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If you’re looking into getting a mortgage for the first time, congratulations! You’re about to embark on a brave new adventure, full of highs and lows with (ideally) a wonderful reward, aka your new home, at the finish line.

But before you get there, you’ll need to navigate some challenges. For instance: the somewhat intimidating home-buying terminology: prequalification vs. preapproval, for instance. And what on earth is escrow? And what does amortized mean?

Here, you’ll learn the answer to that last question, quickly and painlessly. Basically, mortgage amortization means that your mortgage loan payments will be spaced out over a period of time (typically 30 years) and will be calculated so that you always pay the same amount per month (if you have a fixed-rate mortgage, not a variable rate mortgage, that is).

That means that if you get a fixed-rate mortgage and your first payment in your first month is $1,500, you know that you’ll pay $1,500 in the last month of your mortgage, years later. If you take out a variable rate mortgage, the amount you pay each month will change periodically as the market rate fluctuates.

Also, as you make mortgage payments at first, most of the money paid goes toward interest and a little to the principal, but that shifts over time to the opposite scenario.
Learn more about mortgage amortization here.

Why Do People Choose Amortized Mortgages?

Mortgage amortization helps ensure that your obligations are predictable, which can make it easier for you to plan. If you take out a 30-year mortgage, then the amortization helps guarantee that in 30 years, you will have finished paying it off. For a fixed-rate mortgage, amortization also keeps all your payments consistently the same amount, rather than different amounts that depend on how much your principal is.

Recommended: The Different Kinds of Mortgages

How to Calculate Amortization Using Tables

In real life, even if you choose an amortized mortgage, you may never need to figure out your 30 years or so of payments yourself. But it’s useful to see what goes into the table of payments (they’re not arbitrary!) and understand how it’s populated. Calculating your amortized mortgage really puts you on the front lines of homebuying.

Let’s say you take out a $300,000 mortgage over 30 years at a 6.50% fixed interest rate. That means your monthly payment will be $1,896. You can then divide your interest rate by 12 equal monthly payments to get your monthly interest rate. That works out to 0.5417% of interest per month. And multiplying that interest rate by your total balance, which at the time of your first payment is $300,000, shows that in the first month of your loan, you’ll pay around $1,625 toward interest and the remaining $271 toward your principal.

Next, to calculate the second month, you’ll need to deduct your monthly payment from the starting balance to get the ‘balance after payment’ for the chart. You’ll also need to put the $1,625 you paid in interest and $271 you paid toward the principal in the chart. Then you can repeat the calculation of your monthly interest and principal breakdown, and continue inputting until you finish completing the chart.

💡 Quick Tip: SoFi’s new Lock and Look* feature allows you to lock in a low mortgage financing rate for up to 90 days while you search for the perfect place to call home.

How to Calculate Amortization Using a Calculator

So you can see that it’s not so much difficult to calculate your amortized payments as it is time-consuming. Fortunately, you can save yourself the trouble by using an online amortization calculator . All you have to do is input info about your mortgage, including the amount you’re borrowing, your term length, and the interest you’re paying, and the calculator will do the math for you.

Recommended: First-Time Homebuyer Guide

What Are the Pros of an Amortized Mortgage?

Here are some of the benefits to consider:

•   You’ll slowly but surely pay off the mortgage principal of your home loan. With every month, you’ll get closer to owning your home outright!

•   It ensures that you pay a set amount for each payment over the life of your loan. With some loans you may end up paying more at the beginning or the end. A balloon mortgage, for example, requires you to pay interest charges monthly during the regular term. You then pay off large parts of the principal at the end of the loan period. (Thus, your payment literally balloons.)

•   You can often get better terms with an amortized loan. And you’ll save money in the long run if you’re paying less interest over the life of your mortgage.

Recommended: What Is PMI and How to Avoid It

What Are the Cons of an Amortized Mortgage?

Next, consider the downsides:

•   Amortized mortgages may favor borrowers who are putting down a larger down payment. To qualify for a competitive interest rate, you’ll probably need to put down 10% (if not 20%).

•   You might not be able to qualify to borrow as much money via an amortized mortgage as you would through an alternative mortgage, such as an interest-only mortgage or a balloon mortgage.

The Takeaway

An amortized mortgage can be a good option for many homebuyers. It provides a steady way to pay down the principal of your home loan.

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

Is it better to have a longer or shorter mortgage term?

It depends on what you can afford. If you have a shorter mortgage term, your monthly payments will be higher, but you will pay less in interest over the (shorter) life of your loan. If your term is longer, your payments will be smaller, but you will be making them for longer and you’ll pay more in interest over the term.

Why are mortgage loans amortized?

Mortgage loans are amortized so that homeowners will pay the same amount of money every month during the duration of their home loan, even though the balance between how much of that payment is for principal and how much is for interest will change. The predictability makes it easier for both the borrower and the lender to plan.

What is the alternative to an amortized loan?

The alternative is called a nonamortizing loan, meaning a loan for which the payment isn’t paid back gradually, over time, but all at once in a lump sum. Balloon-payment mortgages and interest-only mortgages are nonamortizing mortgages.

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.

If you’ve made the decision to buy a home—or sell the one you have—you also may be thinking about hiring someone to help things go as smoothly as possible.

A real estate professional can assist in assessing how much to list or bid on a home for, help with negotiations, hold your hand while you make important decisions, and help you understand the complicated paperwork.

The right agent can help you buy your dream home or sell the home you have now. The wrong agent might not focus on your needs or price your house incorrectly, leaving you angry or disappointed.

But how can you know who to hire when the pros often have different job experience or expertise and go by different job titles? Are all real estate agents also Realtors®? Is that the same thing as a sales associate? What’s the difference between a buyer’s agent and a listing agent? And what does a real estate broker do?

What’s in a Name?

Though the terms Realtor and real estate agent are often used interchangeably, there are important differences you should know when it’s time to buy a house. Here’s a breakdown of the various titles real estate professionals use and what they mean:

Real estate agent: This is the most common term used for professionals who help clients buy and sell real estate. (Some firms may call their real estate agents “sales associates” or “salespeople.”) But a person can’t just slap their name on a business card and start selling homes.

A real estate agent must have a professional license to help residential or commercial clients buy, sell, or rent real estate. And to get that license, aspiring agents must take the required hours of pre-licensing training and any written exams mandated by their state. There are also continuing education requirements for license renewal. States also have different age, education, and residency requirements, and some jurisdictions also require a background check.

Realtor: This term is trademarked by the National Association of Realtors (NAR), the largest trade organization in the U.S., and it should be used only to refer to that organization’s dues-paying members.

Members of the NAR are licensed professionals who expect to be held to a higher standard of practice, and they have their own strict code of ethics which is made up of 17 articles, meant to protect clients, the public, and other real estate agents. According to the NAR, in 2024, 65% of its members are licensed sales agents, 22% hold a broker license, and 17% hold a broker associate license.

If you’re looking at hiring a Realtor vs. an agent, one of the big perks of NAR membership is access to additional research, market data, and transaction management services.

Broker: Brokers are professionals who take their real estate education and licensing to the next level — and they often manage other agents. (Think of it like a school principal who still may teach, but also has management responsibilities.)

Because of this elevated role, a broker’s pre-licensing coursework usually dives deeper into complicated topics such as contracts, taxes, insurance, and other legal issues.

Real estate brokers can work as independent agents or have other agents working for them — in the latter situation, they typically receive a percentage of their agents’ commissions as payment for overseeing their transactions. Agents who pass the broker exam but choose to work under another broker may be referred to as associate brokers.

Listing agent: Some agents prefer to work only with sellers. Others work only with buyers. But many agents do both. Real estate agents who represent someone selling a home are called “listing agents.”

In that capacity, their duties may include pricing the home, suggesting improvements, marketing and holding open houses, coordinating showings with other agents, recommending renovations or offering staging tips, and negotiating with potential buyers.

Buyer’s agent: Agents who represent homebuyers are called “buyer’s agents,” and it’s their job to help their clients find potential homes to tour and show those homes, offer references for other professionals that may be needed (inspectors, mortgage brokers, etc.), negotiate house prices, and help their clients through the closing. Listing agents and buyer’s agents typically split a 4% to 6% commission on a home’s sale price — and that money is typically paid by the seller from the sale proceeds of the home.

Recommended: How to Make an Offer on a House

Looking Beyond the Job Title

Besides understanding the credentials, duties, and level of education each real estate professional involved in your home sale or purchase may have, here are some other factors to consider when finding a real estate agent:

•   Do you want to work with a team or an individual? With a team, you’ll have multiple agents looking out for you — and there might always be somebody to sub in if your agent is unavailable for a showing or to answer a question. With an individual agent, you’ll have just one person to go to for all your needs, but you’ll get to know that agent, and they’ll get to know you. That personalized approach might be helpful during what could be a stressful process.

•   How much experience does your potential agent have? Not that there’s anything wrong with a sharp, gung-ho newbie, but given that your home purchase may be the biggest financial transaction of your life, it’s important to get it right. A seasoned agent can draw from past experiences when negotiating and problem-solving. You also may want to ask if the agent considers real estate to be a full- or part-time job. If this is a major purchase for you, you may want to know that you have the person’s full focus.

•   How familiar is the real estate agent with your current neighborhood (if you’re selling) and desired neighborhood (if you’re buying)? Knowledge of the area can be a plus when you’re looking at “comps” or “comparables” to determine the fair value of a home. Your agent should also be able to help if you need information about schools or crime. Of course, anyone can look up this information, but an agent’s insider knowledge (school zones that might slow your commute? A big new development planned nearby but not yet constructed?) may give you an edge in decision-making.

•   Where did you hear about the professional you’re considering? The agent with the biggest advertising budget may or may not be the right person for you. If you have family and friends in the area, they might be able to help with recommendations. (Don’t just ask who they used—ask if they’d use that person again.) Plan on interviewing your top prospects, ideally in person, to be sure communication is easy.

Recommended: First-Time Homebuyer Guide

The Takeaway

Finding a qualified, experienced real estate professional to work with a major step in the home buying or selling process. The right person could help you with everything from figuring out how much house you may be able to qualify for, to getting you into the home you want with as little financial and emotional pain as possible.

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.

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-Q225-030

Are you thinking about hunting for a home or already hitting the open houses? If so, creating a home-buying wish list can help you identify what you need, what you want, what to avoid, and other key factors in your decision of whether to bid on a property or not.

By getting these thoughts down on paper (or an online document), you can better focus your house hunting and have a guide as you navigate this process.

Here, you’ll learn more about creating a home-buying wish list template and zooming in on the right property for you. It will also help you steer clear of falling for a house that can wind up being a bad fit as time passes.

What Is a Home-Buying Wish List?

A home-buying wish list is a simple template that can help you identify and prioritize the features you are looking for in a home. It gives you a method to evaluate whether a property is one to bid on or one to pass on.

For example, a wish list can help you zero in on the price you want to pay, the community you want to be in, the style and size of the home, the acreage of the property and outdoor features, and other variables.

By having a wish list, you can stay on target. Say you fell in love with a charming farmhouse with shutters and perfect window boxes full of flowers, but no ground-floor bathroom (or room to add one) and a roof in need of repair. If your wish list said, “Must have a ground-floor bathroom” and “Roof in good repair,” you would (ideally) be able to say no to the home’s curb appeal and keep searching. That way, you may well avoid having buyer’s regret.

Benefits of a Home-Buying Wish List

A home-buying wish list has several pros:

•  Creating a wish list gives you the opportunity to consider your needs and wants in a home. It also will help you prioritize the features that you most want in a property.

•  A wish list can help you stay on budget. If you know that you absolutely must have a spa-style bathroom or a chef’s kitchen, you need to stay focused on finding a home that offers that feature or else have money set aside to renovate to your specifications.

•  By developing a wish list, you and your partner or family member you are house shopping with can align on priorities.

•  You can better understand trade-offs involved in a home purchase. For instance, if you are determined to buy in an area with a hot housing market or a pricey school district, you may only be able to afford a smaller property than you might like.

Recommended: First-Time Homebuyer Programs

How to Create a Home-Buying Wish List

If you’re ready to dive in, follow these steps to develop your wish list.

First, Daydream a Little

After you’ve closed your eyes and thought about it, write down everything you saw in the vision.

Before writing down all your wants on a home-buying wish list, sit back and fantasize a little about what an ideal home looks like. This dream house will look different to everyone, but after you’ve closed your eyes and thought about it for a while, you should write down everything you saw in the vision.

Is there a big yard and open space (or even a pool), or is it in the center of town where all the action is? Do you gravitate toward a mid-century modern home or a center-hall colonial? Does the dream home come with a big eat-in kitchen, or are lots of bedrooms more important? Is there space for a game room? An outdoor spa? A wraparound deck or a balcony overlooking it all?

It’s your dream. Go ahead and dream about home size, home age, and home style. That way, you can better realize what you really want (and want to steer clear of) in a home. Start writing down your wish list.


💡 Quick Tip: With SoFi, it takes just minutes to view your rate for a home loan online.

Whittle Down the Dream List

After spending some time thinking about what a dream home would look like if money were no object and jotting down notes, you might then start crossing things off your list.

Realistically, maybe you don’t need five bedrooms but can live with three instead, and maybe the basement doesn’t need to be finished just yet. Or, perhaps a kitchen remodel can come with lower-end appliances that look like commercial ones but come with a more manageable price tag.

Bring that daydream list down to reality before beginning the search.

Consider Who You’re Buying With, Too

Before going out to buy a home, whether you’re a first-time homebuyer or old hand, it’s important to think about who’s going to live there. Is it just for one? A couple? A whole family?

It would be best to get everyone’s input on wants vs. needs to ensure that all will be satisfied with this monumental life and financial decision. You might want to sit down as a group and consider the following.

•  Setting: It may also be a good idea to get granular about your location. For instance, a potential homebuyer who has a dog may want to consider a neighborhood that has good walkability and sidewalks.

A potential buyer who works from home may want to think about how close a coffee shop is so they can pop over for a snack. Websites like Walk Score can help people discover how close cafes, shops, restaurants, grocery stores, and public transportation are to their new address.

•  The right school district: If you’re buying a new home with family members in mind, it’s important to consider every home’s school district. Websites like GreatSchools provide information on school district rankings. All users need to do is pop in the ZIP code.

Even if a homebuyer isn’t thinking about having children, school districts still may play a role in their home-buying decision. That’s because a school district can play a major part in a home’s resale value.

It may be a good idea to also draw up a neighborhood wish list.

💡 Quick Tip: To see a house in person, particularly in a tight or expensive market, you may need to show proof of prequalification to the real estate agent. With SoFi’s online application, it can take just minutes to get prequalified.

Home-Buying Wish List Template

Need some inspo for creating a home-buying wish list? Check out the Alabama Housing Finance Authority’s Home-Buying Wish List .

You can then customize it and drill down on the features that really matter to you. For instance, if you have school-age kids, you might add a line for after-school care programs; are they offered or not?

If you know you will be tight on cash for renovations, then you might get more specific about the age of key home systems, such as the HVAC, the major appliances, the roof, and so forth.

Recommended: What Do You Need to Buy a House?

Questions to Ask While Home Shopping

In addition to the usual features of a home, here are a few additional points to consider:

•  Are you in an area that is prone to natural disasters? Would you, say, need flood insurance, and how much would it cost?

•  Have any additions been made to the home? If so, was the paperwork (permits and such) properly filed?

•  What are the typical monthly utility costs for the home? This may help you get a ballpark number that can help you assess your home-buying budget.

•  Is there an HOA? If so, what costs are involved, and what rules are enforced?

The Takeaway

Creating a home-buying wish list helps to identify wants and needs, what is in the budget, and what everyone involved—spouse, children, pets, guests, an elder parent—can live with happily (if not ever after, for a while). Home style, size, neighborhood, and amenities all come into play.

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 do I make a house wish list?

A good place to start is with the Alabama Housing Finance Authority’s checklist. You can then customize the wishlist to better suit your areas of focus, such as school districts and programs, or, say, acreage and outdoor features.

How do I get my house ready to sell with a checklist?

Many home-buying sites and mortgage lenders offer downloadable checklists that help you get your house in order to sell. These typically review how to assess and enhance the exterior of your home, your property, as well as the interior. Usually, they go room by room with features for you to note and maintenance issues to potentially wrangle.

What is a house-buying must-have?

Something that you won’t be able to live in a new home without is a must-have. Things like electricity, heating, and plumbing are no-brainers. But must-haves can also include other items that are non-negotiable for you, which could mean good nearby schools, great light, or multiple walk-in closets.

*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.

SOHL-Q225-170

Attending an open house is a common step when you’re shopping for your dream home. Of course, it lets you see a property (often after it’s been styled and staged to look its best), which can trigger “I love it!,” “hard pass,” and every possible reaction in between.

But an open house also gives you information beyond just the surface appeal of a home. It can give you clues to structural issues, the level of home maintenance it’s received, and how popular it is with potential buyers. That is, it can if you know what to look for as you walk through, rather than just admiring some great use of subway tile or a charming farmhouse sink.

Here, learn about what to expect at an open house and how to get the most out of attending one.

Benefits of Attending an Open House

At an open house, you can view a property, whether you’re just looking casually or already planning on getting your home loan. You can eyeball the house, the street, the neighbors’ places. It can be a great way to scope out what it might be like to live there.

There are several benefits to attending an open house as you move through the steps of buying a house. These include:

•   You can hone your house-hunting skills by taking detailed notes and comparing them to past and future listings.
•   It’s a face-to-face opportunity to make a good impression on the listing agent and ask as many questions as necessary (without having to wait for a reply).
•   Sometimes listing photos simply don’t do a house justice. The in-person lighting might be brighter, the hardwood floors shinier, or the primary bedroom larger than it seemed online.
•   Similarly, strategically hidden flaws, red flags, and nuances that can only be detected in person are exposed so you (and other potential bidders) can make a truly informed decision.

Recommended: How Long Does It Take to Buy a House?

What to Expect at an Open House

Some open houses are literally open, meaning they’re posted on a real estate listing or a sign out front and members of the public are allowed to stop by.

In other cases, an open house is available only by appointment and arranged by the seller’s broker.

Typically, the sellers won’t be on the scene at an open house. It’s likely their listing agent will handle the event, guiding potential buyers around the dwelling and answering questions.

There could be other house hunters or curious visitors attending the open house.

Most homebuyers will be provided with a booklet or pamphlet featuring details about the property, which could include the year it was built, heating and cooling information (oil vs. natural gas, etc.), the square footage, how many bedrooms and bathrooms there are, the size of the lot, types of appliances, and exterior features like decks, porches, pools, and sheds.

From there, house hunters will fill out a sign-in document that records their information for follow-up (unless this was already done in advance) and tour the property. This could occur with the listing agent in tow or by themselves, saving questions for the end.

Open House Etiquette

Figuring out what to do at an open house isn’t always intuitive, but a crisp, respectful approach can go a long way:

•   Bringing along food, drinks, pets, or unruly children could be considered disrespectful and distracting.
•   Following the house rules can be crucial, so buyers should be prepared to remove shoes, steer clear of personal property, and ask permission before snapping photos.
•   Being polite and personable to the hosting agent can help potential homebuyers appear in a more favorable light.
•   Maintaining a poker face can be helpful during the open house process. If homebuyers spill the beans about how much they love the property, it could make negotiations tougher if and when they make an offer.

Recommended: The Mortgage Loan Process, Explained

Things to Look For at an Open House

If you stay focused and zoom in on details, you can learn a lot during an open house. Perhaps there’s an initially inconspicuous flaw on the exterior of the house or there’s no closet in the fourth bedroom.

Things to look for when buying a house and at an open house in particular could include:

•   Visible signs of neglect or damage (more on that soon).
•   Proximity to the neighbors and whether there’s sufficient privacy. A poke around the premises can also reveal what those new neighbors are like. Do they have a half-built skate park? A forever-barking dog? A chicken coop?
•   Closet and storage space and whether it’s enough to suit your needs.
•   What other potential buyers are up to. If they’re in and out quickly or lingering in one area in particular, perhaps it’s an indication of an issue you should investigate.

Recommended: First-Time Homebuyer Guide

Potential Red Flags

Aside from standard considerations like the ones above, some red flags to look for at an open house could include:

•   An abundance of sweet aromas from candles or air fresheners. This could signal hard-to-fix smells (perhaps caused by mildew or another issue) lurking under the surface.
•   Unevenly spaced tiles or crooked electrical outlets, which could signify sloppy DIY renovations that might require costly repairs down the line.
•   Issues with the foundation of the house like large gaps, doors that stick, windows with visible cracks, or uneven floors.
•   Proximity to water. Checking a FEMA flood map can also help potential buyers know whether there’s the risk of flooding and if flood insurance will be required.
•   Signs of lax property maintenance, including faded or chipped paint, leaky faucets, water damage, or overgrown grass and brush. These issues could signify that the owners have neglected other vital home maintenance tasks, which could mean a buyer needs extra funds to cover home repair costs.
•   Signs of mold: small black or gray spots in bathroom closets or cabinets, on the ceiling, or around showers, tubs, and faucets.
•   Exposed pipes with visible rust or leakage.
•   Drafts around windows, doors, and electrical outlets that could be a sign of neglect and a hefty heating bill come winter.
•   Stained or warped baseboards (especially in the basement) that could indicate a prior flood. A sump pump can also indicate that flood damage has occurred in the past.
•   Cosmetic damage like stains from pets that are strategically hidden by area rugs.
•   Condensation or peeling paint around windows, which could signify ventilation problems and moisture issues.

Recommended: How to Winterize a House

Questions to Ask at an Open House

Knowing what to ask is an essential element of attending an open house; it can help you make the most of the experience.

Here are a few key questions homebuyers can ask the selling agent:

•   What year was the house built?
•   Why is it being sold?
•   How long has it been on the market, and were there any asking price fluctuations?
•   Are there any offers?
•   Are there any problems the seller can disclose about the property? These are issues that could come up in an inspection but are made transparent between the seller and buyer, e.g., health and safety hazards, structural defects, mechanical issues, previous water damage, pests, or renovations.
•   Is the property part of a homeowners association? Are there monthly fees associated with it?
•   What is the local school system like? How about the neighborhood?
•   Is the sewer system handled by the town, or does it run on a private septic tank?
•   What fixtures and appliances are part of the purchase: washer/dryer, stove, refrigerator, lighting fixtures, and window treatments?

The Takeaway

After every question has been asked, every surface has been scoured, and every disclosure has been made, it might be time to bid and (with luck) snag your new home. Another important step will then be securing a home loan.

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 should I not do at an open house?

If you’re attending an open house, it’s a good idea not to reveal too much about your level of interest in the house. Likewise, it’s smart not to talk about your budget or any time constraints you may have. This information is extraneous to the open house, and it could affect your ability to negotiate later if you decide you want to make an offer on the property. Additionally, be a good guest: Don’t be rude or demanding; don’t bring food or drink; don’t bring unruly kids or pets; and ask before taking photos.

How long is an open house?

An open house typically takes from one to three hours. However, if you’re attending one, you’re not expected to stay for the duration. Instead, you should view the house, ask any questions you may have, and leave.

Do real estate agents go to open houses with you?

You can go to an open house without a real estate agent. That said, if you are far enough along in your house search to have engaged a real estate agent, it may be useful to have them with you when you review a property as they may be able to ask questions you don’t think of and provide context on the neighborhood.

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-Q225-168

Buying a home is a major responsibility. If you’re unable to continue paying the mortgage on your house, what happens next? You’ve heard of foreclosure, which can result in losing your home and be financially damaging. But there’s another option called a deed in lieu of foreclosure, which may be less stressful than foreclosure, could have less negative impact on a credit report, and might be faster to complete.

Note: SoFi does not offer a Deed in Lieu at this time.

Here’s what you need to know about a deed in lieu of foreclosure, and when it might be an option to consider.

What Is a Deed in Lieu of Foreclosure?

While a foreclosure may involve the court and a lengthy process, the alternative, a deed in lieu of foreclosure, is fairly simple.

If your lender agrees, you hand over the deed to them and the lender releases the lien on the property. You may be released from any balance you owed on the mortgage (however, there may be exceptions if you owe more than the home is worth).

And while a deed in lieu will appear on your credit report, it doesn’t have as severe an impact as a foreclosure.

The lender might even offer you financial assistance to relocate or let you rent temporarily while you find a new place to live.

Recommended: Tips On Buying a Foreclosed Home

Working With the Lender

Your lender may only consider a deed in lieu of foreclosure in certain situations.

For instance, the lender might require that you first put your home on the market as a short sale or explore a loan modification.

If you’re completely unable to pay, start by contacting your lender and asking if a deed in lieu of foreclosure is an option. If it is, you’ll be given an application and asked for documents proving your inability to pay the mortgage. The documents will show your income and expenses, as well as bank account balances.

This process can take 30 days or more.

If your application is approved, you may want a real estate lawyer to review it to help you understand whether you are fully released from the financial obligations tied to the mortgage. For example, if the lender sells the home for less than the remaining mortgage balance, are you responsible for that deficiency?

Once you are comfortable with the title-transferring agreement, you and the lender will sign it, and it will be notarized and recorded in public records.

At this point, you will be notified how long you have to leave the home.

When to Consider a Deed in Lieu

One instance when a deed in lieu may be a good idea is if you owe more on your home than it is worth, as long as the agreement stipulates that you won’t owe the difference between the value of the home and what you owe.

If you are unable to continue paying your mortgage, it’s important to know that a foreclosure will leave a nasty mark on your credit report for seven years and make it difficult or impossible for you to take out another mortgage for years.

A deed in lieu will appear on your credit report, but it may not have the same lasting effect. Your credit score will drop, but in the long term, it may not affect your ability to take out a loan.

Benefits of a Deed in Lieu

There are advantages for both the borrower and the lender when it comes to a deed in lieu. For both, the big benefit is not having to go through the long and expensive process of foreclosure.

Because a deed in lieu is an agreement between you and the lender and not an order from a court, you may have a little more flexibility in terms of when you vacate the property.

With foreclosure, you are sometimes forced to vacate within days by local law enforcement. With a deed in lieu, you may even be able to work out an arrangement where you rent the property back for a period. The lender gets a little rent money and you have more time to figure out your next move.

In addition, this option is more private than a foreclosure.

From the lender’s perspective, the benefits of a deed in lieu include avoiding litigation and court time.

Drawbacks of a Deed in Lieu

There are disadvantages as well. A deed in lieu will appear on your credit report, even if it’s not as damaging as a foreclosure. Plus, it may still be difficult to get another mortgage in subsequent years. Many lenders won’t issue you a mortgage until at least four years after your deed in lieu, and government-backed programs typically treat it as a foreclosure.

If you owe more than your home is worth, you may still be on the hook for the difference between the appraised property value and what you owe.

You may be denied a deed in lieu if there are other liens or tax judgments on the property, or if the home is in bad condition and requires maintenance to sell.

Recommended: Home Affordability Calculator

Being Smart About Your Mortgage

The best thing to do, if at all possible, is to avoid getting into a situation where you can’t afford to pay your mortgage. If you’re having short-term financial issues, talk to your lender immediately to see if there is the possibility of delaying a few months’ payment or setting up a loan modification so you can work to pay off your outstanding debt.

Typically, the lender will want to help you; it’s easier to work out an agreement now than several months down the road, when you haven’t paid your mortgage at all and are facing foreclosure.

If you do end up in a situation where you are unable to continue paying your mortgage and you aren’t offered options, consider a deed in lieu of foreclosure as a faster and easier solution than a foreclosure.

If you’re just starting to consider buying a home, create a budget and calculate how much in mortgage payments you can afford each month. Don’t forget to calculate insurance and interest as well. Make sure that you won’t be stretched thin financially.

Recommended: Mortgage Calculator

The Takeaway

If you can’t pay your mortgage and you’re unable to get a short sale or loan modification approved, a deed in lieu of foreclosure may be the best option. Rather than go through the foreclosure process, a deed in lieu allows a borrower to sign a property over to the lender. Your credit will take a significant hit, though not as bad as with a foreclosure.

FAQ

Does a deed in lieu of foreclosure affect your credit score?

A deed in lieu of foreclosure will typically have a negative effect on your credit scores, but a foreclosure would affect it even more severely. Your mortgage will be listed as closed and have a balance of zero, but it won’t be shown as paid in full and can remain on your credit report for up to seven years. Your credit score will probably be affected as long as the mortgage remains on your report.

Why do lenders prefer a deed in lieu of foreclosure to a foreclosure?

There are several reasons why a lender may prefer a deed in lieu of foreclosure to a foreclosure. A deed in lieu lets them avoid litigation, which can be lengthy and expensive. Furthermore, in a foreclosure, the property may remain vacant for an extended period and deteriorate, but a lender will want the property in good condition so it will be easier to sell.

Can you buy a house after a deed in lieu of foreclosure?

After a deed in lieu of foreclosure, you may need to wait several years before you can get a mortgage again. Many lenders won’t issue you a mortgage until at least four years after your deed in lieu, and government-backed loan programs generally treat a deed in lieu the same way they would an actual foreclosure, with a waiting period of several years, depending on the 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.

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