mortgage Archives

Jan

2026

A dense group of miniature wooden houses, painted white and teal blue, are spread across a surface, illustrating topics like foreclosure rates.

Foreclosure Rates for All 50 States

By Sarah Brooks | Home Ownership, mortgage | Comments Off

In the ever-evolving landscape of real estate, the U.S. foreclosure market often unveils key trends that will shape the future of homeownership. According to property data provider ATTOM, 28,269 properties started the foreclosure process in December 2025. Rob Barber, CEO of ATTOM, notes that “Foreclosure activity increased in 2025, reflecting a continued normalization of the housing market following several years of historically low levels.”

Nationwide, one in every 3,163 housing units had a foreclosure filing in December 2025. Foreclosure starts increased nationwide by 46% from last year. States with the worst foreclosure rates in December 2025 included New Jersey, South Carolina, and Maryland. Borrowers should stay up to date on their mortgage payments and work closely with their lenders to explore options for assistance if needed.

Read on for the foreclosure rates in December 2025 – plus the top three counties with the worst foreclosure rates in each state.

50 State Foreclosure Rates

Read on for the December 2025 foreclosure rates for all 50 states — beginning with the state that had the lowest rate of foreclosure filings per housing unit.

50. South Dakota

The Mount Rushmore State nabbed the 50th spot once more for its foreclosure rate in December. Having 398,903 total housing units, the fifth-least populous state had a foreclosure rate of one in every 28,493 households with 14 foreclosures. The counties with the most foreclosures per housing unit were (from highest to lowest): Yankton, Brown, and Minnehaha.

49. Vermont

In 49th place for population, the Green Mountain State also ranked 49th for its foreclosure rate in December. Of the state’s 337,072 housing units, 13 homes went into foreclosure at a rate of one in every 25,929 households. The three counties in the state with the most foreclosures were: Rutland, Orange, and Washington.

48. Montana

Listed as 44th in population, the Treasure State rated 48th for its foreclosure rate in December. With 34 foreclosures out of 522,939 housing units, Montana’s foreclosure rate was one in every 15,381 homes. The counties with the most foreclosures per housing unit were: Sweet Grass, Daniels, and Lincoln.

47. North Dakota

The Peace Garden State’s foreclosure rate was one in every 12,496 homes. This puts the fourth-least populous state — with 374,866 housing units and 30 foreclosures — into 47th place. The counties with the most foreclosures per housing unit were (from highest to lowest): Griggs, McHenry, and Pembina.

46. Wisconsin

With 259 foreclosures out of 2,750,750 total housing units, America’s Dairyland and the 20th most populous state secured the 46th spot with a foreclosure rate of one in every 10,621 households. The counties with the most foreclosures per housing unit were (from highest to lowest): Langlade, Juneau, and Marinette.

45. Kansas

The Sunflower State ranked 45th for highest foreclosure rate in December. With 1,285,221 homes and a total of 133 housing units going into foreclosure, the 35th most populous state’s foreclosure rate was one in every 9,663 households. The counties with the most foreclosures per housing unit were (from highest to lowest): Pawnee, Morton, and Geary.

44. West Virginia

Ranked 39th in population, the Mountain State claimed the 44th spot for the month of December. It has a total of 859,653 housing units, of which 95 went into foreclosure. This means that the foreclosure rate was one in every 9,049 homes. The counties with the most foreclosures per housing unit were (from highest to lowest): Marion, Wetzel, and Raleigh.

43. New Hampshire

The Granite State, and the 41st most populous state in the U.S., ranked 43rd for highest foreclosure rate. New Hampshire saw 82 of its 644,253 homes go into foreclosure, making for a foreclosure rate of one in every 7,857 households. The counties with the most foreclosures per housing unit were (from highest to lowest): Sullivan, Merrimack, and Hillsborough.

42. Rhode Island

The eighth-least populous state placed 42nd for highest foreclosure rate in December. A total of 65 homes went into foreclosure out of 484,615 total housing units, making the foreclosure rate for the Ocean State one in every 7,456 households. The counties with the most foreclosures per housing unit were (from highest to lowest): Bristol, Kent, and Newport.

41. Alaska

The Last Frontier saw 46 foreclosures in December, making the foreclosure rate one in every 6,933 homes. This caused the third-least populous state, with a total of 318,927 housing units, to claim the 41st spot. The boroughs with the most foreclosures per housing unit were (from highest to lowest): Sitka, North Slope, and Ketchikan Getaway.

40. Hawaii

The Paradise of the Pacific, and the 40th most populous state, came in 40th for highest foreclosure rate. Of its 564,905 homes, 84 went into foreclosure, making for a foreclosure rate of one in every 6,725 households. The three counties with the most foreclosures were (from highest to lowest): Honolulu, Hawaii, and Kauai.

Recommended: Tips on Buying a Foreclosed Home

39. Kentucky

With a total of 2,010,655 housing units, the Bluegrass State saw 299 homes go into foreclosure, thus landing in 39th place in December. This puts the foreclosure rate for the 29th most populous state at one in every 6,725 households. The counties with the most foreclosures per housing unit were (from highest to lowest): Owen, Bell, and Union.

38. Nebraska

Ranking 37th in population, the Cornhusker State placed 38th in December with a foreclosure rate of one in every 6,685 homes. With a total of 855,631 housing units, the state had 128 foreclosure filings. The counties with the most foreclosures per housing unit were (from highest to lowest): Clay, Morrill, and York.

37. Mississippi

Ranked 34th in population, the Magnolia State experienced 206 foreclosures out of 1,332,811 total housing units. This puts the foreclosure rate at one in every 6,470 homes and into the 37th spot in December. The counties with the most foreclosures per housing unit were (from highest to lowest): Franklin, Clay, and Webster.

36. Oregon

The 27th most populous state ranked 36th for highest foreclosure rate in December. Of the Pacific Wonderland’s 1,838,631 homes, 296 went into foreclosure, making for a foreclosure rate of one in every 6,212 homes. The counties with the most foreclosures per housing unit were (from highest to lowest): Gilliam, Columbia, and Lake.

35. Washington

Sorted as 13th in population, the Evergreen State ranked 35th for its foreclosure rate in December. Of its 3,262,667 housing units, 588 went into foreclosure, making the state’s foreclosure rate one in every 5,549 households. The counties with the most foreclosures per housing unit were (from highest to lowest): Pacific, Okanogan, and Lewis.

34. Missouri

Coming in at 19th in population, the Show-Me State took the 34th spot for highest foreclosure rate in December. Of its 2,809,501 homes, 567 went into foreclosure, making for a foreclosure rate of one in every 4,955 homes. The counties with the most foreclosures per housing unit were (from highest to lowest): Scotland, Butler, and Mississippi.

Recommended: What Is a Short Sale?

33. Minnesota

Ranked 22nd for most populous state, the Land of 10,000 Lakes obtained the 33rd spot for highest foreclosure rate in December. It has 2,519,538 housing units, of which 540 went into foreclosure, making the state’s foreclosure rate one in every 4,666 households. The counties with the most foreclosures per housing unit were (from highest to lowest): Martin, Dodge, and Benton.

32. Tennessee

Ranked 16th in population, the Volunteer State endured 677 foreclosures out of its 3,095,472 housing units. This puts the foreclosure rate at one in every 4,572 households and in 32nd place for the month of December. The counties with the most foreclosures per housing unit were (from highest to lowest): Hardeman, Moore, and Hancock.

31. Massachusetts

The 15th most populous state ranked 31st for highest foreclosure rate in December. Of the Bay State’s 3,014,657 housing units, 687 went into foreclosure, making for a foreclosure rate of one in every 4,388 homes. The counties with the most foreclosures per housing unit were (from highest to lowest): Hampden, Bristol, and Plymouth.

First-time homebuyers can
prequalify for a SoFi mortgage loan,
with as little as 3% down.

Questions? Call (888)-541-0398.

30. North Carolina

The ninth-most populous state claimed 30th place for highest foreclosure rate. Out of 4,815,195 homes, 1,099 went into foreclosure. This puts the Tar Heel State’s foreclosure rate at one in every 4,381 homes. The counties with the most foreclosures per housing unit were (from highest to lowest): Anson, Lee, and Gates.

29. New Mexico

The 36th most populous state claimed the 29th spot for highest foreclosure rate in December. Of the Land of Enchantment’s 949,524 homes, 219 went into foreclosure, making for a foreclosure rate of one in every 4,336 homes. The counties with the most foreclosures per housing unit were (from highest to lowest): Union, Eddy, and Torrance.

28. Virginia

With 867 homes going into foreclosure, the 12th most populous state ranked 28th for highest foreclosure rate in December. Having 3,654,784 total housing units, the Old Dominion saw a foreclosure rate of one in every 4,215 households. The counties with the most foreclosures per housing unit were (from highest to lowest): Emporia City, Petersburg City, and Franklin City.

27. Idaho

Ranked 38th in population, the Gem State received the 27th spot due to its 188 housing units that went into foreclosure in December. With 776,683 total housing units, the state’s foreclosure rate was one in every 4,131 households. The counties with the most foreclosures per housing unit were (from highest to lowest): Franklin, Elmore, and Payette.

26. Connecticut

With 373 of its 1,536,049 homes going into foreclosure, the Constitution State had the 29th-highest foreclosure rate at one in every 4,118 households. In this 29th most populous state, the counties that had the most foreclosures per housing unit were (from highest to lowest): Northeastern Connecticut, Greater Bridgeport, and South Central Connecticut.

25. Arizona

Sorted as 14th in population, the Grand Canyon State withstood 776 foreclosures out of its total 3,142,443 housing units. This puts the foreclosure rate at one in every 4,050 homes and into the 25th spot in December. The counties with the most foreclosures per housing unit were (from highest to lowest): Pinal, Santa Cruz, and Cochise.

24. Wyoming

The country’s least populous state claimed the 24th spot for highest foreclosure rate in December. With 275,131 housing units, of which 71 went into foreclosure, the Equality State’s foreclosure rate was one in every 3,875 households. The counties with the most foreclosures per housing unit were (from highest to lowest): Niobrara, Goshen, and Converse.

23. Arkansas

Listed as the 33rd most populous state, the Land of Opportunity ranked 23rd for highest foreclosure rate in December. The state contains 1,382,664 housing units, of which 357 went into foreclosure, making its latest foreclosure rate one in every 3,873 households. The counties with the most foreclosures per housing unit were (from highest to lowest): Grant, Prairie, and Randolph.

22. Maine

Ranked 42nd in population, the Pine Tree State placed 22nd for highest foreclosure rate in December. With a total of 746,552 housing units, Maine saw 196 foreclosures for a foreclosure rate of one in every 3,809 homes. The counties with the most foreclosures per housing unit were (from highest to lowest): Washington, Somerset, and Penobscot.

21. California

The country’s most populous state ranked 21st for highest foreclosure rate in December. Of its impressive 14,532,683 housing units, 4,153 went into foreclosure, making the Golden State’s foreclosure rate one in every 3,499 households. The counties with the most foreclosures per housing unit were (from highest to lowest): Shasta, El Dorado, and Kern.

20. New York

With 2,495 out of a total 8,539,536 housing units going into foreclosure, the Empire State claimed the 20th spot in December. The fourth-most populous state’s foreclosure rate was one in every 3,423 households. The counties with the most foreclosures per housing unit were (from highest to lowest): Rockland, Washington, and Richmond.

19. Pennsylvania

The Keystone State had the 19th highest foreclosure rate. The fifth-most populous state saw 1,733 homes out of 5,779,663 total housing units go into foreclosure, making the state’s foreclosure rate one in every 3,335 households. The counties with the most foreclosures per housing unit were (from highest to lowest): Delaware, Philadelphia, and Berks.

18. Michigan

Ranked 10th in population, the Wolverine State secured the 18th spot with a foreclosure rate of one in every 3,251 homes. With a total of 4,599,683 housing units, the state had 1,415 foreclosure filings. The counties with the most foreclosures per housing unit were (from highest to lowest): Sanilac, Tuscola, and Jackson.

17. Oklahoma

The Sooners State landed the 17th spot in December. With housing units totaling 1,763,036, the 28th most populous state saw 549 homes go into foreclosure at a rate of one in every 3,211 households. The counties with the most foreclosures per housing unit were (from highest to lowest): Noble, Caddo, and Woodward.

16. Iowa

The Hawkeye State had the 16th highest foreclosure rate in December. With 459 out of 1,427,175 homes going into foreclosure, the 31st most populous state’s foreclosure rate was one in every 3,109 homes. The counties with the most foreclosures per housing unit were (from highest to lowest): Jones, Tama, and Muscatine.

15. Colorado

The 21st most populous state ranked 15th for highest foreclosure rate in December. Of the Centennial State’s 2,545,124 housing units, 825 went into foreclosure, making for a foreclosure rate of one in every 3,085 homes. The counties with the most foreclosures per housing unit were (from highest to lowest): Pueblo, Alamosa, and Cheyenne.

14. Louisiana

Sorted as 25th in population, the Pelican State placed 14th for highest foreclosure rate in December. Louisiana had a foreclosure rate of one in every 2,966 households, with 706 out of 2,094,002 homes going into foreclosure. The parishes with the most foreclosures per housing unit were (from highest to lowest): Tangipahoa, Livingston, and Ascension.

13. Georgia

Ranked eighth in population, the Peach State took the 13th spot for highest foreclosure rate in December. Of its 4,483,873 homes, 1,582 were foreclosed on. This puts the state’s foreclosure rate at one in every 2,834 households. The counties with the most foreclosures per housing unit were (from highest to lowest): Butts, Peach, and McDuffie.

12. Alabama

Listed as 24th in population, the Yellowhammer State came in 12th for highest foreclosure rate in December. Of its 2,316,192 homes, 820 went into foreclosure, making for a foreclosure rate of one in every 2,825 homes. The counties with the most foreclosures per housing unit were (from highest to lowest): Hale, Lowndes, and Bibb.

11. Ohio

The Buckeye State placed 11th in December with a foreclosure rate of one in every 2,736 homes. With a sum of 5,271,573 housing units, the seventh-most populous state had a total of 1,927 filings. The counties with the most foreclosures per housing unit were (from highest to lowest): Cuyahoga, Stark, and Crawford.

10. Indiana

The 17th largest state by population, the Crossroads of America landed the 10th spot in December with a foreclosure rate of one in every 2,544 homes. Of its 2,953,344 housing units, 1,161 went into foreclosure. The counties with the most foreclosures per housing unit were (from highest to lowest): Sulivan, Daviess, and Noble.

9. Texas

The Lone Star State withstood 4,852 foreclosures in December. With a foreclosure rate of one in every 2,451 households, this puts the second-most populous state in the U.S., with a whopping 11,890,808 housing units, into ninth place. The counties with the most foreclosures per housing unit were (from highest to lowest): Liberty, Borden, and Kaufman.

8. Nevada

Ranked 32nd in population, the Silver State took the eighth spot for highest foreclosure rate in December. With one in every 2,386 homes going into foreclosure, and a total of 1,307,338 housing units, the state had 548 foreclosure filings. The counties with the most foreclosures per housing unit were (from highest to lowest): Clark, Lyon, and Nye.

7. Utah

The Beehive State placed seventh for highest foreclosure rate in December. Of its 1,193,082 housing units, 501 homes went into foreclosure, making the 17th most populous state’s foreclosure rate one in every 2,381 households. The counties with the most foreclosures per housing unit were (from highest to lowest): Iron, Tooele, and Wayne.

6. Illinois

The Land of Lincoln had the sixth-highest foreclosure rate in all 50 states in December. Of its 5,443,501 homes, 2,425 went into foreclosure, making the sixth-most populous state’s foreclosure rate one in every 2,245 households. The counties with the most foreclosures per housing unit were (from highest to lowest): Dewitt, Edgar, and Saint Clair.

5. Florida

The third-most populous state in the country has a total of 10,082,356 housing units, of which 4,757 went into foreclosure. This puts the Sunshine State’s foreclosure rate at one in every 2,119 homes and into fifth place in December. The counties with the most foreclosures per housing unit were (from highest to lowest): Hendry, Charlotte, and Osceola.

4. Delaware

The sixth-least populous state in the country, the Small Wonder nabbed fourth place in December. With one in every 2,044 homes going into foreclosure and a total of 457,958 housing units, the state saw 224 foreclosures filed. Having only three counties in the state, the most foreclosures per housing unit were (from highest to lowest): Kent, New Castle, and Sussex.

3. Maryland

Ranked 18th for most populous state, America in Miniature took 3rd place for highest foreclosure rate in December. With a total of 2,545,532 housing units, of which 1,298 went into foreclosure, the state’s foreclosure rate was one in every 1,961 households. The counties with the most foreclosures per housing unit were (from highest to lowest): Baltimore City, Dorchester, and Charles.

2. South Carolina

The 23rd most populous state had the second-highest foreclosure rate in December with one in every 1,917 homes going into foreclosure. Of the Palmetto State’s 2,401,638 housing units, 1,253 were foreclosed on in December. The counties with the most foreclosures per housing unit were (from highest to lowest): Dorchester, Kershaw, and Florence.

1. New Jersey

With a foreclosure rate of one in every 1,734 homes, the Garden State ranked first for highest foreclosure rate in December. The 11th most populous state contains 3,775,842 housing units, of which 2,178 went into foreclosure. The counties with the most foreclosures per housing unit were (from highest to lowest): Salem, Camden, and Cumberland.

The Takeaway

Of all 50 states, Texas had the most foreclosure filings (4,852), and Vermont had the least (13). As for the states with the highest foreclosure rates, Maryland, South Carolina, and New Jersey took the top three spots.

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SOHL-Q126-017

Jan

2026

A couple sits on the front steps of a pretty bungalow, toasting their home purchase with champagne glasses in hand.

What Credit Score Is Needed to Buy a House?

By Jody McMaster | Credit, Family Finances, Home Ownership, mortgage, personal_loan | No Comments

What’s your number? That’s not a pickup line; it’s the digits a mortgage lender will want to know — your credit score for a mortgage application. Credit scores range from 300 to 850, and for most mortgage-seekers, a good credit score to buy a house is at least 620. The lowest interest rates usually go to borrowers with scores of 740 and above whose finances are in good order, while a score as low as 500 may qualify some buyers for a home loan, but this is less common.

Table of Contents

Why Does a Credit Score Matter?
Do I Have One Credit Score?
What Is the Minimum Credit Score to Buy a House?
Steps to Improve Your Credit Score Before Buying a House
Other Factors Besides Credit Score That Affect Mortgage Approval

Key Points

• A credit score of at least 620 is generally needed to buy a house, but FHA loans may accept scores as low as 500 with a higher down payment.

• Paying attention to credit scores before applying for a mortgage can lead to lower monthly payments.

• A higher credit score can save borrowers money by securing lower interest rates over the loan’s term.

• When two buyers are purchasing a home together, lenders look at both buyers’ credit scores.

• Credit scores are not the only factor; lenders also evaluate employment, income, and bank accounts.

Why Does a Credit Score Matter?

Just as you need a résumé listing your work history to interview for a job, lenders want to see your borrowing history, through credit reports, and a snapshot of your habits, expressed as a score on the credit rating scale, to help predict your ability to repay a debt.

A great credit score vs. a bad credit score can translate to money in your pocket: Even a small reduction in a homebuyer’s mortgage rate can save thousands of dollars over time.

Do I Have One Credit Score?

You have many different credit scores based on information collected by Experian, Transunion, and Equifax, the three main credit bureaus, and calculated using scoring models usually designed by FICO® or a competitor, VantageScore®.

To complicate things, there are often multiple versions of each scoring model available from its developer at any given time, but most credit scores fall within the 300 to 850 range.

Mortgage lenders historically have focused on FICO scores. Here are the categories:

• Exceptional: 800-850

• Very good: 740-799

• Good: 670-739

• Fair: 580-669

• Poor: 300-579

Here’s how FICO weighs the information:

• Payment history: 35%

• Amounts owed: 30%

• Length of credit history: 15%

• New credit: 10%

• Credit mix: 10%

Mortgage lenders will pull an applicant’s credit score from all three credit bureaus. If the scores differ, they will use the middle number when making a decision.

If you’re buying a home with a non-spouse or a marriage partner, each borrower’s credit scores will be pulled. The lender will home in on the middle score for both and use the lower of the final two scores (except for a Fannie Mae loan, when a lender will average the middle credit scores of the applicants).

What Is the Minimum Credit Score to Buy a House?

The median FICO score for homebuyers in late 2025 was a very healthy 735, according to Realtor.com® data. Fortunately, not everyone buying a home will need a score this high to qualify for a home loan. After all, the median credit score in the U.S. is 715. (Using the median versus the average credit score necessary to buy a house helps ensure that unusual buyers with extremely high or low scores don’t throw off the calculations.) How low can you go and still buy a house? The answer hinges on your mortgage.

Credit Score Requirements by Loan Type

What credit score do you need to buy a house? The answer will depend on the type of mortgage loan you’re seeking. If you are trying to acquire a conventional mortgage loan (a loan not insured by a government agency) you’ll likely need a credit score of at least 620. The best credit score to buy a house is 740 or better, because that will help you obtain a lower interest rate. But many buyers purchase a home with a lower score.

With an FHA loan (backed by the Federal Housing Administration), 580 is the minimum credit score to qualify for the 3.5% down payment advantage. Applicants with a score as low as 500 will have to put down 10%.

Lenders like to see a minimum credit score of 620 for a VA loan, though some will go lower, to 600.

A score of at least 640 is usually required for a USDA loan, though borrowers with strong compensating factors, such as a healthy savings, might qualify at 620.

A first-time homebuyer with good credit will likely meet FHA loan requirements, but a conventional mortgage will probably save them money over time. One reason is that an FHA loan requires upfront and ongoing mortgage insurance that lasts for the life of the loan if the down payment is less than 10%.

First-time homebuyers can
prequalify for a SoFi mortgage loan,
with as little as 3% down.

Questions? Call (888)-541-0398.

Steps to Improve Your Credit Score Before Buying a House

Working to build credit over time before applying for a home loan could save a borrower a lot of money in interest. A lower rate will keep monthly payments lower or even provide the ability to pay back the loan faster. Here are some ideas to try:

1. Pay all of your bills on time. “Payment history makes a bigger impact on a person’s credit score than anything else — 35%. So the most important rule of credit is this: Don’t miss payments,” says Brian Walsh, CFP® and Head of Advice & Planning at SoFi.

2. Check your credit reports. Be sure that your credit history doesn’t show a missed payment in error or include a debt that’s not yours. You can get free credit reports from the three main reporting agencies. To dispute a credit report, start by contacting the credit bureau whose report shows the error. The bureau has 30 days to investigate and respond.

3. Pay down debt. Installment loans (student loans and auto loans, for instance) affect your DTI ratio, and revolving debt (think: credit cards and lines of credit) plays a starring role in your credit utilization ratio. Credit utilization falls under FICO’s heavily weighted “amounts owed” category. A general rule of thumb is to keep your credit utilization below 30%.

4. Ask to increase the credit limit on one or all of your credit cards. This may improve your credit utilization ratio by showing that you have lots of available credit that you don’t use.

5. Don’t close credit cards once you’ve paid them off. You might want to keep them open by charging a few items to the cards every month (and paying the balance). If you have two credit cards, each has a credit limit of $5,000, and you have a $2,000 balance on each, you currently have a 40% credit utilization ratio. If you were to pay one of the two cards off and keep it open, your credit utilization would drop to 20%.

6. Add to your credit mix. An additional account may help your credit, especially if it is a kind of credit you don’t currently have. If you have only credit cards, you might consider applying for a personal loan.

How Long It Takes to See Changes in Credit Score

Working on your credit scores may take weeks or longer, but it can be done. Should you find an error in a credit report, you can expect it to take up to a month for your score to change. And if you haven’t been paying bills on time, it could take up to six months of on-time payments to see a significant change.

Other Factors Besides Credit Score That Affect Mortgage Approval

Credit scores aren’t the only factor that lenders consider when reviewing a mortgage application. They will also require information on your employment, income, debts, and bank accounts. Your down payment will be a factor as well. Putting 20% down is desirable since it often means you can avoid paying PMI, private mortgage insurance that covers the lender in case of loan default. But many homebuyers — particularly first-time buyers — put down less than 20% and simply factor PMI into their monthly budget.

Other typical conventional mortgage loan requirements a lender will consider include:

Debt-to-Income Ratio

Your debt-to-income ratio is a percentage: the total of your monthly debts (car payment, student loan payment, alimony, etc) divided by your gross monthly income. Most lenders require a DTI of 43% or lower to qualify for a conforming loan. Jumbo loans may have more strict requirements.

Employment and Income History

A mortgage lender will want to verify your employment and income and may request pay stubs and w-2 statements. Don’t be surprised if the lender also reaches out to your employer to confirm your employment. If you are self-employed, you may be asked for a profit-and-loss statement for your business and for more than a year or two of tax returns. Lenders are looking for borrowers who have a steady income source and can be relied upon to repay a large sum over a long period of time.

Available Savings and Assets

Having cash reserves or investments that you can liquidate in the event that you need to pay your mortgage bill is another factor a prospective lender will consider. So lenders will ask you for information about your accounts, including savings and 401(k) accounts. The lender is also looking to be sure that you have the resources to cover the down payment amount and closing costs related to the home purchase.

A lender facing someone with a lower credit score may increase expectations in other areas like down payment size or income requirements.

If you want to see how all these factors come together in your financial profile to determine what size loan you might be approved for, you can first prequalify for a mortgage with multiple lenders. Ultimately, you may want to seek out mortgage preapproval from at least one lender so you have a very clear picture of your home-buying budget and can move forward swiftly when you find a home you love.

Recommended: 31 Ways to Save for a House

The Takeaway

What credit score is needed to buy a house? The number depends on the lender and type of loan, but most homebuyers will want to aim for a score of 620 or better. A better credit score is not always necessary to buy a house, but it may help in securing a lower interest rate.

SoFi Mortgages: simple, smart, and so affordable.

FAQ

What credit score is considered good for buying a house?

Generally speaking, you’ll want a credit score of 620 or better if you are looking at a conventional loan or VA loan. A USDA loan would require at least 640 from most borrowers. An FHA loan offers more lenient terms: You could qualify with a score as low as 500, though 580 will allow you to put down a low, 3.5% down payment.

Can I buy a home with a low credit score?

It is possible to get a mortgage and purchase a home with a credit score as low as 500 if you obtain an FHA loan and put down a 10% deposit. If you are looking at a different loan type, then you will likely need at least a 620 score, though if you have a healthy savings and solid income, you may be able to squeak by with a slightly lower credit score.

Do mortgage lenders use FICO or VantageScore?

Mortgage lenders have historically relied on FICO scores but now can use either FICO or VantageScore for loans delivered to Fannie Mae and Freddie Mac, the two entities that buy mortgages from lenders, thereby guaranteeing most of the mortgages in the U.S.

How can I improve my credit score before applying for a mortgage?

The most important thing you can do to help nurture your credit score before applying for a loan is to make your payments in full and on time. Other things, such as requesting credit line increases (but not spending up to the limit) or diversifying your credit mix by adding a personal loan to your credit cards, can help. So can not closing old, unused credit cards. But by far, on-time payments should be your number-one goal.

What other factors do lenders look at besides credit score?

A lender considering a mortgage application will look at your income (both the raw number and how consistent your earnings have been). Your debts, and the ratio of debts to income, will also be important, as will your savings in cash and other assets. Your down payment amount could also factor into a lender’s decision about qualifying you for a loan.

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 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.
^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. Third Party Trademarks: Certified Financial Planner Board of Standards Center for Financial Planning, Inc. owns and licenses the certification marks CFP®, CERTIFIED FINANCIAL PLANNER®
Checking Your Rates: To check the rates and terms you may qualify for, SoFi conducts a soft credit pull that will not affect your credit score. However, if you choose a product and continue your application, we will request your full credit report from one or more consumer reporting agencies, which is considered a hard credit pull and may affect your credit.
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 .

SOHL-Q126-006

Jan

2026

Two pairs of hands, each holding a model of a house, extend into the center of the frame, one from the left and the other from the right.

Real Estate Trading: Can You Trade Houses with Someone?

By Sheryl Nance-Nash | Home Ownership, mortgage | Comments Off

House trading involves selling your home to someone while buying their property. You essentially swap residences. This can spare both parties the irritation of showings and the expense of agent commissions while giving each party their new next home.

Trading homes isn’t done every day, but it can occasionally be an option that works for the parties involved. Learn more here.

Table of Contents

What Is House Trading?
How Does House Trading Work?
What If the Homes Are Unequal in Value?
How Common Is House Trading?
Pros and Cons of Trading Your House
Who Typically Trades Homes?
Trading Houses vs. Conventional Selling
Legal and Financial Considerations When Trading Homes
FAQ

Key Points

• House trading is a permanent, simultaneous swap of homes between two parties.

• The process requires two simultaneous processes, including mortgage qualification, inspection, and title search for both homes.

• The buyer of the more expensive home pays the difference to its seller at closing.

• Benefits include potential savings on agent commissions and an easier time qualifying for a new mortgage.

• Downsides include a limited market for partners and the risk of briefly paying two mortgages.

What Is House Trading?

House trading means that you sell your home to someone and simultaneously buy their place.

You’re likely familiar with home exchange programs when it comes to vacations. You dash off to a lovely apartment in Paris, and the owners come to your city to enjoy all that it has to offer. Both parties enjoy a vacation with a much lower price tag. Maybe you’ve even thought, “Can I trade my house for another house?” and daydreamed about a permanent swap with another homeowner.

With real estate trading, this kind of switch is made permanent. Perhaps you’re outgrowing your compact two-bedroom house as your family expands, and the empty nesters down the street in a four-bedroom are looking to downsize their home. You could proceed with a house trade, selling and buying each other’s places simultaneously.

💡 Quick Tip: SoFi’s mortgage loan experience means a simple application — we even offer an on-time close guarantee. We’ve made $9.4+ billion in home loans, so we know what makes homebuyers happy.‡

How Does House Trading Work?

Think of trading real estate as a win-win. You want to sell your house. You find a home you like, and the homeowner is interested in buying your home too. It happens.

What comes next? Can you trade houses with someone? Yes. There will be two transactions at once. You sell your home to the Joneses, and they buy yours, typically on the same day. Because you’re selling and buying at the same time, it’s much like a trade. This is not a simple transaction, though. You want the stars aligned on that day.

However, there are some similarities to buying a home the traditional way. Expect the home-buying process checklist to be the same:

• Qualifying for a home loan

• Getting a home inspection

• Doing a title search

• Closing with simultaneous transactions.

You pay off one mortgage, if you have one, and take on a new one if needed. At the same time, the other party will sign their purchase and sale agreement.

As much as doing all this at once may feel overwhelming, the upside is that you won’t have two mortgages on your hands at the same time. If both homes are owned free and clear, then the only money matters are transfer taxes and closing costs.

You’ll probably want a real estate lawyer who knows how these deals work at your side.

What If the Homes Are Unequal in Value?

It’s quite probable that the two homes won’t be of equal value. That’s not a deal-breaker, though. What matters is whether each house meets the needs and desires of the other party.

It’s important for both parties to order home appraisals. If one home is more valuable than the other, the buyer of the more expensive home pays the seller the difference at closing.

How Common Is House Trading?

Home trading is not something that happens every day, but as people continue to search for creative ways to fulfill their dreams and technology helps connect like-minded folks, house trading has its place in the array of home-buying options out there.

Pros and Cons of Trading Your House

Here’s a look at the upsides and downsides of trading houses. On the one hand, there’s something to be said for this unconventional way of buying and selling a home.

• You may be able to buy a house without a Realtor®. If there is no real estate agent involved in the trade, both buyer and seller keep the money they would have shelled out to their agent.

• You eliminate some of the hassle of moving day. Because both parties are working in concert, it makes orchestration of the move easier.

• You skip the whole dog-and-pony show of potential buyers traipsing through your home and the stress of having it look perfect for showings.

• You also may find that getting financing when trading a home is easier. Some homeowners encounter hurdles qualifying for a mortgage before their home is sold. However, if you have a contract to sell your current house (which you would in a home trade), your lender won’t count your monthly mortgage payments as debt if you apply for a mortgage.

Having this improved debt-to-income ratio can allow you to qualify for better terms on your new mortgage, which just might save you a ton of money as well.

Real estate trading isn’t without its issues, however. These are some of the concerns related to trading houses instead of selling in a conventional manner.

• If you’re in a hurry to move, you may not be able to find someone who wants a house swap as quickly as you want to move.

• In a big-picture way, house trading may mean you have fewer options, you may not get the neighborhood you have in mind, or you may not find a home with all your dream features.

• If you owe more on your mortgage than your home is worth, you may have trouble getting financing. The only way a trade would work is if you pay the lender the difference between what you sell your house for and what is still owed on the mortgage.

• Issues could arise as you think about how to swap houses with mortgages. If for some reason the purchase and sale don’t happen at the same time, you could be stuck for a time with two mortgages.

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Pros:

• You may not need to use a real estate agent

• Getting financing may be easier

• Avoid the hassle of showing your home to multiple potential buyers

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Cons:

• May not find a home as quickly as you want

• Fewer options

• Could have to temporarily pay two mortgages

Who Typically Trades Homes?

Home trading is usually a transaction between individual homeowners, although sometimes investors who own properties might trade homes within their portfolio with one another. Friends or relatives, older homeowners who wish to downsize, and people moving for work are among those who may be more likely than the average homeowner to engage in a house trade.

Common Scenarios for House Swaps

Here are a couple examples of how a house trade might play out:

The upsize, downsize trade A couple living in a small two-bedroom home is expecting their second child. They decide they would like to look for a larger place. They want to stay in their neighborhood, as it has great schools and their eldest child is starting kindergarten in the fall. And given that the baby is due in a few months, they want to move soon.

Meanwhile, an elderly couple living in a large house around the corner is thinking about downsizing into a smaller place. They, too, wish to remain local, as their children and grandchildren are in the area. Word travels quickly that each is looking to buy a house, and soon enough they are connected by a neighbor and start talking about a trade. Both properties are appraised, and the young couple agrees to pay the downsizers the difference between the two home prices. The larger house is a bit bigger than they were looking for, but there is very little for sale in the local market so they decide to move forward.

Once they are able to secure a mortgage for the new, larger home, the two families schedule a double closing. Each is represented by a lawyer in the transaction, and they also have to pay for title searches and title insurance. But no real estate agent is involved in the trade.

The job-transfer trade A marketing manager in a midwestern office of a large packaged-goods company sees an opportunity to move into a better job with her company by transferring to the Philadelphia headquarters. She owns a small house that she inherited from her grandparents, and she puts it on the market, but also posts on her social-media accounts that she is open to trading her midwestern house for a place in Philly.

To her surprise, she receives a message from a woman in Philadelphia who is looking to sell her condo and move back to her midwestern hometown. The two schedule virtual house “tours” and swap appraisal information. The Philly resident is head over heels for the midwesterner’s house. Meanwhile, the condo is satisfactory to the midwesterner as well — maybe it doesn’t have everything she wants, but as a first stop in the city, it’s fine, and she thinks it will hold its value.

In this case, the properties are valued about equally, and the two agree to a trade. Since neither of them has or needs a mortgage, the deal moves ahead with speed.

When House Trading Makes the Most Sense

As demonstrated in the two scenarios above, house trading makes the most sense when owners want to move soon and are willing to be somewhat flexible about what property they are buying. House trade has the added benefit of saving on real estate agents’ fees, so it may be especially appealing to cost-conscious consumers.

Trading Houses vs Conventional Selling

With home trading there’s a good chance you will be able to avoid using a real estate agent if you find your trading partner on your own, be it a relative, colleague, friend of a friend, or from a website. You can also avoid the hassle of staging your home and showing it to prospective buyers.

There are some things that are pretty much the same. Both parties may need new mortgages, and both may want home inspections. Both will probably want attorneys present.


Trading Homes	Conventional Sale
Likely no real estate agent	Usually buyer’s and seller’s agents involved
Small market	Wide market
Deal with one buyer	Handle multiple offers

Legal and Financial Considerations When Trading Homes

Owners who are trading properties will want to hire an attorney who is familiar with real estate trades to help ensure that the trade is binding and all the appropriate paperwork is filed. And they will go through most of the same steps as anyone purchasing a house in the conventional way.

Mortgage Transfers and Financing

If one or both of the homeowners in a house trade needs a home loan, the first step will be to secure financing if one or both parties doesn’t already have mortgage preapproval. A lender will require an appraisal of the home, and each owner will need to determine the size of their down payment, screen potential lenders, and decide on a lending partner.

In rare cases, one or both parties may have a mortgage that is assumable, meaning the mortgage can be transferred with the house to the new owner of the property. This can be an attractive feature when mortgage rates are high, but it’s a pretty unusual situation. Both parties will also need to arrange for homeowner’s insurance on their new property.

Title, Inspection, and Closing Requirements

A title search will be necessary to ensure that the person selling the home does in fact own it. And one or both homebuyers may want to arrange for an inspection of the property they are acquiring to safeguard against any costly surprises after they take possession. If the inspection reveals any serious issues, it may be necessary to remedy them or to negotiate a change in home price before the closing. Good communication is essential throughout these processes so that both parties involved in a house trade can arrive at the closing date with all their ducks neatly in a row.

The Takeaway

Trading homes is a viable option for house hunters who find a trading partner who wants to own their home. While the home exchange approach is decidedly nontraditional, the steps of securing a home loan (if needed) and closing will be familiar.

SoFi Mortgages: simple, smart, and so affordable.

FAQ

Does house trading have tax benefits?

A house trade is still a sales transaction, so the tax situation is the same as it would be in an ordinary sale. When you sell your residence, you have to pay capital gains tax if your profit is more than $500,000 (for a married couple) or $250,000 (for a single person). It’s a good idea to seek advice from a tax advisor when preparing your return after a home sale.

Can two people just trade houses without buying and selling?

In theory, two people could trade houses without two sales transactions, but the likelihood that this would happen is small. The two houses would need to be of equal value, which is unlikely. The deed would still need to be recorded which involves a title search and lawyers. And if one or both parties has a mortgage, that would further complicate matters.

What salary do you need for a $400,000 mortgage?

Assuming a down payment of 7% (on a home priced at $430,000), and an interest rate of 7.00% on a 30-year loan, you would need to earn $130,000 per year to qualify for a $400,000 mortgage. Your credit score, income, and debts will influence the exact salary number for you.

How do mortgages work when you trade houses?

If one or both parties in a house swap has a mortgage, the process will probably work much the way it does if you were selling or buying a house as an isolated transaction. You’ll pay off your mortgage and take out a new loan, and the other party will do the same. If all goes well, having both transactions happening at the same time can prevent either of the parties from having to hold two mortgages simultaneously.

Is house trading a good option in a slow real estate market?

House trading may be a smart choice in a slow real estate market because, provided you can find someone to trade with, you won’t have to list your home and keep it open for viewings for months on end. Nor will you have to sit through round after round of price cuts in order to get a buyer. If you can find a trading partner, the deal can be done quickly and without involving a real estate agent (though you will want to hire a lawyer familiar with house trades).

Photo credit: iStock/AndreyPopov

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 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 On-Time Close Guarantee: If all conditions of the Guarantee are met, and your loan does not close on or before the closing date on your purchase contract accepted by SoFi, and the delay is due to SoFi, SoFi will give you a credit toward closing costs or additional expenses caused by the delay in closing of up to $10,000.^ The following terms and conditions apply. This Guarantee is available only for loan applications submitted after 04/01/2024. Please discuss terms of this Guarantee with your loan officer. The mortgage must be a purchase transaction that is approved and funded by SoFi. This Guarantee does not apply to loans to purchase bank-owned properties or short-sale transactions. To qualify for the Guarantee, you must: (1) Sign up for access to SoFi’s online portal and upload all requested documents, (2) Submit documents requested by SoFi within 5 business days of the initial request and all additional doc requests within 2 business days (3) Submit an executed purchase contract on an eligible property with the closing date at least 25 calendar days from the receipt of executed Intent to Proceed and receipt of credit card deposit for an appraisal (30 days for VA loans; 40 days for Jumbo loans), (4) Lock your loan rate and satisfy all loan requirements and conditions at least 5 business days prior to your closing date as confirmed with your loan officer, and (5) Pay for and schedule an appraisal within 48 hours of the appraiser first contacting you by phone or email. This Guarantee will not be paid if any delays to closing are attributable to: a) the borrower(s), a third party, the seller or any other factors outside of SoFi control; b) if the information provided by the borrower(s) on the loan application could not be verified or was inaccurate or insufficient; c) attempting to fulfill federal/state regulatory requirements and/or agency guidelines; d) or the closing date is missed due to acts of God outside the control of SoFi. SoFi may change or terminate this offer at any time without notice to you. *To redeem the Guarantee if conditions met, see documentation provided by loan officer. 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.
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 Trademarks: Certified Financial Planner Board of Standards Center for Financial Planning, Inc. owns and licenses the certification marks CFP®, CERTIFIED FINANCIAL PLANNER®

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

SOHL-Q126-002

Jan

2026

A woman with curly hair sits in a sunlit room at a desk, smiling down at her computer as she types.

How to Use Home Equity to Build Wealth

By Lauren Ward | Growing Wealth, Home Ownership, mortgage | Comments Off

The average homeowner with a mortgage was sitting on $212,000 in home equity in mid-2025, according to ICE Mortgage Monitor. Obviously, the equity number varies for each individual and depends on factors such as the original down payment, local property values, and the amount of time in the home. But if you have more than 20% equity in your home, using a home equity line of credit (HELOC) to build wealth is a strategy to consider. Let’s explore the basics of how to use home equity to build wealth.

Table of Contents

Ways to Build Wealth With a HELOC
What to Consider Before Getting a HELOC
How a HELOC Works to Build Wealth Over Time
Pros and Cons of Taking Equity Out of Your Home
The Takeaway
FAQ

Key Points

• A home equity line of credit allows you to borrow against your home equity as needed and, used with care, can build wealth.

• Strategic uses include funding home improvements with high ROI, consolidating high-interest debt, and investing in income-generating real estate.

• Investing in education or a business can increase your future earning power.

• You must earn a higher return on your investment than the HELOC’s variable interest rate to truly build wealth.

• Key considerations include the risk of losing your home if you default and unpredictability of variable interest rates.

Ways to Build Wealth With a HELOC

A home equity line of credit lets you borrow funds as needed (up to a prearranged limit) through a credit draw. This is different from a home equity loan, in which you would borrow a one-time sum of cash. Drawing on your home equity for certain expenses could help grow your wealth over time, if it financially makes sense. Here are some options to consider.

1. Home Improvements

A HELOC works well for larger home improvement projects and renovations because you can draw funds to pay for materials and contractors as needed. You accrue interest only on the outstanding balance, so it could be cheaper to opt for a HELOC vs. a home equity loan. And if you itemize your taxes, you could deduct HELOC interest payments.

Plus, a renovation project could build wealth by increasing the value of your home. Home improvement experts estimate that a kitchen refresh could deliver a 377% return on investment and refinishing hardwood floors could have a 348% ROI.

2. Debt Consolidation

Paying off debt with a lower interest rate could save you a lot of money over the long run. Let’s look at an example:

Say you have a $10,000 credit card balance with a 22.00% APR. In order to pay off that card in five years, you’d pay $276.19 per month and pay $6,571.35 in interest.

If you qualify for a HELOC with an 8.00% APR, on the other hand, you could make interest-only payments for one year, then spread out the principal and remaining interest over four years, for a total of five years. During the interest-only period, your payment would be $66.67, followed by $244.13 for the remaining four years. On top of that, you’d only pay a total of $2,518.19 in interest for the entire five years.

That’s a potential savings of $4,053.16 in interest payments by consolidating to a lower rate! And here again, HELOC interest is deductible in 2026 for those who itemize. A tax advisor can keep you up to date on deductibility in future years.

3. Real Estate Investments

Using a HELOC to buy investment property can help you start climbing the real estate ladder. Homeowners could use the funds to make a down payment, cover closing costs, and/or make some upgrades before renting out the property.

You’ll still need to qualify for the new property’s monthly mortgage loan payments, particularly if there isn’t a current rental income history for the lender to review. Assuming you’re eligible for the loan, the goal is to use the rental income to pay off the HELOC and make a profit. On top of that, the property itself could increase in value over time, building your overall wealth.

That all sounds simple, but using a HELOC to invest in real estate is something you should only do if you have studied the ins and outs of this business model and factored property management expenses, repair costs, and vacancy rates into your profit and loss calculations.

4. Education and Skills Development

Investing your home equity in your education or skills development could increase your earning power and, consequently, your wealth. Research shows that people with advanced degrees tend to earn more than those without them.

For instance, a study published in Demography revealed that women with bachelor’s degrees earn $630,000 more in a lifetime than those with a high school degree. For men, the increase in lifetime earnings is $900,000. The numbers are even more dramatic with graduate degrees. Women’s lifetime earnings are $1.1 million higher than their high school graduate counterparts, whereas men earn $1.5 million more. Clearly, investing in your professional skills can translate into greater wealth.

5. Start or Expand a Business

The majority of small business owners invest their personal funds in the growth of their companies. Research also shows that upfront funding correlates with greater revenue. So while there’s no way to know that home equity financing you use for your business will guarantee success, it could improve your odds to scale more quickly. It’s important to remember, though, that a HELOC uses your home as collateral. If you use a HELOC to finance a business, it’s a good idea to have a backup plan for how you’ll cover your payments if the business doesn’t get off the ground.

6. Investment Portfolio Growth

Growing a diversified investment portfolio is another option for using a HELOC to build wealth. Obviously, there is risk involved when using a HELOC to invest in the stock market. Focusing on long-term investments could help reduce the risk of short-term market volatility. Remember, though, that for investments made with money from a HELOC to truly pay off, you would have to earn more on the investment than you pay in interest for the HELOC.

7. Emergency Fund or Cash Reserve

Most financial experts recommend having three to six month’s worth of savings on hand in cash in case you lose a job or the ability to earn an income. However, the economic volatility that came during the pandemic has people rethinking that number and even recommending up to a year of expenses in savings. Using a type of home equity loan like a HELOC could give you the peace of mind of having a financial cushion to fall back on, while allowing you to carefully invest that six months of savings instead of keeping it in cash.

Turn your home equity into cash with a HELOC brokered by SoFi.

Access up to 90% or $500k of your home’s equity to finance almost anything.

What to Consider Before Getting a HELOC

There are several factors to consider before you decide on a HELOC instead of some other type of financing, such as a cash-out refinance or unsecured personal line of credit.

• Your home is used as collateral: As we’ve said already, if you default on your HELOC payments, you could lose your house.

• You must maintain 10% to 20% equity in your home: You can’t tap into your entire equity amount; lenders require you to keep some in reserve, which means you may not be able to borrow as much as you originally thought.

• HELOCs have two stages: The first is the draw period, in which you only have to make interest payments. After the draw period, you’ll make payments on both principal and interest. The draw period usually lasts five to 10 years. So it’s critical to be prepared for the bump up in monthly payments when it happens.

Variable Interest Rates and Payment Changes

One of the most important things to understand about a HELOC is that this method of borrowing comes with a variable interest rate. Your rate won’t stay the same throughout the life of the HELOC, and so your monthly payment amount could increase if rates rise. That could mean a bigger balance and bigger payments down the road. Of course, variable rates can also drop — which would be good news. But it’s important to be prepared for the worst, even as you’re hoping for the best where interest rates are concerned.

Impact on Home Equity and Long-Term Value

Another key thing to understand about a HELOC is how it will affect your home equity. A HELOC is technically a second mortgage (assuming you are still paying off your first home loan). This means that as you draw on a HELOC, your home equity could actually decline — until you have repaid what you borrowed. If you’re using a HELOC to make improvements in your home, it’s possible your home value will increase and your equity percentage will hold steady. But using a HELOC for other purposes means your equity level will take a hit, even though, long term, you could be growing your net worth.

How a HELOC Works to Build Wealth Over Time

Many HELOC borrowers feel it’s worth it to take a temporary hit on their home equity level because they are optimistic about building wealth using home equity. To use a HELOC to build wealth, you will first need to qualify for this type of financing. To get a HELOC, you’ll need a credit score of at least 640, though some lenders will require a score of 680 or better. You will also need to have at least 15% (ideally 20%) equity in your home. To compute your equity, subtract what you owe on your mortgage from the home’s market value, then divide the answer by the market value for an equity percentage. In case you are wondering: Yes, you can get a HELOC if you have an FHA loan.

Leveraging Equity Strategically

Being smart about leveraging equity means watching the variable interest rate on this type of financing to make sure that whatever you’re spending the funds on is on track to have a higher rate of return than the interest rate you’re paying to borrow the money. So for example, using a HELOC with a 7.00% interest rate to purchase a 6-month CD that pays 4.00% isn’t the smartest way to leverage your equity. Investing in a postgraduate degree that has the potential to significantly increase your income for the remainder of your career would likely have a better payoff. Weighing costs versus benefits (including the interest you’ll pay on the HELOC) is important no matter how you choose to use the funds.

The Importance of Repayment Planning

The other key aspect of using a HELOC to build wealth is preparing for the time when you exit the draw phase of the HELOC and begin to make monthly principal-plus-interest payments to pay down what you have borrowed. If you’re using a HELOC to buy investment property, for example, you’ll want to make sure that you have a robust rent income stream teed up when the repayment phase comes and that you have made any major repairs to the property.

Your HELOC agreement will specify how often the interest rate can change on the HELOC and by how much. So part of preparing for repayment is computing what payments would be at various interest rates using a HELOC repayment calculator.

Pros and Cons of Taking Equity Out of Your Home

It’s certainly possible to build wealth using a HELOC, but there are advantages and disadvantages to think about.

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Pros:

• Low interest rate compared to other financing

• Interest accrues only on the balance, not available credit

• Borrow again when you replenish the credit line

• No restrictions on how you use the money you borrow

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Cons:

• Home is used as collateral, putting it at risk

• Payment amount increases after draw period is over

• May come with closing costs and maintenance fees

The Takeaway

Tapping into your home equity using a HELOC is one way to potentially build wealth, especially because rates tend to be low when compared to other forms of borrowing. It’s critical to weigh the pros and cons, since defaulting on payments could result in losing your house. But if you have the financial confidence to move forward, there are several ways that your home equity could help you build wealth.

SoFi now partners with Spring EQ to offer flexible HELOCs. Our HELOC options allow you to access up to 90% of your home’s value, or $500,000, at competitively lower rates. And the application process is quick and convenient.

Unlock your home’s value with a home equity line of credit from SoFi, brokered through Spring EQ.

FAQ

Is it smart to use a HELOC for investment property?

Using a HELOC for an investment property could help you fund the transaction sooner than if you used other types of financing. You may be able to make a bigger down payment or even make an all-cash offer. Just be sure that you feel confident in your real estate market research and your ability to make payments even if a worst-case scenario occurs.

What should you not use a HELOC for?

A HELOC should not be used for depreciating assets, especially when your goal is to build wealth. Things like vacations and car purchases aren’t usually recommended since they don’t hold their financial value.

What are the pitfalls of a HELOC?

The biggest pitfall is that your home is used as collateral to secure a HELOC and can go into foreclosure if you miss payments. On top of that, variable interest rates result in the potential for larger-than-expected payments if rates increase over time.

What credit score do you need for a HELOC?

In order to qualify for a HELOC, you’ll likely need a credit score of at least 640. In fact, some lenders like to see a score of 680 or better. And for the best interest rates, you would be wise to try to push your credit score to 700 or better before applying for a HELOC.

Can using a HELOC improve your net worth?

Used strategically, a home equity line of credit can help you grow your net worth in one or more ways. If you use funds from a HELOC to make improvements that increase the value of your home, then your net worth will increase too (after you have repaid what you borrowed). Some borrowers use a HELOC to fund investments in their education that lead to income gains. Investments in a business or even in the stock market are other, riskier ways to use HELOC funds that have the potential to increase net worth.

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SoFi Mortgages
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SOHL-Q126-005

Jan

2026

In a sea of little white plastic houses, a red house stands out under an inspector’s magnifying glass.

How Much Does a Home Inspection Cost and Who Pays for It?

By Kim Franke-Folstad | Home Ownership, mortgage | Comments Off

A home inspection costs $300 to $425, and while it may not be required by law or your lender, if you’re purchasing a home, you’ll likely want to consider having a professional take a close look. You may even choose to make your contract contingent on the results. Here’s what you can expect to get for your money.

Table of Contents

What Do Home Inspectors Do?
What Isn’t Included in a Basic Home Inspection?
Why Get a Home Inspection?
Is an Inspection Necessary for a New or Renovated Home?
What Factors Into the Price of a Home Inspection?
Average Cost of a Home Inspection by Region
How Long Does an Inspection Take?
What Happens After the Home Inspection?
Tips on Choosing an Inspector
FAQ

Key Points

• A home inspection typically costs $300 to $425 and is highly recommended before purchasing a home, even if not required by a lender.

• Home inspectors examine structural soundness, roof, exterior, heating/cooling, plumbing, electrical, and insulation/ventilation, among other things.

• A home inspection can help buyers negotiate repairs, request seller concessions, or even back out of a deal if significant problems are found.

• Factors influencing the cost of a home inspection include the home’s size, age, location, and the inspector’s experience.

• A basic inspection is visual and noninvasive, and specialized inspections for issues like mold, termites, or lead paint will incur additional costs.

What Do Home Inspectors Do?

The goal of a professional inspection is to help you avoid being surprised by structural defects, plumbing and electrical issues, or other significant problems when buying a home. In highly competitive local real estate markets, some buyers take the risk of waiving the home inspection (some even go so far as to buy a house sight unseen). But certified home inspectors are trained to find the problems you might not see when you walk through a home that’s for sale (even if you’ve seen the property multiple times).

Many states require inspectors to be licensed, and there are several professional organizations that require their members to follow certain standards of practice. Two of the largest national organizations for certified inspectors are the International Association of Certified Home Inspectors (InterNACHI) and the American Society of Home Inspectors (ASHI), but there are also many state associations.

Below is a list of some of the things on a home inspection checklist that an inspector will look at.

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

First-time homebuyers can
prequalify for a SoFi mortgage loan,
with as little as 3% down.

Questions? Call (888)-541-0398.

Roof Condition

Inspectors aren’t required to stand on a roof to inspect its condition, but they will review the materials used to cover the roof; the gutters and downspouts; any vents, flashing, skylights, etc.; and the general structure of the roof. They’ll also report any evidence of active leaks.

Exterior

This part of the inspection will generally include the exterior walls; the eaves, soffits, and fascia; windows and doors (including garage doors); walkways and driveways; stairs, steps, and ramps; porches, patios, decks, and the like; railings; and any issues that could cause problems with water intrusion.

Structural Soundness

This typically includes looking for cracks or other problems with the home’s foundation, the basement or crawlspace, and other structural components.

Heating and Cooling

The inspector will report on the types of systems used to heat and cool the home and if they are in working order.

Plumbing

This may include checking the main water supply shut-off valve and water heater; running the faucets and flushing all toilets; and reporting drainage problems for sinks, tubs, and showers. The inspector will look for damage, loose connections, leaks, and equipment that wasn’t properly installed.

Electrical

Besides checking a representative number of switches, light fixtures, and receptacles, the inspector will look at the type of wiring used in the home, the electrical panel, the main service disconnect, and any equipment that wasn’t properly installed or repaired. The absence of smoke detectors and carbon monoxide detectors also will be noted.

Insulation and Ventilation

The inspector may note any issues with the insulation used in the home, including the depth and type, and the exhaust systems in the kitchen, bathrooms, and laundry room.

Recommended: First-Time Homebuyer Guide

What Isn’t Included in a Basic Home Inspection?

A basic inspection is a noninvasive, visual assessment of accessible areas of the property, so inspectors may not move rugs, furniture, or other items that block their view. If there’s a problem behind a wall or under the floors, the inspector may not catch it. And you shouldn’t expect the inspector to predict how long the roof, appliances, or HVAC system might last.

You may have to hire specialists as you’re preparing to buy a house, and that could add to your overall costs. Specialized inspections might include looking at the swimming pool, fireplace chimney and flue, a well and/or septic tank, and detached sheds and garages. You also may choose to get separate inspections to search for mold, termites, asbestos, lead paint, or radon gas, and to check for municipal code compliance.

While the cost of a single-family home inspection normally ranges from $300 to $425, the price can go significantly higher depending on the home’s square footage and the addition of specialized inspections.

You’ve probably already looked at numbers with a mortgage calculator or plan to. That’s more money you’ll need to come up with before or during your closing.

Why Get a Home Inspection?

A home inspection can cost hundreds of dollars, but getting one could save you thousands. After all, the home you’re buying could be the biggest investment you’ve ever made.

Once you receive your inspection report, it will be up to you to decide if and how you want to move forward with the purchase. As a buyer, you may have a few options, including:

• If there are problems, you can give the seller a list of requested repairs (based on the inspection, not your taste) that must be completed and paid for as a condition of the sale.

• You may request a credit, or a seller concession, that gives you enough to pay for the necessary repairs yourself.

• You could back out of the deal altogether.

You don’t have to do anything, by the way. If you want the home and you think the price is fair, you can proceed with the transaction even if the report lists major issues. And you’ll know what renovations you should prepare for financially if you move forward with the home purchase. It might even prompt you to begin saving for that work.

Home Inspection Pros and Cons

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Pros:

• Can give you an unbiased evaluation of the home you hope to buy

• Can help you decide if repairs are in your DIY skill set or would require a pro

• May help you assess if the asking price is fair or if you should negotiate

• May enable you to ask the seller to make repairs before you buy

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Cons:

• Adds a cost to the already expensive home-buying process

• Requires you to schedule the inspection and coordinate access to the home with your real estate agent or the homeowner

Is an Inspection Necessary for a New or Renovated Home?

Given the lengthy list of things you have to do when buying a home — everything from researching mortgage rates to getting mortgage preapproval to hiring movers — it might be tempting to waive the inspection. This is particularly true if you’re buying new construction or a home that looks new thanks to a remodel. Fresh paint, that “new home smell,” and some professional staging can be a distraction for eager buyers. But even new construction can have problems, and an inspection can help find red flags. And even if you waive inspection, an insurer may still require a four-point inspection before agreeing to issue an insurance policy on the home.

Recommended: Tips to Qualify for a Mortgage

What Factors Into the Price of a Home Inspection?

When you’re shopping for an inspector, you may want to ask for a written estimate of how much does an inspection cost and a breakdown of line items. Here are some things that could affect the price:

Size

The larger the home, the longer it could take to complete the inspection and the inspection report. Here’s a breakdown of approximate costs based on square footage:

Home Size	Approximate Cost
Under 1,500 sq. ft.	$250
1,500 to 2,500 sq. ft.	$325
2,500 to 3,000 sq. ft.	$380
3,000 to 4,000 sq. ft.	$420
Over 4,000 sq. ft.	$500-plus

Age

Because it may take more time — depending on the condition of the home and the design — the inspection for an older home may cost more than for a newer build of the same approximate size.

Location

If the inspector must travel a long distance to get to the home, the cost estimate may be higher. (The inspector may charge by the mile or a negotiated amount.)

The Inspector

How much experience does the inspector have? Are they licensed by your state and/or certified by a professional association like ASHI or InterNACHI? You may have to pay extra for this expertise.

Additional Costs

The first price you’re quoted may not be the final price you’ll pay for an inspection. If you want additional inspections that require more expertise or specialized equipment, you can expect to pay much more. Inspecting detached structures on the property also may increase the price. Ask about those separate costs and if they’ll be listed on your written estimate.

💡 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.

Average Cost of a Home Inspection by Region

The part of the country where the property is located could also have an impact on the cost of a home inspection. If the cost of living is high in an area, it may have an impact on the cost of home inspections.

National Cost Range

As noted above, the national range for a basic home inspection is $300 to $425. This doesn’t include specialized services such as radon or water testing, for example.

But inspections in some areas can be much more expensive.

Regional Price Differences and Trends

The part of the country where a property is located is another potential factor in cost. Spectora, which makes home-inspection software, compiled inspection data from its users to get to the bottom of the question “how much does a house inspection cost by region?” The company reported that the Northeastern U.S. had the highest inspection costs, with the average being $575. Inspectors in certain Zip codes in Florida and Texas reported the highest overall inspection costs, with West Palm Beach County, Florida, weighing in at an average of more than $1,500. Generally speaking, though, the South is the area with the least expensive home inspections, according to the Spectora report.

How Long Does an Inspection Take?

A home inspection typically takes two to three hours onsite, and you may have to wait one or two days to get your inspection report. You may find it helps to research inspectors even before you find a home so you can move quickly when you’re ready to buy. That way you’ll have plenty of time to read the report and decide what you want to do about any points of concern.

What Happens After the Home Inspection?

As soon as you receive the home inspection report, you’ll want to review it thoroughly. Home inspection contingencies, which can allow buyers to get out of the contract if they find something they don’t like, usually have a tight deadline. You may have to send formal notice to the seller that you’re canceling the contract within seven days after signing the purchase agreement. This means the inspection, the report, and any notice to the buyer will all have to happen in a tight window of time. And even if you don’t have an inspection contingency, you’ll no doubt be eager to see if the inspector found anything concerning.

Reviewing the Inspection Report

Your first step in reviewing the inspection report is to study the summary. This will highlight any specific issues that the inspector felt were cause for concern, and may include page numbers where you can find detailed information about any red-flag issues. After you’ve reviewed the major concerns, if any, it’s a good idea to read the inspection report from cover to cover. Problem spots include structural concerns, a deteriorated roof (since a roof can be quite expensive to replace), and water or mold inside the building. Take notes on any issues raised by the inspector that you feel would be costly or otherwise difficult to address — these may be issues to bring up with the seller.

Also keep in mind that there are things the inspector cannot see and won’t address in the report. You may want to schedule an inspection of a septic system, for example, or testing of well water or testing for radon.

Negotiating Repairs or Price Adjustments

Once you’ve made a list of any concerns, you’ll want to call your real estate agent to discuss approaching the seller. If the home wasn’t advertised to buyers “as-is,” you may be able to request that certain repairs be made before closing, or negotiate a lower selling price or a rebate from the seller to allow you headroom in your budget to cover the repair costs. And of course, if severe problems are identified, you may want to move on — that’s where the contingency clause comes into play. Especially in a hot market, you may not be able to use the report as a negotiation tool to lower the price or get the seller to pay for repairs. Still, you’ll have the information you need to make the best decision for your personal needs and goals.

Are Any Fixes Mandatory After an Inspection?

A home inspector’s report isn’t a list of “must-dos.” Most repairs are negotiable. And you may decide not to press the seller for any fixes. But it’s important to be aware of the cost of home repairs that may be needed down the line.

In some cases, a buyer may be denied financing or insurance if the bank or insurer isn’t satisfied with the results of an inspection and the planned repairs. Those items likely would include dangerous structural or electrical defects and/or building code violations.

Tips on Choosing an Inspector

Word-of-mouth references can be a great place to start when you’re looking for a home inspector. There are also plenty of online sites that can help you find local inspectors. And real estate agents often know inspectors whom they have found to be reliable and thorough in the past. Once you have a few names, you can:

Look for Online Reviews

There are several sites that list inspectors, and some offer reviews. You also can ask the inspector for references.

Check Credentials

Is the inspector a member of a professional organization? You may want to ask to see a membership card. And don’t forget to ask for proof of licensing if it’s required in your state.

Ask About Experience

How long has the inspector been in the business? Experienced inspectors likely will have seen several types of homes and know where to look for problems.

Get Pricing Information

You can start by asking about the cost of a basic inspection and what it includes, then go from there. If the inspector does specialized tests you’re interested in (for mold, radon, asbestos, etc.), you can request to have those costs included in the estimate.

Compare Sample Reports

One way to gauge an inspector’s work may be to look at a past report and compare it to other companies’ reports.

Set the Date

Keep your timeline in mind as you consider whom to hire. Things can move quickly in the mortgage process, and you don’t want your inspection to hold up the deal.

Try to be there when the inspector is working, so you can see the home through an unbiased lens. If you can’t be there, you may want to ask your real estate agent to attend.

The Takeaway

It might be tempting to skip the home inspection to save money or time, or to make your offer more appealing. After all, the average home inspection cost is $300 to $425 and could go higher. But a home inspection can provide an important layer of protection and reassurance that the money you’ve budgeted for your new home will be well spent.

SoFi Mortgages: simple, smart, and so affordable.

FAQ

Does the buyer or seller pay for a home inspection?

The homebuyer typically pays for a home inspection and hires the inspector.

What’s the biggest warning sign on a home inspection?

There are many issues that can be red flags on a home inspection, but the most serious include structural or foundation problems, significant water damage or an active leak, or bad or outdated electrical wiring. All of these can be very costly to repair and can create safety or health hazards.

Can I back out of a home purchase after a bad inspection report?

Homebuyers may be able to back out of a home purchase if an inspection turns up significant problems, but whether or not you can do so will depend on your contract with the seller. An inspection contingency in your purchase contract could allow you to back out under certain circumstances and retain your deposit. If you aren’t protected by this contingency, you might forfeit your deposit by backing out.

How much should I budget for a home inspection?

The typical home inspection cost averages $300 to $425, but you may want to budget extra if the property being inspected is particularly large or old. You’ll also want to factor in extra funds for any specialized testing or inspection — for example, if the property has a well or septic system or a swimming pool.

Are specialized inspections (e.g., mold, radon) worth the extra cost?

Specialized inspections are generally worth the cost, particularly if they have the potential to uncover an issue, such as mold or radon, that can be invisible to the untrained eye but harmful to human health. Inspections that examine areas of the home that may be especially costly to repair, such as a septic system or well, can also be worthwhile. When in doubt, ask yourself if finding out about a major issue after the fact would be potentially catastrophic, either to your health or to your budget. When you think of the house inspector cost that way, the decision is clear.

Photo credit: iStock/Altayb

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

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

Non affiliation: SoFi isn’t affiliated with any of the companies highlighted in this article.
This content is provided for informational and educational purposes only and should not be construed as financial advice.

SOHL-Q126-003

Foreclosure Rates for All 50 States

50 State Foreclosure Rates

50. South Dakota

49. Vermont

48. Montana

47. North Dakota

46. Wisconsin

45. Kansas

44. West Virginia

43. New Hampshire

42. Rhode Island

41. Alaska

40. Hawaii

39. Kentucky

38. Nebraska

37. Mississippi

36. Oregon

35. Washington

34. Missouri

33. Minnesota

32. Tennessee

31. Massachusetts

First-time homebuyers can prequalify for a SoFi mortgage loan, with as little as 3% down.

30. North Carolina

29. New Mexico

28. Virginia

27. Idaho

26. Connecticut

25. Arizona

24. Wyoming

23. Arkansas

22. Maine

21. California

20. New York

19. Pennsylvania

18. Michigan

17. Oklahoma

16. Iowa

15. Colorado

14. Louisiana

13. Georgia

12. Alabama

11. Ohio

10. Indiana

9. Texas

8. Nevada

7. Utah

6. Illinois

5. Florida

4. Delaware

3. Maryland

2. South Carolina

1. New Jersey

The Takeaway

What Credit Score Is Needed to Buy a House?

Why Does a Credit Score Matter?

Do I Have One Credit Score?

What Is the Minimum Credit Score to Buy a House?

Credit Score Requirements by Loan Type

First-time homebuyers can prequalify for a SoFi mortgage loan, with as little as 3% down.

Steps to Improve Your Credit Score Before Buying a House

How Long It Takes to See Changes in Credit Score

Other Factors Besides Credit Score That Affect Mortgage Approval

Debt-to-Income Ratio

Employment and Income History

Available Savings and Assets

The Takeaway

FAQ

What credit score is considered good for buying a house?

Can I buy a home with a low credit score?

Do mortgage lenders use FICO or VantageScore?

How can I improve my credit score before applying for a mortgage?

What other factors do lenders look at besides credit score?

Real Estate Trading: Can You Trade Houses with Someone?

What Is House Trading?

How Does House Trading Work?

What If the Homes Are Unequal in Value?

How Common Is House Trading?

Pros and Cons of Trading Your House

Pros:

First-time homebuyers can
prequalify for a SoFi mortgage loan,
with as little as 3% down.

First-time homebuyers can
prequalify for a SoFi mortgage loan,
with as little as 3% down.

First-time homebuyers can
prequalify for a SoFi mortgage loan,
with as little as 3% down.