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A $150,000 mortgage will cost a total of $341,318 over the lifetime of the loan, assuming an interest rate of 6.5% and a 30-year term. It might be tempting to think that a $150,000 mortgage will cost…well, $150,000. But lenders need to earn a living for their services and mortgage loans come with interest.

What’s the True Cost of a $150,000 Mortgage?

The specific price you will pay to borrow $150,000 depends on your interest rate — which, in turn, is based on a wide range of factors including your credit score, income stability, and much more. Here’s what you need to know to get an estimate of how much a $150,000 home mortgage loan might cost in your specific circumstances.

Where Do You Get a $150,000 Mortgage?

Good news: There are many banks and institutions that offer $150,000 mortgages. For 2025, the maximum amount for most conventional loans is $806,500, so the loan you’re considering is well within reach. To see how your salary, debts, and down payment savings affect how much home you can afford, use a home affordability calculator.

However, it’s important to understand that even a $150,000 mortgage may cost far more than the sticker price after interest and associated fees. For instance, let’s say you purchase a $200,000 home with a 25% down payment and a $150,000 mortgage. If your interest rate is 7% and your loan term is 30 years, the total amount you’d pay over that time is $359,263.35 — which means you’d actually pay more than the home price ($209,263.35) in interest alone. (And that’s before closing costs, home insurance, property taxes, or mortgage insurance.)

At prices like that, it may seem like taking out a mortgage at all is a bad deal. Fortunately, property has a tendency to increase in value (or appreciate) over time, which helps offset the overall cost of interest. (Of course, nothing is guaranteed.)

Keep in mind that you can potentially lower the interest rate you qualify for by lowering your debt-to-income (DTI) ratio, improving your credit score, or increasing your cash flow by getting a better-paying job. Even a small decrease in interest can have a big effect over the lifetime of a loan. In our example above, with all else being equal, you’d pay only $139,883.68 in interest if your rate were 5% instead of 7% — a savings of nearly $70,000!

Recommended: The Best Affordable Places to Live in the U.S.

Monthly Payments for a $150,000 Mortgage

When you take out a $150,000 mortgage, you’ll repay it over time in monthly installments — of a fixed amount, if you have a fixed mortgage, or amounts that can change if you take out a variable rate loan.

Your monthly $150K mortgage payment includes both principal (the amount you borrowed) and interest (the amount you’re being charged), and may also wrap in your property taxes, homeowners insurance, and mortgage insurance if applicable. (You’ll only need to pay mortgage insurance if your down payment is less than 20%.)

But there is another caveat here that some first-time homebuyers don’t know about. Even if your mortgage payments are fixed each month, the proportion of how much principal you’re paying to how much interest you’re paying does change over time — a process known as the amortization of the loan. It’s a big word, but its bottom line is simple: Earlier on in the loan’s life, you’re likely paying more interest than principal, which increases the amount of money the bank earns overall. Later on in the loan, you’ll usually pay more principal than interest.

What to Consider Before Applying for a $150,000 Mortgage

Amortization is important to understand because it can affect your future financial decisions. For example, if you’re not planning on staying in your house for many years, you may find you have less equity in your home than you originally imagined by the time you’re ready to sell — because the bulk of your mortgage payments thus far have been going toward interest. It might also affect when it makes sense to refinance your mortgage.

Most lenders make it easy to make larger payments or additional payments against the principal you owe so that you can chip away at your debt total faster, but be sure to double-check that your lender doesn’t have early repayment penalties.

Of course, there are different types of home loans. Here are some sample amortization schedules for two $150,000 home loans. (You can also build your own based on your specific details with a mortgage calculator or an amortization calculator online.)

Amortization Schedule, 30-year, 7% Fixed

Notice that, for more than the first half of the loan’s lifetime, you’ll pay substantially more interest than principal each year — even though your mortgage payments remain fixed in amount.

Amortization Schedule, 15-year, 7% Fixed

While a shorter loan term may help you build equity in your home more quickly, it comes at the cost of a higher monthly payment.

How to Get a $150,000 Mortgage

To apply for a $150,000 mortgage, you can search for providers online or go into a local brick-and-mortar bank or credit union you trust. You’ll need to provide a variety of information to qualify for the loan, including your employment history, income level, credit score, debt level, and more.

The higher your credit score, lower your debt, and more robust your cash flow, the more likely you are to qualify for a $150,000 mortgage — and, ideally, one at the lowest possible interest rate. That said, mortgage interest rates are also subject to market influences and fluctuations, and sometimes rates are simply higher than others overall.

💡 Quick Tip: To see a house in person, particularly in a tight or expensive market, you may need to show the real estate agent proof that you’re preapproved for a mortgage. SoFi’s online application makes the process simple.

The Takeaway

A $150,000 mortgage can actually cost far more than $150,000. Depending on your interest rate and your loan term, you may spend more than you borrowed in principal in the first place on interest, and you’ll likely pay a higher proportional amount of interest per monthly payment for about the first half of your loan’s lifetime.

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 much is a $150K mortgage a month?

A 30-year, $150,000 mortgage at a 6.25% fixed interest rate will be about $924 per month (not including property taxes or mortgage interest), while a 15-year mortgage at the same rate would cost about $1,286 monthly. The exact monthly payment you owe on a $150,000 mortgage will vary depending on factors like your interest rate and what other fees, like mortgage insurance, are rolled into the bill.

How much income is required for a $150,000 mortgage?

Those who earn about $55,000 or more per year may be more likely to qualify for a $150,000 mortgage than those who earn less. Although your income is an important marker for lenders, it’s far from the only one — and even people who earn a lot of money may not qualify for a mortgage if they have a high debt total or a poor credit score. (Still, the best way to learn whether or not you qualify is to ask your lender.)

How much is a downpayment on a $150,000 mortgage?

To avoid paying mortgage insurance, you’d want to put down 20% of the home’s purchase price, which if you are borrowing $150,000 would be $37,600 for a home priced at $188,000. Some lenders allow you to put down as little as 3.5% of the home’s price. So if you had a $150,000 mortgage and put down 3.5%, your down payment and home price would be smaller. (Keep in mind these figures do not include closing costs.)

Can I afford a $150K house with a $70K salary?

Yes, as long as you don’t have a lot of other debt, you can probably afford a $150,000 home if you’re making $70,000 a year. There’s a basic rule of thumb to spend less than a third of your gross income on your housing. With an income of $70,000 per year, you’re making about $5,833.33 per month before taxes — and a third of that figure is $1,925. A $150,000 mortgage might have a monthly payment of as little as $998 per month, even with a 7% interest rate, so it should be affordable for you as long as you don’t have other substantial debts.

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-Q425-180

You’ve been getting up early weekend after weekend to go to open houses and have spent hours looking at online listings. You’ve finally found a place that you like, but before you make an offer, one good idea is to do some research on what to look for when buying a home.

Most people don’t want to buy a home that is going to require a lot of work or be difficult to finance because it’s structurally unsound or unsafe. The home might look great on the surface, but it’s recommended that a buyer order the proper home inspection(s) to see if it actually measures up prior to lifting any property contingencies. It can be stressful or even derail the home purchase to find out that you’ll need to do all sorts of costly renovations that make you go over budget or have to look for renovation financing vs. traditional financing, after you’ve worked hard to find that dream home.

Signs Your Dream Home Could Be a Nightmare

There are a lot of things to look for when buying a home. But these are 10 common home inspection red flags that would put a home on the buyer-beware list because of the home repair costs and stress involved in fixing the issues. (Passing the home inspection will also be an important part of getting through the real-estate purchase contract process.) Consider these factors as you continue your search for your new nest, and especially if you’re a first-time homebuyer, lean on professional inspectors for help.

1. Structural Problems

If there is a problem with the foundation or load-bearing walls in your new home, structural repairs involving health and safety issues could derail your home loan by making the property ineligible for financing, or could wind up costing thousands of dollars. But structural problems aren’t just expensive to fix, they could also be considered unsafe — which is why they should be at the top of any list of things to check when buying a home.

Look for major cracks in the foundation, problems with doors closing, door frames not being perfectly rectangular, or walls or floors that seem to sag. You’ll want to spend the money for a professional home inspection. If the inspection reveals there is a larger issue, a structural engineer’s report may be able to provide additional insight.

💡 Quick Tip: When house hunting, don’t forget to lock in your home mortgage loan rate so there are no surprises if your offer is accepted.

2. Water-Damage Woes

The biggest cause of rot and mold is moisture. So if your potential new home has leaking pipes or a roof that lets in water, it won’t just be expensive to replace your roof or find where the leak is coming from — the leak could have already created other problems.

Water stains and mold are home inspection red flags. Not only can mold have implications for your health, it could indicate a bigger problem with the house. If you see either of them, look into the cause of the stain, because a new roof or new plumbing could set you back a significant amount of money. Dry rot and related problems like mold can also fall under health and safety issues and, as a result, affect the home’s eligibility for most types of home mortgage loans.

3. Poor Drainage

Poor grading and drainage can potentially cause huge problems with the foundation or basement of your home, so it should be high on your list of home inspection red flags. When it comes to bad drainage, things to look for when buying a home can include but are not limited to: pooling water around the foundation; leaking in the basement; gutters that are blocked or overflowing; and soil being moved by water in any flower beds around the home. While there are ways to fix poor drainage and improper grading if it’s minor, you might struggle with larger drainage problems if the home is in a low-lying area.

4. Bad Plumbing

The last thing you want is for your sink to spring a leak. Plumbing problems could have an array of causes, including improper installation or older pipes that need to be replaced or are leaching metals into your water supply. Plumbing that regularly leaks could cause water damage, which, as noted previously, could have some pretty serious consequences (like mold and rot). The home inspector will generally test the plumbing system, but as you look at houses, be observant and try running all the faucets and flushing the toilets. Keep an eye out for any signs of possible water damage and be aware of any funky smells.

5. Pests

There are a few ways to avoid buying a pest-infested home, such as having a home inspector look for pests. If the general home inspection calls out pest issues, it is recommended to go a step further and request a pest inspection report from a licensed pest inspector.

If the inspector finds signs of bugs, it might be possible to request that the seller fix the infestation before you close on the house. Sometimes, pest infestation can mean a significant discount, which may be appealing to some buyers. But getting rid of certain kinds of bugs can be very costly, complicated, toxic, and even require you to leave your home while the fumigation takes place. So the discount may not actually be as rosy as it seems. Lenders do not usually close on a traditional home loan with a serious pest issue because it may present a health and safety problem.

6. Electrical Problems

A general home inspection will cover basic electrical items, but some buyers opt for an additional electrical inspection. Depending on when the home was built, there could be improper or even dangerous wiring throughout the house. That could affect eligibility for home financing due to health and safety issues, increase the fire risk in your home, or affect how you budget for buying the house.

7. Neighborhood Troubles

You might have found a beautiful home, but what if the location isn’t ideal? If your home is in a neighborhood that has a high number of vacant properties, a high crime rate, or a poorly rated school system, your investment might not pay off. Ask your real estate agent and neighbors about the neighborhood, stop by at different times, search for the area’s crime statistics, and check out the reputation of local schools.

💡 Quick Tip: Not to be confused with prequalification, preapproval involves a longer application, documentation, and hard credit pulls. Ideally, you want to keep your applications for preapproval to within the same 14- to 45-day period, since many hard credit pulls outside the given time period can adversely affect your credit score, which in turn affects the mortgage terms you’ll be offered.

8. Homeowners Association Problems

If you’re moving into a development with dues, you’ll want to know more about the homeowners association (HOA). Your lender will likely require you to obtain a completed Homeowners Association Questionnaire, and once this form is completed, it could answer many of the questions you may have, such as: How much are the HOA fees? What are the rules around making changes to your property? Is there any pending litigation against the condo association? Can you rent out your place or use it as an Airbnb when you go on vacation? Before you put in an offer, it’s a good idea to find out the answer to these or any other issues of importance to you and your family.

9. DIY Improvements

Watch out for shoddy renovations. If the house looks like it has undergone a recent facelift, have a close look at the workmanship. If there are visible shortcuts, there may be other areas of the house that weren’t properly renovated that could cause you headaches in the future. Check them carefully and make sure the major improvements or additions were done with the proper permits.

10. Older Windows

Older windows could translate into higher heating and cooling costs for your home. Moisture leakage can cause mold issues over time. Those costs add up, so you’ll want to add windows to your list of things to look at when buying a home. On your house tour, look for windows that stick, have discoloration around the indoor casing, or are warping. Updating windows (or replacing them completely) could be costly.

The Takeaway

In certain situations, a buyer may consider making an offer on a house even with one or two of these home inspection red flags. But before committing to a property that needs TLC, you’ll want to add up what the potential repairs may cost. Doing the math now could mean fewer financial surprises when you move in. And in some cases, it may be possible to negotiate with the seller so that major issues are addressed before the closing.

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’s the biggest red flag on a home inspection?

There are many issues that can be red flags on a home inspection, but the most serious include structural or foundation problems, major water damage or an active leak, or problematic electrical wiring. All of these can be very costly to repair and can create safety or health hazards.

How often do homebuyers pull out of the deal?

According to the National Association of Realtors®, five percent of would-be buyers pull out of a deal before reaching the closing.

When buying a house, how do I protect myself in case the home inspection finds a problem?

An inspection contingency clause in the contract could allow you to pull out of the deal without losing your deposit if an inspection finds a significant flaw in the home you’re hoping to buy. You and the seller might also come to an agreement whereby the seller repairs the problem or credits you for the cost of repairing it. But with an inspection contingency, you can also walk away.

Photo credit: iStock/Jitalia17

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-Q425-175

A home equity agreement allows homeowners to access a lump sum of cash without applying for a traditional loan. In exchange for receiving cash now, the homeowner agrees to repay a percentage of their home’s value at some future date. Home equity agreements are an alternative to home equity loans or lines of credit. While they may appeal to some homeowners, there are important pros and cons to weigh.

What Is a Home Equity Agreement?

A home equity agreement is a contract between a homeowner and a third-party investor, typically a corporation. This contract allows homeowners to tap into cash using their equity, while giving the investor a stake in the home’s future appreciation. Home equity is the difference between what’s owed on the mortgage and your home’s fair market value. These agreements may also be referred to as home equity contracts, shared equity agreements, or home equity investments (HEIs).

What is a home equity agreement designed to do? For homeowners, it’s a way to get cash that they can use to fund home improvements, consolidate debts, or meet other financial needs. Home equity agreements are not traditional home equity loans; that means homeowners do not have to make monthly payments or pay any interest charges on the cash they receive.

For the investor, a home equity agreement is an opportunity to benefit from a property’s appreciation over time. Once the contract period ends, the investor walks away with a predetermined amount of equity. Essentially, it’s similar to any other type of buy-and-hold strategy, in that the investor is banking on their investment gaining value in the long term.

Home equity agreements have become increasingly common in recent years, and it’s important to understand that they can be risky arrangements. While they are often marketed as an alternative to a loan, they do in fact require repayment. The amount of the repayment can be difficult to predict, and when it comes due, it can be in the hundreds of thousands of dollars.

How Home Equity Agreements Work

Home equity agreements work by allowing homeowners to leverage their equity for a set period, with the agreement to give an investor some of the home’s future value. For example, in exchange for $50,000 in cash today, you may agree to repay the investment company that amount, plus 10% of your home’s value in the future. The terms of the contract dictate how the arrangement works, including the length of the contract period, the amount of appreciation the investor gets to collect, and any obligations the homeowner is expected to uphold regarding the property’s maintenance and upkeep.

Requirements and Eligibility

Eligibility requirements for a home equity agreement primarily center on your home’s value and the current amount owed on your mortgage. Home equity agreement companies may take other factors into account as well, including your credit scores, income, and the area in which your home is located. If approved, you’re expected to:

•   Continue making regular mortgage payments (if you have a home loan)

•   Pay required property taxes promptly

•   Maintain adequate homeowners insurance coverage

•   Take care of necessary maintenance, repairs, and upkeep

As you think about how a home equity agreement works, it’s important to understand that a typical home equity agreement lasts 10 to 30 years; you won’t pay any equity value to the investor until the contract ends. Should you decide to sell the home before the contract period expires, you would need to pay the required amount to the investor at that time. If you have a home loan, you’ll also be paying off the mortgage at that time.

How much equity do you need for a home equity agreement? Home equity investment companies expect you to have anywhere from 10% to 40% equity. In exchange, you may be able to borrow 25% to 30% of your equity. You can estimate your current equity by subtracting whatever you still owe on your mortgage from your home’s estimated value (find that on a real estate site).

Once you have the dollar amount, you can divide by the home’s estimated value to see your percentage of equity. If you proceed with a home equity agreement, you should expect to undergo a professional appraisal to determine your home’s value, which you’ll likely have to pay for yourself.

Is a Home Equity Agreement a Good Idea?

A home equity agreement may be a good option for homeowners who need cash and have sufficient equity, but don’t want a traditional loan arrangement. However, it’s important to consider what a home equity investment contract may cost. Here are the main home equity agreement pros and cons to know.

Pros

Home equity agreements can offer some significant benefits for homeowners who qualify.

•   No monthly payment: Home equity contracts do not require a monthly payment, and you’re not creating any debt.

•   Easier to qualify: You don’t necessarily need a great credit score to get a home equity agreement; you simply need sufficient equity.

•   Flexibility: Funds from a home equity agreement are delivered in a lump sum; there are no restrictions on how you can use the money.

•   Built-in safety: Home equity agreements are structured so that risk is shared between you and the investor; if your home’s value declines instead of increasing, you pay less.

Cons

While home equity agreements can hold appeal for some homeowners, the drawbacks can’t be ignored.

•   Unpredictable repayment: The dollar amount you repay to the investor is tied to your home’s appreciation, which can make it difficult to know exactly what the cost will be. A review of complaints to the U.S. Consumer Financial Protection Bureau shows that homeowners felt frustrated or misled by their contracts and surprised by their repayment amounts. Disputes might arise about the appraised value of the home, as well.

•   Fees may apply: Even though an HEA is not a loan in the traditional sense, you may be expected to pay closing costs and other fees when signing a contract.

•   Higher costs: A home equity agreement could prove more expensive than a home equity loan or home equity line of credit (HELOC) in the long run, depending on the amount you have to repay and the extent of your home’s appreciation.

•   Refinancing restrictions Many people with an HEA will also have a mortgage on their home, and the HEA can make it difficult to refinance that loan, should a homeowner wish to do so.

•   Forced sale: If you cannot repay the amount due to the investor at the end of the contract period, you may be forced to sell the home to satisfy your side of the agreement.

Who Should Consider a Home Equity Agreement

Home equity agreements aren’t right for everyone, and a home equity loan or HELOC might be a less costly way to tap into your home equity. Those who may consider a home equity investment contract include homeowners who need to access a large sum of cash for home improvements, debt consolidation, or other needs, and who also meet one of these criteria:

•   Do not want to take on a home loan because they don’t want to add another payment to their budget

•   Cannot qualify for a HELOC or home equity loan, based on their credit scores or debt levels

In either scenario, the homeowner should also feel confident that they understand the terms of the HEA and can repay the amount due when the contract period ends, or when they sell the home, whichever comes first.

If you don’t have any plans to sell, either now or later, then you may want to look for another option. While you may assume you’ll be able to pay the investor their due when the time comes, much can happen between now and then. You don’t want to find yourself in a situation where you’re forced to sell because the clock has run out on your home equity contract.

How to Choose a Home Equity Agreement Company

Finding a reputable home equity agreement company requires some research and planning. Some of the most important considerations to weigh as you compare the options include the amount of equity you may be able to access, eligibility requirements, ongoing homeowner responsibilities if approved, funding speeds, and how contracts are structured.

More specifically, you should understand:

•   How long the contract term is

•   What percentage of your equity you’re expected to repay

•   How risk is shared between yourself and the HEA company in case your home’s value doesn’t rise like you expect it to

•   What fees you’ll pay, either upfront or at the end of the contract

It’s especially important to understand how the company calculates its equity share. Some companies use a fixed rate of return, while others use a shared appreciation model. With shared appreciation, you agree to repay the amount of cash you initially access, plus a percentage of your home’s appreciation. A fixed return model, meanwhile, means you pay one flat amount, regardless of how much your home appreciates.

How the HEA company calculates its share of your equity could make a big difference in the amount of profit the company walks away with. Additionally, you should also be aware of whether the company caps the amount you’re expected to repay or offers any downside protection. Both can make a home equity agreement more fair and balanced for you, but not all companies offer these benefits.

Checking reviews on sites like Trustpilot or looking at a company’s Better Business Bureau (BBB) profile can give you an idea of its reputation. You can also search the Consumer Financial Protection Bureau’s complaint database to see if any complaints have been filed against a company you’re thinking of working with.

Alternatives to Home Equity Agreements

Home equity agreements are just one way to access your equity. Depending on your situation, you may also consider a home equity loan or home equity line of credit, cash-out refinancing, or a reverse mortgage to get the money that you need. Each option has pros and cons.

Home Equity Loan

A home equity loan is a second mortgage that’s secured by your home. You can withdraw a portion of your equity in a lump sum and repay the loan over a set term, typically 10 to 30 years. Home equity loans usually have fixed interest rates, so you can easily calculate your cost of borrowing and monthly payment.

You can use a home equity loan for any purpose. The amount you can borrow is tied to your equity, credit scores, income, and debt. You might get a home equity loan with the lender you have your primary mortgage through, or shop around for a loan online.

HELOC

A HELOC is a revolving credit line that’s secured by your home. Instead of providing you with a lump sum, a HELOC works more like a credit card. You can withdraw funds from your credit line as needed during a draw period, which may last up to 10 years. During this time, you may be expected to make interest-only payments.

Once the draw period ends, you enter the repayment period, which may last 5 to 20 years. This is when you’ll make both principal and interest payments. You only pay interest on the amount of your credit line that you use. HELOC rates are typically variable, meaning the rate can go up or down over time, but some lenders offer a fixed-rate option.

Cash-Out Refinancing

Cash-out refinancing replaces your existing mortgage with a new, larger home loan. You get the difference between your old and new loans as cash at closing. A cash-out refinance increases your total mortgage debt, but you still have just one mortgage payment to make each month. You might choose a cash-out refi if you’re interested in withdrawing equity and changing the terms of your home loan at the same time.

Reverse Mortgage

A reverse mortgage or home equity conversion mortgage (HECM) is a special type of equity financing available to homeowners aged 62 and older. With a reverse mortgage, you can withdraw your equity in a lump sum or in a series of payments. You repay nothing monthly; full repayment is only required when you sell the home or no longer use it as a primary residence.

Reverse mortgages have strict eligibility requirements, and they charge interest like traditional home loans. Should you pass away with a reverse mortgage in place, your estate would be responsible for settling the debt. That could put your heirs in the position of having to sell the home if they don’t have other resources to pay.

The Takeaway

Home equity agreements can help owners unlock equity without the traditional home loan process, but it’s helpful to consider all paths available. It’s important to understand home equity agreement pros and cons, including the fact that the payment you would ultimately need to make at the conclusion of your HEA term can be wildly unpredictable. You may find that a home equity loan is a better fit if you prefer predictability with how much you’ll repay. A HELOC or cash-out refinance loan could be other good options. Comparing rates from lenders can give you an idea of what you might pay to borrow.

FAQ

How much does a home equity agreement cost?

The cost of a home equity agreement depends on how your contract is structured. Factors that affect cost include the amount of equity you agree to share, the amount of money you receive, and any fees you’re required to pay at the beginning or end of the contract. Upfront fees are similar to closing costs for a mortgage, and may range from 3% to 5% of the amount you receive.

How is the repayment amount determined in a HEA?

Home equity agreement companies typically use one of two approaches to set repayment terms. They may collect a fixed rate of return, or require homeowners to repay the initial amount they received plus a percentage of their home’s appreciation. HEAs may have repayment caps that set an upper limit on what you’ll repay, or include downside protection that helps you if your home doesn’t appreciate as expected.

How do you pay back a home equity agreement?

Home equity agreements are usually repaid in a lump sum when the contract period ends, or when you sell your home, whichever comes first. If you don’t plan to sell, you’ll need to have cash set aside to cover the amount you’re expected to repay. If you do decide to sell, then you could repay the HEA company from the proceeds of the sale.

How do you get a home equity agreement?

To get a home equity agreement, you’ll need to find an HEA company to work with. You’ll also need to meet eligibility requirements, which usually hinge on how much equity you have in the home. Your credit scores and income may also factor into the approval process.

What states allow home equity agreements?

Every state handles home equity loans and home equity agreements differently. Your options for getting an HEA can depend on where you live and which company you decide to work with. It’s not unusual for HEA companies to only offer equity agreements in certain states.

Photo credit: iStock/Miljan Živković

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-Q425-061

If you’re thinking about purchasing a home, you’ve probably heard that an FHA loan (backed by the Federal Housing Administration) is worth exploring. These government-backed loans are especially popular with first-time homebuyers, because they have lower down payment requirements than many conventional loans and less stringent borrowing criteria.

But did you know there are several different types of FHA loans and programs designed to make homeownership accessible to more Americans? The FHA offers a wide variety of options, from traditional home mortgages to loans meant to help homeowners refinance; repair and renovate; improve their home’s energy efficiency; or tap their home equity for retirement income.

Read on for a look at some of the many available options.

What Is an FHA Loan?

FHA loans are mortgages that are provided by private lenders but are insured by the Federal Housing Administration (FHA), which is part of the U.S. Department of Housing and Urban Development (HUD). This means that if a borrower defaults on an FHA loan, the FHA will reimburse the lender for the loan’s unpaid principal balance.

Because lenders are taking on less risk when they fund an FHA loan, they can offer different types of FHA loans to borrowers who might otherwise struggle to qualify due to low credit scores or because they can’t save enough for a big down payment. Borrowers also may be eligible for lower closing costs or other benefits.

If you’re considering an FHA loan, here are some helpful basics to know:

FHA Loan Eligibility

FHA loan requirements can vary by lender and by the type of FHA loan, but generally you can expect underwriters to look for a 580 credit score with a minimum down payment of 3.5%. Some lenders prefer a minimum score of 600. If you can make a larger down payment — at least 10% — you may be able to qualify with a lower credit score (in the 500 to 579 range), but your interest rate and other terms you’re offered may be less favorable. The FHA allows your down payment to be a gift from a family member, friend, charity or other source, but the money will need to be documented with a gift letter.

There isn’t a set income requirement to qualify for an FHA mortgage, but lenders will ask for documentation of your income sources. They also will consider your debt-to-income (DTI) ratio, which compares your monthly debt payments with your monthly gross income. FHA guidelines generally allow a DTI ratio up to 43%, but if you have a strong credit score and meet other requirements, some lenders may accept a DTI ratio of up to 50% on an FHA loan.

FHA loans have occupancy rules regarding the size of the residence and how it is used. And FHA borrowers must pay mortgage insurance — both an upfront premium and an ongoing annual premium.

FHA Loan Limits

The FHA sets new guidelines each year for the maximum amount you can borrow based on housing costs and the cost of living in your region. The value of the property you plan to purchase (as determined by your appraisal) must fall within these specific limits.

HUD maintains a searchable database on its website where you can look up loan limits for specific areas. The following are the 2025 limits in most areas of the U.S.:

•   Single-unit property: $524,225

•   Two-unit property: $671,200

•   Three-unit property: $811,275

•   Four-unit property: $1,008,300

Limits in higher-cost areas can range from $1,209,750 (for a single-unit property) to $2,326,875 (for a four-unit property). In Alaska, Hawaii, Guam, and the U.S. Virgin Islands, limits range from $1,814,625 to $3,490,300.

Types of FHA Mortgage Loans

The FHA insures several different types of loans, including the popular Section 203(b) Basic Home Mortgage Loan that many homebuyers use to purchase their primary residence. Here’s a list of loan options you may want to consider:

FHA 203(b) Loan: Standard Home Purchase

This is the FHA’s main home loan program, and it’s similar to a conventional mortgage. Borrowers can choose among different loan terms, up to a 30-year term, and must also decide whether they prefer a fixed or adjustable interest rate. To qualify, the home must pass strict HUD appraisal standards.

FHA 203(k) Loan: Rehab and Renovation

By now, you’ve probably seen enough renovation TV shows to know that you can often find a more affordable home if you’re willing to make some improvements. The FHA’s standard and limited 203(k) rehabilitation mortgages can be used to help homebuyers and current homeowners finance those repairs and improvements. The renovation expense with an FHA 203(k) loan must be a minimum of $5,000, and the home must be at least a year old.

Recommended: FHA 203(b) Loans vs. FHA 203(k) Loans

FHA Streamline Refinance

An FHA streamline refinance is a refinancing option that’s available only to borrowers with an existing FHA loan. It’s referred to as “streamlined” because the underwriting process is limited compared to a standard mortgage refinance. (A home appraisal usually isn’t required, for example.) Eligibility requirements may be stricter, however, if the refinance will lower the borrower’s mortgage payment by more than 20%.

FHA Cash-Out Refinance

With an FHA cash-out refinance, eligible homeowners can get a new, larger mortgage that’s insured by the FHA, use it to pay off their existing mortgage, and receive the balance that’s left over as a lump sum of cash.

You can use money from a cash-out refinance for just about any purpose, including to pay down debt or to fund a remodel. With an FHA cash-out refinance, you may be able to borrow up to 80% of the property’s appraised value. And unlike the streamline refinance, you can do an FHA cash-out refinance no matter what type of mortgage you currently have.

FHA Energy Efficient Mortgage (EEM)

With the EEM program, a borrower can use an FHA-insured mortgage to purchase or refinance a principal residence plus get help covering energy efficient improvements that could help lower the home’s utility bills. In the past, there were tax credits that helped homeowners fund the energy-efficiency improvements, but these credits end on December 31, 2025, However, the EEM program continues.

The FHA loan can be used to cover materials, labor, inspections, and a home energy assessment by a qualified energy assessor. But there are restrictions on how much you can borrow for the updates, and the improvements to be made must be approved by a qualified assessor or home energy rater.

FHA Reverse Mortgage (HECM)

An FHA home equity conversion mortgage (HECM) is an FHA-insured reverse mortgage that allows borrowers 62 and older to tap into a portion of their home equity to get tax-free income. The monthly payments borrowers receive through a reverse mortgage can then be used to help cover medical bills, home maintenance, or other general living expenses.

The amount available for withdrawal is based on:

•   The age of the youngest borrower or eligible nonborrowing spouse;

•   The current interest rate; and

•   The appraised value, the HECM FHA mortgage limit, or the sales price — whichever amount is lowest.

When the borrower moves out, sells the home, or passes away, the loan must be repaid.

How to Choose the Right FHA Loan

If you aren’t sure which type of FHA mortgage loan loan would be best for your needs, it may be helpful to speak with a HUD-approved housing counselor. You can use the search tool on the HUD website to find a participating housing counseling agency near you.

A qualified mortgage professional with an FHA-approved lender (like SoFi) can also provide you with information about the various types of FHA mortgage loans, as well as the pros and cons. And you can go online to further research the type of loan you want and the lenders who offer those programs or products.

The Takeaway

An FHA mortgage has long been a popular option for first-time homebuyers who are looking for a basic home loan. But homeowners who want to refinance their current mortgage, improve their property, or turn their equity into income may also benefit from different types of FHA mortgage loans. Working with a trusted lender, you can find an FHA loan that makes the most sense for your budget and financial goals.

SoFi offers a wide range of FHA loan options that are easier to qualify for and may have a lower interest rate than a conventional mortgage. You can down as little as 3.5%. Plus, the Biden-Harris Administration has reduced monthly mortgage insurance premiums for new homebuyers to help offset higher interest rates.

FAQ

What is the most common FHA loan?

The most commonly used FHA loan is the FHA 203(b) loan, which could make it possible to purchase a primary residence even if your credit is so-so or you don’t have a large down payment saved up.

Can I use an FHA loan for home improvements?

Yes. An FHA 203(k) loan can be used by homeowners and homebuyers who want to make major renovations to a property. But depending on your specific circumstances, you might also consider other FHA loans (a 203(b) mortgage, a reverse mortgage, or a refinancing option) to help pay for improvements.

What’s the difference between FHA 203(b) and FHA 203(k) loans?

The FHA 203(k) rehabilitation mortgage insurance program was created to assist homebuyers and homeowners who have a property that’s in need of substantial renovation or remodeling, while the 203(b) loan is typically used to purchase a move-in ready home or one that may not require such significant repairs.

Who qualifies for an FHA streamline refinance?

To qualify for an FHA streamline refinance, the existing mortgage must be FHA insured and it can’t be delinquent. The term “streamline” refers to the amount of documentation required and level of underwriting the lender must perform, which is usually minimal compared to some other loans.

Are there income limits for FHA loans?

FHA loans do not have maximum or minimum income limits. Still, you can expect lenders to request documentation of your income sources.

How do FHA reverse mortgages work?

An FHA-insured reverse mortgage allows borrowers 62 and older to tap into a portion of their home equity to get tax-free income. The loan must be repaid when the borrower sells the home, moves out, or passes away.

Photo credit: iStock/ferrantraite

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-Q425-059

Even if you have a fixed-rate home loan, your mortgage payment may go up over time. It’s no fun when it happens, especially if you carefully built your budget around the monthly payment you were counting on. But there are several reasons why your payment could go up (and keep increasing) unexpectedly. And no, it doesn’t mean you did something wrong.

Read on for a look at some of the factors that could affect your payment and ways you can deal with an unplanned hike to your monthly housing costs.

Common Reasons for Mortgage Payment Increases

If your monthly payment changes, it may not have anything to do with your mortgage principal or your interest rate. Some common reasons why a mortgage payment can go up include:

1. Escrow Account Adjustments

As part of the home loan process, it’s likely your lender set up an escrow account to collect money for costs like property taxes, homeowners insurance, and when necessary, private mortgage insurance (PMI) and flood insurance. Lenders typically perform an annual escrow analysis, and if any of those costs have gone up year over year, you can expect to see an increase in your payment.

2. Property Tax Change

There are a few different factors that can cause your property taxes to rise. If your home is worth more (because you made significant improvements, for example, or houses in your area have been selling for higher prices), your local government may reassess your property’s value, which results in a larger property tax bill. You also might see a tax increase if your city or county needs more money to build a school or to fund its yearly budget. And you could end up paying more if you lost a property tax exemption.

If your property taxes are included in your mortgage payment, your escrow contribution will likely reflect any increase.

3. Homeowners Insurance Premium Increase

If you make a change that adds to the cost of your homeowners insurance policy — or if your insurance company raises its rates — you can anticipate that your lender will collect more from you each month to cover that increase.

4. Private Mortgage Insurance Change

Borrowers who purchase a home with less than 20% down usually must pay for private mortgage insurance (PMI) until they build up more equity. The cost of your PMI should not go up over the course of your loan. In fact, it should decline as your principal balance declines, and when you reach 20% equity in your home, you can request that PMI be removed. If you see a PMI increase on your monthly bill, check in with your lender to ascertain whether an error is to blame.

5. Interest Rate Adjustment

If you have a fixed rate mortgage, your interest rate should stay the same for the length of your loan. But if you have an adjustable-rate mortgage (ARM) and your loan’s introductory period has ended, your interest rate may start going up or down based on current market rates. Each time your loan hits an adjustment period — typically every six months or once a year — your lender will recalculate your payment. (The length of your adjustment period should be included in your loan documents.)

6. Interest-Only Period Ended

Some lenders offer interest-only mortgages that allow borrowers to postpone making principal payments for a predetermined period (usually from three to 10 years). During that time, homeowners pay only the interest that’s accumulating on the amount they borrowed — no money is going toward the amount actually owed on the home. If you have this type of loan, and the interest-only period has ended, your monthly payment amount will increase to include the portion of the payment that will go toward the principal.

7. Loan Terms Changed

It’s also possible that a change in your loan terms pushed up your payment. If you’re a service member, for example, and your active-duty status ended one year ago, your mortgage rate may no longer be protected under the Servicemembers Civil Relief Act (SCRA), which caps rates at 6.00%. Instead, your loan will revert to the original higher rate you agreed to when you took out your mortgage, causing your payments to rise.

8. Missed Payment or Late Fee

Did you make a late or partial payment, or did you miss a payment? If so, your lender may have tacked a penalty fee onto your current bill or included the unpaid balance. (If it’s your first time paying late, you may be able to get the fee reduced or eliminated.) It’s a good idea to keep in touch with your loan servicer when you make a late payment or fall behind. You may be able to negotiate a payment plan so you can make sure you get back on track.

If you’re experiencing unexpected financial troubles, your loan servicer may agree to temporarily lower or pause your mortgage payments through a process called mortgage forbearance. Forbearance can help you avoid foreclosure, but when the forbearance period ends, the loan servicer will expect repayment — sometimes with a lump sum, or by adding the amount owed to the end of the loan term, or through monthly installments that can increase the cost of your payments for a while.

Recommended: Average Monthly Expenses for One Person

How to Avoid Unexpected Mortgage Payment Increases

Because there are so many factors that can cause the amount of your monthly mortgage payment to fluctuate, it can be important to keep an eye out for any changes. (Especially if your payments are automatically withdrawn from your bank account.)

Mortgage servicers are generally required to provide a mortgage statement for each billing cycle, and that statement should include:

•   The amount you owe and when it’s due

•   A breakdown of how the payment will be applied to principal, interest, and escrow, as well as any fees or amounts that are past due

•   Account details, like your interest rate and outstanding principal balance

•   Contact information for your loan servicer

Your statement will likely have the answers to any questions or concerns you have. But if you need more help, you can call the company you make your monthly payment to. It’s possible they simply made an error, or that you missed a notification about a recent change to your payment amount.

What to Do If Your Mortgage Payment Goes Up

If a higher mortgage bill is pushing you out of your comfort zone, there are a few steps you might consider to help get your payment back in line with your budget, including:

Shopping for a Lower Homeowners Insurance Premium

Homeowners insurance can get expensive, and the cost continues to rise, so it can make sense to shop around for a lower rate once in a while. You could call around for information on what various carriers have to offer or work with an insurance broker. Or you may prefer the convenience of using an online comparison site. (SoFi’s platform, for example, lets you compare quotes from up to 30 top insurers using Experian Insurance Services.) Remember that bundling your home and auto policies may help you find a lower rate, and you might be eligible for other discounts, as well.

If you decide to make a change, be sure to let your mortgage servicer know.

Appealing Your Property Tax Assessment

If your property taxes have gone up, your new assessment should include instructions on how to file an appeal. If not, you can call your property appraiser’s office for information and to voice your concerns. You might also benefit from researching any exemptions for which you may be eligible. Before requesting an assessment, try to research property tax assessments of other properties similar to yours in your area, to make sure other assessments really are lower than your own. Inviting further scrutiny of your property by assessors can sometimes backfire and result in higher taxes.

Removing Your Private Mortgage Insurance

Your mortgage servicer should automatically cancel your PMI payments when you reach 22% equity in your home or the midpoint of your loan term (whichever comes first). But once you know you’ve reached 20% equity, you can reach out to your mortgage servicer and request that they cancel your PMI to lower your payment.

Refinancing to a More Manageable Mortgage Payment

A mortgage refinance means replacing your current mortgage with a new one that has terms that better suit your current needs. You might be able to qualify for a lower interest rate, for example, or you could look at changing your loan length to lower your monthly payment. “It’s important to understand that not every mortgage refinance will save you money on interest. For example, if you extend the repayment term, you may have smaller monthly payments, but you’ll end up paying more money over the course of the loan,” says Brian Walsh, CFP® and Head of Advice & Planning at SoFi.

Refinancing typically comes with some fees, as well, so you’ll want to be sure to run the numbers when considering this move. But if refinancing will enable you to stay current on your monthly payments instead of falling behind, it may be a wise move for your mortgage (and your credit score).

Recommended: How to Lower Your Mortgage Payment

The Takeaway

The amount of your mortgage payment may fluctuate from time to time — but that doesn’t mean you should ignore it when it happens. If you’re unsure about why your payment changed, you can check your monthly statement or talk to your mortgage servicer for information. And if you want to lower your payment, you can explore getting rid of PMI or refinancing your mortgage.

SoFi can help you save money when you refinance your mortgage. Plus, we make sure the process is as stress-free and transparent as possible. SoFi offers competitive fixed rates on a traditional mortgage refinance or cash-out refinance.

FAQ

Why would my mortgage payment go up even though my interest rate is fixed?

A fixed interest rate doesn’t mean your monthly mortgage payment won’t ever change. If your mortgage servicer is paying for your property tax, homeowners insurance, or private mortgage insurance (PMI) from an escrow account, and one or more of those costs go up, you can expect your monthly payment to reflect the increase.

Can property taxes increase every year?

There aren’t any federal laws that cap property tax increases; it’s up to state and local governments to put limitations in place. You can look for information relevant to your area on your property appraiser’s or tax assessor’s website.

What can I do if I can’t afford my new mortgage payment?

You can talk to your lender about your concerns and ask for options that could help. And you may want to look into refinancing to a new loan with terms that better fit your needs.

Will my mortgage payment go back down?

It’s possible your payment could go back down, if the costs driving it up can be reduced. But in the meantime, you may want to take some proactive steps to be sure the new payment is based on current and correct information. If the new payment is accurate, you can research options that could lower your payments, such as trimming your insurance costs or refinancing.

How often does escrow get recalculated?

Lenders typically perform an escrow analysis on an annual basis.

Photo credit: iStock/zamrznutitonovi

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-Q425-058