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As you sort through the many details that go into buying a home, have you wondered if there’s a best or worst day to schedule the closing? The answer is yes: Choosing the right date and/or day of the week to finalize your home purchase could help lower your stress — and potentially save you some money.

Read on for a look at how carefully timing your closing could have benefits for you as a homebuyer.

Who Chooses the Closing Date?

Generally, buyers suggest a tentative closing date when they make an offer on a home, but there may be some negotiations before this important day is finalized on the purchase contract. It’s also not unusual for the established closing date to be moved if the buyers or the sellers request a change.

It can be hard to predict how long it will take to close on a house. It may take the buyers longer than expected to get the home they hope to purchase inspected, for example, or to pull together all the necessary paperwork for their approval. Or the sellers may ask to modify the date to accommodate the purchase of their next home. The day also has to work for the mortgage lender, the title company, any cosigners, and others involved in the transaction.

Still, as the buyer, you can expect to have a say as to when you’ll head to the closing table. So it can make sense to be prepared to propose a day that works best for your needs.

Worst Day to Close on a House

Because the logistics can get complicated when you’re trying to find a closing date that works for everyone, you may want to focus first on avoiding what might be the worst day to close on a house. And surprisingly, that could be a Friday.

It might be tempting to schedule your closing for the end of the week — especially if there’s a holiday weekend coming up — so you can take advantage of those days off to move into your new home. But it can be a risk. If there’s a delay such as missing paperwork or a complication during the final walk-through, you may have to push the closing to the following Monday or even later in order to resolve the trouble and get back on track.

Mondays can also be problematic. Even if everything is in order for your closing, the professionals you’re dealing with may be swamped with a backlog of issues left over from the week before. Your experience may be more pleasant if you pick a day that’s not as busy.

If you can manage it, a Tuesday, Wednesday, or Thursday may be a better choice. Closing midweek can give you more time to overcome any last-minute hiccups and still get the transaction finalized without having to shift it to the next week.

Recommended: When Is the Best Time to Buy a House?

Best Day to Close on a House

The best day to close on a house for the buyer is the one that’s the right fit for your schedule as a busy employee, parent, etc. — and it must work for everyone else who plans to participate. You’ll also want to be sure to give yourself plenty of time to accomplish all the steps in the home-buying process, from getting an appraisal and inspection to arranging for homeowners insurance and planning and packing for your move.

Your financial needs can also play a significant role in choosing the right closing day. And getting that right can be more about finding the best day of the month to close than the best day of the week.

If you want the maximum breathing room between your closing and your first mortgage payment, for example, you may want to pick a day that’s early in the month. A buyer’s first mortgage payment is usually due on the first day of the month after a 30-day period following the closing. So if your closing was on, say, Sept. 3, you’d have nearly two months before your first payment was due on Nov. 1. But if you closed on Sept. 28, you’d only have about a month before the first mortgage payment was due, also on Nov. 1.

If you’re trying to save money on closing costs, however, you might want to avoid the start of the month. As the buyer, you can expect your lender to add any interest that will accrue between your closing date and the end of the month to your closing costs. With a date that’s later in the month, your first mortgage payment will come sooner, but you could substantially reduce the amount of interest you’ll have to prepay at your closing. Some lenders will roll closing costs into your home loan, but you will still pay them, perhaps by paying a higher interest rate on the loan.

You could also decide to compromise and shoot for a closing date in the middle of the month. With this option, you’ll pay less interest than if you’d closed at the start of the month, and you’ll still have a month and a half before your first mortgage payment is due.

Recommended: VA Loan Closing Costs

Other Things to Consider When Choosing a Closing Date

Along with the money you could save on prepaid accrued interest by scheduling your closing toward the end of the month, here are a few other financial factors to consider:

Do You Have an Existing Lease?

If you’re a first-time homebuyer and you’re currently renting, you may want to time your closing so that you can avoid making another rent payment before you move into your new home. For example, if your rent is due on the first day of the month, your best closing date may be at the end of the month prior. (This could also allow you to reduce the amount of prepaid interest due at closing.)

Is the Home in an HOA?

Buyers often overlook the cost of homeowners association (HOA) fees when they prepare for a closing — but it’s possible those fees could rise or fall depending on the date you close. The difference in what you’ll pay might not be enough to make you want to change your closing date, but it’s worth checking out ahead of time.

Are You Asking for Seller Concessions?

Are you dealing with eager home sellers? You might be able to ask for some seller concessions as part of your home purchase. If the sellers agree to pay some or all of your closing costs, for instance, that amount could include the accrued interest the lender will charge. If that’s the case, you could close at the start of the month and enjoy a longer period of time before you must make your first mortgage payment without having to make a larger interest payment at closing. (Just be sure to check that the accrued interest will be included in the costs covered by the sellers.)

The Takeaway

So many decisions go into buying a home that it might not even occur to you to put some thought into choosing the best closing date. But picking the best day to close on a house as a buyer can have several benefits, including providing opportunities to save some money at a time when that can be so important.

The closing date is negotiable, and of course you’ll want to be open to finding a day that works for all involved. But as a buyer, you’ll have a chance to propose the best closing date for you when you make an offer on a home. So why not check your calendar, run the numbers, consult with your real estate agent and mortgage lender, and come prepared with a day in mind?

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

FAQ

Does the buyer or seller choose the closing date?

Both buyers and sellers may have some input into the closing date. But typically, the buyer first proposes a closing date on the purchase contract when making an offer on a home.

Is it better to close on a house at the beginning or end of the month?

There are several factors that may go into deciding the best timing for a closing. For example, if the buyer wants to pay less toward accrued interest, a closing date at the end of the month is generally better. But if the buyer wants to maximize the time between the closing and the first mortgage payment, closing at the start of the month may be the better choice.

Does it matter if I close on my house before a holiday?

You may want to avoid scheduling your closing right before a holiday weekend. The professionals who are working on your closing may be busier at this time of year, and if an issue comes up that can’t be resolved quickly, the closing might have to be delayed until after the holiday.

How does the closing date affect the first mortgage payment?

A buyer’s first mortgage payment is typically due on the first day of the month after a 30-day period following the closing. Closing early in the month can maximize breathing room.

Is there an optimal day of the week to close on a house?

Tuesdays, Wednesdays, and Thursdays are generally considered to be the best days of the week for a closing. If something goes wrong and the closing is early in the week, it’s more likely there will be time to fix the problem and get things back on track before the weekend.

Photo credit: iStock/gorodenkoff

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

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

SOHL-Q326-057

If you’re thinking about tapping the equity in your home, you’re looking at either a home equity loan or a home equity line of credit, better known as a HELOC. Both may allow you to borrow a large sum at a relatively low interest rate and with lower fees than a mortgage refinance.

Either a home equity loan or a HELOC is a second mortgage, so you’re literally betting the house: Your home can be foreclosed on if you cannot make payments. But for homeowners who have a secure income, good credit, and a substantial amount of equity, either one can be an excellent way to fund big expenses like renovations and debt consolidation.

When you’re considering a HELOC vs. a home equity loan side by side, there are differences that mean one type of loan may make more sense for you than the other. Let’s take a deep dive into the two to help you decide.

What’s the Difference Between a Home Equity Line of Credit (HELOC) and Home Equity Loan?

Both HELOCs and home equity loans let you use your home equity as collateral, but they’re not exactly the same. The main differences between the two are how the money is disbursed, how it’s repaid, and how the interest rate works. Let’s take a closer look.

What Is a Home Equity Line of Credit?

A HELOC is a revolving line of credit. You can take out money as you need it, up to your approved limit, during the draw period, which is typically 10 years. You may be able to make interest-only payments on the amount you withdraw during that time if you’re not ready to start paying back the funds you borrowed.

After the draw period comes the repayment period, which is usually 20 years. During this period, you must repay any principal balance with interest.

Most HELOCs have a variable interest rate. Some have a low introductory rate, and some require minimum withdrawal amounts.

What Is a Home Equity Loan?

A home equity loan is another type of second mortgage that uses your home as collateral. In this case, however, the funds are disbursed to you all at once, and repayment (with interest) starts immediately. It is usually a fixed-rate loan of five to 30 years, and monthly payments remain the same until the loan is paid off.

Key Differences

How Each Option Uses Home Equity as Collateral

Both types of loan rely on the equity in your house to secure the loan. This means that if you don’t repay your debt, the lender can take your home as payment. Because you repay these loans differently, when this becomes an issue may also be different.

With a home equity loan, you begin repaying the loan in set monthly payments immediately. You know what to expect, but if your financial situation changes and you can’t make your payments, your house can be at risk during any time in the loan term.

With a HELOC, you usually pay for only what you borrow (and interest) during the draw period. During the repayment period, when you pay back principal and interest for anything you borrow, you may be less able to manage payments, especially since they can vary in amount.

Comparing HELOCs and Home Equity Loans

Homeowners usually will need to have 15% to 20% equity in their home — the home’s market value minus what is owed on any mortgage — to apply for a home equity line of credit or home equity loan.

If you’ve been diligently paying off your home loan and you meet this threshold, then how much home equity can you tap? Many lenders will require your combined loan-to-value ratio — combined loan balance / appraised home value — to be 90% or less, although some will allow you to borrow 100% of your home’s value.

Here’s what to look at when comparing a HELOC with a home equity loan.

Interest Rate

The interest rate for a home equity loan is typically fixed, while the interest rate for a HELOC is usually variable.

HELOC rates tend to be a little higher than home equity loan rates (but keep in mind that you pay interest only on what you borrow from the credit line). Some lenders offer a low HELOC teaser rate for six months to a year before converting to a variable rate.

Keep in mind that Federal Reserve decisions affect the rates for both products. The prime rate, the rate given to low-risk borrowers for prime loans, is based on the federal funds rate set by the Fed.

Even when home equity loan rates rise, though, the rate for these secured loans will be lower than those of almost all unsecured personal loans and credit cards.

Recommended: What to Learn From Historical Mortgage Rate Fluctuations

Costs

Closing costs are essentially the same for a HELOC and a home equity loan — 2% to 5% of the total loan amount — but many lenders offer to reduce or waive them. Lenders may have already baked their costs into your rate quote — but that doesn’t mean it’s a better deal.

You’ll want to shop around with multiple lenders for the best deal, comparing rates, upfront costs, closing costs, and fees. Bear in mind that advertised rates are often reserved for well-qualified borrowers, so read the fine print.

Requirements

To see if you qualify for a HELOC or home equity loan, lenders will look at your employment and credit history, income, and the appraised value of your home. In other words, you must:

•   Have enough equity in your home

•   Have enough income to cover the monthly payment on the home equity loan

•   Have a good credit score (typically 620 or over, though some lenders may require a higher score)

•   Have a debt-to-income ratio of 45% or lower

Repayment

When it comes to repayment, HELOCs and home equity loans are very different.

With a home equity loan, the entire loan amount is deposited into your account at once. This also means you’ll start paying on the loan immediately. You can use a mortgage repayment calculator to see what your monthly payment might be, depending on how much you borrow and your interest rate.

With a HELOC, you use funds as you need them, up to the limit, during the draw period. Your payment may be just the interest charge for the amount borrowed. (A HELOC interest-only calculator can show you what your payments might be during this time.) However, the revolving credit line means you can withdraw money, repay it, and repeat before the repayment period, when the draw period ends and principal and interest payments begin.

Money Disbursement

Funds for a home equity loan are disbursed immediately. Sums from a HELOC are withdrawn as needed.

Payments

Payments on a home equity loan begin immediately. Payments on a HELOC aren’t required until you start borrowing money from your credit line.

Flexibility and Access to Funds Over Time

A home equity loan allows you immediate access to the whole loan immediately. However, your payments also start immediately and are typically at a fixed rate, meaning they will remain stable over time until you’ve paid off the loan.

By contrast, with a HELOC, you have access to your line of credit maximum immediately, but you don’t have to withdraw funds until you need them. Typically, you may be able to pay back only the interest on what you’ve drawn out until the end of the draw period. Once the repayment period starts, however, you will not be able to draw funds, and you will need to make payments on a regular schedule.

Recommended: Turn Your Home Equity Into Cash

HELOC vs. Home Equity Loan: Pros and Cons

HELOC Pros and Cons

Home Equity Loan Pros and Cons

Which Is Better, HELOC or Home Equity Loan?

The better loan is the one that fits your life circumstances. A home equity line or loan can be used to buy a second home or investment property, pay medical bills, pay off higher-interest credit card debt, fund home improvements, and pay for other big-ticket items. But differences in your situation can make one more appealing than the other.

When a HELOC Is a Better Fit

HELOCs are more flexible than home equity loans. If you’re unsure how much money you need, don’t need to borrow immediately, or want flexible repayment options, you might want to think about applying for a HELOC over a home equity loan.

When a Home Equity Loan Is a Better Fit

A home equity loan can be a good fit for people who know how much they need to borrow and want the regularity of an installment loan with a fixed interest rate and fixed payments.

Risks to Consider with Both HELOCs and Home Equity Loans

Since HELOCs and home loans both use your home itself as collateral, you are potentially risking your house if you can’t make payments. If you default, your lender can foreclose on your house.

The Takeaway

Your decision on a home equity loan vs. a HELOC can depend on what you’re planning to use the money for. If you need a certain amount of money all at once, a home equity loan may be a good fit. If you want the flexibility to take out money as you need it, a HELOC may work better.

SoFi now offers flexible HELOC options to turn your home equity into cash. Access up to 85% of your home equity, or $350,000, to finance home improvements or consolidate debt. Competitive interest rates and repayment terms up to 20 years could result in lower monthly payments versus other loans. And the online application process is quick and convenient.

FAQ

Which is faster, a HELOC or home equity loan?

When it comes to the time it takes to get a home equity loan vs. a HELOC, they’re tied, typically. It could take two to six weeks to get a HELOC or home equity loan.

HELOC or home equity loan for an investment property?

Investors may like the flexibility of a HELOC. A lump-sum home equity loan, however, could also be advantageous for renovating or buying properties.

HELOC or home equity loan for a home remodel?

If you know exactly how much you’re going to be spending on a home remodel and you’d like predictable payments, you can use a home equity loan. If you want more flexibility or are less certain about your costs, you might prefer a HELOC.

Can you have both a HELOC and home equity loan?

It is rare to have both a HELOC and a home equity loan. One would be a second mortgage and the other would be a third mortgage (assuming you are still paying off your first mortgage). Few banks are willing to lend money on a third mortgage, and for any that do, the interest rate would be high.

What happens if you default on a home equity loan or HELOC?

If you can’t or don’t make the required payments on your home equity loan or HELOC, you risk having your lender foreclose on your home. Since your house serves as collateral for both, if you default, you may lose it.

Photo credit: iStock/Hispanolistic

^²SoFi Bank, N.A. NMLS #696891 (Member FDIC), offers loans directly or we may assist you in obtaining a loan from SpringEQ, a state licensed lender, NMLS #1464945.
All loan terms, fees, and rates may vary based upon your individual financial and personal circumstances and state.
You should consider and discuss with your loan officer whether a Cash Out Refinance, Home Equity Loan or a Home Equity Line of Credit is appropriate. Please note that the SoFi member discount does not apply to Home Equity Loans or Lines of Credit not originated by SoFi Bank. Terms and conditions will apply. Before you apply, please note that not all products are offered in all states, and all loans are subject to eligibility restrictions and limitations, including requirements related to loan applicant’s credit, income, property, and a minimum loan amount. Lowest rates are reserved for the most creditworthy borrowers. Products, rates, benefits, terms, and conditions are subject to change without notice. Learn more at SoFi.com/eligibility-criteria. Information current as of 06/27/24.
In the event SoFi serves as broker to Spring EQ for your loan, SoFi will be paid a fee.

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

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

SOHE-Q326-056

The monthly cost of a $150K mortgage will vary depending on the type of loan, the interest rate, and the length of the loan. Mortgage loan terms are typically either 15 years or 30 years. The monthly payments for a 15-year loan are significantly higher than those for a 30-year loan. However, the lifetime cost of a shorter loan term is usually lower because, overall, you will pay less interest.

There are also additional costs to consider, such as private mortgage insurance (PMI) charged on some loans, condo or HOA fees, and any hazard insurance that may be required because of the location of the home. Here’s a look at how much a $150,000 mortgage might cost per month for a 15-year and 30-year loan term.

Total Cost of a $150K Mortgage

A $150,000 30-year mortgage with a 6.00% interest rate costs around $900 a month. The same loan over 15 years costs around $1,266 a month. However, these are just estimates. The exact costs will depend on your loan’s term and other hidden costs.

The monthly payment includes the principal and interest, but if you’re a first-time buyer, you may not realize that escrow, taxes, and insurance might be additional line items. There are also upfront costs, or closing costs, that are paid when the purchase is initially finalized.

Upfront Costs

Upfront costs are the costs you pay once your offer on a home has been accepted. They are typically called closing costs, and some of them might be covered by your down payment.

Earnest Money

Also known as a good faith deposit, this is the money you put down to show the seller you are serious about buying their property. The amount will differ based on the price of the home.

Down Payment

Your down payment will likely be the biggest upfront cost you will have. The amount will vary depending on your lender, but typically it will be between 3% and 20% of the cost of the house. The more you can afford as a down payment, the lower your total loan will be, and the less you will have to pay each month in principal and interest. The following are the typical minimum down payments for the various types of home loans:

•  Conventional loan with mortgage insurance: 3%

•  Conventional loan without mortgage insurance: 20%

•  FHA loan: 3.5%

•  VA loan: 0%

•  USDA loan: 0%

Closing Costs

The lender that makes your mortgage loan will charge administration fees, including the origination fee, underwriting fees, and application fees. You can also expect to pay taxes associated with transferring the title on the property, and you may need to pay for the cost of the home’s appraisal at the closing as well.

Bear in mind that your mortgage lender may want to see that you have enough money in your bank account to pay for at least two months of mortgage payments after paying closing costs and the down payment. This amount is called reserves. It’s not something that you will have to pay, but it is an amount you may need to show will be available to you after you have paid other expenses.

Long-Term Costs

The biggest long-term cost of buying a home is usually the monthly mortgage payment, which includes a portion of the principal (the amount you borrowed) plus the interest. Here are some other costs you can expect.

Property Taxes

The seller or their real estate agent should be able to give you a sense of what the annual property taxes will be on your new home, although taxes may change annually.

HOA, Condo, or Co-op Fees

Some homes are part of a condominium association, a co-op, or a Homeowners Association (HOA). Homeowners pay a monthly fee and receive benefits such as grounds maintenance, use of a community center, or snow removal. These fees can range anywhere from $100 to $1,000 a month or more, depending on the association and location.

Home Upkeep

Home repair costs are highly variable, but as a general rule you can expect to pay out around 1%-2% of the home’s value each year for routine maintenance.

Insurance

You will, of course, need to insure your new home and its contents. You might also need to purchase hazard insurance if your area is at high risk for floods, earthquakes, wildfires, severe storms, or other natural disasters. The cost of hazard insurance can be based on a percentage of the home’s value for a year-long policy.

If you paid a smaller down payment, your mortgage lender may also require you to pay monthly private mortgage insurance (PMI) because you are considered a higher risk.

Recommended: Home Loan Help Center

Estimated Monthly Payments on a $150K Mortgage

The table below shows the estimated monthly payments for a $150,000 mortgage loan for both a 15-year and a 30-year loan with interest rates varying from 5% to 8%.

How Much Interest Is Accrued on a $150K Mortgage?

The amount of interest you pay on a $150,000 mortgage will depend on the length of the loan and the interest rate. For a 15-year loan with a 6.00% interest rate, the interest would amount to around $77,841 over the life of the loan. For a 30-year loan with a 6.00% interest rate, the interest would amount to $173,757, which is more than double.

$150K Mortgage Amortization Breakdown

An amortization schedule for a mortgage loan tells you when your last payment will be. It also shows you how much of your monthly payment goes toward paying off the principal and how much goes toward paying off the interest. Most of your payment will be used to pay off the interest early on in the loan term.

Below is the mortgage amortization breakdown for a $150,000 mortgage with a 6.00% interest rate for a 30-year loan.

SoFi offers a mortgage calculator that shows the amortization of a property of any value and for any down payment or interest rate.

What Is Required to Get a $150K Mortgage?

Getting any mortgage usually requires both an adequate income and a large enough down payment. This home affordability calculator shows you how much of a mortgage you can afford based on your gross annual income, your monthly spending, your down payment, and the interest rate.

The Takeaway

The payments on a $150,000 mortgage will depend on the term of the loan and the interest rate. As a general rule, the shorter the term of the loan, the less interest you will pay over its lifespan.

In addition to your $150,000 mortgage payment, you can also expect to pay upfront closing costs and additional costs over the years that you are a homeowner. SoFi’s home loan help center has information and calculators that can help you decide what size of a mortgage you can afford considering the upfront and hidden costs. There are special considerations and special mortgage assistance programs if you are a first-time buyer.

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

FAQ

What will monthly payments be for a $150K mortgage?

Your monthly payment for a $150,000 mortgage will depend on the interest rate and the term of the loan. The payment for a $150,000 30-year mortgage with a 6.00% interest rate is approximately $900. The same loan over 15 years costs $1,266 each month.

How much do I need to earn to afford a $150K mortgage loan?

Assuming you go with a 30-year mortgage at an interest rate of 6.00%, you would need to earn about $50,000 a year in order to cover your mortgage plus insurance and property taxes. (As a general rule, lenders recommend these costs not exceed 28% of your gross earnings.)

How much down payment is required for a $150K mortgage loan?

The down payment you are expected to pay on a home depends on the lender. The more you pay up front, the lower your loan amount and the lower your payments will be. Conventional wisdom says your down payment should be 20%. Some lenders will accept a down payment as low as 3%, but you may have to purchase private mortgage insurance.

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

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

SOHL-Q326-060

A home equity line of credit (HELOC) is a revolving credit line secured by your home. HELOCs give you access to cash that you can use to make improvements or repairs, consolidate debt, or cover large expenses.

Lenders set HELOC requirements to determine who qualifies, but you’ll typically need a minimum amount of equity, good credit, and a steady income. Read on to learn how to get a HELOC and what you can expect during the application process.

What Is a HELOC?

A home equity line of credit is an open-ended line of credit that allows you to borrow against your home equity. Equity is the difference between what you owe on your home and its fair market value.

HELOCs have an initial draw period, during which you can access your credit line. You can borrow what you need when you need it, up to a preset credit limit. You can even make payments to pay down your balance and then borrow up to the credit line again. The draw period may last 10 years, and your lender might only require you to make interest payments toward the principal you’ve borrowed during that time. Once the draw period ends, you’ll repay the principal amount, plus interest.

Interest rates on a HELOC are typically variable, meaning they can go up or down over time following movements in a benchmark rate. That means your payment can increase or decrease. Some lenders offer fixed-rate HELOCs, though that’s less common. Incidentally, a HELOC isn’t the only type of home equity loan. There’s also a standard home equity loan, in which a lender loans you a lump sum that you begin repaying immediately.

How the HELOC Application Process Works

The HELOC approval process is fairly straightforward. You’ll need to:

•  Choose a lender and apply for a HELOC

•  Provide the lender with required supporting documents

•  Complete underwriting

Underwriting is a process in which a lender verifies certain information about you and your home to assess your creditworthiness and decide whether to approve you for a HELOC.

During underwriting, the lender will check your credit, review your income and debt, and assess your home’s value. That last step is particularly important, as you’ll need to have sufficient equity in the home to qualify for a HELOC.

How long does it take to get a HELOC? It varies, but a typical time frame for approval is two to six weeks from the date you submit your application.

HELOC Requirements

Knowing how to qualify for a HELOC can help you gauge whether you’re a good candidate and help you narrow down which lender to work with. HELOC requirements vary by lender but generally include:

•  Good credit

•  A low debt-to-income (DTI) ratio

•  Sufficient home equity

A good credit score on the FICO® scale is a score of 670 or better, and as a general rule, lenders like a score in the upper 600s. FICO credit scores are used by 90% of top lenders for credit decisions.

Your DTI ratio measures how much of your gross income goes to debt repayment each month. Lenders look at your DTI ratio to determine how much money you have available each month to make HELOC payments. Home equity lenders generally look for a DTI below 50% but the lower the better.

Perhaps most importantly, lenders want to know how much equity you have in your home. This is where your LTV ratio comes into play. This ratio measures how much you want to finance versus your home’s appraised value. Typically, lenders look for an LTV of no more than 85%, meaning you have at least 15% equity in the home.

HELOC Approval Tips

There’s no special secret to how to get a HELOC. You’ll just need to find the right lender to work with and meet their approval requirements. With that being said, here are a few tips that could smooth the path to HELOC approval:

•  Reduce debt. Paying down some of your existing debt could improve your DTI ratio, potentially making you more attractive to lenders.

•  Check your credit. Checking your credit reports and scores is an opportunity to learn what lenders will see and address any errors or mistakes that could be hurting your score. If you find an error, you can dispute it with the credit bureaus to have it removed or corrected.

•  Calculate your equity and LTV. If you don’t know these numbers, take a minute to figure them out. Here’s how to calculate home equity: Subtract what you owe on your primary mortgage from your estimated home value. To find your LTV, divide your mortgage balance by your home’s estimated value.

You could also get preapproved for an equity loan. HELOC preapproval means that a lender has done a cursory check of your credit and finances to conditionally approve you.

Preapproval for a HELOC can give you an idea of what loan terms you’re likely to qualify for. Keep in mind that you’ll still need to submit a full application and complete underwriting to get a HELOC.

Common HELOC Mistakes to Avoid

You want to know how to get a HELOC, but it’s just as important to understand what could hurt your application. Here are a few HELOC mistakes to avoid as you navigate the approval process:

•  Don’t overborrow. HELOCs only charge interest on the amount of your credit line you use. However, that’s no reason to get a larger line of credit than you need. If you only need $50,000 for a home improvement project, for instance, but get a $100,000 HELOC because a lender is willing to approve you for that amount, you could end up with more debt to repay than you’d planned on.

•  Don’t assume a HELOC is your only option. There are many ways to use a HELOC, but you may find that a different type of loan makes more sense. Weigh the benefits of a HELOC vs. a home equity loan or a personal line of credit vs. a HELOC to decide which borrowing option to pursue.

•  Don’t apply without comparing options. With so many HELOC lenders to choose from, it makes sense to do some comparison shopping. Study HELOC rates and compare lenders’ draw periods, repayment terms, fees, and approval requirements to see which lender is the best fit for your needs.

•  Don’t forget to plan your budget. Missing payments on a HELOC could put your home at risk, since it secures the loan. Calculating how much you can afford to pay in the draw period and repayment period can help you avoid a scenario where you’re in danger of losing your home to foreclosure because your HELOC payments are too steep.

•  Don’t miss out on tax breaks. Here’s a tip about HELOCs and taxes: If you use the money to pay for home improvements, the interest is tax deductible. If you’re getting a HELOC to handle major or minor home upgrades, keep your receipts so you can write the interest off at tax time. Right now, this benefit is good through the 2026 tax year. Consult a tax advisor for the latest updates.

How to Apply for a HELOC

Ready to apply for a home equity line of credit? It’s not an overwhelming process if you know what you’ll need to do and what you can expect from the lender. Here’s how to apply for a HELOC, step by step.

1. Check Your Home Equity and Credit Score

If you haven’t calculated your equity or checked your credit scores yet, now’s the time to do that.

You can use a home equity calculator and a loan-to-value calculator to find your equity amount and LTV. You can pull copies of your credit reports for free through AnnualCreditReport.com. You can also log in to your credit card accounts to see if free FICO score access is a card benefit. SoFi offers complimentary access to your VantageScore, which is an alternative to FICO.

Note that checking your credit reports or scores yourself won’t impact you in any way. However, hard pulls (which happen when a lender checks your credit) will show up on your credit reports and take points away from your scores.

2. Gather Required Documents

You’ll need some documentation to complete your HELOC application. The good news is that it’s more or less the same as what you needed to apply for the mortgage loan you used to buy the home.

A lender may ask for copies of your:

•  Driver’s license or government-issued ID

•  Bank account statements

•  Investment account statements

•  W-2s

•  Tax returns

•  Profit and loss statement and cash flow statement if you’re self-employed

Gathering these documents beforehand can save you time and potentially speed up your HELOC approval.

3. Submit Your HELOC Application

If you’ve chosen a lender and you’ve got your documents, you’re ready to apply for a HELOC. Many lenders allow you to do this online. You’ll just need to complete all required sections, then upload the requested documents.

Review your application carefully before you hit submit to check for errors and look for any questions that you accidentally left blank. If everything looks good, you can move ahead with submitting your application.

4. Underwriting and Home Appraisal Process

Once the lender receives your application, they’ll move forward with underwriting. The lender will check your credit and schedule an appraisal, which you’ll be expected to pay for up front.

Lenders may schedule an in-person appraisal, a drive-by appraisal, or a desktop appraisal. The in-person appraisal requires a professional appraiser to come to the home and look over the property to determine a valuation. A drive-by appraisal doesn’t require the appraiser to enter the home, while a desktop appraisal is done remotely using home valuation software.

What if the appraisal comes in too low? That could keep you from getting approved for a HELOC. You can ask the lender to reconsider or schedule a new appraisal with a different appraiser. You’ll have to pay any additional appraisal fees.

5. HELOC Approval and Closing Process

If all goes well and you’re approved for a HELOC, closing is the final step. You’ll sign all of the HELOC documents and pay closing costs, unless the lender is allowing you to roll them into the loan.

Once you’ve closed on your HELOC, the lender will make your line of credit available to you. That can take a few business days. Once your HELOC account is set up, you may be able to access your credit line using a special credit card or debit card or paper checks. If you got your HELOC through a local bank, you could also visit a branch to make withdrawals.

The Takeaway

Doing some research can help you decide if getting a HELOC makes sense for you, and once you’re set on a HELOC, a little more research can help you determine which lender will offer the best rate and terms. HELOC approval is ultimately up to the lender, but you can make yourself more creditworthy by paying down debt and taking good care of your credit profile before you apply.

SoFi now offers home equity loans. Access up to 85%, or $750,000, of your home’s equity. Enjoy lower interest rates than most other types of loans. Cover big purchases, fund home renovations, or consolidate high-interest debt. You can complete an application in minutes.

FAQ

How long does it take to get a HELOC?

The exact timing varies, but generally, it can take between two and six weeks to get approved for a home equity line of credit (HELOC). Factors that affect the speed of HELOC approval can include your choice of lender, your financial situation, and the results of your home appraisal.

Can I get a HELOC with bad credit?

It’s possible to find lenders who will offer home equity lines of credit for bad credit, though there are some caveats to know. A lower credit score can add more obstacles to approval overall. If you are approved, you’ll likely pay a higher interest rate or more fees to make up for the higher degree of risk the lender is taking on.

Does a HELOC require an appraisal?

Lenders generally require an appraisal for a home equity line of credit (HELOC) because they need to know how much your home is worth. Without an appraisal, they can’t determine how much equity you have and whether you have a sufficient loan-to-value ratio to qualify for a HELOC.

How hard is it to get a HELOC?

Getting a home equity line of credit may be a breeze if you’ve got near-perfect credit, make a six-figure income, and are sitting on a pile of equity. But if everything isn’t universally rosy, you can still qualify. It’s up to each individual lender to decide whom to approve, so if you don’t qualify the first time you apply, you may still be able to borrow.

What are the requirements for a HELOC?

Getting a home equity line of credit (HELOC) is similar to getting a mortgage to buy a home. You’ll need to show a lender that you have sufficient income to repay a HELOC and that you have a history of responsible credit use, which means paying back what you borrow on time. You may also need to undergo a home appraisal to determine the value of your property, and thus your equity amount.

What disqualifies you for a HELOC?

Lack of a credit history, lack of income, lack of adequate equity, or overwhelming debt could all be barriers to getting approved for a HELOC. Insufficient documentation may also affect your chances of being approved for a HELOC.

Photo credit: iStock/shapecharge

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

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Buying a home is a big milestone, but with hefty housing prices and high mortgage rates, homeownership can feel out of reach for many Americans. And even if you can afford the down payment and monthly mortgage for your dream home, you may not have strong enough credit to qualify for the loan. So, what can you do?

Adding a qualified cosigner to your mortgage is a great way to improve your approval odds when buying a house, but there are several risks the cosigner takes on when they help you out. Below, you’ll walk you through how cosigning a mortgage works, what the requirements are, and the pros and cons.

What Is a Mortgage Cosigner?

A mortgage loan cosigner is someone (usually a relative or close friend) who signs the mortgage alongside the primary borrower but has no ownership interest in the home (and does not live in the same home). Instead, the cosigner simply agrees to take full financial responsibility for the mortgage should the primary borrower miss payments or stop paying entirely.

This is a big deal: The lender has every right to come after the cosigner if the borrower defaults on the mortgage. The cosigner may have to pay missed payments and late fees, and in most cases, the lender is able to use debt collection methods (such as filing a lawsuit or asking the court for a wage garnishment order) against the cosigner without first trying to collect from the borrower.

Having a mortgage cosigner can make a big difference in your approval odds if you don’t have a strong enough credit score to qualify for a mortgage otherwise. However, there are clearly tremendous risks to the cosigner that you should take seriously as the borrower.

How Cosigning a Home Loan Works

Whether your credit score is so low that you can only qualify for a mortgage with an extremely high interest rate — or so low that it precludes you from qualifying for a mortgage altogether — you can get a cosigner on your mortgage loan to help smooth your path.

A well-qualified cosigner should have a strong credit score and a low debt-to-income ratio (DTI ratio), meaning they should make significantly more money than they pay in debts each month. Adding this person, such as a parent, spouse, grandparent, or sibling, can suddenly make your application way more attractive to a mortgage lender. After all, the lender knows that if you fall behind on payments, your cosigner is well within their means to take over.

Assuming you are approved for a mortgage with a cosigner and close on the home, the mortgage will proceed as usual. You’ll move into the house, and the cosigner will continue living separately. They have no further responsibility — unless you stop making payments.

Because your failure to pay can negatively impact your loved one’s credit score and finances — and thus your relationship with that relative or friend — it’s imperative that you do everything within your power to stay on top of mortgage payments. Communicate with your cosigner regularly about the mortgage, and let them know the instant you suspect you’ll struggle to make a payment.

Conventional Mortgage Cosigner Requirements

If you’re using a cosigner to get a conventional mortgage, you’ll still need to meet basic conventional loan requirements. For instance, you’ll still need a minimum credit score for a mortgage with a cosigner of 620 — but if your credit score isn’t strong enough, you can rely on your cosigner’s high credit score to increase your approval odds.

There are a few other conventional mortgage cosigner requirements to keep in mind:

•  Down payment: If you’re using a cosigner, you still must use your own funds to make at least 5% of the down payment (in most circumstances).

•  DTI ratio: Using only your income (but the debt of both you and your cosigner), your DTI ratio must be no greater than 43%.

•  Loan-to-value ratio: When using a cosigner, the loan-to-value ratio (LTV), combined loan-to-value ratio (CLTV), and home equity combined loan-to-value ratio (HCLTV) usually cannot exceed 90%.

FHA Loan Cosigner Requirements

Similarly, FHA loans, backed by the Federal Housing Administration, have special cosigner requirements for a mortgage to bear in mind. FHA loans are ideal because you generally only have to put 3.5% down, which makes them great for first-time homebuyers who have limited savings to rely on.

However, if you’re adding an FHA loan cosigner, the down payment requirement jumps to 25% — unless the cosigner is a family member. In that case, the down payment remains at 3.5%.

Can parents cosign an FHA loan? Yes. But fortunately, the FHA is pretty liberal with the term “family member,” and also allows it to include:

•  A child or grandparent (including step and foster)

•  A spouse or domestic partner

•  An adopted child or foster child

•  A sibling (including step)

•  An aunt or uncle

•  An in-law (son, daughter, mother, father, brother, or sister)

The cosigner (which the FHA calls a “nonoccupying co-borrower”) must be a U.S. citizen or have a principal residence in the country.

Recommended: Guarantor vs. Cosigner: What Are the Differences?

Benefits of Mortgage Cosigners

The benefits of a mortgage with a cosigner belong primarily to the borrower. Here are a few pros of mortgage cosigners to consider:

•  Improved approval odds: Adding a qualified cosigner to your mortgage increases your approval odds, assuming the cosigner has a healthy credit score and stable income. This can be especially helpful for borrowers with low credit scores or unconventional income (such as self-employment income).

•  Lower interest rate: Even if you can qualify for a mortgage without a cosigner, you might face high interest rates. Adding a well-qualified cosigner could help you secure a lower mortgage interest rate, which means less money spent over the life of the loan and a lower, more manageable monthly payment.

•  Larger loan: You may be able to qualify for a more expensive house with the help of a cosigner. This could be crucial if you live in an area with a high cost of living (and thus more expensive real estate).

Drawbacks of Mortgage Cosigners

As you’d imagine, the cons primarily apply to the cosigner, not to the borrower. Here are a few cons of mortgage cosigners to consider:

•  Huge financial risk: Cosigning a mortgage poses a huge financial risk. If the borrower stops making payments, you’re on the hook. The lender could potentially sue you or garnish your wages to cover the payments. Plus, late payments by the borrower don’t only impact their credit score. The cosigner’s credit score will take a hit, too.

•  Limited borrowing ability: The mortgage you cosign will impact your DTI ratio. Until that mortgage is paid off (which could take three decades), your DTI ratio might be too high for you to qualify for your own loans, such as a mortgage on a new house, a personal loan, or a car loan.

•  Strained relationship: If the borrower isn’t taking enough responsibility for their home loan, you’ll have to have some difficult conversations. Disputes over money could even end your relationship (and yes, you’ll still be on the hook for the mortgage, even if you and the borrower no longer speak).

Recommended: Refinance Your Mortgage and Save

Other Factors to Consider When Cosigning a Mortgage

Planning to cosign a mortgage? Here are a few things to consider:

•  Cosigner release: Read the contract carefully to understand what your options are for eventual cosigner release. Some lenders may include a clause outlining cosigner liability release. If the primary borrower meets the lender’s strict requirements (credit score, income, history of on-time payments), you may be able to request to be released from the loan.

•  Credit monitoring: Regularly check your credit report for missed payments. While you can communicate with the borrower about how the payments are going, it’s always good to verify with an unbiased resource.

•  Long-term commitment: Remember, mortgages typically last between 15 and 30 years. Cosigning one is a long-term commitment. Make sure cosigning won’t impede any of your financial goals during that time period, and think carefully about whether the borrower is responsible enough to manage a loan of this magnitude for that long.

The Takeaway

Adding a cosigner to a mortgage loan can improve the approval odds if your credit score isn’t strong enough to get approved on your own. A cosigner can also help you secure a larger loan and/or a lower interest rate. However, cosigners assume a major financial risk when getting involved — and disagreements over money can easily end even the strongest of relationships. Proceed with caution.

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

FAQ

Who can be a cosigner on a mortgage?

Technically, anyone can cosign on a mortgage, but because it’s a big financial risk, people usually rely on family members or very close friends. For FHA loans, cosigning with a family member is ideal, as using a cosigner who is not a relative means you have to put 25% down, instead of 3.5%.

Do I need my parents to cosign a home loan for me as a first-time homebuyer?

You do not need your parents to cosign a home loan as a first-time homebuyer. If you have a strong credit score and enough income to handle the loan on your own, you can proceed without a cosigner. But if you need help with your first home purchase, asking a parent to cosign is an option.

Can retired parents cosign a mortgage?

Yes, retired parents can cosign a mortgage. Lenders analyze cosigners’ credit scores, debts, and incomes when making an approval decision. A retired parent’s income will simply look different from a working parent’s income, and it might include Social Security payments, investment income, a retirement account distribution, or a pension.

Does having a mortgage cosigner affect my home loan approval chances?

Adding a mortgage cosigner can and should affect your home loan approval chances. The whole reason to add a cosigner is to use their stronger credit score and higher income to make you a more attractive applicant and thus improve your approval odds — perhaps at a lower interest rate or for a larger loan amount.

Is it possible to remove a cosigner from a mortgage in the future?

While challenging, it’s technically possible to remove a cosigner from a mortgage in a few ways. Assuming your own credit and income are strong, you can just ask the lender to remove the cosigner, but they won’t always say yes. Your next move, then, is to refinance the mortgage without the cosigner or wait until you sell the property, at which point you can buy your next home without a cosigner.

How do cosigners on home loans affect taxes?

Borrowers may be able to deduct mortgage interest and property taxes when filing their tax returns, but as the cosigner, you generally don’t reap these benefits. Plus, if you help the borrower by giving them money for the down payment, it may be subject to the gift tax on your tax return.

Can you have a cosigner on a VA mortgage?

Yes, you can have a cosigner on a VA loan, but unlike other types of mortgage cosigners, the cosigner must live with the borrower in the home. In addition, the cosigner needs to be another qualifying veteran, service member, or a spouse of a qualifying buyer.

What’s the difference between a cosigner and a co-borrower?

Both cosigners and co-borrowers sign a mortgage with the primary borrower to help strengthen the application, and they’re also both on the hook financially should the primary borrower not keep up with payments. However, cosigners only guarantee the loan and do not live in the home or have any ownership in the home. Co-borrowers on a mortgage share ownership of the home, and their name appears on the title.

Photo credit: iStock/tonefotografia

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

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

SOHL-Q326-056