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How Often Can You Refinance Your Home?

Other than possible lender-imposed waiting periods after a mortgage loan closes, you can refi as many times as your heart desires. But you’ll want to crunch numbers and think about more than interest rates.

Homeowners choose to refinance for a number of reasons: to lower monthly payments, take advantage of lower interest rates, get better terms, pay the loan off more quickly, or eliminate private mortgage insurance.

Refinancing involves paying off the current mortgage with a second loan that has (hopefully) better terms. Borrowers don’t have to stay with the same lender—it’s possible to shop around for the best deals, and lenders will compete for that business.

Mortgage rates seem to be constantly in flux, moving mostly in parallel with the federal interest rate. Both were on a downward trend throughout 2020, and mortgage rates rang in the new year at 2.67% for a 30-year fixed loan and 2.17% for a 15-year fixed loan.

Rates that low could mean the chance for homeowners to save significant money. But should a killer interest rate automatically trigger a refinance? Here are some things to consider before taking the plunge.

The Basics of Mortgage Refinancing

Because a homeowner who refinances is essentially taking out a new loan, the cost of acquiring the new loan must be compared with potential savings. It could take years to recoup the cost of refinancing.

As with the initial mortgage loan, a refinance requires a number of steps, including credit checks, underwriting, and possibly an appraisal.

Typically, however, many homeowners start with an online search for the rates they qualify for. (A low average mortgage rate doesn’t necessarily translate to an individual offer—creditworthiness, debt-to-income ratio, income, and other factors similar to what’s required for an initial mortgage will matter.)

The secret sauce that makes up a mortgage refinance rate might seem like a mystery right up there with how car sellers price their inventory, but there are some common factors that can affect your offer:

•  Credit score: As a general rule, higher credit scores translate to lower interest rates. A number of financial institutions will give account holders access to their credit scores for free, and a number of independent sites offer a free peek, too.
•  Loan term/type: Is the loan a 30-year fixed? A 15-year? Variable rate? The selected loan repayment terms are likely to affect the interest rate.
•  Down payment: A refinance doesn’t typically require cash upfront, as a first-time mortgage usually does, but any cash that can be put toward the value of a loan can help reduce payments.
•  Home value vs. loan amount: If a home loan is extra large (or extra small), interest rates could be higher. But generally speaking, the less the mortgage amount is compared with the value of the home, the lower the interest rates may be.
•  Points: Some refinance offers come with the option to take “points” in exchange for a lower interest rate. In simplest terms, points are discounts in the form of a fee that’s paid upfront in exchange for a lower interest rate.
•  Location, location, location: Where the property is physically located matters not only in its value but in the interest rate you might receive.

What Types of Refinance Loans Are Out There?

As with first-time home loans, consumers have a number of refinance mortgage options available to them. The two most common types involve either changing the terms of the original loan or taking out cash based on the home’s equity.

A rate-and-term refinance changes the interest rate, repayment term, or sometimes both at once. Homeowners might seek out this type of refinance loan when there’s a drop in interest rates, and it could save them money for both the short term and the life of the loan.

A cash-out refinance can also change the terms or interest rate, but it includes cash back to the homeowner based on the home’s equity.

Within those two basic types of refinance options, conventional mortgages from traditional lenders are the most common. But refinancing can also happen through a number of government programs.

Some, like USDA-backed loans , require the initial mortgage to be a part of the program as well, but others, such as the VA, have a VA-to-VA refinance loan called an interest rate reduction refinance loan and a non-VA loan to a VA-backed refinance , so it’s important to shop around to find the best option.

How Early Can I Refinance My Home?

If a home purchase comes with immediate equity—it was purchased as a foreclosure or short sale, for example—the temptation to cash out immediately with a refinance may be strong. The same could be true if interest rates fall dramatically soon after the ink is dry on a mortgage. Especially for conventional loans that are backed by Fannie Mae or Freddie Mac, it may be possible to refinance right away. Others may require a waiting period.

According to credit-reporting company Experian, for example, there can be a six-month waiting period for a cash-out refinance. Or, refinancing via government programs like the FHA streamline refinance or VA’s interest rate reduction refinance loan can require waiting periods of 210 days.

Lenders can require a waiting period (also called a “seasoning period”) until they refinance their own loans for a number of reasons, including insurance that the original loan is in good standing.

For a cash-out refinance, some lenders may also require that the home has at least 20% equity.

Questions to Ask Before You Refinance

As with other things in life, just because you can (refi) doesn’t necessarily mean you should. Before you jump on the refinance bandwagon, ask yourself these questions.

What Is the Goal?

The endgame of a mortgage refinance can help determine whether now is the right time. If a lower monthly payment is the goal, it can be wise to play around with a refinance calculator to see just how much a lower interest rate will help.

For years, it has been a general rule that a refinance should lower the interest rate by at least 2 percentage points to be worth it. Some lenders believe 1 percentage point is still beneficial (each percentage point amounts to roughly $100 a month in payment reduction), but anything less than that and the savings could be eaten up by closing costs.

What Is the Total Repayment Amount?

It’s important to remember that a lower monthly payment—even if it’s significantly less—doesn’t necessarily equal savings in the long run.

If a mortgage with 20 years remaining is refinanced to lower the monthly payment, for example, the most affordable option could be a 30-year mortgage. But is the lower monthly payment worth it if it will be around for 10 additional years?

Will I Need Cash to Close?

One of the biggest differences between a first-time mortgage and a refinance is the amount it costs to close the loan. Many times, closing costs for a refinance can be rolled into the loan, requiring no cash at the outset.

Closing costs typically come in at 2% to 5% of the loan amount, and although they can be rolled into the loan and paid off over time, that could mean the new monthly payment isn’t as low as planned.

One way to make sure the investment is worth the cost is to ask the lender for a break-even period.

SoFi offers a traditional refi and cash-out refi with competitive interest rates and no hidden fees.

Check your rate in just two minutes.



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.

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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.

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How Does Housing Inventory Affect Buyers & Sellers?

For better or worse, the real estate market can fluctuate from year to year or even by season. For both buyers and sellers, housing inventory is a key factor to pay attention to. Whether the housing inventory is high or low can carry advantages or drawbacks.

Here’s how to gauge the local real estate market and navigate high and low housing inventory through the perspective of buyers vs. sellers.

What Is Housing Inventory?

An area’s housing inventory can be thought of as the current supply of properties for sale.

The housing inventory will increase or decrease according to the difference between the rate of new listings on the market and the number of closed sales or houses taken off the market for other reasons.

Although this calculation can be done at any time, it’s common practice to assess the balance at the end of the month. Comparing monthly figures can show if housing inventory is trending up, down, or staying relatively stable.

If there appears to be a rapid trend in either direction, it may signal the need to take quick action on a purchase or sale, or hold off for a while.

Even within a town or city, housing inventory can vary significantly. To better understand your local housing market trends, you can dig deeper into important indicators like average time on the market and average price of nearby homes or in your desired neighborhood.

High Housing Inventory

An area with a high housing inventory has more properties on the market than there are people looking to buy. This can also be referred to as a buyer’s market, since the larger selection of homes usually favors prospective buyers more than sellers.

These conditions may cause the price of homes to stagnate or, in more extreme cases, fall. Typically, the average property will also take longer to sell in this environment.

Still, different financial situations and unique property characteristics can influence the advantages or challenges associated with buying and selling during high housing inventory. Here are some considerations and tips for either situation.

If You’re a Buyer Amid High Housing Inventory

In many cases, shopping for a new home during high housing inventory is a favorable situation to be in.

If timelines and scheduling allow, buyers could benefit from seeing multiple properties before making an offer. High housing inventory means there are fewer buyers to compete with, so there’s less of a risk that homes will quickly get scooped up.

Knowledge is power when it comes to making an offer. Having viewed comparable houses in the area firsthand could help later at the negotiating table.

Other property details, such as price reductions and total days on the market, are potential indicators that sellers might be ready to accept an offer below asking price.

Although buyers can have a comparative edge when housing inventory is high, there is still a chance of multiple offers and bidding wars for well-priced homes.

If You’re a Seller Amid High Housing Inventory

Putting a property on the market in a location with high housing inventory may pose challenges and require more time to find the right buyer. However, there are several strategies at a seller’s disposal to unload a house without financial loss.

To stand out in a crowded field, it can help to address any persisting issues and accentuate your home’s best assets.

Parts of the property in need of common home repairs—the foundation, electrical system, HVAC system, and so on—could discourage potential buyers. Instead of accepting lower offers or other concessions, sellers may save more money by handling the repairs before putting the house on the market.

Making improvements can be helpful, too.

A kitchen reno is one thing, but doing a thorough cleaning and tidying up landscaping are easy fixes that could make a better impression on prospective buyers.

Decluttering is another way to enhance a house for showings and listing photos. It could also indicate a shorter turnaround for buyers eager to move quickly.

When all is said and done, setting an asking price that’s not too far above similar properties may be necessary to keep your property on buyers’ radar.

Low Housing Inventory

Also known as a seller’s market or a hot housing market, an area with low housing inventory has a surplus of interested homebuyers and a shortage of available listings.

Usually, sellers in an area with low housing inventory can get a higher price for their property. Thanks to the abundance of buyers, It’s not uncommon to see multiple offers for any type of housing stock.

Let’s take a closer look at how to make the most of low housing inventory for either side of the deal.

If You’re a Buyer Amid Low Housing Inventory

Although the odds may not favor buyers in a low housing inventory environment, they still have some options to increase their chances of finding a dream home

In a multiple-offer situation, the highest price may not be the most advantageous deal for the seller. Being flexible on the closing date and limiting contingencies can affect an offer’s competitiveness.

Getting pre-qualified or pre-approved for a mortgage loan can show that buyers are ready to go and financially eligible. Typically, lenders provide potential borrowers with a letter stating how much they can borrow, given some conditions.

Pre-approval, which involves analysis of at least two years of tax returns, months’ worth of income history and bank statements, and documents showing any additional sources of income, can carry more weight and speed up the mortgage application process.

If you can swing it, a cash offer is often seen as advantageous because there’s no risk of the deal falling through from a denied mortgage loan.

An escalation clause is another method for beating out competing bids. The clause means a buyer automatically will increase their initial bid up to a specified dollar amount. For example, a buyer with an escalation clause could offer $250,000 with an option to bump up to $255,000 if another offer exceeded theirs.

Even in a seller’s market, house hunters would do best to keep appraised values in mind. If buyers pay thousands more than the appraised value of a house, their home equity could take a hit.

If You’re a Seller Amid Low Housing Inventory

When the forces of supply and demand favor sellers, they have a better chance of fielding multiple offers on a property. Still, getting a great deal is not a sure thing.

The same conventional wisdom applies for cleaning and touching up a house to get more foot traffic at showings or open houses.

Setting a reasonable asking price just below the market value—a figure based in part on comps, or comparables, what similar homes in the same area have sold for recently—is another way to capture buyer interest. In a multiple-offer situation, this gives buyers room to outbid each other, potentially increasing the purchase price above asking.

If faced with more than one offer, it may be tempting to go for the highest bidder. It can be beneficial to review each buyer’s finances and contingencies to lower the risk of a deal falling through.

Cash offers are generally the most secure but represent just 14% of buyers, according to a National Association of Realtors® report.

Lenders may not extend financing for pre-approved buyers if they’re applying to borrow more than the appraised value of a home.

And contingencies like the house passing an inspection could allow a buyer to back out of a deal, too.

Buying a Home

Housing inventory is an important consideration when looking for a new home, but it’s just one aspect of deciding the best time to buy a house.

Personal finances also come into play. Most buyers will have to borrow to seal the deal.

Getting quotes from several lenders can help find a home loan that best fits your needs. And you can get pre-approved by multiple lenders without hurting your credit score, as long as it’s done within a 45-day time frame.

SoFi offers mortgage loans with competitive rates, no hidden fees, and as little as 10% down. Mortgage loan officers are on hand to help you through the process and make your dream home a reality.

The Takeaway

Housing inventory dictates whether an area is a buyer’s or seller’s market. Knowing homes’ average time on the market, comps, and strategies can help lookers and listers navigate high and low housing inventory.

Find your rate on a SoFi home loan in just two minutes.



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.

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.
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.
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.

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Getting a Mortgage in Retirement

With an abundance of Americans reaching retirement age—10,000 people will turn 65 every day for the next two decades—some of those will be looking for a new place to call home and a way to finance it.

Given that interest rates are low and that workers, in general, continue to be confident they will have a comfortable retirement, more retirees may be looking to buy new homes, or refinance theirs.

You might think of the young and middle-aged as typical homebuyers and older people as more likely to have paid off, or nearly paid off, their homes and wanting to stay put.

But with opportunity in the air and a desire to downsize—and sometimes upsize—more retirees could well be in the market for a new home loan.

Recommended: Home Buyer’s Guide

Lenders and Age: No Legal Gray Area

Mortgage lenders look for a variety of things when vetting a home loan applicant. What they can’t do is take age into consideration when making a lending decision.

The Equal Credit Opportunity Act bans creditors from using age to influence a loan application decision.

Retirees applying for a home loan, like people still working, generally just need to have good credit, not too much debt, and enough ongoing income to repay the mortgage.

Here are some of the main factors you need to buy a house that lenders home in on:

•   Income
•   Debt
•   Credit
•   Primary home?
•   Down payment

Let’s look at each.

Income

While many retirees live on a fixed income, putting multiple sources of income together can help establish income that is “stable, predictable, and likely to continue,” as Fannie Mae instructs lenders to look for.

Social Security. The average monthly Social Security payout was $1,503 in January 2020, enough to contribute to a mortgage payment. But if Social Security is an applicant’s only source of income, they may have trouble qualifying for a certain loan amount.

Investment income. Sixty-six percent of older adults receive income from financial assets, according to the Pension Rights Center. But half of those receive less than $1,754 a year, the center says.

But for those who do receive investment income, it’s important to know that a lender generally looks at dividends and interest, based on the principal in the investment. If an applicant plans to use some of the principal for a down payment or closing costs, the lender will make calculations based on the future amount.

Lenders may view distributions from 401(k)s, IRAs, or Keogh retirement accounts as having an expiration date, as they involve depletion of an asset.

Home loan applicants who receive income from such sources must document that it is expected to continue for at least three years beyond their mortgage application.

And lenders may only use 70% of the value of those accounts to determine how many distributions remain.

Annuity income can be used to qualify as long as the annuity will continue for several years (three years is likely the minimum).

Part-time work. Retirees who earn money driving for a ride-share service, teaching, manning the pro shop, and so forth add income to the pot that a lender will parse.

Clearly, the more income a retiree can note on a mortgage application, the better the odds of a green light.

Debt

If your income level falls into a gray area, mortgage lenders are even more likely to focus on your debt-to-income ratio.

Debt-to-income is a straightforward proposition. It’s calculated as a percentage and it’s vetted by lenders and creditors as a percentage. Simply divide your regular monthly expenses by your total monthly gross income to get your debt-to-income ratio.

Let’s say you have $5,000 in regular monthly gross income and your regular monthly debt amount is $1,000. In that scenario, your debt-to-income ratio is 20% (i.e., $1,000 is 20% of $5,000.)

By and large, the higher your DTI ratio, the higher the risk of being turned down for a mortgage loan.

If you have a spouse who also has regular income and low debt, adding that person to the mortgage application could help gain loan approval. Then again, married couples applying for a loan may want to consider how a spouse’s death would affect their ability to keep paying the mortgage.

Lenders, though, cannot address that matter in the loan application.

Credit Score

Mortgage lenders also give great weight to consumer credit scores when evaluating a home loan application. That’s understandable, as a high FICO® credit score—740 or above is considered generally quite mortgage-worthy—shows lenders that you pay your bills on time and that you’re not a big credit risk.

It might be smart to take some time before you apply for a mortgage and review your credit report, making sure all household bills are paid up to date and no errors exist that might trip you up. And it’s a good idea to limit credit inquiries on big-ticket items. (And realize that several months may be needed to significantly increase a credit score.)

You can get a free copy of your credit scores at annualcreditreport.com and at any of the “big three” credit reporting agencies: Experian, Equifax, and Transunion.

The Property

Mortgage lenders will also take a close look at the home you wish to purchase.

In general, it’s easier to obtain a mortgage for a primary residence, as it represents the home you’ll live in long term and there’s only one mortgage to pay.

A second home, either as an investment or vacation property, is a riskier proposition, as it represents another mortgage to pay and may bring more debt to the lender’s mortgage approval score sheet.

Down Payment

Using the asset depletion method, a lender will subtract your expected down payment from the total value of your financial assets, take 70% of the remainder, and divide that by 360 months.

Then the lender will add income from Social Security, any annuity or pension, and part-time work in making a decision.

For borrowers in general, putting at least 20% down sweetens the chances of being approved for a mortgage at a decent interest rate.

Recommended: Home Affordability Calculator

The Takeaway

As a retiree, if your income, debt-to-income ratio, and credit score are up to snuff, you’re as likely as any other borrower to gain approval for a new home loan. Lenders cannot legally take age into consideration when making their decisions.

Thinking about buying or refinancing in retirement?

SoFi home mortgage loans come with competitive rates, no hidden fees, and as little as 10% down. And SoFi offers a traditional refi and cash-out refi, again with no hidden fees.

Find your rate in two minutes.



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.

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.
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.

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Should I Downsize My Home?

For many, downsizing is more accurately described as “right-sizing.” Popularized by author Sheri Koones, the idea of a smaller home is that it helps people live compactly and reduce the typical avalanche of stuff.

It’s not about giving up everything, but instead deciding what’s really important and then finding ways to better incorporate those priorities into one’s lifestyle.

Shrinking a home’s total square footage might not be the right fit for everyone, but it does offer economic, lifestyle, and emotional benefits for some.

Read on to learn why less is more for the Americans who choose to downsize.

The Rise of Downsizing

Living minimally has always been a lifestyle choice, but lately, more and more people are opting to live with less and less. Minimalism went mainstream with Marie Kondo’s The Life-Changing Magic of Tidying Up: The Japanese Art of Decluttering and Organizing, which urges readers to get rid of items that don’t bring joy.

Downsizing as a trend goes hand in hand with minimalism, the urge to have fewer objects and live in a smaller space. It’s part of the cultural shift of valuing doing something over having something. Three-quarters of Americans value experiences more than things, one study showed.

That shift and home building data suggest that it’s not just empty-nesters looking to purchase a home with less square footage. The National Association of Home Builders reported the slight shrinking of the average home size in recent years.

The choice to downsize a house is personal, but it’s one that many homeowners are taking on.

Signs It’s Time to Downsize

No matter a person’s life stage, there are a few signs that may signal that it’s time to downsize.

•  Housing expenses are too high. The traditional notion is that no more than 30% of a person’s gross income should be spent on housing costs. (The number has been debated, but the 50/30/20 rule has wide support: 50% of post-tax income goes to essential needs, including housing, 30% to discretionary spending, and 20% to savings.) If the cost of the mortgage, upkeep, and additional home-related expenses far exceed a 30% of a person’s budget, it might be time to think about downsizing. This could apply to a retired couple now living on a fixed income or a first-time homeowner who has a hard time paying the mortgage without roommates.
•  No ties to the location. Remote work is on the rise, and that could mean employees are no longer tied to their neighborhood, city, or state. Similarly, the kids might be out of school and parents no longer feel the need to stay in the school district. When a homeowner no longer feels committed to their property’s location, it might be time to consider downsizing.
•  A lifestyle change. It could stem from limited mobility or simply fewer people living in the house, but if rooms or even floors aren’t being used weekly, it could be time to try a smaller space.
•  Home equity could be used. Depending on the amount of equity a person has in their home and the value of the market, they could be sitting on a potentially huge payday. The proceeds from the sale of their home could be a significant down payment on a smaller property.

The Upside of Downsizing

Downsizing can sound restricting, but there’s a lot to benefit from.

•  Less upkeep. A smaller home means less upkeep overall. A bigger home requires more maintenance, cleaning, and possibly yardwork.
•  More affordable. A survey of downsizers showed that they spent 62% less on a new home than on the house they owned before, according to Homes.com. A smaller home will probably come with a smaller mortgage payment or none at all. On top of that, the less space, the less things that can go wrong in the home. Additionally, a smaller space typically means lower heating and cooling bills.
•  A fresh locale. In general, smaller homes typically cost less, so that could create the opportunity to move into a small place in a more desirable or exciting neighborhood. It could cost more on average per square foot, but with less square footage overall, up and coming neighborhoods might be attainable.
•  Freed-up money. A smaller space with fewer expenses and less upkeep can translate to a bigger budget for travel and experiences.

The Downside of Downsizing

Downsizing has its perks, but there are a few potential drawbacks to the life choice as well.

•  Less space. A smaller footprint could mean sacrificing a guest room, having fewer bathrooms, or losing some garden space. Homeowners thinking about downsizing can be forced to make tough decisions about what truly matters to them in their day-to-day living space.
•  Cost of moving. Overall, downsizing is a more affordable lifestyle, but don’t discount the cost of selling a home and moving. Remember, when selling a home, real estate agent commissions and other fees can eat up to 10% of the sales price of the home. Selling should lead to a payday, but homeowners take on expenses when prepping their property for sale. Additionally, a full-service move can cost thousands, move.org notes.
•  Stress of sorting through stuff. In a recent survey, 45% of respondents said moving is the most stressful event in life, ranked a hair above divorce or a breakup. Downsizing can be particularly stressful because not everything can go with you. It could mean parting with keepsakes; paring heaps of clothes, shoes, books, holiday decorations, and the list goes on; or deciding to go without some beloved items because they simply don’t suit a smaller home.
•  Staying minimalist-minded. Downsizing isn’t just a one-time choice; it’s the conscious decision to live with less. The initial work of downsizing is probably the biggest hurdle to overcome, but there’s the ongoing choice to live with less and resist buying and accumulating more stuff.

How to Downsize: Steps to Get Started

•  Explore alternative housing. Before diving headfirst into downsizing, it’s worth trying out a smaller way of life. That could mean renting a smaller home for a week or two in a new neighborhood. Downsizing can mean a lot of things, from a tiny house to a condo, or moving from a four-bedroom to a two-bedroom. Getting an idea of what downsizing will mean on a personal level starts with understanding how small you’ll go.
•  Start organizing. Sorting through all your worldly possessions and deciding what to get rid of can be exhausting. Getting started on organizing sooner rather than later can save downsizers time and energy. Starting to live with less sooner can make the transition a little easier.
•  Research your property’s value. Knowing the value of your current property, as well as the equity you have, can help create a road map to more affordable living. With an idea of the market value and the proceeds, you’ll have a good idea what your down payment could be.

The Takeaway

If you’re asking yourself “Should I downsize my home?” know that downsizing comes with benefits including less stuff, a smaller a href=”https://www.sofi.com/home-loans/mortgage/”>mortgage payment, and minimized upkeep, freeing up time and money for other pursuits.

Downsizing is about making everything simpler, down to the mortgage process and loan. SoFi home loans come with competitive rates, help through the whole process, and as little as 10% down.

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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.

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.

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Home Appraisals 101: What You Need to Know

Your home is oftentimes your most valuable asset. It’s not only a place where you and your family can congregate and enjoy your time together; it’s also an investment.

Let’s say, you want to either refinance your mortgage at a lower rate or sell it to try and make a profit. Or, perhaps you’re trying to purchase a new home. Before applying for refinancing, listing your house on the market, or buying a house, you’ll need to get a home appraisal.

What Is a Home Appraisal?

A home appraisal is an objective and professional analysis of a home’s value. An appraisal consists of information based on different aspects including what’s in the home (like the floor plan, amenities, and how big it is), a visual inspection, real estate trends in your area, and how much nearby homes in your area sold for.

Generally, an appraisal will be completed when someone is buying, selling, or refinancing a home. It will tell a homeowner whether or not the price they’re putting on the home is fair based on the condition of the home, its amenities, and its location.

Home appraisals will let those buying a home know if a home is a good price. If you’re refinancing, it shows the lender that you, the borrower, aren’t receiving more money than the home is actually worth.

According to a National Association of Realtors study from January 2020, appraisal issues led to 18% of real estate contract delays , so it’s important to get the appraisal right the first time around.

How Much Does a Home Appraisal Cost?

The home appraisal cost is typically several hundred dollars, and the borrower will most likely be responsible for paying it. However, the seller will cover it in some circumstances.

For instance, they may want to get the appraisal and see what modifications they can then make to increase their home value when they’re ready to sell it, or if they’re going to sell their home to a family member, to guarantee that the parties involved are getting a fair price.

Most people can expect to pay at least $450 to $550 for a home appraisal, but it could be higher if depending on the specific property.

For example, if you live on a lake or you’re buying a home on a lake, you can expect the home appraisal cost to be more.

If the appraiser is inspecting a larger home and/or a bigger overall property, then the home appraisal cost will go up. The same applies to jumbo loans, which are usually given to borrowers purchasing big luxury homes.

The cost of a home appraisal covers things like the appraiser’s training, licensing, insurance, and expertise. It also covers the time it’ll take for the appraiser to assess nearby sales and market trends as well as conduct a visual inspection.

You’re paying for the appraisal report, which will show how the appraiser came to their conclusion on the price and information about your home.

At the end of the appraisal, if it comes up lower than the amount for which you want to refinance or sell it, then you may need to work out a new deal with your lender or purchasing party.

What Is the Home Appraisal Process?

The home appraisal process may seem complicated, but trained appraisers will be able to explain it to you and guide you through every step.

Generally, the home appraisal process happens after an offer on a house is accepted and within a week after an inspector has toured the home if it is being sold. Sellers have the option, should they wish to pay for it, to do a pre-listing appraisal. This can prevent the seller from having to work out the price with every prospective buyer.

Generally, the lender will seek out a third-party appraisal management company to come up with an objective analysis of the home and the appraisal estimate.

The lender will determine the cost of the home appraisal, and usually the borrower will be responsible for covering the expense.

The actual appraisal can take as little as 15 minutes or up to several hours depending on how big and complex the home is.

The appraiser will usually bring a form to collect information about the home including things like measurements, nearby housing trends, the demographics of the neighborhood, the condition of your home, and how it fits in with your area.

The appraiser will also review things like the home’s location, quality of construction, parking situation, exterior condition, how old it is, its structure, the quality of the siding and gutters, and the square footage.

They will also research the appliances, health and safety factors, the number of bedrooms, bathrooms, and kitchens in the house and how old they are, and the code compliance.

The appraiser will usually take photos of the home as well as make notes. Homeowners don’t have to be there for it, but if they are present, try to avoid getting in the way when the appraiser is taking photos or interrupting them while they’re trying to concentrate.

The appraiser may ask you questions about what has been done with the home to get a more accurate report. If the homeowner doesn’t don’t want to be there for the appraisal, the real estate agent can fill in to answer questions that may come up during the appraisal.

After the appraiser finishes, they’ll put together a report, which is generally delivered within a week to 10 days–but it could always take longer.

Along with looking at information on recent sales nearby and market trends, the appraiser may need to check that you had permits to make upgrades, which could delay the process.

When you receive the report, it could be anywhere from less to 10 pages up to 100 pages long. It’ll show details about the home as well as local properties that are similar to it.

If the appraised value is around the same price as listed, then the sale could close shortly after that. If it’s lower than expected it may be necessary to get in touch with the lender to show them comparable homes in the same neighborhood.

One option could be to print out a list of similar homes in the community and show that they were valued at a higher price than your home. You may have the option to appeal the appraisal, just note you’ll likely need to support your argument and the appraiser may not change their appraisal.

Each lender may have different criteria for formally disputing an appraisal, so should there be an issue, contact the lender to review their policies. In most cases, only the lender can request a second appraisal.

You may not even need to contact the appraiser if you’re willing to negotiate with the buyer, seller, or lender. They may be flexible on the price; all you have to do is ask.

Home Appraisal Checklist

Before getting a home appraised, there are a few things you can do to help the process go smoothly.

First up, decluttering. Think things like storing clothes and items in closets and drawers, organizing clutter in storage bins, and taking donations to your local Goodwill or thrift shop.

Thoroughly clean the inside and outside of the home, including the yard. Break out the cleaning supplies or hire a professional cleaning team. The goal is for the house to be spotless.

It’s also a good idea to repair any cracks in the wall, paint over paint that is peeling, take loose nails out of the walls, and make any other visual repairs that may need attention.

Test the lights, faucets, ceiling fans, and security system, as well as confirming that the windows and doors open and close easily. Run appliances like the oven and dishwasher as well to guarantee there are no problems.

Other items to consider checking off your list might include trimming hedges, getting rid of cobwebs, cleaning the gutters, pulling weeds, and mowing the lawn.

Adding plants or flowers could help add some curb appeal to the house. If there is a patio and/or pool area, clean up any outside furniture and power wash the surrounding concrete, fences, and walkways.

Since the appraiser will be walking outside, avoid watering the grass on the day of the appraisal. This can help avoid mud or dirt being tracked through the house.

If you have pets, you may need to make a plan for them. Consider putting them in a designated room or taking them to a family member or friend’s home during the appraisal. Also, double check that there are no fleas or other insects in the house.

In terms of paperwork, consider writing down a list of all the upgrades that have been completed on the home and attach permits and receipts detailing how much it all cost.

It can also help to research comparable homes in the area; an agent will be able to help with that.

Right before the appraiser arrives, consider doing one last light cleaning.

Ensuring You Get the Best Appraisal Possible

Whether you’re buying, selling, or refinancing a home, a home appraisal is a key part of the process. Knowing what to expect with the process can help ensure it goes as smoothly as possible and could help you feel more comfortable with the process.

If you’re ready to buy or refinance your home, take a look at what SoFi has to offer. Apply for a SoFi Home Loan in minutes and see competitive rates on your new or refinanced home.



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