove your residence, and therefore eligibility for any type of personal loan, you may need to provide utility statements, bank statements, or other official documents.

Getting a Personal Loan

Taking out a personal loan is a big financial responsibility, but it can also be a smart money move if you need to handle large, unexpected expenses at the last minute, or to consolidate existing debt. For someone who has bad credit, a small personal loan responsibly managed can be one way to bolster their credit score.

Just remember that all loans come at a price — interest charged — and considering the total amount you’ll pay back to the lender over time is important in order to have a full understanding of the cost of the loan.

For example, if you take out a $10,000 personal loan at a 7% interest rate to be repaid over a term of five years, you’ll pay back a total of $11,880.72, or an additional $1,880.72 in interest. That’s not including any origination fees, late fees, or prepayment penalties a lender might charge.

The Takeaway

If you’re considering a personal loan, reading the loan agreement in depth is a good way to understand for sure what you’re agreeing to. That loan agreement will contain many details about funds borrowed and how they will be repaid.

Think twice before turning to high-interest credit cards. Consider a SoFi personal loan instead. SoFi offers competitive fixed rates and same-day funding. Checking your rate takes just a minute.

SoFi’s Personal Loan was named NerdWallet’s 2024 winner for Best Personal Loan overall.

FAQ

Does a personal loan agreement need to be notarized?

No, a personal loan agreement does not need to be notarized to be legally binding — it simply needs to be signed by each party to the agreement.

What is a private personal loan agreement?

A private personal loan agreement is the binding legal contract between a borrower and a private lender for a personal loan.

Why do you need a loan agreement?

The personal loan agreement serves to outline the specific terms of the loan and protect both parties in case either fails to uphold the agreement.

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Photo credit: iStock/Chaay_Tee

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.

Disclaimer: Many factors affect your credit scores and the interest rates you may receive. SoFi is not a Credit Repair Organization as defined under federal or state law, including the Credit Repair Organizations Act. SoFi does not provide “credit repair” services or advice or assistance regarding “rebuilding” or “improving” your credit record, credit history, or credit rating. For details, see the FTC’s website .

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 article is not intended to be legal advice. Please consult an attorney for advice.

SOPL-Q224-1840979-V1

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Starting a new business requires a good idea, customers to whom you can sell your product or service, and money to get you off the ground. A personal loan to start a business can be one option for funding, especially if you don’t yet qualify for a small business loan or you qualify for a personal loan with a low interest rate.

Here’s a look at the pros and cons of using a personal business loan to start your business as well as some alternatives to look into.

What Is a Personal Business Loan?

Personal loans to start a business are offered by some banks, credit unions, and online lenders. The borrowed funds are paid back with interest in regular monthly installments. While most loans will specify what you can spend the money on — a mortgage must be used to buy a house, for example — the sum you receive from a personal business loan can be spent in a variety of ways. It’s important to check with your lender about whether their personal loans can be used for business expenses, as some lenders do not allow it.

Your personal loan interest rate is based on a combination of financial factors, including financial history, income, and credit score. Generally speaking, the higher a person’s credit score, the more likely they are to receive a personal loan with favorable terms and interest rates. Applicants with lower credit scores may find it more difficult to qualify for low-interest rates. That’s because lenders tend to see them as at greater risk of defaulting on their payments and, to offset that risk, they might charge a higher interest rate.


💡 Quick Tip: Some lenders can release funds as quickly as the same day your loan is approved. SoFi personal loans offer same-day funding for qualified borrowers.

Why Might You Use a Personal Loan to Start a Business?

Taking out personal loans for business may present a number of benefits compared to some other alternatives.

Ease of Qualification

Banks offer personal business loans based on personal income and credit score. When you apply for a business loan, you’ll likely be asked for quite a bit of information during the application process, including your personal and business credit score, annual business revenue and monthly profits, and how long you’ve been in business. The longer your business has existed, the more likely you are to have a record of revenue and profit, and the more likely you are to qualify.

If your business is brand new, it can be tricky to get a business loan right off the bat, and it may be easier to qualify for a personal loan.

Faster Funding

How long it takes to get approved for a personal loan and receive funding will vary by lender. Online lenders are typically faster than banks and credit unions. However, you are likely to receive funding within seven business days.

By contrast, the process for a business loan can be much slower. For example, it can take 60 to 90 days to receive funding from a Small Business Administration (SBA) loan.

Can Have Low Interest Rates

Personal loan applicants with a positive credit history and a healthy credit score may be able to qualify for a low interest rate. In general, interest rates on personal loans can be much more competitive than those on other types of credit.

Credit cards, for instance — although not an inherently bad choice for business credit — can have higher interest rates than other types of lending options. They may also have penalties and fees that personal loans may not have, such as penalty annual percentage rates (APRs) that go into effect if you make a late payment, over-limit fees if you spend more than your credit limit, annual fees, and more.

Flexibility and Versatility

Personal loans have few restrictions on how you’re allowed to use the money you borrow. That means you can spend on anything from buying or renting a building to marketing materials to purchasing inventory, as long as your lender doesn’t restrict the personal loan funds to non-business purposes.

Recommended: 11 Types of Personal Loans & Their Differences

What Are Some Risks of Using a Personal Loan to Start a Business?

Despite the potential advantages of using a personal loan to help you start your business, there are also potential drawbacks to consider.

Some Lenders Don’t Allow Personal Loans for Business

Some lenders do place certain restrictions on how you spend your personal loan. Being upfront about your intentions to use it for business expenses and asking if that is allowed is a good idea. In some cases, it may not be. However, it’s far better to be honest about how you plan to use a loan than risk breaching the loan agreement. If you end up using a loan in a prohibited way, your lender could force you to repay the full amount of the loan with interest.

Can Mean a Smaller Loan

Personal loans generally offer borrowing limits as low as $1,000 and as high as $100,000 for larger personal loans. For small businesses, this might be plenty. But if you’re a larger business that needs more money, you may be better off looking for a loan that can better meet a business’ financial needs.

Can Have Shorter Repayment Terms

Lending periods for personal loans will vary. Typically you can find loans with term lengths of 12 months to five years, sometimes a bit longer. When compared to some small business loans, this is a relatively short period of time. Consider that for SBA loans, maximum terms can be as much as 25 years for real estate, 10 years for equipment, and 10 years for working capital or inventory.

Personal Credit Score and Assets Could be Affected

If you take out a personal loan and are unable to make monthly payments, you are putting your personal credit at risk. Missed payments may have a negative effect on your credit score, which can make it more difficult for you to access funding in the future.

Recommended: What Is Considered a Bad Credit Score?

May Qualify for Fewer Tax Deductions

In general, the interest you pay on a personal loan is not tax deductible. However, it may be if you use it for business purposes. This can get a bit tricky. You may only deduct interest on the portion of the loan that is used for business expenses. So if you use any of that money to remodel the bathroom in your home, for example, interest on that portion can’t be deducted.

Businesses are able to deduct interest from bank loans, vehicle loans, credit card debt, and lines of credit.

Personal Business Loans vs Small Business Loans

Borrowing money to pay for business expenses is a decision that takes some consideration. There are different reasons you might want or need a business loan, there are many lenders to choose from, and there are different lending options to compare. Here are some things to think about if choosing between a personal loan for business or a small business loan.

Factor to Consider	Personal Loan for Business	Small Business Loan
Use of funds	Some lenders may not allow personal loan funds to be used for business purposes	Specifically for business purposes — cannot be used for personal use
Qualification	Personal creditworthiness determines approval, interest rate, and loan terms	Lenders will require business financials, proof of time in business, and other details, in addition to possibly taking personal credit into account
Interest rate	Depending on your creditworthiness, interest rate may be lower than other forms of credit, such as credit cards	Depending on the type of loan, interest rates on SBA loans may be lower than some personal loans
Loan amount	Up to $100,000 depending on the lender.	SBA maximum loan amount is $5 million. Some lenders may approve working capital loans for up to several million dollars
Funding time	Depending on the lender, loan funds may be disbursed as soon as the day of approval or in up to seven days	The SBA loan timeline is between 60 and 90 days from application to disbursement. A working capital loan from a traditional lender may be approved quickly and funded shortly after approval
Tax deductibility	Interest is not generally tax deductible	Interest may be tax deductible in some cases

Recommended: Business Loan vs Personal Loan: Which Is Right for You?

Alternatives to Personal Business Loans

Personal loans may not be the best option for everyone and are not the only way you can fund your small business. You may also want to consider small business loans or a business line of credit.

Small Business Loans

Small business loans are offered through online lenders, banks, and credit unions. There are a variety to choose from that may be designed for specific purposes. For example, a working capital loan is designed to help you finance the day-to-day operations of your business. An equipment loan can help you replace aging technology and buy new equipment.

SBA loans are guaranteed by the Small Business Administration, whose aim is to help small businesses get off the ground and grow. That means if you aren’t able to make your payments, the SBA will step in and cover 85% of the default loss. By reducing risk in this way, the organization helps businesses get easier access to capital.

Shopping around for the best small business loan rates is a good way to compare lenders and find the one that works best for your unique financial needs.

Business Lines of Credit

A business line of credit is revolving credit, much like a credit card. You are allowed to borrow up to a certain amount, and you only pay interest on the amount you are currently borrowing — making this option more economical than a term loan for some business owners. As you repay the funds, the amount of credit available to you reverts back to the original limit and you can borrow the money again.

Another advantage to a line of credit over a term loan is the ability to use a check to pay vendors who may not accept credit cards.

Credit Cards

Credit cards, with a current average interest rate of more than 22%, tend to have higher interest rates than other types of funding. For example, the average finance rate for personal loans is about 12.49%, according to the Federal Reserve.

Also, credit cards are revolving credit. If you don’t pay off the balance each month, you can fall deeper into debt. Whereas, installment loans offer fixed monthly payments with a fixed end date.

Business credit cards may be a good choice for some business owners, though, to keep personal and business expenses separate. They may also offer rewards, perks, and bonuses that make them an attractive option.

Recommended: Breaking Down the Different Types of Credit Cards

Merchant Cash Advance

Funding for a merchant cash advance (MCA) is based on a business’ past credit card receipts. Technically not a loan, an MCA is an advance on future revenue. The business repays the MCA lender a percentage of its monthly sales revenue until the debt is paid in full.


💡 Quick Tip: Generally, the larger the personal loan, the bigger the risk for the lender — and the higher the interest rate. So one way to lower your interest rate is to try downsizing your loan amount.

The Takeaway

Can you use a personal loan to start a business? Short answer: Yes. Taking out a personal loan is one way to fund your small business needs, as long as your lender allows the funds to be used for business expenses. There are alternatives, though, including lines of credit and SBA loans.

Think twice before turning to high-interest credit cards. Consider a SoFi personal loan instead. SoFi offers competitive fixed rates and same-day funding. Checking your rate takes just a minute.

SoFi’s Personal Loan was named NerdWallet’s 2024 winner for Best Personal Loan overall.

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Photo credit: iStock/fizkes

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.

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

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

Non affiliation: SoFi isn’t affiliated with any of the companies highlighted in this article.

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.

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Multifamily property has the power to generate cash flow and build wealth. Yet it also has the power to drain you of your free time and become the biggest money pit of your life.

If you’re looking to buy a multifamily property and avoid common headaches, you have your research cut out for you.

What Is a Multifamily Property?

Multifamily property consists of multiple units in a single building. This includes duplexes, triplexes, fourplexes, condominium buildings, student housing, apartment complexes, age-restricted communities, low-income housing, and townhomes. The units in a full multifamily housing property must have separate entrances, kitchens, bathrooms, and utility meters.

Multifamily property investing has declined in the year ending November 2023, due in part to concerns about interest rates, but multifamily properties are still a popular investment vehicle. There’s a reason that individual investors gravitate toward two- to four-unit properties, other than ease of management. Residential loans of 30 years with a fixed rate are available for properties with one to four dwelling units. FHA, VA, and USDA loans are available for those properties if they are owner-occupied.

For five or more units, a commercial loan is required. Commercial loans usually come with a higher down payment requirement, higher interest rate, and a shorter term, meaning significantly higher mortgage payments.


💡 Quick Tip: With SoFi, it takes just minutes to view your rate for a home loan online.

Why Buy a Multifamily Property?

Buying a multifamily home can jump-start your own real estate portfolio and investment portfolio. Here’s how.

Recommended: First-Time Homebuyer Guide

Income From Flipping

Multifamily homes can be improved and then resold for a profit, or ”flipped.” Buying a multifamily property, remodeling, and then reselling can be even more profitable than flipping single-family homes because as you remodel, you can increase rents.

Once you increase rents, the property becomes more valuable, both in terms of monthly income, cash flow and overall worth.

The ‘BRRRR’ Method

BRRRR stands for buy, rehab, rent, refinance, repeat. An investor buys a property, renovates it, and rents out the newly refurbished units for more money. After that, they can refinance the property to take out extra cash to buy a new property to renovate.

This method works well with larger multifamily properties because the rehabbing of multiple units can be done while other units that are not being renovated can still bring in some income.

Cash Flow

Multifamily homes were designed for cash flow. Space and amenities are optimized to bring in money for the investor. On the other hand, single-family homes are designed for comfort. The added space of a single-family home may not bring as high of a return as a multifamily property.

Quick Portfolio Expansion

Buying multifamily properties allows investors to acquire multiple units with one transaction, so they may have a favorite in the single-family vs. multifamily comparison. Additionally, investing in multifamily properties can allow an investor to quickly generate income, which could be enough to acquire more properties.

Reduced Risk

A multifamily property lessens risk exposure. When you have single-family homes, vacancies have a bigger effect on your monthly cash flow. With one or more multifamily properties, the risk is spread across a number of properties. In other words, there are units still rented that can help cover the costs of the units that are vacant.

Analyzing the Investment Potential of a Multifamily Property

Investors can use a number of methods to determine if it makes sense to buy a multifamily property or not. Here are some of the most common calculations you can use to make that determination for yourself.

Cash Flow

In real estate investing, cash flow is money that’s generated by the property and money spent on the property. Positive cash flow means income exceeds expenses. You could also call it profit.

Investors have differing amounts that they consider acceptable. Some real estate investors bank on the appreciation of the property instead of the amount of cash flow.

The 1% Rule

The 1% rule states that the gross rents should be 1% or more of the purchase price. The 1% rule is hard to apply in high-income areas where the purchase price of a property is high relative to the rents it generates.

Gross Rent Multiplier

The gross rent multiplier (GRM) is a ratio: the fair market value of a property divided by its gross annual rents. It doesn’t take expenses into consideration and is meant to be a simple calculation to determine if a property is worth exploring further. If you’re comparing two properties for purchase, the one with the lower GRM may be the better investment.

Cash on Cash Return

The cash on cash return is the annual amount earned compared with the amount of cash invested. It’s expressed as a formula: annual net cash flow divided by cash investment. This is helpful for investors who want to know how much cash is brought in by their cash investment each year.

Capitalization Rate

The capitalization rate, or cap rate, is the amount of net operating income divided by the purchase price. This number indicates how long it will take to get back all your money in an investment.

Recommended: What Is Cap Rate and How Do You Calculate It?

Internal Rate of Return

The IRR measures the rate of return over an amount of time. It takes into account both cash flow and expected appreciation.

Recommended: Mortgage Payment Calculator

How to Buy a Multifamily Property

You may be able to use 75% of documented rental income to help finance mortgage interest on your loan. And again, multifamily homes with four or fewer units can be financed more traditionally, while five or more units require a commercial mortgage.

Getting preapproved for a mortgage for your multifamily investment property is one of the best things you can do to get started. After a mortgage officer has examined your finances and greenlighted an amount, you can go shopping for your multifamily investment properties.

Find a Multifamily Home

To narrow your search for a new multifamily property here, you’ll want to decide what it is you’re looking for. Keep a few of these factors in mind:

•   Location: Do you have an area that you have expertise in? Are you going to manage the property yourself? These are some questions you’ll want to ask yourself to determine if you can buy a multifamily property near or far.

•   Price range: After you’ve looked at where you want to potentially invest, you’ll get a good sense of what properties will cost by looking at real estate listings. Keep in mind that you can count 75% of documented rents toward the purchase price for many loan types, so the price you’ll be looking at will be much different than if you were looking for a single-family home.

•   Type of property: Are you looking for a fourplex or an apartment complex? Duplex or 55+ community? There are a lot of choices to make between different property types and whether or not they’ll bring you a profit.

•   Profit potential: Are you looking to invest for appreciation or cash flow? Many properties with a lower price tag in the Midwest may be better for cash flow, while properties on the West Coast may appreciate more. Take a look at both and decide on your investment strategy.

•   Condition: Do you have the resources and team in place to take on a multifamily property that needs a lot of work? Or would you rather have something turnkey? You’ll want to be sure you know what resources you can commit to the project before you get in over your head.

Choose a Loan

The type of rental property used may determine what type of loan you’re able to get. If this is your first rental, you may want to consider living in one of the units so you can qualify for owner-occupied financing, which usually comes with lower rates and down payment requirements.

Choose a lender that can answer your questions about mortgages.

Make an Offer and Close

Working with a real estate agent, you’ll submit a competitive offer for the property you’ve chosen. Some buyers use cash to make the most competitive offer, while others need financing.

Renovate and Get Ready for Your Tenants

No matter what class of property you buy, the rental units will almost always require some work. Whether it’s a simple clean or a major renovation, these things are both tax-deductible and will improve the value, not to mention rentability, of your property.

Create a Management Plan

To make sure you’re running a business, and it’s not running you, you need to have a solid plan in place for how the rentals will be managed. How are repairs going to be taken care of? What’s your process when a rental turns over? How are you going to keep up with laws and ordinances?

Having a plan helps. Even so, you’ll learn as you go and will need to adjust this plan.


💡 Quick Tip: One answer to rising house prices is a jumbo loan. Apply for a jumbo loan online with SoFi, and you could finance up to $2.5 million with as little as 10% down. Get preapproved and you’ll be prepared to compete in a hot market.

The Takeaway

How to buy a multifamily property? Do your research and choose a property that you’ll have the ability to finance and manage. Investing in rental properties and multifamily investing is not easy, but it can generate cash flow and create family wealth.

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

SoFi Mortgages: simple, smart, and so affordable.

FAQ

Is buying a multifamily property a good investment?

Finding a multifamily property that is a good investment will depend on the investor’s analysis of the property. This can include the price, condition, gross rent multiplier, capitalization rate, and a number of other factors that will make renting the units successful.

What are the different kinds of multifamily properties?

•   Duplexes, triplexes, fourplexes

•   Townhouses

•   Apartment buildings

•   Condominiums

•   Bungalow courts

•   Mixed-use buildings

•   Student housing

•   Age-restricted housing units

•   Low-income housing units

What is the best way to finance a multifamily home?

Some would argue that an FHA loan with 3.5% down is one of the best ways to finance a home with up to four units. The owner must live in one of the units to qualify for this type of financing.

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Photo credit: iStock/Andrey Sayfutdinov

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*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.

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

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

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

^¹FHA loans are subject to unique terms and conditions established by FHA and SoFi. Ask your SoFi loan officer for details about eligibility, documentation, and other requirements. FHA loans require an Upfront Mortgage Insurance Premium (UFMIP), which may be financed or paid at closing, in addition to monthly Mortgage Insurance Premiums (MIP). Maximum loan amounts vary by county. The minimum FHA mortgage down payment is 3.5% for those who qualify financially for a primary purchase. SoFi is not affiliated with any government agency.
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Car sales professionals make an average of $103,042 a year, according to Salary.com. While that’s more than what the average American worker earns annually, the job often requires long hours and your income may depend on how many cars you sell.

Let’s dive into what car salesmen do and how much they can make.

What Are Car Salesmen?

Car salespeople help customers shop for cars. Typical duties include answering questions about the cars on the lot, arranging test drives, and explaining financing options, warranties, and specifications.

Being able to build relationships with customers and close deals can help you succeed as a car salesman. Since car salespeople work directly with customers, the job may not be the best fit for introverts.


💡 Quick Tip: Online tools make tracking your spending a breeze: You can easily set up budgets, then get instant updates on your progress, spot upcoming bills, analyze your spending habits, and more.

How Much Do Starting Car Salesmen Make a Year?

The average salary for entry-level car sales positions in the United States is $38,680 per year, according to ZipRecruiter data. The pay for entry-level jobs in car sales will likely differ based on the dealership’s size, location, and car brand.

While some employers pay a base wage, others offer commission-based pay. Base wages tend to provide a more consistent monthly income, usually between $2,000 and $4,000. With commission-based compensation, you may earn a portion of each sale, typically between 20% and 30%.

What Is the Average Salary for a Car Salesman?

If you’re looking to enter the field, you may wonder, how much does a car salesman make a year?

As mentioned above, the average annual salary for a car salesman is a competitive $103,042, per Salary.com, though pay can range between $88,987 and $119,501. High-achieving salespeople may make more than six figures, particularly if they are employed by luxury car dealerships or in regions with wealthy buyer demographics.

Commission-based arrangements are also a major factor in determining overall income.

Recommended: What Trade Makes the Most Money?

What Is the Average Car Salesman Salary by State for 2024?

A car salesman may not be the highest-paying job in most states, but it can provide a good living. This is especially true if you happen to work in a state like California, New Jersey, or Alaska, where the position tends to pay more. Let’s see how salaries in 2024 vary by state.

State	Salary
Alabama	$94,664
Alaska	$112,418
Arizona	$100,919
Arkansas	$93,902
California	$113,665
Colorado	$104,103
Connecticut	$111,058
Delaware	$105,257
Florida	$97,889
Georgia	$99,984
Hawaii	$108,111
Idaho	$95,670
Illinois	$105,875
Indiana	$100,486
Iowa	$98,611
Kansas	$98,116
Kentucky	$96,962
Louisiana	$97,972
Maine	$99,332
Maryland	$106,242
Massachusetts	$112,140
Michigan	$102,195
Minnesota	$105,597
Mississippi	$91,892
Missouri	$98,183
Montana	$94,200
Nebraska	$96,684
Nevada	$104,154
New Hampshire	$104,402
New Jersey	$113,438
New Mexico	$95,046
New York	$109,956
North Carolina	$98,920
North Dakota	$98,941
Ohio	$101,060
Oklahoma	$95,273
Oregon	$103,598
Pennsylvania	$102,835
Rhode Island	$107,988
South Carolina	$97,283
South Dakota	$90,800
Tennessee	$94,726
Texas	$101,290
Utah	$97,499
Vermont	$99,229
Virginia	$102,423
Washington	$110,553
West Virginia	$92,787
Wisconsin	$101,496
Wyoming	$94,778

Source: Salary.com

Car Salesman Job Considerations for Pay and Benefits

Flexible schedules and possible commissions and bonuses are some attractive parts of being a car salesman. Plus, dealerships might provide extra incentives, such bonuses for hitting or exceeding sales goals, corporate cars, and expense reimbursements. Retirement plans, health insurance, and employee car discounts may also be included in the benefits package.

Recommended: Work-From-Home Jobs for Retirees

Pros and Cons of a Car Salesman Salary

As with any profession, there are advantages and disadvantages of working as a car salesman.

Pros:

•   Performance-driven earnings. Commission-based pay can boost your income, especially during strong sales periods.

•   Flexibility. Compared to standard 9–5 jobs, the position may offer flexibility in terms of work hours.

•   Career advancement. A successful car sales career can lead to managerial roles and a path for professional advancement within the dealership.

•   Diverse work environment. Helping customers find a car that fits their needs and budget can be professionally satisfying.

•   Incentives and perks. Dealerships often provide extra bonuses and perks, such car discounts for staff members or opportunities for career advancement.

Cons:

•   Income volatility. If you earn a commission, your earnings could decrease during slow times.

•   Pressure to perform. Reaching sales goals is essential, and the stress of closing deals might lower your level of job satisfaction.

•   Long hours. In order to accommodate consumers, you’ll likely need to work weekends and evenings.

•   Customer relations. Resolving complaints and interacting with a variety of client personalities can be difficult.


💡 Quick Tip: Income, expenses, and life circumstances can change. Consider reviewing your budget a few times a year and making any adjustments if needed.

The Takeaway

How much does a car salesman make? These professionals have the potential to earn $100,000 or more a year, especially if they can earn a commission based on their sales. They also have the chance to advance their careers and gain a variety of work experiences. That said, the job often requires long hours, income may not be steady, and there’s often a pressure to hit sales goals.

Whatever type of job you pursue, you’ll want to make sure your earnings can cover your everyday living expenses. Establishing a budget — and using online tools to help monitor spending — can help you make progress toward your financial goals.

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

With SoFi, you can keep tabs on how your money comes and goes.

FAQ

Can you make $100k a year as a car salesman?

Yes, it is possible to make $100,000 or more as a car salesman. Your salary may depend on your location, base pay, the car brand being sold and how many cars you sell each month.

Do people like being a car salesman?

Some people love being a car salesman, but the job is not a good fit for everyone. Those who enjoy making sales and building customer relationships may enjoy a career as a car salesman.

Is it hard to get hired as a car salesman?

The difficulty of getting hired as a car salesman depends on factors such as the dealership, car brand, location, and your experience. If you’re a people person, willing to put in time, and eager to make sales, you can likely find a position at a dealership.

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

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.

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