woman on her phone

Preparing To Buy a House in 8 Simple Steps

In life there are some situations a person simply can’t prepare for, like locking the keys in a car full of groceries or having a head full of shampoo when the smoke alarm goes off. Luckily, purchasing a home doesn’t have to be one of those moments.

Buying a house is probably one of the biggest financial decisions many people will make in their lifetime, and the process can be lengthy and complex. From getting a bird’s-eye view of their overall financial picture to calculating housing costs and securing loan pre-approval, there are many actions for home buyers to take as they get ready to purchase a home.

With the right resources and a solid strategy, however, purchasing a house can be a smooth process.

8 Steps to Prepare for a Home Purchase

1. Determining Credit Score

A home buyer’s credit score can impact their ability to secure a mortgage loan with a desirable rate. It can also affect how much they’ll be required to pay as a down payment when it’s time to close.

In a recent report from the National Association of Realtors , home buyers who had debt said it hindered their ability to set aside funds for a down payment by a median of four years.

Credit score can be influenced by a variety of factors, from payment history to amount of debt (a.k.a. credit utilization ratio) to age of credit accounts, mix of credit accounts, and new credit inquiries.

Payment history is the main factor that affects a person’s credit score, accounting for 35% of an overall FICO® score. Missing a payment on any credit account—from unpaid student loans to credit cards, auto loans, and mortgages—can negatively impact a person’s credit score.

By making on-time payments, limiting the number of new inquiries on their credit file, and working to pay down outstanding balances, home buyers could potentially boost their credit score and qualify for a lower mortgage rate.

Is There a Credit Score “Sweet Spot?”

Many buyers wonder whether there’s a desired credit score range or “sweet spot” to obtain a mortgage. The 2020 Q1 Federal Reserve Report on Household Debt and Credit found that the median credit score of newly originating borrowers increased to 773 in the first quarter for mortgages—up 14 points from 2019.

That’s not necessarily to say a credit score of 773 is a must for securing a mortgage, but the difference between a credit score in the 600 range and one in the 700 range could amount to about half a percent less interest on a mortgage loan and add up to a lot of money over time.

Credit scores can also affect the amount of the down payment itself. Many mortgage lenders require at least 20% of the house’s sale price be put down, but might offer more flexibility if the buyer’s credit score is in the higher range. A lower credit score, on the other hand, could call for a larger down payment.

Whether home buyers have debt or not, checking credit reports is still a recommended first step to applying for a mortgage. Understanding the information on credit reports is invaluable in knowing whether time is needed to repair credit, which could potentially lead to a higher credit score and possibly lower mortgage loan rate.

2. Deciding how Much To Spend

Deciding how much to pay for a new home can be based on a variety of factors including expected and unexpected housing costs, up-front payments and closing costs, and how it all fits into the buyer’s overall budget.

Calculating Housing Costs

There are several housing costs for home purchasers to consider that might affect how much they can afford to offer for the house itself. The costs of ongoing fees like property taxes, homeowner’s insurance, and interest—if the loan does not have a fixed rate—can all lead to an increase in the monthly mortgage payment.

Closing costs are fees associated with the final real estate transaction that go above and beyond the price of the property itself. These costs might include an origination fee paid to the bank or lender for their services in creating the loan (typically amounting to 0.5% to 1% of the mortgage), real estate attorney fees, escrow fees, title insurance fees, home inspection and appraisal fees and recording fees, to name a few. To get an idea on how this can impact your budget, use this home affordability calculator to estimate total purchase cost.

Last year, the average closing costs for a single-family property were $5,749 including taxes, and $3,339 excluding taxes, according to a recent report from ClosingCorp .

In addition to closing costs, expenses that potential home buyers might want to consider are repairs and updates they might want to make to a home, new furniture, moving costs, or even commuting costs.

Finally, unforeseen costs of a major life event like a layoff or the birth of a new child might not be the first expenses that come to mind, but some buyers could find themselves making a potential home buying mistake by not getting their finances in order to prepare for the unexpected.

Making a list of these estimated expenses can help home buyers calculate how much they can feasibly afford and create a budget that could help them avoid being overextended on housing costs, especially if they might be paying other debt or saving for other financial goals.

3. Saving for a Down Payment

Saving money for a house is one of the biggest financial goals many people will have in their lifetime. And how much they’re able to offer as a down payment can significantly impact the amount of their monthly mortgage payment.

A larger down payment can also be convincing to sellers who see it as evidence of solid finances, sometimes beating out other offers in a competitive housing market.

The average down payment on a house varies depending on the type of buyer, loan, location, and housing prices, but, according to Zillow’s 2019 Consumer Housing Trends Report , 56% of buyers put down less than the typical 20% down payment, 19% put down 20%, and 20% of home buyers put down more than 20%.

For first-time home buyers, 20% of the price of the home can seem like a daunting figure. Many buyers find that cutting spending on luxury or non-essential items and entertainment can help them save up the funds.

Other tactics could include getting gifts and loans from family members, applying for low-down-payment mortgages, withdrawing funds from retirement, or receiving assistance from state and local agencies.

For buyers who were also sellers, proceeds from another property could also fund the down payment.

4. Shopping for a Mortgage Lender

There are many mortgage lenders competing for the business of the 86% of home buyers who finance their home purchases. These lenders offer a variety of mortgages to apply for, with a few of the most common being conventional/fixed rate, adjustable rate, FHA loans, and VA loans.

Buyers might not realize they can—and should—shop around for a lender before selecting one to work with. Different lenders offer different variations in interest rates, terms, and closing costs, so it can be helpful to conduct adequate research before landing on a particular lender.

Mortgage lenders must provide a loan estimate within three business days of receiving a mortgage application. The form is standard—all lenders are required to use the same form, which makes it easier for the applicant to compare information from different lenders and make sure they are getting the best loan for their financial situation.

5. Getting Pre-Approved for a Loan

While it might seem like a bit of a nuance, getting prequalified for a loan versus pre-approved for a loan are two different things.

When a buyer is prequalified for a loan, their mortgage lender estimates—but does not guarantee—the loan rate, based on finances provided by the buyer.

When a buyer is pre-approved, the lender conducts a thorough investigation into their finances that includes income verification, assets, and credit rating. This pre-approval gives a guarantee to the buyer that they will be able to obtain the loan and breaks down exactly what the bank is willing to lend.

Having a pre-approval letter in hand can help some buyers get ahead by appealing to the seller as a serious intention of purchase and a lender’s guarantee to back that purchase up.

6. Finding the Right Real Estate Agent

According to the National Association of Realtors 2020 Generational Trends Report :

•  89% of all buyers purchased their homes through a real estate agent.
•  The primary method most used to find that agent was referral.
•  All generations of buyers continued to utilize a real estate agent as their top resource for helping them buy a home.

While the internet and popular real estate search websites have made it easier for home buyers to hunt for a house online, most buyers still solicit the help of a real estate agent to find the right home and negotiate the price and purchase.

Also, many realtors are experts in their particular housing market, so for buyers who are searching in a specific location, a real estate agent may be able to offer valuable insights that might not be revealed online.

7. Exploring Different Neighborhoods

By researching neighborhoods where they might want to purchase a property (both in-person and online), home buyers can get a better sense of what living in their future community could look like.

Many real estate websites provide comparable listings to help determine a reasonable offer amount in a given neighborhood.

Check out housing market
trends, hot neighborhoods,
and demographics by city.


They may also highlight nearby school ratings, price and tax history, commute times, and neighborhood stats like home value fluctuations or predictions, and walkability ratings.

All of this information can help paint a picture of life in the area a home buyer chooses to settle in. Doing a deep dive into a desired neighborhood can help inform a more realistic decision on where to buy a house.

8. Kicking off the House Hunt

Once the neighborhoods are whittled down, the loan is secured, the real estate agent has been signed, and the savings are set aside, the official house hunt can begin.

For 55% of buyers, the most difficult step in the home buying process was finding the right property. Some had to undergo a considerable process before making the final purchase, with most searching for 10 weeks and seeing a median of nine homes first.

With the help of a trusted real estate agent and a housing market with adequate inventory, most home buyers can begin to book showings, attend open houses, and formally put down an offer on a house they like.

In particularly “hot” markets, houses could receive several offers, so home buyers might want to be prepared to go through the bidding process with a few properties before they get to that glorious final sale.

Home buyers might wish they could snap their fingers and move into their dream house as quickly and painlessly as possible. While that is not realistic, SoFi can help simplify the mortgage loan process.

Without any hidden fees or prepayment penalties, a SoFi home loan could be the right option for many homebuyers. For questions about buying a home, SoFi offers home loan resources, guides, and tips to steer future homeowners through the process. There are a lot of steps, but managing them can be easier with a helping hand.

Learn more about how SoFi home loans make the mortgage process as quick and painless as possible.



External Websites: The information and analysis provided through hyperlinks to third party websites, while believed to be accurate, cannot be guaranteed by SoFi. Links are provided for informational purposes and should not be viewed as an endorsement.
SoFi Loan Products
SoFi loans are originated by SoFi Lending Corp (dba SoFi), a lender licensed by the Department of Financial Protection and Innovation under the California Financing Law, license # 6054612; NMLS # 1121636 . For additional product-specific legal and licensing information, see SoFi.com/legal.

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

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

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. A hard credit pull, which may impact your credit score, is required if you apply for a SoFi product after being pre-qualified.

SOHL20008

Read more
couple sitting at table at home

8 Steps to Buying a Vacation Home

If you’re like many Americans, you dream of having a beach house, a desert escape, or a mountain hideaway. Perhaps you’re tired of staying at hotels and want the comforts of home at your fingertips.

You’re ready to make this dream a reality. Before you do, consider these steps.

How to Buy a Vacation Home

1. Choose a Home That Fits Your Needs

As you begin your search for a vacation home, carefully consider your goals and needs. Start with the location. Do you prefer an urban or rural area? Lots of property or a townhouse with just a small yard to care for?

Consider what amenities are important to be close to. Where is the nearest grocery store? Is a hospital accessible?

Consider your goals for the property. Is this a place that only you and your family will use? Do you plan to rent it out from time to time? Or maybe you plan to be there only a couple of weeks out of the year, using it as a rental property the rest of the time.

The answers to these questions will have a cascade effect on the other factors you’ll need to consider, from financing to taxes and other costs.

2. Figure Out Financing

Next, consider what kind of mortgage works best for you, if you’re not paying cash. You may want to engage a mortgage broker or direct lender to help with this process.

If you have a primary residence, you may be in the market for a second mortgage. The key question: Are you purchasing a second home or an investment property?

Second home. A second home is one that you, family members, or friends plan to live in for a certain period of time every year and not rent it out. Second-home loans have the same rates as primary residences. The down payment could be as low as 10%, though 20% is typical.

Investment property. If you plan on using your vacation home to generate rental income, expect a down payment of 25% or 30% and a higher rate for a non-owner- occupied loan. If you need the rental income in order to qualify for the additional home purchase, you may need to identify a renter and have a lease. A lender still may only consider a percentage of the rental income toward your qualifying income.

Some people may choose to tap equity in their primary home to buy the vacation home. One popular option is a cash-out refinance, in which you borrow more than you owe on your primary home and take the extra money as cash.

3. Consider Costs

While you consider the goals you’re hoping to accomplish by acquiring a vacation home, try to avoid home buying mistakes.

A mortgage lender can delineate the down payment, monthly mortgage payment, and closing costs. But remember that there are other costs to consider, including maintenance of the home and landscape, utilities, furnishings, insurance, property taxes, and travel to and from the home.

If you’re planning on renting out the house, determine frequency and expected rental income. Be prepared to take a financial hit if you are unable to rent the property out as much as you planned. For a full picture of cost, check out our home affordability calculator.

4. Learn About Taxes

Taxes will be an ongoing consideration if you buy a vacation home.

A second home qualifies for mortgage interest and property tax deductions as long as the home is for personal use. And if you rent out the home for 14 or fewer days during the year, you can pocket the rental income tax-free.

If you rent out the home for more than 14 days, you must report all rental income to the IRS. You also can deduct rental expenses.

The mortgage interest deduction is available on total mortgages up to $750,000. If you already have a mortgage equal to the amount you on primary residence, your second home will not qualify.

The bottom line: Tax rules vary greatly, depending on personal or rental use.

5. Research Alternatives

There are a number of options to owning a vacation home. For example, you may consider buying a home with friends or family members, or purchasing a timeshare. But before you pursue an option, carefully weigh the pros and cons.

If you’re considering purchasing a home with other people, beware the potential challenges. Owning a home together requires a lot of compromise and cooperation.

You also must decide what will happen if one party is having trouble paying the mortgage. Are the others willing to cover it?

In addition to second home and investment properties, you may be tempted by timeshares, vacation clubs, fractional ownership, and condo hotels. Be aware that it may be hard to resell these, and the property may not retain its value over time.

6. Make It Easy to Rent

If you do decide to use your vacation home as a rental property, you have to take other people’s concerns and desires into account. Be sure to consider the factors that will make it easy to rent. A home near tourist hot spots, amenities, and a beach or lake may be more desirable.

Consider, too, factors that will make the house less desirable. Is there planned construction nearby that will make it unpleasant to stay at the house?

How far the house is from your main residence takes on increased significance when you’re a rental property owner. Will you have to engage a property manager to maintain the house and address renters’ concerns? Doing so will increase your costs.

7. Pay Attention to Local Rules

Local laws or homeowners association rules may limit who you can rent to and when.

For example, a homeowners association might limit how often you can rent your vacation home, whether renters can have pets, where they can park, and how much noise they can make.

Be aware that these rules can be put in place after you’ve purchased your vacation home.

8. Tap Local Expertise

It’s a good idea to enlist the help of local real estate agents and lenders.

Vacation homes tend to exist in specialized markets, and these experts can help you navigate local taxes, transaction fees, zoning, and rental ordinances. They can also help you determine the best time to buy a house in the area you’re interested in.

Because they are familiar with the local market and comparable properties, they are also likely to be more comfortable with appraisals, especially in low-population areas where there may be fewer houses to compare.

The Takeaway

Buying a vacation home can be a ticket to relaxation or a rough trip. It’s imperative to know the rules governing a second home vs. a rental property, how to finance a vacation house, tax considerations, and more.

Ready to buy? SoFi offers mortgages for second homes and investment properties, including single-family homes, two-unit buildings, condos, and planned unit developments.

SoFi also offers a cash-out refinance, all at competitive rates.

Got two minutes to spare? That’s how long it takes to check your rate for a mortgage with SoFi.



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

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.
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.

SOHL21004

Read more
Yellow and red credit car

Cash-Out Refinance vs Home Equity Line of Credit

Cash-out refinances and home equity lines of credit are two borrowing options that allow homeowners to tap into the equity they have built in their home.

A HELOC is a line of credit secured by the borrower’s home. The line of credit can be accessed on an as-needed basis, up to the borrowing limit. The borrower is only charged interest and responsible for repaying the amount they actually borrowed.

For a cash-out refinance, the borrower takes out an entirely new mortgage while borrowing a portion of their existing home equity. The total borrowed amount of the cash out refinance will be greater than the borrower’s original mortgage, and the borrower will receive the difference in a lump sum payment from the lender.

There are differences in how each type of loan works that may influence which is right for you. In general, HELOCs give borrowers flexibility since they can draw on the line of credit as needed and are suited for shorter-term financial needs. Cash-out refinances require the borrower to take out a new mortgage and the borrower generally needs to pay closing costs upfront. They often have a fixed interest rate and may be a better option for borrowers who have a long-term need.

Learn more about the pros and cons of a HELOC vs a cash-out refinance.

Difference in HELOCs and Cash-Out Refinancing

Home Equity Line of Credit (HELOC)

A HELOC is like a line of credit in that borrowers can draw from using their home as collateral. The amount of the line of credit is determined by the mortgage lender and is based on the amount of equity a homeowner has built. Lenders usually limit the line of credit to around 80% to 90% of the equity amount.

A unique feature of a HELOC is that it works somewhat like a credit card in that it is revolving. If a borrower, for example, is approved for a $30,000 home equity line of credit, they can access it when they want for the amount that they choose by writing a check or even using a specified credit card.

Many lenders, however, have a minimum draw requirement, which means a borrower has to take out a minimum amount even if it’s more than they need at the time. Also, lenders have the right to change the terms associated with the line of credit and can even close it, often without having to provide advanced notice.

A major drawback of a home equity line of credit is that the interest rate is usually adjustable. This means that the interest rate can rise, and if it does, the monthly payment can increase. Another point that borrowers should keep in mind is that there is a draw period of 5 to 10 years during which a borrower can access funds and a repayment period of 10 to 20 years.

During the draw period, the monthly payments can be relatively low because the borrower pays interest only, but during the repayment period, the payments can increase significantly because both principal and interest have to be paid.

Cash-Out Refinance

A cash-out refinance is a form of mortgage refinancing that allows a borrower the ability to refinance their current mortgage for more than what they currently owe in order to receive extra funds.

For example, if a borrower owns a home worth $200,000 and owes $100,000 on their mortgage at a high interest rate, they could refinance at a lower interest rate, while at the same time taking out a larger mortgage. Let’s say they refinance the mortgage at $130,000. In this case, $100,000 would replace the old mortgage, and the borrower would receive the remaining amount of $30,000 in cash.

Borrowers should keep in mind that a cash-out refinance replaces their current mortgage and even though they receive additional cash they only have to make one monthly payment. Unlike a home equity line of credit, a cash-out refinance may have a fixed interest rate, meaning that the interest rate remains unchanged for the life of the loan so the monthly payments remain the same. Additionally, interest rates are typically lower than with a HELOC.

The approval process for a cash-out refinance is similar to the initial approval process when buying a home. It can be somewhat cumbersome, but the payoff is a lower interest rate, a fixed payment, and access to additional cash.

Which is Better?

Like most things in the world of finance, the answer to which option is better will vary by person based on their individual financial circumstances and unique needs. In some situations, a HELOC may make more sense than a cash-out refinance and vice versa.

HELOCs can be useful for shorter-term needs or situations where a borrower may want access to funds over a certain period of time, for example when completing a home renovation. Because HELOCs generally have a variable interest.

Cash-out refinances can make sense if there is a need for a large sum of money or if they can be used as a tool to improve your financial situation on the whole.

Both a home equity line of credit and a cash-out refinance have fees associated with them. With a cash-out refinance, fees are paid upfront in the form of loan closing costs. With a HELOC, several types of fees can be charged periodically such as an annual fee or inactivity fee for non-usage. One way for a borrower to reduce these fees is to shop around and compare lenders.

While it’s typically faster to be approved for a home equity line of credit, the adjustable interest rate and lack of a fixed payment can potentially be a drawback. The approval process for a cash-out refinance is more complex than that of a HELOC, but the loan will have a set payment and a lower interest rate that can provide significant savings. Both options give borrowers the ability to turn their home equity into cash, which can make it possible to achieve certain goals, consolidate debt, and improve their overall financial situation.

The Takeaway

Both cash-out refinancing and HELOCs have their place in a borrower’s toolbox. In both cases, borrowers are borrowing against the equity they have built in their home, which comes with risks. In the case that a borrower is unable to make payments on their HELOC or cash-out refinance, the consequence could be selling the home or even losing the home to foreclosure.

HELOCs are generally used when a borrower has shorter-term financial needs. Borrowers are able to draw against the line of credit as needed however the interest rate is variable. Cash-out refinances are generally used for longer term needs and often have a fixed interest rate.

Borrow more with less money down.



SoFi Mortgages are not available in all states. Products and terms may vary from those advertised on this site. See SoFi.com for details.

MG17110

Read more
Couple in front of house

Here’s How To Refinance A Mortgage (And Know If It’s Right For You)

Over the past decade, mortgage refinancing has grown in popularity. Not that big of a surprise, considering we’ve seen a sizable drop in mortgage rates during this time. At the height of the housing crisis in 2008, rates averaged about 6% for a 30-year fixed-rate mortgage for a 30-year fixed-rate mortgage.

Currently, the average rate for a 30-year fixed mortgage is about 3.26% , which gives some folks the opportunity to save some serious moola by lowering their interest payments. If you signed on for a higher rate years ago or your financial situation has improved, refinancing is worth considering.

While refinancing might not be right for every homeowner, but starting to look at rates and terms could be the first step to being able to save for other financial goals. Here’s everything you need to know about refinancing a mortgage from how to start the process, to figuring out if it’s right for you.

How much does it cost to refinance a mortgage?

Since you’re essentially applying for a new loan, there will most likely be fees if you choose to refinance. Because of this, it’s important to consider those costs compared to the potential savings. A good rule of thumb is to be certain you can recoup the cost of the refinance in two to three years—which means you shouldn’t have immediate plans to move.

Refinancing will generally cost from 3% to 6% of your loan’s principal value, though you should be sure to shop around to make sure you’re getting the best deal.

There are helpful online calculators for determining approximate costs for a mortgage refinance. Of course, this is only an estimate and all lenders are different. The lender will provide final closing cost information alongside a quote for your new mortgage rate.

When you refinance, you also have to consider closing costs. Some lenders may not have origination fees, but instead charge the borrower a higher interest rate.

If you have a great borrowing history and a strong financial position, there are some mortgage refinancing lenders, like SoFi, that reward such borrowers by offering competitive rates and no hidden fees.

Mortgage RefinancingMortgage Refinancing

What are the steps in the mortgage refinancing process?

The first (and arguably most important) step is to determine what you want to get out of your mortgage loan refinance. There are several mortgage loan types, but “rate and term” and “cash out” are the two most common.

Just as the name implies, a “rate and term” refinance updates the interest rate, the term (or duration) of the loan, or both. You can also switch from an adjustable rate to a fixed rate and vice versa.

It is important to understand that not every refinance will save you money on interest. For example, if you extend the loan terms, you may end up paying more money over the course of your loan.

With a “cash out” refinance, you are using increased equity in your home to take out additional money on your mortgage; This is usually done to fund home repairs or pay off other, higher-interest debt. This is an excellent tool if you use it wisely, but as with all loans, it’s rarely advisable to take out more than you absolutely need.

Once you determine your goal, your primary focus will be determining whether the fees are worth what you’ll gain by refinancing. Here are the steps you’ll need to take to refinance:

1. Check your credit score and credit history for errors. Your credit score is an important factor in determining whether you get a better rate. Make sure you take time to clear up anything that’s been reported erroneously, and if possible take steps to boost your credit score.1
2. Research your home’s approximate value. Check comparable sale prices—not just listing prices—in your neighborhood to get an idea of what your house is worth. If the value of your home has gone up significantly and improves your loan-to-value ratio (LTV), this will be helpful in securing the best refinancing rate.
3. Compare refinance rates online. Don’t forget to ask about all costs involved. Most financial institutions should be able to give you an estimate, but the accuracy can depend on how well you know your credit score and LTV ratio.
4. Get your paperwork together. The process will move faster if you have your pay stubs, bank statements, tax filings, and other pertinent financial information ready to go.
5. Have cash on hand. You may have to pay some up-front costs, like property taxes and insurance.
6. The lender will (mostly) take it from here. They will send an appraiser for a home inspection. After the loan documentation and appraisal are submitted, loan officers determine the interest rate and create the loan closing documents. The closing is then scheduled with the refinancing company, mortgage broker, and real estate attorney.

How long does a mortgage refinance take?

The process can take anywhere from 30 to 90 days, depending on your diligence, the complexity of the loan, and the efficiency of the lender or broker.

If you want the process to move fast, look for mortgage lenders who are looking to disrupt the traditional mortgage process by offering a more streamlined service and a better customer experience.

If you’re like most people, you’ve got a life to live and don’t want your mortgage refinance to drag on for months. Keep this in mind while looking for a lender to refinance with.

Ready to check out your mortgage refinance rates with a competitive lender that values your time? SoFi can give you a quote (that won’t affect your credit score! 2) in as little as two minutes.



1. 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 on credit.
2. To check the rates and terms you may qualify for, SoFi conducts a soft credit pull that will not affect your credit score. A hard credit pull, which may impact your credit score, is required if you apply for a SoFi product after being pre-qualified.

SoFi Lending Corp. is licensed by the Department of Business Oversight under the California Financing Law, license number 6054612. NMLS #1121636.
The information and analysis provided through hyperlinks to third party websites, while believed to be accurate, cannot be guaranteed by SoFi. Links are provided for informational purposes and should not be viewed as an endorsement.
SoFi Mortgages not available in all states. Products and terms may vary from those advertised on this site. See SoFi.com for details.

MG18103

Read more
couple holding keys

How Much Are Closing Costs on a New Home?

Congrats if you’ve saved for a down payment on a new place. That’s a huge chunk of change, but dig deeper, because closing costs average 2% to 5% of the loan principal.

Whether you are buying your first house or you’re a seasoned buyer, know what you’re in for at the closing table.

When you apply for a mortgage, each lender must provide a loan estimate within three business days. It will estimate closing costs, interest rate, and monthly payment.

Your closing costs will depend on the sale price of the home, the fees the chosen lender charges, the type of loan and property, and your credit score.

What Closing Costs Include

Closing costs range from fees charged by professionals like appraisers and title companies to lender fees and home warranty fees.

Closing costs are traditionally divided between the buyer and seller, so you won’t necessarily be on the hook for the whole bill.

That said, the exact division between buyer and seller will depend on your individual circumstances, and can even be a point of negotiation during the buying process.

Here are some of the closing costs a homebuyer should account for:

Lender fees. This is the cost the lender charges for processing your loan. In addition to the origination fee, you may have “bought down” your interest rate with one or more points. Each point costs 1% of your mortgage amount, and that money is due at closing.

Appraisal, inspection, and survey fees. It is easy to be wooed by pristine wood floors and a shiplap statement wall, but you and your lender want to make sure that your potential new home is actually worth the purchase price. This means paying professionals to double-check that there are no major issues with the house and to provide a current market value.

Settlement agent, lawyer, or escrow fees. It turns out that paperwork can be difficult and is easy to mess up, so a settlement agent or lawyer is typically required so that your lender can be sure everything is properly prepared and signed.

Title service. To make sure you’re buying property that actually belongs to the seller and that the property isn’t subject to any legal obligations, it’s necessary to do a title search. Your lender will likely require a lender’s title insurance policy for its protection. You may also want an owner’s title insurance policy to protect yourself. The buyer and seller often divide these costs.

Recording fees. When the title of the property is transferred from the seller to you, legal documents need to be recorded in the county records to make sure the property is correctly transferred into your name. County recorders typically charge fees for doing this.

Home warranty. A home warranty can be purchased to protect against major problems. A warranty plan may be offered by the seller as part of the deal, or a buyer can purchase one from a private company. Your lender, however, will not require a home warranty.

Private mortgage insurance. Often lenders require PMI if you make a down payment that is less than 20% of the purchase price. This is usually a fee that you pay monthly, but it can also be paid at the time of closing.

Be aware that a “no closing cost mortgage” often means a higher rate and a lot more interest paid over the life of the loan. The lender will pay for many of the initial closing costs and fees but charge a higher interest rate.

Other Costs of Buying a Home

In addition to your down payment and closing costs, you also need to make sure that you can swing the full monthly costs of your new home. That means figuring out not only your monthly mortgage payment but all the ancillary costs that go along with it.

Understanding and preparing for these costs can help ensure that you are in sound financial shape for your first few years of homeownership:

Principal and interest. Your principal and interest payment is the amount that you are paying on your home loan. This can be estimated by plugging your sales price, down payment, and interest rate into a mortgage calculator. This number is likely to be the biggest monthly expense of homeownership.

Insurance. Your homeowner’s insurance premium should be factored into your monthly ownership costs. Your insurance agent can provide you with details on what this policy will cover.

Property taxes. Property tax rates vary throughout the country. The rates are typically set by the local taxing authorities and may include county and city taxes.

Private mortgage insurance. As mentioned, PMI may be required with a down payment of less than 20%. PMI is usually required until you have at least 80% equity in your home based on your original loan terms.

Homeowners association fees. If you live in a condo or planned community, you may also be responsible for a monthly homeowners association fee for upkeep in the common areas in your community.

The Takeaway

Before buyers can close the door to their new home behind them and exhale, they must belly up to the closing table with closing costs—usually 2% to 5% of the loan amount. A home loan hunter may want to compare estimated closing costs in addition to rates when choosing a lender.

Shopping for a home and a mortgage? SoFi home loans come with no hidden fees and competitive rates.

Get prequalified for a SoFi home loan in two minutes.



SoFi loans are originated by SoFi Lending Corp (dba SoFi), a lender licensed by the Department of Business Oversight under the California Financing Law, license # 6054612.. For additional product-specific legal and licensing information, see SoFi.com/legal.
SoFi Mortgages are not available in all states. Products and terms may vary from those advertised on this site. See SoFi.com/eligibility-criteria#eligibility-mortgage for details.
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.

SOMG18107

Read more
TLS 1.2 Encrypted
Equal Housing Lender