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The term “first-time homebuyer” may sound really specific, but it isn’t nearly as limiting as you might think. Even if you’ve purchased a home before, you may still be eligible for many first-time homebuyer assistance programs.

That’s good news if you’re hoping to take advantage of benefits like down payment and closing cost help, which could make a real difference in the type of home you can afford — or whether you can afford a home at all.

Read on to find out how you can be a first-time homebuyer twice and how to make the most of any benefits that might be available to you.

First-Time Homebuyer Qualifying Factors

If you’ve never owned a home before, you’re obviously a first-time homebuyer. But other criteria can also factor into whether you qualify for first-time homebuyer status and can benefit from assistance programs.

When are you considered a first-time homebuyer again? The U.S. Department of Housing and Urban Development (HUD) says a former homeowner may still qualify if you meet one of these criteria:

You Haven’t Owned a Principal Residence for Three Years

Even if only one spouse qualifies under this scenario, both spouses would be considered first-time homebuyers.

It’s Your First Home as a Single Parent

If you’re a single parent who has only previously purchased a home with a former spouse while still married, you qualify as a first-timer.

You’re a Displaced Homemaker

If you are a displaced homemaker who doesn’t or didn’t earn wages from outside employment and has only ever owned a home with a spouse, you would be considered a first-time homebuyer.

Your Last Home Wasn’t Affixed to a Foundation

If you’ve owned a primary residence that wasn’t permanently attached to a foundation according to applicable building regulations (such as a mobile home when the wheels are in place), you qualify.

Your Home Was Out of Compliance

If you have only owned a home that didn’t comply with state, local, or model building codes, and could not be brought into compliance for less than the cost of constructing a permanent structure, you can claim first-timer status.

State, local, and private first-time homebuyer programs may have their own qualifying criteria, so it can be a good idea to check out all the rules before starting the application process.

Recommended: First-Time Homebuyer Guide

Is It Smart to Be a First-Time Homebuyer Twice?

Finding a home — and figuring out how to afford a down payment on your first home — can be especially challenging in today’s market, while prices are still high and mortgage rates are rising. But if you’re eligible for one of the many assistance programs created to help first-time buyers, you may be able to improve your chances of (literally) getting your foot in the door.

Many states, cities, and community organizations provide assistance in the form of grants or forgivable second loans that can help with the down payment on your home and/or closing costs. Some of these down payment assistance programs only offer support to those who fall under an income cap. But, according to a report from the Urban Institute, 43.6% of homebuyers in the 10 largest U.S. metropolitan areas in 2022 would qualify for some form of home down payment assistance. Some private lenders also offer lower low-interest mortgage loans on conventional loans and other benefits to qualifying first-time homebuyers. And, of course, there are several longstanding federal programs that may offer more lenient income and credit score requirements, smaller down payments, and lower mortgage rates. So it can be a good idea to investigate all the opportunities available to you — and to your spouse if you’re married.

Note: At SoFi, a member cannot be claimed as a first-time homebuyer twice.

Benefits of Using an FHA Loan

Whether this is the first time you’ve considered purchasing a home, or you’re a returning first-time homebuyer, you may want to look into the benefits provided through the Federal Housing Authority (FHA) loan program.

The FHA isn’t a lender, so it doesn’t make loans directly to borrowers. Instead, it insures loans made by HUD-approved private lenders. If a property owner defaults on the mortgage, the FHA will pay the lender’s claim for the unpaid principal balance.

Because lenders are taking on less risk with an FHA-insured loan, they can offer more flexible eligibility requirements, lower down payment amounts, and lower closing costs than a buyer might get with a conventional loan. For example, if you have a FICO® credit score of 580 or higher, you may qualify for an FHA loan with just 3.5% down. And even with a score between 500 and 579, you still could be able to get a loan with 10% down.

FHA loans also may offer lower interest rates than comparable conventional mortgages.

Are There Drawbacks to an FHA Loan for First-Time Homebuyers?

FHA loans can be appealing to first-time buyers who are struggling to come up with a down payment, or who have a low debt-to-income ratio or other problems qualifying for a mortgage. But, a potential downside is that the mortgage insurance premiums (MIP) borrowers typically must pay to get and keep an FHA loan may end up being more expensive than the private mortgage insurance (PMI) required for a conventional home loan. Here’s what those costs can look like when you compare MIP versus PMI:

•   Homebuyers with a conventional mortgage can expect to pay an annual premium for private mortgage insurance (PMI) until they have at least 20% equity in their home, when they can request cancellation, or 22%, when cancellation should be automatic. (If you make a down payment of 20% or more, PMI isn’t required.) PMI costs can vary based on the type of mortgage you get, your loan-to-value ratio (LTV), your credit score, and other factors, but generally, the annual premium is 0.5% to 1% of the total loan amount.

•   FHA borrowers, on the other hand, are required to pay two separate mortgage insurance premiums (MIP). One premium is paid upfront at closing and is 1.75% of the loan amount. The other premium is based on the amount, length, and loan-to-value (LTV) ratio of the mortgage and is usually paid annually for as long as you have the FHA loan. If you put down at least 10%, you may have the FHA MIP removed after 11 years of payments — but unlike PMI on a conventional loan, there is no equity cutoff for MIP.

As you research different lenders and types of loans, you may want to keep these costs in mind. Remember: Mortgage insurance, whether MIP or PMI, protects your lender, not you, if you default on your payments. You still could ruin your credit or lose your home to foreclosure if you fall behind, so it’s important to keep your payments as manageable as possible.

Other First-Time Buyer Options

FHA loans are a popular borrowing option, but there are many other first-time homebuyer programs that could help you manage your costs, including programs offered by your state or city, or through local charitable organizations. Your real estate agent or lender may be able to help you find a program that’s appropriate for your situation. You also can find information through your state housing finance agency or HUD.

Other federal programs that you may want to consider include:

Freddie Mac Home Possible Mortgages

The Federal Home Loan Mortgage Corporation, known as Freddie Mac, offers the Home Possible mortgage program to help low-income borrowers who hope to purchase their own home. Because the program is backed by Freddie Mac, approved lenders can accept a smaller down payment from qualifying buyers, and some qualifications and terms may be more flexible than with a conventional mortgage.

Fannie Mae HomeReady Mortgages

The Fannie Mae HomeReady Mortgage is another path to homeownership for low-income borrowers. Creditworthy buyers may find lenders are more flexible with their terms and qualifications because these loans are backed by Fannie Mae.

Department of Veterans Affairs (VA) Loans

With a VA-backed home loan, the Department of Veterans Affairs guarantees a portion of the loan you obtain from a private lender. And because there’s less risk for the lender, you may receive better terms. Service members, veterans, National Guard members, Reserve members, and eligible surviving spouses may be eligible for this assistance.

US Department of Agriculture (USDA) Loans

The USDA offers both direct and backed loans to assist very low-, low- and moderate-income buyers who want to buy a home in an eligible rural area. Usually, no down payment is required. And more areas of the country are eligible for USDA-loan status than you might imagine.

HUD Good Neighbor Next Door Program

Eligible law enforcement officers, teachers, firefighters, and emergency medical technicians may find housing help through HUD’s Good Neighbor Next Door program. Through this program, certain single-family HUD properties in designated revitalization areas are available for sale to public service workers at 50% off the list price.

Recommended: How Much House Can I Afford?

The Takeaway

If you can qualify for one of the many assistance programs available to first-time homebuyers (even if you’ve owned before), you may be able to significantly reduce the daunting down payment and closing costs that can come with purchasing a home. Or you may qualify for a loan with a lower interest rate.

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

FAQ

Can I be a first-time homebuyer again?

Yes, under certain circumstances, you may qualify as a first-time homebuyer even if you’ve owned a home before. You may be eligible for many first-time buyer programs, for example, if you haven’t owned a home in three years.

Can I get an FHA loan twice?

Yes, you can apply for an FHA loan even if you’ve had one before. But you usually can’t have more than one FHA loan at a time.

As a first-time homebuyer, am I required to make a 20% down payment?

No. A first-time homebuyer may be able to qualify for a mortgage with as little as 3% down.

Photo credit: iStock/FG Trade Latin

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

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

Imagine this: You’re staring at your closing documents and you’re trying to figure out where all your fees are going. Oddly, you can’t find the amount that your mortgage officer is paid. How is that? How does a loan officer get paid if it’s not there in the closing documents?

It’s not a mystery, but it’s not exactly clear how their compensation works, either. The short version? There are a couple of places where the mortgage loan officer could be paid: from the origination fees on the front end or from the cost of the mortgage itself on the back end.

It’s important to know where your money is going, so we’re here to help. In this article, we’ll discuss the average salary for a mortgage loan officer, how a mortgage loan officer gets paid, and the earning potential, benefits, and job prospects of mortgage loan officers.

•   The average salary for a mortgage loan officer

•   How a mortgage loan officer gets paid

•   The payment structure for mortgage loan officers

•   Earning potential, benefits, job prospects

What’s the Average Salary of a Loan Officer?

The median wage for loan officers, including mortgage loan originators, is $74,180 per year, as of May 2024, according to the Bureau of Labor Statistics.

It’s worth noting, however, that the Bureau of Labor Statistics includes other types of loan officers in that category, such as those who originate auto or personal loans. It also does not differentiate between a loan officer and a loan processor.

In contrast, data from Indeed.com shows the average mortgage loan officer salary at $167,413. Glassdoor.com also estimates the total average pay of a mortgage loan officer in the neighborhood of $155,335, including base pay and additional pay such as cash bonuses, commissions, and profit sharing.

Since the pay for mortgage loan officers is usually commission-based, it’s easy to see why average numbers can vary so widely.

How Is a Mortgage Loan Officer Paid?

A mortgage banker or other mortgage loan officer is typically paid after your home mortgage loan has closed and funded. They’re often paid on commission, meaning a percentage of the loan amount will go to the mortgage loan officer. This amount can come from one of two places: either the loan originator (like the bank or mortgage lender), or from a loan origination fee paid by the borrower. (Laws do not allow for payment to come from both sources.)

If the commission comes from the lender rather than the borrower, you won’t see it in your closing documents. This is why you probably won’t know how much the lender is getting paid from your transaction.

It’s also possible that the mortgage loan officer’s pay comes primarily from a salary instead of a commission. This is more common with larger lenders, such as banks, credit unions, and other financial institutions.

Either way, the money paid to the mortgage loan officer comes from the lender’s profits. A lender’s profits, in turn, come from origination fees, income from interest, income from mortgage servicing, and proceeds earned from secondary mortgage market sales.

Payment Structure for MLOs

Mortgage loan officers may be paid entirely on commission, a combination of salary and commission, or a salary. Bonuses or incentives may also be paid out. Their pay is usually incentivized by how good they are at closing home mortgage loans.

Mortgage Loan Officer Earning Potential

Mortgage loan officers have high earning potential. As noted previously, even average compensation can exceed $155,000.

Mortgage Loan Officer Benefits

Benefit packages for mortgage loan officers tend to be very comprehensive, but can vary depending on the different types of mortgage lenders. They can include:

•   Medical

•   Dental

•   Vision

•   Retirement plans

•   Life insurance

•   Vacation time

•   Parental leave

•   Sick leave

You may also see flexible schedules, bonuses, wellness benefits, company retreats, and more on the menu of benefits offered to a mortgage loan officer.

Mortgage Loan Officer Job Prospects

The U.S. Bureau of Labor Statistics expects employment of loan officers to rise 1% between 2023 and 2033. This is a below-average rate of growth; the BLS does note that the decline of bank branches and increase in technology is expected to slow the growth for mortgage loan officers.

Recommended: Mortgage Brokers vs Direct Lender: What’s the Difference?

Mortgage Loan Officer Pros and Cons

The job of a mortgage loan officer has some serious earning potential, but there are also some drawbacks to the job.

Pros

•   High salary potential

•   High commission and bonus potential

•   Can help individuals and businesses obtain financing for desired properties

•   Regular, consistent schedule (though may work more than 40 hours on occasion)

Cons

•   Loan officers may only be able to offer financial products from their employer

•   Likely has no ability to adjust price

•   Lots of paperwork, regulation, and details

•   High barrier to entry-level jobs, such as a bachelor’s degree or related work experience

•   Opportunity for employment and commission payments are affected by market conditions

Recommended: First-time Homebuyer Programs and Loans

The Takeaway

Mortgage loan officers are an important part of the homebuying process for many buyers. Their knowledge is invaluable and can help guide you in the right direction. How much they get paid usually depends on how many mortgages they originate throughout the year.

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

FAQ

How is loan officer commission calculated?

Loan officers either earn commission from an origination fee or from the lender. The mortgage loan officer can’t receive compensation both ways, as this is considered illegal as per Regulation Z of the 2010 Dodd-Frank Act.

How do you make money as a loan officer?

Loan officers make money by closing loans, and, as there is often some type of commission structure in place, loan officers who close more loans generally make more money.

What does a mortgage loan officer do on a daily basis?

Mortgage loan officers process loan applications, interviewing applicants and analyzing loan documents to determine an applicant’s eligibility for a loan. They also calculate debt-to-income (DTI) and loan-to-value (LTV) ratios to make sure the numbers for the borrower and the property are within the guidelines set by the lender. Additionally, they spend time looking for new prospective customers and attending closings.

Photo credit: iStock/skynesher

*SoFi requires Private Mortgage Insurance (PMI) for conforming home loans with a loan-to-value (LTV) ratio greater than 80%. As little as 3% down payments are for qualifying first-time homebuyers only. 5% minimum applies to other borrowers. Other loan types may require different fees or insurance (e.g., VA funding fee, FHA Mortgage Insurance Premiums, etc.). Loan requirements may vary depending on your down payment amount, and minimum down payment varies by loan type.

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

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

SOHL-Q325-015

Townhouses offer convenience and amenities that appeal to a range of homebuyers. They’re also growing in popularity, with new townhouse construction up 23% in the 12-month period from mid-2023 to mid-2024, compared with the previous 12 months. Construction costs also increased during the same time period.

Whether you’re building an investment property or your own new home, determining the project cost is essential before breaking ground. The cost to build townhouses depends on the size, location, number of units, onsite amenities, and the style of the building.

What Is a Townhouse?

A townhouse, also called a townhome, is a type of single-family home that has two or more floors and a shared wall with at least one other home. Compared to different home types, like duplexes and triplexes, each townhouse is individually owned and has its own entrance. Given the high-density design, townhouses tend to be more common in urban and suburban communities.

Townhouses often have their own yard or garage, but may share other communal amenities, such as a pool or tennis court, with neighboring townhouses. These shared facilities are typically governed by a homeowner’s association (HOA), which townhouse owners pay fees to for managing amenities and providing services like landscaping and snow removal.

If choosing between a condo or townhouse, another distinction is that townhomes usually have more autonomy in customizing the exterior of their home and outdoor living space, and more responsibility for that space as well.

Recommended: What is a Townhouse?

What Determines the Cost of Building a Townhouse?

The cost to build townhomes depends on a variety of factors. The type of townhouse, size, number of units, location, and additions like garages and basements all contribute to the total construction cost.

Here’s what to consider when estimating how much it costs to build a townhouse.

Type of Townhouse

There are different types of townhouse layouts and configurations, including traditional, stacked, and urban.

•   Traditional: Generally organized in a row with two floors of living space, a basement, and garage.

•   Stacked: Refers to townhouse units stacked in a multi-floor building, which typically have their own entrances.

•   Urban: Similar to traditional townhomes, but often have more modern and spacious floor plans and higher prices.

Another key decision when purchasing a new construction home or townhome is whether to go with a modular or stick-built design. The components of a modular townhome are manufactured off-site, saving time and labor.

Stick-built townhouses are constructed on-site using a wooden frame and finished with a brick or vinyl exterior. This type of construction allows for greater customization, but generally comes at a higher cost than modular townhomes.

Recommended: Pros and Cons of Building a Townhouse

Square Footage

The cost to build a townhouse is impacted by the size, which is measured in square feet.

Townhomes cost between $80 to $200 per square foot on average. Because townhouses share walls and occupy smaller lots, they’re often more affordable than detached single-family new construction, which breaks down to an average of $162 per square foot.

Using the square footage to estimate total townhome cost is a fairly straightforward calculation. For instance, builders can expect to pay between $160,000 and $400,000 to erect a 2,000-square-foot townhouse based on the average range. Bear in mind that does not include the cost of the building site.

With these estimates, you can compare mortgage rates and determine what financing you qualify for.

Number of Rooms

The interior layout, including the number and types of rooms, is a key determining cost factor.

Not all rooms are created equal though, with kitchens and bathrooms being the most expensive due to appliances, tiling, plumbing, and more complex electrical work. The living spaces and bedrooms are generally simpler and cheaper to build.

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

Number of Units

By definition, townhouses are built in groups. Leveraging economies of scale to build multiple units or a complex could reduce the cost per unit. Keeping the design and floor plan consistent across units can also lower the price.

So, how much does it cost to build a townhouse complex? That depends on the extent of amenities included, as well as the number of units.

Location

Location, location, location. Where you choose to build a townhouse will impact the cost of construction and its value once completed.

The cost of labor varies significantly between regions. Paying builders and contractors typically accounts for up to 40% of new home construction expenditures. The location of the townhouse also matters in terms of costs related to accessing the site and sourcing materials.

Additions

Wondering how much to build townhomes with attractive amenities? Here’s what you can expect to pay for common townhome add-ons.

•   Basement: Building a basement foundation can cost anywhere between $24,000 and $50,000 or more on average.

•   Driveway: The materials and installation costs for a new driveway range from $7 to $22 per square foot depending on the material used.

•   Fencing: More affordable fence materials like wood, vinyl, and composite range from $10 to $45 per linear foot.

•   Garage: Cost varies by size, with one-car garages ranging from $10,500 to $27,000 and double garages costing between $15,000 and $40,000.

•   Pool: Expect to pay between $44,499 and $87,349 for an in-ground pool, with vinyl and fiber-glass lining typically costing less than concrete.

•   Shed: Adding a storage shed normally ranges from $800 to $18,000, with pre-fabricated options usually costing less than custom builds.

💡 Quick Tip: Your parents or grandparents probably got mortgages for 30 years. But these days, you can get them for 20, 15, or 10 years — and pay less interest over the life of the loan.

Construction Cost for Building a Townhouse

Construction costs are often the deciding factor when you’re thinking of buying or building a house. Townhouses are generally less expensive to build per unit than a detached single-family home.

In addition to the factors discussed above, townhouse construction involves a range of pre-construction costs, like purchasing land, building permits, and architectural or design fees. The materials and labor usually account for the majority of the expenses to build a townhouse.

Townhouses can be designed as starter homes or luxury properties, and project budgets can be structured according to the target market and expected return on investment. Still wading into the waters of homebuying? Consult our Home Loan Help Center for useful tips and guides to master the basics.

Recommended: Construction Loans for Building a House

The Takeaway

How much does it cost to build a townhouse? In short, it depends on the type of townhouse, size, number of units, location, and added amenities. But you can estimate roughly $80 to $200 per square foot or between $160,000 and $400,000 for a 2,000 square-foot abode, not including land cost.

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

FAQ

How many townhouses can fit on an acre?

The number of townhomes that can fit on an acre will depend on what’s permitted by local zoning, as well as space allocated for landscaping, parking, and other amenities. However, an acre can accommodate around 12-18 two- or three-story townhomes.

How much are utilities in a townhouse?

Utility costs vary by location, unit size, personal energy use, and equipment used for heating and cooling. Due to their smaller footprint, townhomes typically have lower utility bills than single-family homes.

Should I buy a townhouse or single-family home?

There are pros and cons with either type of home. Townhomes may require less maintenance and include extra amenities, while single-family homes can offer more space and discretion in how you design and decorate your home’s exterior.

What are the disadvantages of living in a townhouse?

Living in a townhouse can mean less privacy from your neighbors and more noise from shared walls.

Photo credit: iStock/vkyryl

*SoFi requires Private Mortgage Insurance (PMI) for conforming home loans with a loan-to-value (LTV) ratio greater than 80%. As little as 3% down payments are for qualifying first-time homebuyers only. 5% minimum applies to other borrowers. Other loan types may require different fees or insurance (e.g., VA funding fee, FHA Mortgage Insurance Premiums, etc.). Loan requirements may vary depending on your down payment amount, and minimum down payment varies by loan type.

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

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

While landing a competitive mortgage interest rate is often a primary goal for borrowers, finding the best mortgage lender to successfully guide you through the home-buying process can also be an important priority. But with so many choices available, how can you know which lender is the right fit for you? Read on for a look at some of the top factors to consider as you shop for the best mortgage lender for your needs.

How to Choose a Good Mortgage Lender

Thanks to online reviews and comparison sites, researching a wide range of mortgage lenders and home loan options is easier than ever. But it can also be overwhelming. Here are a few strategies that could help you narrow down your choices:

Get Your Finances in Order

It can be useful to have your financial ducks in a row before you start your mortgage research. That way, you’ll have an idea of how much you’ll be able to borrow, and whether lenders might consider you a reliable or risky borrower. Some things you can do to prepare include:

•   Check out your creditworthiness. You can expect lenders to look at your credit scores, credit reports, and other financial factors to assess your ability to pay back the money you borrow. So why not scrutinize your status in advance to see where you stand? (Remember, by improving your numbers, you can better your chances of getting the rate and terms you want.) If you use a money tracker app, or if you go to your bank or credit card company’s website, you can probably check your credit score without paying. You also can get a free credit report from each of the three main credit bureaus just by visiting AnnualCreditReport.com.

•   Determine what you can realistically afford on your income. You may want to use a debt-to-income (DTI) ratio calculator to assess how much of what you earn every month would be going straight toward your debt obligations. Though you may have some wiggle room — depending on the type of loan you want and the lender’s requirements — a good goal is keep your potential housing costs (mortgage payment, homeowner’s insurance, homeowners association fees, property taxes) to 28% or less of your monthly gross income and your total debt payments (housing costs plus credit card payments, car and student loans, etc.) to no more than 36% to 43% of your monthly income.

Familiarize Yourself with Different Types of Mortgage Loans

Though most U.S. borrowers end up getting a conventional loan from a private lender, there are many different types of mortgage loans to choose from. There are government-backed loans, such as Federal Housing Administration (FHA) loans, that can make homebuying more affordable for borrowers — including qualified first-time homebuyers. And there are jumbo loans available for buyers who want a mortgage that exceeds the maximum loan limit for a conforming loan. It’s also important to consider if a fixed- vs. adjustable-rate mortgage is better for your needs, and the loan length you prefer (typically 15, 20, or 30 years).

Comparison-Shop Online

Comparing multiple lenders can help ensure that you find a loan package tailored to your unique financial situation. You can use an online comparison site to see types of loans, interest rates, annual percentage rates (APR), and other terms lenders are offering. Customer reviews and ratings can also be valuable when you shop for a mortgage. And don’t forget to consider how specific loan requirements, like a minimum credit score or down payment amount, might affect your eligibility.

Ask Trusted Sources for a Recommendation

Do you have friends, family members, or colleagues who recently purchased a home? You may want to ask them about their experiences and if they’d use the same lender again. Your real estate professional also may be able to recommend a reputable lender. (Keep in mind that someone who purchased their house years ago may not have had as many choices or opportunities to find the best lender for a mortgage.)

Apply for Preapproval

Most lenders offer a mortgage preapproval process that can give you a solid estimate of your loan costs and interest rate — though it doesn’t mean your final approval is guaranteed or binding. You can get preapproved through several lenders if you want to compare offers.

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Types of Mortgage Lenders

There are many different types of mortgage lenders, and each one may have pros and cons, depending on your circumstances.

Direct Lenders

A direct lender is a financial institution (a bank, credit union, or mortgage company) that originates, processes, underwrites, and funds loans to borrowers without intermediaries. Direct lenders establish their own rates and terms. A direct lender may have a brick-and mortar location, serve customers online only, or both.

Correspondent Lenders

Correspondent lenders originate and fund their own loans but quickly sell them on the secondary mortgage market. Because of this, correspondent lenders tend to have stricter lending requirements. And borrowers can expect to work with a new loan servicer soon after they go through their closing.

Portfolio Lenders

Portfolio lenders originate and fund “nonconforming loans” — loans that don’t meet the criteria required for resale to Fannie Mae and Freddie Mac, the government-sponsored entities that purchase most U.S. mortgages. Because they generally don’t sell the loans they originate to investors in the secondary market, portfolio lenders don’t have to use the same eligibility requirements that traditional lenders use to qualify borrowers for conforming loans and government-backed mortgages.

Mortgage Brokers

A mortgage broker is actually a matchmaker, not a lender. These independent, licensed professionals don’t originate or service loans or set rates or fees. But they can help borrowers compare a wide range of mortgage options and connect them with lenders that are a good fit for their particular needs. The broker’s commission is usually a small percentage of the loan amount. It’s typically paid by the lender, but the cost is often passed down to the borrower.

Five Questions You Should Ask a Mortgage Lender

Before you settle on a particular lender and move forward with the mortgage process, here are some questions you may want to ask:

How long could it take to close?

A lender won’t be able to tell you exactly how long your loan will take to close (there may be delays that can’t be controlled), but they can give you an idea of how long it usually takes. This can help you determine if their process works for your timeline.

How much of the mortgage process will be handled in-house?

If the lender does most or all of the loan processing in-house, the operation may be more streamlined. You may also want to ask if the lender will service the loan after you close.

Do you think that the loan I’m interested in is the best fit for me?

Your lender may have thoughts on why you would benefit from one loan type vs. another. If you’re buying your first home, you can also ask about down payment assistance programs and other information specific to your situation.

What length of time do you recommend for a mortgage rate lock, and is there a fee?

A mortgage rate lock keeps your rate from changing for a set period of time, so you won’t pay more if interest rates rise before you close on your loan. You may be able to lock in your rate for 30, 60, or even 120 days, depending on the lender. The cost of the lock can also vary.

How will we usually communicate?

It can be helpful to let your lender know your preferred method of contact so you can reach each other quickly when there’s a question, potential problem, or good news to share.

Recommended: Average Monthly Expenses for One Person

Where to Get a Mortgage

You’ll find there’s a wide range of options available when you’re ready to get a mortgage. The most popular choices include:

Conventional Banks

You can apply online at most larger banks; or, if you prefer, you can head to a local brick-and-mortar branch for one-on-one attention. Still, even if you’re a longtime customer of the bank where you have your checking, savings, and other accounts, you may want to do some research and compare their terms to what other lenders have to offer.

Credit Unions

Like banks, credit unions typically offer a variety of mortgage loans online or in person. But to become a borrower, you may have to meet certain membership requirements, such as living in a certain geographic area or working in a specific profession.

Online Lenders

Some lenders handle every part of the mortgage process online only. This can reduce their overhead costs, and online-only lenders are also known to offer faster approvals. But this approach may be daunting if you prefer to speak to someone face-to-face or want to share certain documents in person.

Mortgage Marketplaces

An online mortgage marketplace collects loan offers from different lenders in one spot. Instead of filling out separate applications for several different lenders, you can enter a few key pieces of information, and the site will list mortgage options from banks, credit unions, and online lenders.

The Takeaway

Buying a home will likely be one of the biggest investments you ever make — which is why it can be critically important to find the best mortgage lender for your transaction. Of course it’s important to look for a competitive interest rate; but when you’re moving through the complicated mortgage process, you’ll also be grateful for a lender that can offer the total package, including good customer service, a solid reputation, lower costs, and favorable loan terms.

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

FAQ

How to decide which mortgage lender is best?

When choosing a lender, it’s important to look at several factors, including the types of loans they offer, their reputation for reliability and good customer support, and the interest rate and other loan terms they can provide.

Where is the best place to look for a mortgage loan?

It can be useful to visit a comparison site to shop online for lenders that offer loans, terms, costs, and support services that are a good fit for your needs.

What is the 2/2/2 rule for mortgages?

The 2/2/2 rule refers to the documentation you’ll probably need to provide when you apply for a mortgage: two years of W-2s, two years of tax returns, and your two most recent pay stubs.

What not to say to a mortgage lender?

You shouldn’t ever lie to your lender or withhold relevant information, but you also don’t have to overshare about money problems, marital issues, or concerns about your job.

What is the 3/7/3 rule in mortgages?

The 3/7/3 rule sets specific deadlines for when mortgage lenders must provide disclosures and when you can officially close on your loan. Lenders must send you the initial loan disclosure within three business days of receiving your application. There is a seven-day mandatory waiting period after the initial disclosure. And if your APR changes beyond a set limit, the lender must send a new disclosure, which triggers another three-day waiting period before you can close.

What looks bad on a mortgage application?

Mortgage underwriters are trained to look for red flags when they review loan applications, including low credit scores, a high debt-to-income (DTI) ratio, recent large deposits to your checking or savings account from an undocumented source, unreliable income sources, or a recent bankruptcy.

Photo credit: iStock/PeopleImages

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

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

SOHL-Q225-258

For the smoothest path to the closing table with a no-money-down loan, you may not need a lot of cash, but you do need a credit score of at least 600. Here’s everything you need to know about what credit score is needed to buy a house with no money down.

Can You Buy a House With No Money Down?

It’s possible to buy a house with no money down, but you’ll need to meet the eligibility requirements that come with certain types of mortgage loans or search for alternative programs that help keep your upfront costs to a minimum. You’ll also need to know what credit score is needed to buy a house with no money down, which can vary based on the type of loan and lender — more details on that below.

Note: SoFi does not offer a zero-down mortgage at this time.

What Is a Zero-Down Mortgage?

Typically, lenders require a down payment on a mortgage, whether you’re buying your first home, taking out a jumbo loan for a luxury property, or getting something in between. The down payment gives you automatic equity in the home, and lowers the lender’s risk since you have a financial investment in the home.

With a zero-down mortgage, also known as a no-down-payment mortgage, you take out a loan for the home’s full purchase price, instead of paying for part of it in cash. As the cost of living in the U.S. increases, this can help you buy a home faster than if you waited to save up a down payment.

How to Buy a House With No Money Down

There are a few different options to explore in order to buy a house with no money down.

Get a Zero-Down Home Loan

There are two primary types of zero-down home loans for first-time buyers, but you’ll need to meet mortgage preapproval requirements.

VA loans are backed by the federal government and designed specifically for veterans, military members, and surviving spouses. You don’t have to make a down payment and won’t have to pay private mortgage insurance. You do, however, need to meet the lender’s requirements for credit and income. Most lenders will be looking for a credit score of 620 for a VA loan, although some may allow a lower score. The higher the loan amount, the more strict a lender’s credit-score threshold may be.

USDA loans, also backed by the government, provide 100% financing for properties located in an eligible zone. The credit score needed for a USDA loan will vary based on the lender. A score of 640 or better is a baseline for many lenders, but even those with lower scores may qualify if they provide additional supporting documents for their application. (Note: SoFi does not offer USDA loans, although it does provide VA loans.)

This option isn’t solely for qualified first-time buyers, but USDA loans come with income limits that may be easier to meet if you’re earlier in your career and home-buying journey. Your income can’t exceed 115% of the area’s median household income. The maximum income level varies depending on family size, since the average monthly expense for one person is less than a family with multiple kids. You can search the USDA’s eligibility site to check eligible property addresses in your area.

Use a Down Payment Assistance Program

Some state and local governments, along with other entities like nonprofits, may offer down payment assistance programs. They’re more common in areas with a high cost of living, so not all of these programs will be available if you live in one of the best affordable places in the U.S.

Consider Alternative Strategies to Pay for a House With No Money

Though less conventional, it is possible to find alternative home financing options, such as seller financing or a lease-purchase agreement. You will need to enlist the help of a lawyer to pull together an agreement that protects you in these scenarios.

Seller financing involves creating a legal agreement directly with the seller, who serves as your lender. The seller typically needs to either fully own the house or just have a small mortgage balance left in order for this to get approved. Together you will negotiate the terms of the loan, including the length of the term and interest rate.

A lease-purchase agreement, also called rent-to-own or lease-to-own, will mean that you start off renting the property and will have the option to buy it after a certain period of time. You may need to pay a fee, and often a sales price is agreed on while you’re renting. A portion of your rent payment usually goes toward the purchase price, serving as a down payment.

Negotiating for closing credits might require you to make a down payment, but an agreement with the seller to cover some of your closing costs will reduce your overall spending. This can be challenging when the majority of the U.S. real estate market currently favors sellers, but the strategy may work with fixer-upper properties or if the inspection comes back with significant issues.

First-Time Homebuyer Loans With a Low Down Payment

Not all homebuyers will qualify for a home loan with no down payment. Here are some alternative options that require smaller down payment amounts.

Conventional mortgages Some mortgage lenders allow qualified first-time homebuyers of any income level to obtain a conventional home loan with just 3.5% down. Conventional loans typically require a credit score of at least 620.

Fannie Mae HomeReady and Freddie Mac Home Possible: Low-income first-time homebuyers may qualify for one of these home loans. The minimum down payment is just 3% and lenders may use your rent history to help supplement a lower credit score. Plus, with Fannie Mae, you could qualify for a $2,500 credit to reduce your loan balance.

FHA loans: These aren’t designed for first-time homebuyers, and you don’t need to worry about meeting income limits. With an FHA loan, you can qualify for a low 3.5% down payment if your credit score is 580 or higher.

How to Find the Best No-Down-Payment Mortgage Lenders

Compare multiple lenders early on in the home-buying process. Even if you qualify for a no-down-payment loan, lenders will vary in their interest rates and closing costs, all of which impact how much you pay upfront and over time.

If you’re trying to keep your cash spending as low as possible, look for lenders that offer closing cost credits for eligible borrowers. Usually they come with income limits and first-time homebuyer requirements. But if you qualify, that could mean extra cash in your pocket at closing — just be sure to check for hidden costs in the form of other fees or higher rates.

Pros and Cons of First-Time Homebuyer Loans With Zero Down

Is a zero-down home loan worth it? Weigh the pros and cons before you get started.

Of course, if you don’t like some of the terms associated with your home loan, you can always apply for a mortgage refinance later on.

The Takeaway

Buying a house is expensive, and using a no-down-payment mortgage can help you become a homeowner faster. But you’ll need to meet a number of eligibility requirements, including credit score minimums, income thresholds, and more. And while there are alternative options available, it’s always crucial to compare lenders, rates, and fees to make sure you’re not taking on hidden costs. Ready to explore some options?

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

FAQ

What credit score do you need to buy a house with no down payment?

It depends on the program and the lender. VA loans technically don’t have a minimum credit score requirement. Many lenders want to see a 620 or higher, though some may accept a score of 600. For USDA loans, the minimum score required by lenders is usually 640.

What credit score is needed to buy a $300K house?

The credit score needed to buy a $300,000 house depends on the type of mortgage. While VA and USDA loans have a minimum of 600 and 640, respectively, FHA loans allow for scores as low as 500 (with a 10% down payment) or 580 (with a 3.5% down payment).

What credit score do I need to buy a $250,000 house?

The credit score needed to buy a $250,000 house depends on the type of mortgage. The lowest credit score you could have and still secure a mortgage would be 500 (for an FHA loan with a 10% down payment). Expect to need a minimum credit score between 580 and 640 for other loans, depending on which kind you choose.

Can I get an FHA loan with no down payment?

You cannot get an FHA loan with no down payment. The least amount you could put down in this situation is 3.5%. You are allowed to obtain this money via a gift from a friend or relative, but you’ll need to follow specific guidelines if you go this route.

How can I get a 700 credit score in 30 days?

Whether you can get to a 700 credit score in a month depends on what is impacting your score — and how high (or low) a score you currently have. Some quick fixes include paying down high credit card balances, identifying and repairing errors in your credit report, and becoming an authorized user on someone else’s credit card — as long as it has a low balance and isn’t delinquent. But even if you already have a fairly good score, it might be hard to achieve a 700 in this brief window of time.

What builds credit the quickest?

In order to quickly build credit, you need to pay all of your bills on time. Late payment entries can quickly derail your score and stay on your credit report for seven years. You can also lower your credit utilization ratio by paying down credit card balances and asking for higher limits (just don’t charge them up).

Photo credit: iStock/Worawee Meepian

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

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

SOHL-Q225-257