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8 Tips for Millennial Homebuyers

Preparing to buy your first home is a thrilling time. Dreaming up all the new furniture, new routines, and brand-new life you’ll live inside those four walls is exciting. And it appears that a portion of the millennial generation is ready to get in on the happy home action.

Realtor.com’s 2021 Housing Market and Predictions projected that members of Generation Y will continue to shape the market, both as first-time buyers and “trade up” buyers, as nearly 5 million Americans turn 30 every year through 2024.

If you happen to be one of these would-be millennial homebuyers, you may have questions about where to look, how to pick a real estate agent, how to save for a down payment, and how to deal with a heated seller’s market.

The process requires being realistic about how much home you can afford, learning about the many resources available, and tips that millennial homebuyers can use to make the entire dream come together.

Pay Down Debt First

The average millennial carries $27,900 in personal debt, excluding mortgages, according to a 2019 survey conducted by The Harris Poll. A big bulk of that debt is student loans. The Pew Research Center found that the median amount of student loan debt carried by millennials was $19,000.

Clearing out other debts may be a great place to start on a millennial homeownership journey. That’s because you’ll likely need to take out a mortgage to purchase a new house, which will account for an even larger portion of personal debt.

There are several ways to pay down student loans or other debts, including the snowball and avalanche methods.

Save for a Down Payment

After paying off outstanding debts it’s time to start thinking about saving for a down payment. Though traditional thinking dictates that people should save enough to cover 20% of the house cost, there may be a way to put down even less.

In fact, the down payment on a house can be as little as 3.5% for those who qualify for an FHA home loan, and in a few cases, a person may be able to buy a home with no money down at all. (This option is usually reserved for veterans and those who qualify for a USDA home loan in rural areas.)

All of the different down payment options come with their own benefits. For example, putting down 20% may mean a better mortgage rate and could make monthly mortgage payments more manageable.

Once you figure out what you may qualify for, a good next step is to start saving toward a down payment. That can be done in a number of ways (just like paying down your debt), including proper budgeting, the snowflake savings method, taking on a side hustle, or even asking your boss for a raise.

You might even ask Mom and Dad, Granddad, or Aunt Charity for a gift.

Determine Your Must-Haves

Here’s one of the most fun parts about purchasing a home: getting to plot out a dream space.

Before starting your home search, it’s helpful to take some time and think about what you really want. Do you want an open-concept home, or need a minimum number of bedrooms and bathrooms? Are you looking for a condo, single-family house, or townhouse?

Get down to the nitty-gritty and think about everything on your must-have vs. like-to-have list to narrow the search.

Find a Real Estate Agent

A buyer’s agent will be your partner throughout the homebuying process, a guide from the first viewing to closing the deal. A real estate agent has access to the multiple listing service, which allows them to sift through every home in your area at once.

A real estate agent is also well-versed in what needs to take place before a person can take ownership of a home, including everything from the offer process to inspection and insurance.

They may also already have a list of trusted inspectors, lawyers, contractors, and insurance agents a buyer may need along the way.

Though you don’t technically need to use a real estate agent to purchase a home, it may be a good idea to have an experienced and knowledgeable person by your side.

According to a survey by Homes.com, 44% of people felt stressed throughout the homebuying process, but having a navigator may ease the pain.

Set Up Real Estate Alerts

Once your list of must-haves is complete and you’ve picked a real estate agent to assist you, it could be a good idea to set up alerts across listing sites such as the MLS, Zillow, and Redfin. You’ll be notified whenever a home in your chosen area, price range, and desires comes on to the market.

These websites also typically allow users to save favorites and gather intel on a specific home such as its tax and sales history. They also allow users to book viewing appointments.

Think About Long-Term Value

While viewing homes, it may be easy to fall in love with fresh subway tiles, staged furniture, and the simple shine of a brand-new spot. However, it helps to take a beat and a breath and think about the long-term value of the home.

Are you buying this as a forever spot to raise a family? Then make sure the schools are a good fit and it’s a walkable neighborhood. Looking at purchasing a home to rent out short term? Check local laws to ensure you’re zoned properly.

Want to purchase that new place but plan on painting the front door red and planting trees? You may want to ensure it’s allowed by the homeowners association, if one exists. That way you don’t buy a house and become stuck with things that don’t work for the long haul.

Prepare to Make a Personal Plea

Once you’ve found the right spot in your price range that comes with all your must-haves, it’s time to put in an offer. However, you could be just one of many putting in similar offers for the home. There is something you can add to your offer to stand out from the crowd: a personal letter.

Write a letter to the current homeowner expressing how much you love the space and why you feel you’d make the next great owner. You may also want to point out all the things you love about the home design.

Beyond the letter, there are a few other ways your offer can stand out. Talk to your agent about providing a quick closing date, offering to pay for things like a termite inspection, and even offering to rent back the home to the owners until they are ready to move out to help move your offer to the top of the list.

Shop for a Mortgage

When choosing a home loan, you may want to shop around and see the various offers from lenders.

When looking at mortgage options, look into loan terms, the application process, and of course interest rates, but don’t forget to look for hidden fees in the application or repayment of the mortgage.

A lender to consider is SoFi, which offers a variety of mortgage options without hidden fees and with competitive rates.

The Takeaway

Millennials face challenges when buying homes in a hot market, but many are suiting up to take the homebuying plunge. Members of Gen Y can employ a number of strategies before searching for the right mortgage.

A lender to consider is SoFi, which offers a variety of mortgage options with competitive rates and without hidden fees.

Ready to buy? A mortgage with SoFi could open the door to your perfect place.



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.

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.
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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How Much Does It Cost to Replace Windows?

Have you noticed a pesky draft in the winter months? Or perhaps blazing sun heats your living space up to greenhouse temperatures in the summertime?

Climate issues inside your home can signal it’s time to replace your windows. Yet doing so will not come cheap. The bill will depend on materials, style (single- or double-hung, single-pane or multipane), size, number needed, and the cost of installation and any commission.

Here’s a look at average cost and some factors that will influence the final price tag.

How Much Do Windows Cost?

Count on a bill of thousands.

A standard new window, installed, can cost anywhere from $400 to $1,000, according to HomeGuide. HomeAdvisor puts the costs at $75 to $1,500 per window and $100 to $300 each for labor.

Three main choices are wood, vinyl, and fiberglass.

Of the three, vinyl windows are the most popular choice. The average cost of a double-hung, double-pane vinyl window, including installation, is $400 to $650, HomeGuide says.

Vinyl windows typically last for 30 years, never need to be painted, and are easy to clean. Compared with their cheaper cousin, aluminum, vinyl windows excel when it comes to insulation and improving energy efficiency, and will not rust.

Fiberglass and fiberglass-composite windows are stronger than vinyl. Like vinyl, they offer a high degree of energy efficiency, and with both types of window, there are options to enhance the energy efficiency. Expect to pay $900 to $1,100 for one fiberglass window, installed, according to The Spruce, though some sites give a lower average cost.

Wood windows can lend a classic look. Expect to pay $700 to $1,000, including installation, according to HomeGuide. Wood windows tend to be harder to maintain than vinyl windows, given that the paint can peel or the wood can start to rot if it gets wet.

When Should I Replace My Windows?

If you’re thinking about replacing your windows, consider these questions. First, do your windows show any damage? Are they drafty, or have you noticed an increase in your electrical bills in the winter when the heat is on, or in the summer when the air conditioning is on?

Is there frequent moisture buildup on the outside of the glass, or is moisture trapped between layers of glazing, signaling leaky seals? Can you hear too much noise outside? Are you ready for a new aesthetic?

If the answer to any of these questions is yes, it may be time to consider replacing your windows. Or if you are on a smaller budget, consider repairing them.

If you’re buying a new home, an inspection will be a part of your mortgage process. It’s best to have the windows inspected, and if there are major issues, try to negotiate for their replacement before you close on the house.

Can I Repair Old Windows?

If your windows are in pretty good shape, it may make sense to repair or update them rather than replace them. Doing so can be a cost-effective way to help you save money on energy costs and reduce drafts and moisture in your home.

•   Check windows for air leaks
•   Caulk and add weather stripping as needed
•   Consider solar control film that can block heat and reduce glare
•   If a pane is cracked, in a pinch the glass alone can be replaced with an insulated glass unit.

How Long Do Windows Last?

The lifespan of a window depends on a number of factors, such as quality and type of material, local climate, and proper installation.

Wood windows can last a long time, but might require a bit of maintenance on your part, whereas vinyl or fiberglass windows may require none.

Local weather can play a big part. Extreme heat or cold can shorten the lifespan, salt spray from the ocean can corrode window exteriors, and humidity can lead to warping or rotting.

Whether or not a window is properly installed can also play a big role in how long it lasts. If it is sealed improperly, for example, moisture may get in and damage the frame.

Finally consider how much a window is used. Normal wear and tear on parts in windows that are opened and closed frequently can lead to replacement more often than windows that are rarely opened.

Replace All My Windows at Once?

Whether or not you decide to replace all of your windows at once will largely depend on your budget. Consider that the price to replace 10 windows in a modest house could be several thousand dollars

If you don’t have the budget to replace all your windows in one go, it’s common to swap windows out in stages. In this case, windows at the front of the house are generally the first to be replaced. They’re public facing and add to the curb appeal of the home. The windows in the back of the house tend to come next, followed by any upstairs windows.

There may be economies of scale. After ordering 10 or more windows, the price per window tends to stay the same.

What Type of Window Should I Buy?

The first thing to consider is materials. You might consider wood windows if you’re trying to match them to an existing wood exterior or trim. You might choose fiberglass or composite for its durability and ability to look like painted wood. Or you might choose vinyl for its affordability.

You’ll also want to consider the many types of windows available. For example, single-hung windows are among the most popular and cheapest options. They have a fixed upper window and allow you to open a lower window sash.

Double-hung windows are pricier but have two moving window sashes that allow for increased airflow and easier cleaning. There are also bay windows, arched windows, sliding windows, and many more to choose from.

The glass option you choose is one of the most important decisions. There are a variety of insulating options, such as dual-pane or triple-pane windows. Glass can be treated with a low-emittance coating to reflect heat in the summer and keep it in in the winter.

In climates where you need to cool the house for much of the year, consider three-coat low-e glazing, which best reduces heat from the sun. In colder climates that require more heating, consider a two-coat low-e treatment.

The space between glass may be filled with a nontoxic gas that can provide better insulation than air.

What’s the Best Time of Year for Replacing Windows?

The mild weather of spring, summer, and fall make these times the most popular for replacing windows. In the warmer months, you don’t have to worry about winter air getting into your house, requiring you to jack up your heat or close off rooms to control drafts. These factors can be especially irksome if you’re having multiple windows replaced.

Weather can affect how materials behave. For example, caulk doesn’t adhere well in extreme cold; nor does it cure well in very high temperatures. As a result, you may want to aim to replace windows when temperatures are between 40 and 80 degrees.

If you can stand the cold, you may be able to secure a discount to have windows installed in the winter.

The Takeaway

What does it cost to replace windows? It depends on the materials (wood, vinyl, fiberglass?), style, size, and labor. Think of new windows as a long-term investment that provides energy savings, visual appeal, and enhanced resale value.

Ready to replace some or all of your windows? A personal loan could be the answer. An unsecured personal loan may have advantages over a home equity loan or home equity line of credit when it comes to funding home renovations.

Check your rate on a SoFi Personal Loan today.



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.

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.
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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Top 30 States with Foreclosures in February 2021

Despite the economic fallout and job loss from the pandemic, the number of US properties with foreclosure filings in February was 11,281, down 77% from last year, according to ATTOM Data Solutions . This is likely thanks to the COVID-19 foreclosure moratorium for federally guaranteed mortgages, which has been extended to June 30, 2021. (Note: President Joe Biden’s executive order also extended the mortgage payment forbearance enrollment window to June 30, 2021.)

While foreclosures were down for the month compared to last year, they were up compared to the previous month: specifically, foreclosures in February were up 16% compared to January. Read on for the top 30 states with foreclosures in February 2021—plus top counties within those states.

States with the Highest Foreclosure Rates: 1 -10

The top 10 states are not located in any one region. That said, the South had five states in the top 10: Delaware, Florida, Louisiana, South Carolina, and Georgia. The Northeast had none.

1. Utah

With a total 1,087,112 housing units, Utah’s foreclosure rate was 1 in every 3,883 homes in February. The 31st most populated state in the country, the state saw a total 280 foreclosure filings (default notices, scheduled auctions, and bank repossessions). The counties with the most foreclosures per housing unit were (in descending order): Utah, Ulintah, Beaver, Juab and Carbon.

2. Delaware

With a total 433,195 housing units, Delaware’s foreclosure rate was 1 in every 5,219 homes. Ranking 45th for population, the state had 83 foreclosure filings in February. The counties with the most foreclosures per housing unit were (in descending order): Kent, Sussex, and New Castle.

3. Florida

The third most populated state, Florida was also third for most foreclosures. Of its 9,448,159 homes, 1,516 went into foreclosure–making the state’s foreclosure rate 1 in every 6,232. The counties with the most foreclosures per housing unit were (in descending order): Highlands, Levy, Hendry, Madison and Taylor.

4. Illinois

With a total housing unit count of 5,360,315, Illinois had 846 homes go into foreclosure, resulting in the state’s foreclosure rate of 1 in every 6,336. The counties with the most foreclosures per housing unit were (in descending order): Power, Boundary, Fremont, Payette, and Bannock.

5. Louisiana

With the 25th largest population in the country, Louisiana’s foreclosure rate of 1 in every 7,923 homes put it in the number five spot. Of its total 2,059,918 housing units, 260 went into foreclosure. The counties with the most foreclosures per housing unit were (in descending order): Washington, West Baton Rouge, Caddo, Jackson, and Union.

Recommended: Tips on Buying a Foreclosed Home

6. Indiana

With a total 2,886,548 housing units in the state, Indiana’s foreclosure rate was 1 in every 7,930 homes. Ranked the 17th most populated, the state ranked 6th for foreclosures with a total 364 filings. The counties with the most foreclosures per housing unit were (in descending order): Vermillion, Clinton, Jasper, Fountain, and Huntington.

7. Ohio

Just like Florida, Ohio’s population ranking (7th) matches its foreclosure rate ranking. With 1 in every 8,310 households going into foreclosure, the state had 626 homes of a total 5,202,304 go into foreclosure. The counties with the most foreclosures per housing unit were (in descending order): Lake, Fairfield, Trumbull, Marion, and Cuyahoga.

8. South Carolina

With 1 in every 8,565 homes going into foreclosure, South Carolina was a close eighth to Ohio. Ranked 23rd for population, South Carolina has 2,286,826 housing units and saw 267 foreclosure filings. The counties with the most foreclosures per housing unit were (in descending order): Mccormick, Allendale, Fairfield, Darlington, and Bamberg.

9. Wyoming

Though it’s the least populated state in the country, Wyoming ranks 9th for foreclosures with 1 in every 8,651 homes. Of its 276,846 homes, 32 homes were foreclosed on. The counties with the most foreclosures per housing unit were (in descending order): Weston, Carbon, Uinta, Campbell, and Lincoln.

10. Georgia

Eighth for most populated state, Georgia was tenth for most foreclosures. It has 4,283,477 housing units, of which 472 went into foreclosure—making the state’s foreclosure rate 1 in every 9,075 households. The counties with the most foreclosures per housing unit were (in descending order): Berrien, Baker, Terrell, Oglethorpe, and Candler.

States with the Highest Foreclosure Rates: 11 – 20

With the next group of states, the trend of the South (North Carolina, Missouri, Oklahoma, Alabama, and Mississippi) dominating foreclosure rates continues. The Northeast appears with Maine and New Jersey and the West Coast debuts with California.

11. Maine

Ranked as the 9th least populated state, Maine saw a total 81 foreclosures in February. With a total 742,788 housing units, its foreclosure rate was 1 in every 9,170 homes. The counties with the most foreclosures per housing unit were (in descending order): Oxford, Penobscot, Franklin, Waldo, and Somerset.

12. California

The most populated state is only 12th for foreclosures. Of its 14,175,976 homes, 1,427 went into foreclosure, making for a foreclosure rate of 1 in every 9,934 homes. The counties with the most foreclosures per housing unit were (in descending order): Calaveras, Sutter, Trinity, Kern, and Butte.

13. North Carolina

The 9th most populated state has 4,627,089 homes, of which 462 homes went into foreclosure. That makes the state’s foreclosure rate 1 in every 10,015 homes. The counties with the most foreclosures per housing unit were (in descending order): Hyde, Anson, Lenoir, Onslow, and Bertie.

14. Missouri

Of Missouri’s 2,790,397 housing units, 265 homes went into foreclosure in February. The 18th most populated state’s foreclosure rate is 1 in every 10,530 households. The counties with the most foreclosures per housing unit were (in descending order): Moniteau, Pike, Montgomery, Greene, and Adair.

Recommended: What Is a Short Sale?

15. Iowa

The 30th most populated state, Iowa is 15th for most foreclosures. Of its 1,397,087 homes, 128 were foreclosed on. That puts the state’s foreclosure rate at 1 in every 10,915 households. The counties with the most foreclosures per housing unit were (in descending order): Guthrie, Wayne, Hamilton, Davis, and Adair.

16. Oklahoma

With 154 of its 1,731,632 homes going into foreclosure, Oklahoma’s foreclosure rate is 1 in every 11,244 households. In the 28th most populated state, the counties with the most foreclosures per housing unit were (in descending order): Roger Mills, Pawnee, Pontotoc, Muskogee, and Choctaw.

17. Alabama

Ranked 24th for most populated, Alabama was 17th for foreclosures. Of its 2,255,026 homes, 198 went into foreclosure, making for a foreclosure rate of 1 in every 11,389 homes. The counties with the most foreclosures per housing unit were (in descending order): Marshall, Jefferson, Coffee, Autauga, and Shelby.

18. New Jersey

New Jersey has a total of 3,616,614 housing units and 317 homes are in foreclosure. While it’s ranked 11th most populated state, its foreclosure rate of 1 in every 11,409 homes puts it in 18th place. The counties with the most foreclosures per housing unit were (in descending order): Salem, Atlantic, Sussex, Gloucester, and Cumberland.

19. Alaska

The third least populated state, Alaska has 314,670 homes, of which 26 went into foreclosure in February. That means its foreclosure rate is 1 in every 12,103 homes. The counties with the most foreclosures per housing unit were (in descending order): Matanuska-Susitna, Anchorage, Fairbanks North Star, Juneau, and Kenai Peninsula.

20. Mississippi

In the number 20 spot for most foreclosures,Mississippi ranks as 33rd for most populated–and has 1,322,808 homes. A total 107 went into foreclosure in February, making the state’s foreclosure rate 1 in every 12,363 households. The counties with the most foreclosures per housing unit were (in descending order): Scott, Simpson, Lawrence, Bolivar, and Pike.

States with the Highest Foreclosure Rates: 21 – 30

The remaining states (21 to 30) in our rankings of the highest foreclosure rates are mainly located in the Northeast: New Hampshire, Massachusetts, Connecticut, and Pennsylvania. The Midwest and Southwest were tied with two states each: Wisconsin and Nebraska and Texas and Arizona.

21. Connecticut

With housing units totaling 1,516,629, Connecticut saw 116 homes go into foreclosure. That puts the 29th most populated state in 21st place, with a foreclosure rate of 1 in every 13,074 homes. The counties with the most foreclosures per housing unit were (in descending order): Windham, Litchfield, Tolland, Hartford, and Middlesex.

22. Arizona

Though ranked as the 14th most populated state, Arizona’s total 228 foreclosures (out of 3,003,286 total housing units) puts it in 22nd place for most foreclosures. The state’s foreclosure rate is 1 in every 13,172 households. The counties with the most foreclosures per housing unit were (in descending order): Apache, Mohave, Pima, Santa Cruz, and Pinal.

23. Pennsylvania

With a total 5,693,314 housing units, Pennsylvania saw 421 homes go into foreclosure. That puts the foreclosure rate for the 5th most populated state at 1 in every 13,523 households. The counties with the most foreclosures per housing unit were (in descending order): Philadelphia, Lycoming, Cambria, Luzerne, and Wyoming.

24. Maryland

The 19th most populated state ranks 24th for foreclosures. Of its 2,448,422 housing units, 170 went into foreclosure, making for a foreclosure rate of 1 in every 14,402 homes. The counties with the most foreclosures per housing unit were (in descending order): Somerset, Allegany, Prince George’s County, Caroline, and Baltimore City.

25. Wisconsin

In Wisconsin, the 20th most populated state, there were 179 foreclosures (out of 2,694,527 housing units.) That puts its foreclosure rate at 1 in every 15,053 homes. The counties with the most foreclosures per housing unit were (in descending order): Florence, Ashland, Langlade, Vernon, and Grant.

26. Massachusetts

Ranked 15th for most populated, Massachusetts came in as 26th for foreclosures. With 2,897,259 housing units and 172 homes in foreclosure, the state’s foreclosure rate was 1 in every 16,845 households. The counties with the most foreclosures per housing unit were (in descending order): Hampden, Franklin, Berkshire, Worcester, and Barnstable.

Recommended: Home Buying 101: How Much House You Can Afford

27. Texas

The second most populated state was 27th for foreclosures. Of 10,937,026 homes, 636 went into foreclosure, making for a foreclosure rate of 1 in every 17,197 households. The counties with the most foreclosures per housing unit were (in descending order): Liberty, Atascosa, Franklin, Mills, and Mcculloch.

28. New Hampshire

New Hampshire’s total number of foreclosures was only in the double digits: 35. But in a state with the 10th smallest population (and 634,726 housing units), that number put it in the 28th spot for foreclosures, making for a foreclosure rate of 1 in every 18,135 households. The counties with the most foreclosures per housing unit were (in descending order): Cheshire, Sullivan, Merrimack, Belknap, and Strafford.

29. Nebraska

With 46 of a total 837,476 housing units in foreclosure, Nebraska’s total number is also in the double digits. But with a foreclosure rate of 1 in every 18,206 households, the 14th least populated state holds 29th for foreclosures.. The counties with the most foreclosures per housing unit were (in descending order): Cuming, Nemaha, Red Willow, Scotts Bluff, and Antelope.

30. Virginia

Last but not least, Virginia saw 192 homes go into foreclosure in February. That nabbed the 12th most populated state the 30th spot on our list. With 3,514,032 total housing units, the state’s foreclosure rate was 1 in every 18,302 households. The counties with the most foreclosures per housing unit were (in descending order): Emporia City, Norton City, Nottoway, King William, and Lancaster.

The Takeaway

Of the top 20 states with the highest foreclosure rates, half were in the South: Delaware, Florida, Louisiana, South Carolina, Georgia, North Carolina, Missouri, Oklahoma, Alabama, and Mississippi. Of the top 30 states, Florida had the most number of foreclosures (1,516) and Alaska had the least (26).

Looking to buy a home? SoFi offers competitive rates, exclusive member discounts, and guidance from mortgage loan officers and member specialists.

Discover more about home loans at SoFi.



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.

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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Understanding Mortgage Basics

Do you ever window-shop for the perfect home, whether by browsing online or taking a stroll through your favorite neighborhood? You’re not alone. It’s fun to dream about owning a place all your own.

If you’re getting more serious about buying a home, you’re probably aware that some of the next steps are, well, not quite as fun. One of those is acquainting yourself with the mortgage process.
A mortgage loan, a loan to buy a home or other real estate, provides people with the opportunity to purchase a home without having all the money upfront—which most people simply do not have.
While it is wonderful that mortgage loans open up homeownership to so many, taking out a mortgage is also a big responsibility. This home affordability calculator estimates what might be in your budget.

Taking the time to learn about mortgages before you dive headfirst into the buying process may be the way to go.

What is a Mortgage?

A mortgage loan, also known simply as a mortgage, is issued to a borrower who is either buying or refinancing real estate.

The borrower signs a legal agreement that gives the lender the ability to take ownership of the property if the loan holder doesn’t make payments according to the agreed-upon terms.

The homebuyer will pay monthly principal and interest payments for a specific term. The most common term for a fixed-rate mortgage is 30 years, but terms of 20, 15, and even 10 years are available.

A shorter term translates to a higher monthly payment but lower total interest costs.

A Buffet of Mortgage Choices

When homebuyers apply for a loan, they’ll need to choose whether they want a fixed interest rate or an adjustable rate and the length of the loan.

Fixed-Rate Mortgage

The interest rate doesn’t change, so the monthly principal and interest payment remains the same for the life of the loan.

Adjustable-Rate Mortgage (ARM)

With an ARM, the interest rate is generally fixed for an initial period of time, such as five, seven, or 10 years, and then switches to a variable rate of interest. The rate fluctuates with the rate index that it’s tied to.

As the rate changes, monthly payments may increase or decrease. These loans generally have yearly and lifetime interest rate caps that limit how high the variable rate can adjust to.

Next, borrowers will need to decide what type of mortgage loan works best for them.

Check out local real estate
market trends to help with
your home-buying journey.


Conventional Loans

Conventional loans are loans that are not backed by a government agency, aand must adhere to the requirements of Fannie Mae, Freddie Mac, or other investors.

Private mortgage insurance commonly known as PMI, is generally required on loans with a down payment of less than 20%.

The coverage protects the lender against the risk of default. Your mortgage servicer must cancel your PMI when the mortgage balance reaches 78% of the home’s value or when the mortgage hits the halfway point of the loan term, if you’re in good standing.

PMI typically costs 0.5% to 1% of the loan amount per year.

Down payment: Generally between 3% and 20% of the purchase price or appraised value of the home, depending on the lender’s requirements.

FHA Loans

Loans insured by the Federal Housing Authority are attractive to first-time homebuyers or those who struggle to meet the minimum requirements for a conventional loan.

These loans usually require a one-time upfront mortgage insurance premium, which typically can be added to the mortgage, and an annual insurance premium, which is collected in monthly installments for the life of the loan in most cases.

Down payment: Starts at 3.5%

VA Loans

Loans guaranteed by the U.S Department of Veterans Affairs are available to veterans, active-duty service members, and eligible surviving spouses.

VA-backed loans require a one-time “VA funding fee,” which can be rolled into the loan. The fee is based on a percentage of the loan amount, and may be waived for certain disabled vets.

Down payment: None for nearly 90% of VA-backed home loans.

How Does a Mortgage Work?

There are several components to a monthly mortgage payment.

Principal: The principal is the value of the loan. The portion of the payment made toward the principal reduces how much a borrower owes on the loan.

Interest: Each month, interest will be factored into payments according to an amortization schedule. Even though a borrower’s fixed payment may stay the same over the course of the loan, the amount allocated toward interest generally decreases over time while the portion allocated to principal increases.

Taxes: To ensure that a borrower makes annual property tax payments, a lender collects monthly property taxes with the monthly mortgage payment. This money is kept in an escrow account until the property tax bill is due, and the lender will make the property tax payment at that time.

Homeowners insurance: Mortgage lenders require evidence of homeowners insurance, which can cover damage from catastrophes such as fire and storms. Similar to property taxes, most lenders collect the insurance premiums as part of the monthly payment and pay for the annual insurance premium out of an escrow account. Depending on your property location, you may have to add flood, wind, or other additional insurance.

Mortgage insurance: When a borrower presents a down payment of less than 20% of the value of the home, mortgage lenders typically require private mortgage insurance.

What is a Reverse Mortgage?

A reverse mortgage homeowners 62 and older to supplement their income or pay for health care expenses by tapping into their home equity.

The loan can come in the form of a lump-sum payment, monthly payments, a line of credit, or a combination, usually tax-free. Interest accrues on the loan balance, but no payments are required. When a borrower dies, sells the property, or moves out permanently, the loan must be repaid entirely.

The fees for an FHA-insured home equity conversion mortgage, by far the most common type of reverse mortgage, can add up:

•  An initial mortgage insurance premium of 2% and an annual MIP that equals 0.5% of the outstanding mortgage balance
•  Third-party charges for closing costs
•  Loan origination fee
•  Loan servicing fees

You can pay for most of the costs of the loan from the proceeds, which will reduce the net loan amount available to you.

You remain responsible for property taxes, homeowners insurance, utilities, maintenance, and other expenses.

This HUD site details all the criteria for borrowers, financial requirements, eligible property types, and how to find an HECM counselor, a mandatory step.

If you’re considering a reverse mortgage, learn as much as you can about this often complicated kind of mortgage before talking to a counselor or lender, the Federal Trade Commission advises.

How to Get A Mortgage

For lots of folks, it can be a good idea to shop around to get an idea of what is out there.

Not only will you need to choose the lender, but you’ll need to decide on the length of the loan, whether to go with a fixed or variable interest rate, and weigh the applicable loan fees.

The first step is to have an idea of what you want, then seek out quotes from a few lenders. That way, you can do a side-by-side comparison of the loans.

Once you’ve selected a few lenders to get started with, the next step is to get prequalified for a loan. Based on a limited amount of information, a lender will estimate how much it is willing to lend you.

When you’re serious about taking out a mortgage loan and putting an offer on a house, the next step is to get preapproved with a lender.

During the preapproval process, the lender will take a closer look at your finances, including your credit, employment, income, and assets to determine exactly what you qualify for. Once you’re preapproved, you’re likely to be considered a more serious buyer by home sellers.

When shopping around for a mortgage, it can be a good idea to consider the overall cost of the mortgage and any fees.
For example, some lenders may charge an origination fee for creating the loan, or a prepayment penalty if you want to pay back the loan ahead of schedule. There may also be fees to third parties that provide information or services required to process, approve, and close your loan.

To compare the true cost of two or more mortgage loans, it’s best to look at the annual percentage rate, or APR, not just the interest rate. The interest rate is the rate used to calculate your monthly payment, but the APR is an approximation of all of the costs associated with a loan, including the interest rate and other fees, expressed as a percentage. The APR makes it easier to compare the total cost of a loan across different offerings.

The Takeaway

Is the world of mortgages a mystery? You’re in good company. Before taking on this colossal commitment, it might be best to soak up as much as you can about how mortgage loans work, what kinds of mortgages are available, potential landmines, and steps to qualify.

When you’re ready to begin looking for a mortgage, add SoFi to your list. SoFi mortgages come with affordable down payment options, competitive rates, and terms of 10, 15, 20, and 30 years.

Prequalifying is painless.

Check your rate on a SoFi mortgage 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.

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.
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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What Is Mortgage Underwriting?

The most important step that will determine whether or not a person can purchase a home is underwriting. The underwriter will see if you’re fiscally fit enough to take on a mortgage and that it’s a manageable size.

Because most people won’t pay for a home out of pocket and will instead have to apply for a mortgage, underwriting must take place before they can close on a home. If all goes well, they can move into their chosen home and begin making monthly payments they can afford.

By learning about underwriting, potential homebuyers will be prepared to handle what comes next.

What Does an Underwriter Do?

Underwriters protect a financial institution by making sure that it only approves applicants who have a good chance of paying the lender back. They:

•   Verify documents and financial information and make sure that enough savings exist to supplement income or to contribute toward the down payment.
•   Look into an applicant’s credit score and history, note any bankruptcies, late payments, a lot of debt, or any other red flags.
•   Calculate the debt-to-income ratio by adding up an applicant’s monthly minimum debt payments and dividing that number by monthly pretax income.
•   Reach out to the applicant to ask questions and request additional documents, if necessary. For example, if an applicant has had more than one job over the past year and their income is not consistent, an underwriter may want to see more assets.

What Is the Underwriting Process?

A mortgage underwriter has the final say on mortgage approval or disapproval. Here are common steps leading up to underwriting:

1. Find a lender. Shop around for the best deal, including the rate, fees, and conditions.

2. Get preapproved for a loan. Perhaps you were prequalified for a ballpark figure, based on self-reported financial info. Now it’s time to verify your income, employment, assets, and debts and allow a look at your credit history and credit scores.

A preapproval letter indicates the willingness to lend you a particular amount, and the interest rate and fees you can expect to pay on that loan. A letter also allows a buyer to act quickly in a seller’s market.

3. Go house hunting. You find a home that meets your needs, and agree on a price.

4. Apply for the loan. You probably submitted documents in order to get preapproved, but a preapproval letter is not a promise. The lender will likely ask for further documentation now that you’re ready to act on a purchase and will take another look at your credit.

5. Wait for the underwriting verdict. A loan processor will confirm your information, and then it’s time for the underwriter to review your credit scores and report, employment history, income, debts, assets, and mortgage amount.

The underwriter will order an appraisal of the chosen property and get a copy of the title insurance, which shows that there are no liens or judgments. Finally, the underwriter will consider your down payment.

Then comes the decision: approved, suspended (more documentation is needed), or denied.

Required Information for Underwriting

Lenders are going to request a number of documents from mortgage loan applicants.

Income verification. The lender will want to see W-2s from the past two years, your two most recent bank statements, and two most recent pay stubs.

Those who are self-employed will need to document stable work and payments and ideally have a business website. Applicants will typically need to show evidence of at least two years of self-employment income in the same field.

Any additional income. Pension, Social Security, alimony, dividends, and the like all count.

Proof of assets. This can include checking and savings accounts, real estate, retirement savings, and personal property.

A lender might want to see that a down payment and closing costs have been in an applicant’s account for a while.

Debts. The debt-to-income ratio weighs heavily, so list all monthly debt payments, each creditor’s name and address, account numbers, loan balances, and minimum payment amounts.

Gift letter. If an applicant is receiving money from a family member or another person to put toward the house, the lender will request a gift letter and proof of that funding in the applicant’s account.

Rent payments. Renters will likely need to show evidence of payments for the past 12 months and give contact information for landlords for two years.

How Long Does Underwriting Take?

Underwriting may take a few days or a few weeks.

Preapproval happens quickly, which may lead applicants to believe that underwriting will be fast as well. It all depends on how complicated someone’s finances are and how busy an underwriter is at that moment.

Thankfully, underwriters typically do everything online these days, so an applicant can upload documents to a website or simply email them.

How Can I Improve My Chance of Approval?

Before applicants try to get a mortgage, they can take a number of steps to improve their chances of getting approved.

Lighten the debt load. It’s critical to pay off as much debt as possible and to ideally make sure your credit utilization ratio is below 30%, though some lenders like to see a ratio below 25%. Applicants can pay off debt faster by budgeting, using cash instead of credit cards to make purchases, and negotiating interest rates with creditors.

Look at credit reports. Applicants should also scour their credit reports and fix any mistakes so that their score is as high as possible. Federal law guarantees the right to access credit reports from each of the three major credit bureaus annually for free. The reports show only credit history, not credit scores. Want weekly credit score updates? SoFi Relay, a free money-tracking app, includes that feature.

Attempt to boost income. Applicants may want to apply for higher-paying jobs or add a side hustle so they can save more money.

Ask for a gift or loan partner. They could also ask a family member for a gift to put toward the down payment, or they could ask a relative with a stable credit history and income if they would act as a co-borrower or co-signer.

With an underwriter helping an applicant, a solution may be found that leads to approval.

The Takeaway

Ready to apply for a mortgage? Prepare for a probing look at your private life—the financial one—by an underwriter, who is gauging the risk of lending you a bundle of money. The underwriter looks at a person’s finances and history, the loan amount, and the chosen property and renders a verdict.

Mortgage shoppers should add SoFi home loans to their list. Why? You can put as little as 5% down, access competitive rates, and save on your mortgage loan or refi processing fees just for being a SoFi member.

Find 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.

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.

SoFi’s Relay tool offers users the ability to connect both in-house accounts and external accounts using Plaid, Inc’s service. When you use the service to connect an account, you authorize SoFi to obtain account information from any external accounts as set forth in SoFi’s Terms of Use. SoFi assumes no responsibility for the timeliness, accuracy, deletion, non-delivery or failure to store any user data, loss of user data, communications, or personalization settings. You shall confirm the accuracy of Plaid data through sources independent of SoFi. The credit score provided to you is a Vantage Score® based on TransUnion™ (the “Processing Agent”) data.
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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