SoFi

If you’re thinking about accessing some of the equity in your home, but you’re a little confused about the mix of terms used to describe this type of borrowing, you’re not alone.

Understanding the subtle differences in how these borrowing options work (a home equity loan vs. a second mortgage vs. a HELOC, for example) can be challenging. But the more you know, the more equipped you can be to make the best choice for your needs.

In this guide, we’ll break down what the different terms mean, some of the pros and cons of each type of financing, and factors that might influence which option you choose.

Key Differences Between Second Mortgages and Home Equity Loans

Ready to have the fog lifted a bit? Let’s start by defining the term “second mortgage,” and discuss how it relates to the term “home equity loan.”

A second mortgage is pretty much just what it sounds like: You’re adding a second mortgage loan to your existing primary mortgage, and your home is the collateral for both loans. The first mortgage is secured by your home, and the second mortgage is secured by the equity you’ve managed to build up in that home.

You see where this is going, right? A home equity loan is a type of second mortgage. But — plot twist! — all second mortgages aren’t necessarily home equity loans. Another type of financing you’ve likely heard of, a home equity line of credit (HELOC), is also considered a type of second mortgage. (A third and less common second mortgage: Some homebuyers, including those with FHA loans, may get a second mortgage when they initially buy their home, as a way of helping to make the down payment.)

So there are two basic types of second mortgages: home equity loans and HELOCs. And there are some important differences between these two options.

Loan Structure

•   A second mortgage that is a home equity loan is considered a “closed-end” loan, which means the borrower receives a lump-sum payment upfront and repays that amount over time. When you pay down the balance — even if you pay off the loan early — you can’t re-borrow, or “draw” from the same loan again. If you need more money, you have to take out a new loan. (You can get an idea of how much you might be able to borrow with a home equity loan calculator.)

•   A HELOC, on the other hand, is an “open-end” line of credit. You can take out cash as you need it, up to the credit limit, and as you repay your outstanding balance, the amount of available credit is replenished, much like a credit card. You can borrow against it again and again, if you need to, throughout your draw period (which is typically 10 years). Usually, you’re only required to make minimum or interest-only payments during this time. Then, when the draw period ends, the repayment period begins.

Interest Rates

•   A second mortgage that’s a home equity loan will typically have a fixed interest rate that’s higher than the mortgage rate for your primary home loan but lower than the rate you’d likely get with an unsecured loan, like a personal loan.

•   A HELOC is also secured with your home, so the interest rate will likely be lower than if you used a credit card. But like a credit card, a HELOC often comes with a variable interest rate, which means the rate can change over time. (There may be an initial fixed rate for an introductory period before the variable rate kicks in.) Much in the way that mortgage rates drive costs on a variable-rate mortgage, if interest rates rise during the variable-rate period, so do the costs associated with your HELOC. This can affect the monthly payments and the total interest paid over the life of the line of credit.

Repayment Terms

•   Home equity loans usually have fixed monthly payments that are made over a predetermined loan term that could range from five to 30 years.

•   A HELOC repayment term, which starts after the draw period is over, generally lasts 10 to 20 years. During this time the interest rate may fluctuate, which means monthly payments may be less predictable. If interest rates rise, your payments could be higher than you expected; if they drop, your payments could be lower. (You can use a HELOC repayment calculator to estimate what your payments might be.)

Pros and Cons of Second Mortgages

As with most types of financing, the different types of home equity loans have pros and cons to consider.

Advantages

•   Because the loan or line of credit is secured with your home as collateral, you can expect your interest rate to be lower than the rate for an unsecured loan or line of credit, like a personal loan or credit card.

•   If your second mortgage is a HELOC, you can decide how much to withdraw (up to your credit limit) and when to withdraw it, and you’ll only pay interest on what you’ve borrowed. The money in the account will be there if you need it at any time during the draw period, but you’ll have some flexibility in how you use it.

•   Unlike many other types of loans (auto loans, first mortgages, student loans), you can use the funds from your HELOC or home equity loan for just about anything you want.

•   The interest you pay may be tax deductible, if you use the money for qualifying home improvements. You’ll want to talk to a tax advisor about this deduction.

Disadvantages

•   Securing your second mortgage with your home as collateral can put you at risk of foreclosure if you default on your payments.

•   If your home’s value declines, you could end up owing more than your home is worth. And if you have a HELOC, your lender may decide to freeze or reduce your line of credit.

•   Closing costs for second mortgages are generally lower than for primary mortgages, but you can still expect to pay some fees when you close on your loan or line of credit.

•   You will likely have to repay your home equity loan or HELOC if you sell your home.

Recommended: HELOC Loan Guide

Pros and Cons of Home Equity Loans

Both HELOCS and home equity loans are a type of a second mortgage, and they have some similar traits and some that differ. Here are some pros and cons that are specific to home equity loans.

Advantages

•   Because you get your money upfront with a home equity loan, it can be a useful way to pay for a large one-time expense, such as a home renovation, or for debt consolidation.

•   Home equity loans typically come with a fixed interest rate and a predictable fixed monthly payment, which can make it easier to budget for and plan around.

Disadvantages

•   With a home equity loan, you’ll immediately start paying interest on the full amount of the loan each month, even if you haven’t used the money.

•   If you don’t know exactly how much you’ll need for a home renovation, medical procedure, etc., you could under-borrow, and you might have to get another loan to finish the work. (With a HELOC, you can keep borrowing and repaying for several years without getting additional approvals or filing new paperwork.)

Recommended: Mortgage Preapproval

Choosing Between a HELOC and a Home Equity Loan

Because there are pros and cons to both second mortgage options, it may be difficult to choose between a home equity loan vs. a HELOC. Here are some points to consider:

Assessing Your Financial Needs

How do you plan to use the funds from your second mortgage? As you weigh a HELOC vs. second mortgage in the form of a home equity loan, consider this:

•   If your goal is to make a large one-time purchase, a home equity loan — which comes in a lump-sum payment — may be the better choice.

•   If you like the idea of having more flexibility in how much you borrow and when you borrow it, a line of credit — which you can use and pay back and use again — might be the right option.

Evaluating Interest Rates and Terms

Which terms better suit your purposes (and personality)? When thinking about using a HELOC second mortgage vs. a home equity loan consider this:

•   A home equity loan has a fixed interest rate and a traditional loan structure with more predictable monthly payments.

•   A HELOC usually has a variable interest rate, which can fluctuate over time. During the first years that you have the line of credit, the “draw period,” you may only have to make minimum or interest-only payments. But when you enter the repayment period, if interest rates have increased, your payments may be higher than you anticipated.

Considering Tax Implications

The interest on both a HELOC and a home equity line of credit may be tax deductible, but only if you use the funds “to buy, build, or substantially improve the residence” you used to secure the loan. (Note that this IRS rule expires at the end of 2025. If it isn’t renewed by Congress, the interest from either type of second mortgage may be deductible in the future — with some limitations — regardless of how the homeowner uses the money.)

The Takeaway

Both home equity loans and home equity lines of credit (HELOCs) are a type of second mortgage. And though they share some similarities, there are also some differences that are important to consider when you’re trying to decide which option is better for your needs.
While both home equity loans and HELOCs allow you to tap into your home’s equity if you need money, a HELOC offers the option to draw only what you require and to pay as you go. This can make it an option worth considering if you’re not sure how much money you need upfront for a project or purchase, or if you want to have a backup plan to cover unexpected costs as they come up. It can also keep your costs down in the first years that you have the HELOC.

SoFi now partners with Spring EQ to offer flexible HELOCs. Our HELOC options allow you to access up to 90% of your home’s value, or $500,000, at competitively lower rates. And the application process is quick and convenient.

Unlock your home’s value with a home equity line of credit from SoFi, brokered through Spring EQ.

FAQ

Are interest rates typically higher for second mortgages or home equity loans?

The interest for a second mortgage — whether it is a home equity loan or a HELOC — is typically lower than what you might find with an unsecured loan. The interest rate on any mortgage can depend on several factors, including the borrower’s creditworthiness and loan-to-value ratio, and the prime rate. But second mortgages often have a higher interest rate than primary mortgages.

Can I use funds from a second mortgage or home equity loan for any purpose?

Yes, you can use the money from a second mortgage for just about any purpose.

How does the repayment term differ between a second mortgage and a home equity loan?

A home equity loan is a type of second mortgage. It usually has a fixed repayment schedule for the life of the loan, and repayment begins as soon as you receive the lump-sum loan. Another type of second mortgage, a home equity line of credit (HELOC) has two phases of payments: There is a draw period, during which payments are typically interest-only, and a repayment period when you repay all that you’ve borrowed, plus interest.

What are the risks associated with taking out a second mortgage or home equity loan?

Securing a loan or a line of credit with your home as collateral can put you at risk of foreclosure if you default on your payments. Also, if your home value declines, you could end up owing more than your home is worth.

How does my credit score affect eligibility for a second mortgage or home equity loan?

The higher your credit score, the more likely you are to be approved for a second mortgage. Your credit score also can affect the interest rate and borrowing terms you are offered.

Can I borrow against my home equity if my house is paid off?

Yes. If you have good credit and meet other eligibility requirements, you should be able to use the equity in a paid-off home to get either a HELOC or a home equity loan. (It wouldn’t be referred to as a “second mortgage” in this situation, however.)

---

Photo credit: iStock/VioletaStoimenova

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.

*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.

Financial Tips & Strategies: The tips provided on this website are of a general nature and do not take into account your specific objectives, financial situation, and needs. You should always consider their appropriateness given your own circumstances.

Third-Party Brand Mentions: No brands, products, or companies mentioned are affiliated with SoFi, nor do they endorse or sponsor this article. Third-party trademarks referenced herein are property of their respective owners.

Tax Information: This article provides general background information only and is not intended to serve as legal or tax advice or as a substitute for legal counsel. You should consult your own attorney and/or tax advisor if you have a question requiring legal or tax advice.

^¹FHA loans are subject to unique terms and conditions established by FHA and SoFi. Ask your SoFi loan officer for details about eligibility, documentation, and other requirements. FHA loans require an Upfront Mortgage Insurance Premium (UFMIP), which may be financed or paid at closing, in addition to monthly Mortgage Insurance Premiums (MIP). Maximum loan amounts vary by county. The minimum FHA mortgage down payment is 3.5% for those who qualify financially for a primary purchase. SoFi is not affiliated with any government agency.
^²SoFi Bank, N.A. NMLS #696891 (Member FDIC), offers loans directly or we may assist you in obtaining a loan from SpringEQ, a state licensed lender, NMLS #1464945.
All loan terms, fees, and rates may vary based upon your individual financial and personal circumstances and state.
You should consider and discuss with your loan officer whether a Cash Out Refinance, Home Equity Loan or a Home Equity Line of Credit is appropriate. Please note that the SoFi member discount does not apply to Home Equity Loans or Lines of Credit not originated by SoFi Bank. Terms and conditions will apply. Before you apply, please note that not all products are offered in all states, and all loans are subject to eligibility restrictions and limitations, including requirements related to loan applicant’s credit, income, property, and a minimum loan amount. Lowest rates are reserved for the most creditworthy borrowers. Products, rates, benefits, terms, and conditions are subject to change without notice. Learn more at SoFi.com/eligibility-criteria. Information current as of 06/27/24.
In the event SoFi serves as broker to Spring EQ for your loan, SoFi will be paid a fee.

Checking Your Rates: To check the rates and terms you may qualify for, SoFi conducts a soft credit pull that will not affect your credit score. However, if you choose a product and continue your application, we will request your full credit report from one or more consumer reporting agencies, which is considered a hard credit pull and may affect your credit.

SOHL-Q125-069

Read more

Home equity loans put cash in your hands that you can use for virtually any purpose. Using a home equity loan to renovate could make sense if you’re making improvements that are likely to increase your property’s value.

Getting a home equity loan or home equity line of credit (HELOC) for home improvements offers some advantages over other types of loans, but you’ll need to have sufficient equity to borrow. A good credit score can also make a difference if you hope to qualify for a low interest rate.

How does a home equity loan or HELOC work for home improvements? Here’s what you should know.

Understanding Home Equity Loans

To understand how does a home equity loan work for home improvements, you first need to understand equity. So, what is home equity? In simple terms, it’s the difference between what you owe on your mortgage and your home’s value. A home equity loan allows you to take some of that value out in cash, pulling equity out of your home with your home used as collateral.

A home equity loan is a type of second mortgage, also called a junior lien. This means that in order of repayment, your first mortgage (which is the home loan you used to purchase the property) takes precedence. Should you end up in foreclosure and your home is auctioned off, the proceeds would pay off the first mortgage and anything left would go to the second.

There are different types of home equity loans and credit line arrangements:

•   Fixed-rate home equity loan. A fixed-rate home equity loan offers a lump sum of money that you pay back at a fixed or set interest rate.

•   Fixed-rate HELOC. A home equity line of credit or HELOC is a revolving line of credit you can borrow against as needed. Fixed-rate HELOCs are less common, but some lenders offer them.

•   Variable-rate HELOC. A variable-rate HELOC has an interest rate that’s tied to an index or benchmark rate. If the benchmark rate rises or falls, your HELOC rate moves in tandem.

Having a home equity loan or HELOC means you’ll have two mortgage payments to make each month. If you’re considering a home equity loan to renovate, it’s important to understand what you’ll pay to make sure it’s a good fit for your budget. A home equity loan calculator can help you crunch the numbers.

Benefits of Using a Home Equity Loan for Home Improvements

Using a home equity loan or HELOC for home improvements offers some unique benefits. For one thing, it may allow you to access a large amount of cash. Considering that the average cost to remodel a home can run anywhere from $20,000 to $90,000, that’s a plus. Here are some other good reasons to consider a home equity loan for home renovation.

Lower Interest Rates

Home equity loans can offer lower interest rates than unsecured loans for qualified borrowers. The higher your credit score is, the lower your rate is likely to be.

A fixed rate is another advantage because it offers predictability. Your payments stay the same and you can easily estimate how much you’ll pay in interest. For example, if you get a $100,000 home equity loan at 7.75% with a 30-year term, you’ll always pay $716 a month. (A HELOC is more likely to have a variable interest rate — one that rises or falls at regular intervals in response to market rates.)

Home equity loan rates tend to be higher than purchase loan rates since there’s more risk for the lender. However, they can still be cheaper than personal loans or unsecured home improvement loans.

Potential Tax Deduction

The IRS offers a tax deduction when you use a home equity loan or HELOC to “buy, build, or substantially improve the residence” that secures the loan.

You can claim this deduction in addition to any mortgage interest you deduct for your primary home loan if you itemize on your return. You’ll just need to be sure that you’re only using your equity loan or HELOC to cover eligible expenses related to your renovations. (Save your receipts as part of your tax records.) You’ll want to talk to your tax advisor about this, especially given that, as of early 2025, the current tax rules for deducting home equity loan interest are set to sunset at the end of 2025.

Increased Home Value

Using a home equity loan to remodel could help boost your home’s value, depending on the projects you decide to tackle. That could leave you with more profit in your pocket if you eventually decide to sell the home, or more equity to borrow against later.

Here are some of the home improvement projects offering the highest return on investment:

•   Garage door replacement

•   Entry door replacement

•   Midrange kitchen remodel

•   Deck addition

•   Vinyl siding replacement

•   Window replacement

•   Roof replacement

•   Bathroom remodel

When deciding which projects to fund, consider the ROI as well as the projected time to complete them. Upgrading to your dream kitchen, for instance, could take months, so you have to be patient enough to see the renovations through.

Evaluating Your Home’s Equity

One of the most important factors lenders consider is the amount of equity you have in your home. Specifically, they look at your loan-to-value (LTV) ratio. If you don’t have sufficient equity in the home, you may not qualify for a home equity loan or HELOC.

Impact on Borrowing Capacity

What is loan-to-value ratio? It’s a ratio that measures the amount you want to finance against the value of your property. Here’s how to calculate it.

LTV ratio = (Current loan balance) / (Appraised value) x 100

Typically lenders look for a maximum LTV ratio of 80% to 90% for home equity loans and HELOCs.

How much home equity can you borrow? Let’s say you owe $300,000 on your home and it’s valued at $500,000. Your LTV would be 60%. In terms of how much of your $200,000 equity you could borrow, you might be able to withdraw up to $100,000 with a home equity loan if a lender allowed a max LTV of 80%, or $150,000 if the lender allowed a max LTV of 90%.

Steps to Obtain a Home Equity Loan for Renovation

How do you get a home equity loan for remodeling? It’s a multi-step process but for the most part, it isn’t that different from getting a mortgage to buy a home. Here’s an overview of how it typically works.

•   Calculate your home equity, then calculate your loan-to-value ratio.

•   Shop around to compare mortgage rates for home equity loans and HELOCs. Consider getting quotes from several lenders to see how they measure up.

•   Consider getting preapproved. Preapproval means that you’re conditionally approved for a home equity loan.

•   Select a lender and finalize your application. Most home equity lenders allow you to apply online and upload your documents digitally.

•   Wait for the lender to schedule an appraisal. Your lender may request an in-person appraisal, offer a desk appraisal, or use a hybrid approach that combines an in-person visit with use of an automated valuation model.

•   Review the loan terms. Assuming you’re approved, you’ll have a chance to review your loan terms before signing off on the final paperwork.

•   Close and sign the documents. You’ll pay any closing costs that are due, sign the loan agreement, and tell the lender where to send the loan proceeds.

The process to get a home equity loan or HELOC can take a few weeks to a few months, depending on your situation and choice of lender.

Alternatives to Home Equity Loans for Renovation

A home equity loan for remodeling is just one way to fund home improvements. If you’re looking for other options, you’ve got choices.

•   Personal loan. The main difference between home equity loans vs. personal loans is that one is secured by your home; the other isn’t. Personal loans can offer generous lending limits, and you can use the money for anything, but interest rates may be higher. And instead of closing costs, you might pay application or origination fees to borrow.

•   Personal line of credit. A personal line of credit is a revolving credit line that you can draw against as needed. A line of credit might be a good fit if you don’t know exactly how much money you’ll need for renovations. The upside is that you only pay interest on the part of your credit line that you use, whereas a home equity loan requires you to pay interest on the entire loan amount.

•   Credit card. A credit card could be a good fit to fund home improvements if you have a low interest rate and earn rewards on your purchases. For example, you might use a card that rewards you with 5% cash back at home improvement stores. Just keep in mind that the interest you pay to a credit card (or personal loan) for home remodeling isn’t tax-deductible.

The Takeaway

Using a home equity loan or HELOC to remodel could be an attractive option if you’re ready for a home makeover but don’t want to pull from your reserves. Checking your credit scores before you can apply can give you an idea of what you might qualify for, as far as rates go. From there, the next step is checking mortgage rates and terms from different lenders to see who has the best offer.

SoFi now partners with Spring EQ to offer flexible HELOCs. Our HELOC options allow you to access up to 90% of your home’s value, or $500,000, at competitively lower rates. And the application process is quick and convenient.

Unlock your home’s value with a home equity line of credit from SoFi, brokered through Spring EQ.

FAQ

Are there risks associated with using a home equity loan for renovations?

There are risks to using a home equity loan for renovations. If you end up in a situation where you can’t make your home equity loan or mortgage payments, you could end up in foreclosure. That would allow your lenders to take the home from you, since it secures both of your mortgages.

Can I use a home equity loan for any type of home improvement?

You can use a home equity loan for home improvements big and small, whether that means a full kitchen remodel, adding on an extension, or simply replacing some of your fixtures and appliances. Home equity loans offer flexibility since you can use the money for virtually any expenses.

What are the typical interest rates for home equity loans?

Interest rates for home equity loans are typically a percentage point or two higher than rates for first mortgages. So if a lender is charging 6.50% on average for purchase loans, it might charge 7.50% to 8.50% for a home equity loan or HELOC. A good credit score can help you qualify for the lowest rate possible on a home equity loan.

How long does it take to get approved for a home equity loan?

Home equity loan approval may take a few weeks since the lender will need to review your credit and income, and schedule an appraisal to determine the home’s value. The entire underwriting process could take a few months if you hit any snags. For example, if you’re self-employed, you may need to provide additional documentation of your income or assets to the lender.

Are there closing costs associated with home equity loans?

Home equity loans can have closing costs just like other mortgages. Typical closing costs for a home equity loan range from 2% to 5% of the loan amount. Some lenders may allow you to roll the closing costs into your loan so you pay nothing upfront; however, that does add to the amount you’ll pay interest on.

---

Photo credit: iStock/andresr

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.

*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.

Financial Tips & Strategies: The tips provided on this website are of a general nature and do not take into account your specific objectives, financial situation, and needs. You should always consider their appropriateness given your own circumstances.

Tax Information: This article provides general background information only and is not intended to serve as legal or tax advice or as a substitute for legal counsel. You should consult your own attorney and/or tax advisor if you have a question requiring legal or tax advice.

^²SoFi Bank, N.A. NMLS #696891 (Member FDIC), offers loans directly or we may assist you in obtaining a loan from SpringEQ, a state licensed lender, NMLS #1464945.
All loan terms, fees, and rates may vary based upon your individual financial and personal circumstances and state.
You should consider and discuss with your loan officer whether a Cash Out Refinance, Home Equity Loan or a Home Equity Line of Credit is appropriate. Please note that the SoFi member discount does not apply to Home Equity Loans or Lines of Credit not originated by SoFi Bank. Terms and conditions will apply. Before you apply, please note that not all products are offered in all states, and all loans are subject to eligibility restrictions and limitations, including requirements related to loan applicant’s credit, income, property, and a minimum loan amount. Lowest rates are reserved for the most creditworthy borrowers. Products, rates, benefits, terms, and conditions are subject to change without notice. Learn more at SoFi.com/eligibility-criteria. Information current as of 06/27/24.
In the event SoFi serves as broker to Spring EQ for your loan, SoFi will be paid a fee.

Checking Your Rates: To check the rates and terms you may qualify for, SoFi conducts a soft credit pull that will not affect your credit score. However, if you choose a product and continue your application, we will request your full credit report from one or more consumer reporting agencies, which is considered a hard credit pull and may affect your credit.

Disclaimer: Many factors affect your credit scores and the interest rates you may receive. SoFi is not a Credit Repair Organization as defined under federal or state law, including the Credit Repair Organizations Act. SoFi does not provide “credit repair” services or advice or assistance regarding “rebuilding” or “improving” your credit record, credit history, or credit rating. For details, see the FTC’s website .

SOHL-Q125-068

Read more

The Child Tax Credit (CTC) is designed to offer a tax break to qualifying families with one or more children. So how much is it worth? The Child Tax Credit 2024 maximum is $2,000 per qualifying child.

Part of the credit, referred to as the Additional Child Tax Credit (ACTC), is refundable. The refundable portion is worth up to $1,700 per qualifying child.

Here’s more on how Child Tax Credit payments for 2024 work.

What Is the Child Tax Credit?

There are two main types of taxes most people have to deal with: federal and state. The IRS, or Internal Revenue Service, is in charge of collecting federal income tax as well as extending tax credits and other tax breaks to eligible filers.

The Child Tax Credit is a federal tax credit for families with qualifying children. Whether you’re filing taxes for the first time or the 20th, it’s to your advantage to claim every credit you’re eligible for, especially if you have kids.

Here are a few key takeaways to know about the credit:

•   Parents and guardians of qualifying children may be eligible to claim the Child Tax Credit even if they don’t normally file a tax return.

•   Unlike some family-oriented tax credits, the Child Tax Credit is not limited exclusively to lower-income households. In other words, what tax bracket you are in or income you earn is not a determining factor.

•   Child Tax Credit maximums and income thresholds are adjusted periodically to reflect changes to the Internal Revenue Code.

The Child Tax Credit is distinct from the Child and Dependent Care Credit, which helps families recover some of the money they pay for child care so they can work. It’s possible to claim the Child Tax Credit alongside one or more deductions, which reduce your taxable income.

Using a money tracker can help you keep up with expenses that may qualify for tax deductions each year. You can also adjust your income tax withholding through your employer to ensure the right amount of tax is being taken out of your paychecks.

Recommended: How Much Do You Have to Make to File Taxes?

How Much Is the Child Tax Credit?

Here’s how much the Child Tax Credit is for 2024: The amount is $2,000 per qualifying child. Some points to note:

•   The $2,000 amount is the most you could qualify for per child if you’re eligible to claim this credit. The amount of the credit you can claim is reduced by $50 for every $1,000 you earn above $200,000 for single filers or above $400,000 for joint filers.

•   Part of the Child Tax Credit is refundable, which means that if you owe less in taxes than the amount of the credit you qualify for, you can get the difference back as a refund. The refundable part of the Child Tax Credit is called the Additional Child Tax Credit (ACTC), and it maxes out at $1,700 per qualifying child.

The IRS decides how much of the Additional Child Tax Credit you qualify for using this formula:

Earned income above $2,500 x 15% = Your additional child tax credit amount

You can do the math yourself or use tax preparation software to crunch the numbers. Or you might work with a tax professional.

How the Child Tax Credit Works

The Child Tax Credit works by reducing the amount of tax you owe when you file your return.

•   First, here’s how to qualify. Each child to be claimed must:

•   Have a Social Security number

•   Be under age 17 at the end of 2024

•   Be claimed as a dependent on your tax return

•   Be a U.S. citizen, U.S. national, or U.S. resident alien

•   Be your son, daughter, stepchild, eligible foster child, brother, sister, stepbrother, stepsister, half-brother, half-sister, or a descendant of one of these (for example, a grandchild, niece, or nephew)

•   Not provide more than half of his or her own support for the tax year

•   Have lived with you for more than half the tax year

Now, here’s the simple version of what it means to claim the Child Tax Credit.

•   Depending on how much you owe, the child tax credit can reduce your tax to $0.

•   If your Child Tax Credit is more than the amount you owe, you may be eligible for the Additional Child Tax Credit, or ACTC.

•   The ACTC lets you get the portion of the credit you didn’t apply to your tax liability back as a refund, up to the $1,700 per child limit.

To claim a tax child credit for 2024, you’ll need to file an income tax return using Form 1040 and complete Schedule 8812, Credits for Qualifying Children and Dependents. This form asks you questions about your child, income, and filing status to determine if you’re eligible for the Child Tax Credit (or Additional Child Tax Credit) and the amount.

Again, if you’re using reliable tax prep software, your program should walk you through the questions you need to answer. And if you expect to get money back from taxes in a refund, using an online budget planner can help you figure out how to make the most of it.

Benefits of the Child Tax Credit

The primary benefit of the Child Tax Credit is that it can reduce what you pay in taxes to the IRS. Tax credits are amounts that reduce your tax liability, or the amount you owe, on a dollar-for-dollar basis. So, if you owe $1,000 in taxes and qualify for a $1,000 tax credit, the credit could bring your tax bill down to $0.

The Child Tax Credit, along with other credits, helps you pay less in taxes and keep more of your money. On a broader scale, research shows that the Child Tax Credit helps to:

•   Reduce poverty and financial hardship

•   Improve housing affordability for families

•   Improve long-term educational, financial, and health outcomes for children

•   Produce greater economic stability overall

While the credit is available to higher-income families, it primarily benefits lower- and middle-income households.

Recommended: Everything You Need to Know About Taxes on Investment Income

Child Tax Credit History

The Child Tax Credit was created by the Taxpayer Relief Act of 1997 to ease the financial burdens associated with raising children. In its earliest form, the credit was generally nonrefundable and its availability was limited to middle- and upper-middle-class taxpayers.

Since inception, lawmakers have taken steps to:

•   Adjust income thresholds for eligibility

•   Raise (or lower) the amount of the credit

•   Redefine what it means to be a qualifying child

The most recent round of changes came in 2017 with the passage of the Tax Cuts and Jobs Act. Under the Act, the credit was expanded to allow more families to claim it.

Did the Child Tax Credit pass for 2024? Yes, it’s still available in its expanded form under the TCJA.

However, without congressional intervention, the limits will revert to their pre-2017 levels beginning in January 2026. That would put the maximum child tax credit at $1,000 while the maximum age for dependents would drop to 16.

Child Tax Credit Eligibility

If you’re preparing for tax season, you might be wondering if you’re eligible for the Child Tax Credit. The IRS has a few requirements you’ll need to meet to claim the child tax credit, as noted above. First, you must have a qualifying child who is:

•   Under 17 at the end of the tax year

•   Your son, daughter, stepchild, eligible foster child, brother, sister, stepsibling, half-sibling, or a descendant of one of these, such as a grandchild, niece, or nephew

•   Reliant on you for more than half of their support for the tax year

•   Living with you or has lived with you more than half the tax year

•   Eligible to be claimed as a dependent on your return

•   Not filing a joint return themselves

•   A U.S. citizen, U.S. national, or resident alien

The child must also have a valid Social Security number that was issued before the tax filing deadline. If they don’t, it would be a tax filing mistake to claim the Child Tax Credit.

For parents, the primary requirement is income-based. If your income is below $200,000 as a single filer or $400,000 for joint filers, you may be eligible to claim the full credit. Those who earn above that amount (considerably higher than the average salary in the U.S.) may be eligible for a lesser amount.

Recommended: Credit Monitoring

The Takeaway

The income tax child credit for 2024 could be a valuable tax break if you’re raising one or more children. Understanding how the Child Tax Credit works, when you can claim it, and what it’s worth can help you maximize your potential tax savings. Keeping on top of your potential tax credits is an important aspect of tracking your finances and managing your money well.

Take control of your finances with SoFi. With our financial insights and credit score monitoring tools, you can view all of your accounts in one convenient dashboard. From there, you can see your various balances, spending breakdowns, and credit score. Plus you can easily set up budgets and discover valuable financial insights — all at no cost.

See exactly how your money comes and goes at a glance

FAQ

How does the Child Tax Credit work?

The Child Tax Credit works by reducing your tax liability on a dollar-for-dollar basis. The Additional Child Tax Credit is the refundable part of the Child Tax Credit. The amount of the credit you qualify for depends on your filing status and household income.

Why am I only getting $2000 for the Child Tax Credit?

The Child Tax Credit maximum is $2,000 per qualifying child. If you file your tax return with just one qualifying child listed, the most you could claim for the credit is $2,000.

What is the $3600 Child Tax Credit?

The $3,600 Child Tax Credit was a temporary benefit granted to eligible families under the American Rescue Act. For 2021, families were eligible to receive up to $3,600 in Child Tax Credit for each qualifying child under 6 and $3,000 for each qualifying child under 18. The purpose of the expanded credit was to provide financial relief to households that were struggling as a result of the COVID-19 pandemic.

How much is the 2024 Child Tax Credit?

The 2024 Child Tax Credit allows a credit of up to $2,000 per qualifying child. The Additional Child Tax Credit, which is the refundable portion of the Child Tax Credit, is worth up to $1,700 per qualifying child.

How much is each dependent worth on taxes in 2024?

If you’re filing taxes with one or more qualifying children listed as dependents, you could claim a Child Tax Credit worth up to $2,000 per child. You could also claim the Additional Child Tax Credit, which is worth up to $1,700 per child. Eligibility is based on several factors, including your child’s age, your income, and your tax filing status.

Is the Child Tax Credit 2024 true or false?

The Child Tax Credit is a legitimate tax break that families with qualifying children may claim for the 2024 tax year. Whether you can claim the full amount of the credit hinges on your income and filing status, as the credit begins to phase out once your income reaches a certain threshold.

---

About the author

---

Photo credit: iStock/AsiaVision

SoFi Relay offers users the ability to connect both SoFi accounts and external accounts using Plaid, Inc.’s service. When you use the service to connect an account, you authorize SoFi to obtain account information from any external accounts as set forth in SoFi’s Terms of Use. Based on your consent SoFi will also automatically provide some financial data received from the credit bureau for your visibility, without the need of you connecting additional accounts. SoFi assumes no responsibility for the timeliness, accuracy, deletion, non-delivery or failure to store any user data, loss of user data, communications, or personalization settings. You shall confirm the accuracy of Plaid data through sources independent of SoFi. The credit score is a VantageScore® based on TransUnion® (the “Processing Agent”) data.

*Terms and conditions apply. This offer is only available to new SoFi users without existing SoFi accounts. It is non-transferable. One offer per person. To receive the rewards points offer, you must successfully complete setting up Credit Score Monitoring. Rewards points may only be redeemed towards active SoFi accounts, such as your SoFi Checking or Savings account, subject to program terms that may be found here: SoFi Member Rewards Terms and Conditions. SoFi reserves the right to modify or discontinue this offer at any time without notice.

Financial Tips & Strategies: The tips provided on this website are of a general nature and do not take into account your specific objectives, financial situation, and needs. You should always consider their appropriateness given your own circumstances.

Tax Information: This article provides general background information only and is not intended to serve as legal or tax advice or as a substitute for legal counsel. You should consult your own attorney and/or tax advisor if you have a question requiring legal or tax advice.

SORL-Q125-015

Read more

Most physicians can expect to earn a good living once they complete their education and training. But by the time they graduate and start their first job, many new doctors are also likely to find themselves deep in student loan debt.

That debt may make it difficult for physicians to qualify for a conventional home mortgage — even though they have a promising financial future. That’s where home loans for doctors come in. Some lenders offer special mortgages called physician loans or doctor mortgage loans. These loans have terms designed to meet the unique needs of newcomers to this profession. Note: SoFi does not offer physician mortgages, but it does offer home mortgage loans with a low down payment for first-time homebuyers.

Read on for a look at how physician mortgages work, some pros and cons, and what it can take to qualify.

What Are Physician Mortgage Loans?

Physician mortgage loans are private mortgages designed specifically to meet the needs of doctors, dentists, medical residents, and fellows. The terms and benefits of these home loans for medical doctors can vary from one lender to the next. But they generally offer more generous terms and/or looser qualifying requirements than conventional home loans. This can make borrowing easier for physicians who have a high income potential but may be struggling with student loan debt or haven’t been able to set aside enough for a down payment.

How Physician Mortgage Loans Differ from Traditional Loans

Doctor loans are a type of nonconforming loan, which means they aren’t backed by the federal government like FHA loans, and they aren’t bound by the same Fannie Mae and Freddie Mac standards as conventional loans. Here are a few important differences you can expect to find with this type of mortgage vs. a conventional loan:

Recommended: Different Types of Mortgage Loans

Low or No Down Payment

Most lenders require at least a 3% to 5% down payment for a conventional mortgage, with the lowest rates typically available to first-time homebuyers. Lenders who offer physician mortgages may not require any money down. (Or the down payment amount required may be very low.)

No Private Mortgage Insurance (PMI)

With a conventional loan, private mortgage insurance, which is meant to protect the lender in case of a default, is usually added to borrowers’ monthly payments until they reach 20% equity in their home. Though PMI rates vary, they typically range from 0.50% to 2% of the loan amount. But doctor loans don’t require PMI, even though the borrower may not make any down payment.

Flexible Debt-to-Income (DTI) Ratio Requirements

As part of their underwriting, lenders typically calculate a borrower’s DTI ratio (all monthly debt payments ÷ gross monthly income = DTI). For conventional mortgages, they usually require a DTI ratio below 45%, although some require the DTI to be below 36%. But lenders who provide physician loans may look at a borrower’s student loans (which they expect to be high) as separate from other debt and not include them in the DTI, or they may include the student loans but set a higher DTI limit.

You may want to keep in mind, though, that just because you can get a loan with a higher DTI ratio doesn’t mean you should. A home affordability calculator can help you see what might fit into your budget and a mortgage calculator can show you what your monthly payments would look like at different interest rates.

It might also be helpful to talk to a financial advisor about how much house you can really afford, and what the costs of homeownership could mean for your overall financial well-being.

Looser Employment and Salary Requirements

Proving that you have stable employment as well as an adequate income is usually part of qualifying for a conventional loan. (Lenders generally like to see at least two years of work history.) Employment requirements may vary with a doctor loan, but lenders who offer these types of mortgages typically understand that a new doctor could be working as an intern, resident, or fellow, and may not be earning as much starting out as they will take home even just a few years into their career. (Borrowers still can expect to provide paperwork that documents their salary and employment, however, along with their medical license.)

Recommended: Understanding Mortgage Basics

Benefits of Physician Mortgage Loans

If you’re eager to get into your own home once you wrap up medical school, a physician home loan may make that possible — and less expensive. Avoiding PMI on a new home could save you hundreds or even thousands of dollars a year, for example. And if you don’t have to make a down payment, you can use that money for other expenses.

Lenders also may offer higher loan amounts with a physician loan than with other loan types. And though some lenders offer doctor loans with fixed rates, most come with variable interest rates, so you can expect to start out with a lower, more affordable interest rate when you begin making payments. (That means you’ll have an adjustable rate after a fixed introductory period, so your monthly payments could change. But if the rate becomes unmanageable down the road, you can look at refinancing to a conventional loan with a more competitive mortgage rate.)

How to Qualify for a Physician Mortgage Loan

Though the underwriting requirements may be more relaxed for doctor loans, you should be prepared to provide the following:

•   Proof of identity (this might include your driver’s license, Social Security number, or other documentation)

•   Proof of employment and income (you may be able to use an employment contract if you don’t yet have a W-2, pay stubs, or similar documents)

•   Documentation of assets and debts

•   A contract for your home purchase, including the purchase price

•   Information about the type of home you’re purchasing (condo, single-family home, etc.)

•   Proof of a medical degree (M.D., D.O., D.D.S., etc.) that meets the lender’s requirements

Other parts of the mortgage process — from determining what you can afford to choosing mortgage terms to closing on the deal — will likely be similar to what you’d expect if you were applying for just about any type of loan.

The Takeaway

If you’re finally starting your career as a doctor and you’re wondering if student debt or minimal savings could keep you from reaching the goal of home ownership — despite your income potential — a physician home loan may be an option worth researching.

Because these special loans typically don’t require a down payment or private mortgage insurance payments, and the eligibility requirements are often less strict than for conventional loans, doctors may not have to wait until they’re on firmer financial footing to purchase a home.

Of course, you’ll want to compare all the pros and cons of a physician mortgage — or any home loan. Buying a home is a big decision, and you’ll likely want to balance your eagerness to reach this milestone with your ability to keep pace with your mortgage payments and your debt payments, as well as other expenses.

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: simple, smart, and so affordable.

FAQ

What credit score do I need to get a physician mortgage loan?

A credit score of at least 700 or 720 may be required to get a physician loan, although some lenders may accept a lower credit score. Each lender has its own criteria.

Are physician mortgage loans available for residents and fellows?

Employment requirements may vary, but lenders who offer these types of loans typically understand that a new doctor could be working as an intern, resident, or fellow.

How do interest rates compare for physician mortgage loans vs. conventional loans?

Doctor’s mortgage loans generally come with a variable interest rate. After a fixed introductory period, your payments could go up or down, depending on several factors. With conventional mortgages, you may have a wider range of interest rate types to choose from.

---

Photo credit: iStock/nortonrsx

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.

*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.

Financial Tips & Strategies: The tips provided on this website are of a general nature and do not take into account your specific objectives, financial situation, and needs. You should always consider their appropriateness given your own circumstances.

^¹FHA loans are subject to unique terms and conditions established by FHA and SoFi. Ask your SoFi loan officer for details about eligibility, documentation, and other requirements. FHA loans require an Upfront Mortgage Insurance Premium (UFMIP), which may be financed or paid at closing, in addition to monthly Mortgage Insurance Premiums (MIP). Maximum loan amounts vary by county. The minimum FHA mortgage down payment is 3.5% for those who qualify financially for a primary purchase. SoFi is not affiliated with any government agency.

SOHL-Q125-061

Read more

If you own a home, a home equity line of credit (HELOC) lets you tap into your home equity to finance renovations or other expenses. Before borrowing against your home equity, it’s worth asking, how does a HELOC affect credit scores?

Taking out a new credit account has an impact on your credit score. But how a home equity line of credit affects credit scores depends on multiple factors, including your payment history and existing credit.

Here’s a look at how a HELOC could affect your credit score across the entire lifespan of the line of credit, from filing your application to closing a HELOC account — plus tips to maintain your credit score.

Understanding HELOCs and Credit Scores

First, let’s start with a HELOC definition. A HELOC, or home equity line of credit, is a revolving line of credit that typically allows homeowners to borrow up to 90% of their home’s value, minus the outstanding mortgage principal. Borrowers can draw against their approved credit line as needed until the end of the draw period, which is usually 5 or 10 years, before having to repay the balance over another 10 to 25 years. That’s HELOCs explained, in a nutshell.

Meanwhile, your credit score is calculated based on how you manage debt payments, also known as credit. A variety of factors affect your credit score, including payment history, credit utilization, length of credit history, credit mix, and applications for new credit. Your credit score appears as a three-digit number. Credit score ranges run from 300 to 850, with scores of 670 or higher being considered good to excellent.

Impact of Applying for a HELOC on Your Credit

So how does a HELOC impact credit scores? Similar to other types of credit, applying for a HELOC involves a credit check, which is added to your credit report.

Hard Inquiries

When you apply for a HELOC, lenders will run a credit check to assess your creditworthiness. This involves requesting to review your credit report, which is known as a hard inquiry.

A record of any hard inquiry, sometimes referred to as a hard pull, is registered on the credit report. Having one hard inquiry could lower your FICO® Score by up to five points, but only for one year.

To avoid multiple hard credit pulls, you can check to see if lenders offer HELOC prequalification with a soft credit pull instead.

New Credit Accounts

Applying for a HELOC means opening a new credit account. This could decrease the average age of your credit accounts and ding your credit score by a few points.

Effects of Using a HELOC on Your Credit

Once you’ve been approved for a HELOC, how you begin using funds and managing payments can affect your credit. Let’s explore what goes into these HELOC credit score impacts.

Credit Utilization Ratio

Your credit utilization ratio is a calculation of how much of your credit you’re using. In other words, it’s the percentage of your credit limit you’re using on all your revolving credit accounts, such as credit cards, combined.

So does a HELOC affect your credit score and credit utilization ratio? While HELOCs operate like a revolving line of credit, they’re secured by a property. This means that it isn’t included in your credit utilization ratio as part of your FICO score.

Using funding from a HELOC to pay off high-interest debt like credit cards could lower your credit utilization ratio and boost your credit score. Maintaining a credit utilization ratio below 30% is recommended to qualify for financing or get mortgage preapproval.

Payment History

Payment history is the largest component of a credit score. Making consistent, on-time payments each month on a HELOC could help build your credit score over time. On the flip side, failing to stay current on payments could hurt your credit score and ultimately put your property at risk.

HELOCs are typically structured to have higher monthly payments after the draw period ends. Once the repayment period begins, you won’t have the ability to continue drawing funds. You can use a HELOC repayment calculator to see what your monthly payment would be based on how much you owe on a HELOC, your repayment term, and interest rate.

Credit Mix

Your credit mix refers to the number and types of credit accounts you have, including student loans, home loans, credit cards, and car loans. Demonstrating your ability to manage different types of debts can benefit your credit score.

Taking out a HELOC could improve your credit mix (and credit score) if you don’t have other types of revolving credit, especially for borrowers without much credit history.

Bottom line: The HELOC–credit score connection can be significant.

Recommended: FHA Loans

Closing a HELOC and Its Credit Implications

Paying off and closing a HELOC can have impacts on your credit. (Paying the balance off on a HELOC removes the lender’s lien on your home.) Here are some potential credit implications to consider when closing a HELOC.

Account Age

If you’ve been making payments on a HELOC for several years, closing the account could potentially lower the average age of your accounts. How much this impacts your credit score will depend on the age of your other accounts.

But if the account is in good standing with no late payments, it can still factor into your credit history for several years after closure.

Credit Availability

Closing a HELOC won’t affect your credit utilization for your FICO score. But if you don’t have other revolving lines of credit, it could reduce your credit mix, potentially putting a small dent in your credit score.

Strategies to Minimize Negative Credit Impact

Applying for a HELOC — or opening any new credit account — can initially lower your credit score by a few points. But there are several ways to reduce further damage to your credit score.

Timely Payments

As a reminder, your payment history is the largest component that goes into calculating your credit score. Continually making on-time payments each month can build up your credit. Conversely, paying less than the minimum or missing a monthly payment could harm your credit score.

Note that the interest on monthly payments could be eligible for a tax deduction, like mortgage interest, if used to make substantial improvements on your home. You’ll want to discuss this with your tax advisor.

Managing Credit Utilization

As you manage monthly HELOC payments, keep an eye on the balances for other revolving lines of credit, such as credit cards. Again, keeping a credit utilization ratio below 30% is considered beneficial for your credit score.

Monitoring Credit Reports

Periodically checking your credit report can help detect any instances of fraud or payment errors and inform strategies to improve your credit score. Requesting a credit report is free, and it’s a good idea to do so before applying for a new loan or credit card to understand how lenders will evaluate you as a borrower.

Recommended: Mortgage Rates

The Takeaway

How does a home equity line of credit affect credit scores? Applying for a HELOC involves a hard credit check, which can have some impact on your credit. However, making timely payments, keeping a strong credit mix, and maintaining a low credit utilization ratio can mitigate these effects and strengthen your credit over time.

SoFi now partners with Spring EQ to offer flexible HELOCs. Our HELOC options allow you to access up to 90% of your home’s value, or $500,000, at competitively lower rates. And the application process is quick and convenient.

Unlock your home’s value with a home equity line of credit from SoFi, brokered through Spring EQ.

FAQ

Does opening a HELOC significantly lower my credit score?

Opening a HELOC typically involves a hard credit check which can lower your credit score by several points. Whether this is significant will depend on what score you start with — if your credit score is teetering near an important benchmark, such as the 669-670 dividing line between “fair” and “good” credit, it may be an important effect. The hard credit check can stay on your credit report for 12 to 24 months.

How does a HELOC affect my credit utilization ratio?

A HELOC typically does not affect your credit utilization ratio, as it’s secured with a property as collateral versus other revolving lines of credit, such as credit cards, which are unsecured.

Will closing a HELOC improve my credit score?

Closing a HELOC can have a negative effect on your credit score by reducing your credit mix and age of accounts. However, if you made on-time payments over the life of the loan, that will be reflected on your credit history for several years.

Can a HELOC help diversify my credit mix?

Yes, a HELOC can help diversify your credit mix and show lenders that you’re a responsible borrower. If you have installment credit like a mortgage, student loans, or personal loans, taking out a HELOC would provide a form of revolving credit to your credit mix.

How can I use a HELOC responsibly to maintain a good credit score?

Paying off higher-interest debt, such as personal loans or credit cards, and funding home improvements that may make it possible for you to deduct the interest paid on a HELOC, are examples of how to responsibly use a HELOC. Making monthly payments on time and in full is essential to safeguarding your credit score when taking out a HELOC.

---

Photo credit: iStock/kate_sept2004

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.

*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.

Financial Tips & Strategies: The tips provided on this website are of a general nature and do not take into account your specific objectives, financial situation, and needs. You should always consider their appropriateness given your own circumstances.

Third-Party Brand Mentions: No brands, products, or companies mentioned are affiliated with SoFi, nor do they endorse or sponsor this article. Third-party trademarks referenced herein are property of their respective owners.

Tax Information: This article provides general background information only and is not intended to serve as legal or tax advice or as a substitute for legal counsel. You should consult your own attorney and/or tax advisor if you have a question requiring legal or tax advice.

^¹FHA loans are subject to unique terms and conditions established by FHA and SoFi. Ask your SoFi loan officer for details about eligibility, documentation, and other requirements. FHA loans require an Upfront Mortgage Insurance Premium (UFMIP), which may be financed or paid at closing, in addition to monthly Mortgage Insurance Premiums (MIP). Maximum loan amounts vary by county. The minimum FHA mortgage down payment is 3.5% for those who qualify financially for a primary purchase. SoFi is not affiliated with any government agency.
^²SoFi Bank, N.A. NMLS #696891 (Member FDIC), offers loans directly or we may assist you in obtaining a loan from SpringEQ, a state licensed lender, NMLS #1464945.
All loan terms, fees, and rates may vary based upon your individual financial and personal circumstances and state.
You should consider and discuss with your loan officer whether a Cash Out Refinance, Home Equity Loan or a Home Equity Line of Credit is appropriate. Please note that the SoFi member discount does not apply to Home Equity Loans or Lines of Credit not originated by SoFi Bank. Terms and conditions will apply. Before you apply, please note that not all products are offered in all states, and all loans are subject to eligibility restrictions and limitations, including requirements related to loan applicant’s credit, income, property, and a minimum loan amount. Lowest rates are reserved for the most creditworthy borrowers. Products, rates, benefits, terms, and conditions are subject to change without notice. Learn more at SoFi.com/eligibility-criteria. Information current as of 06/27/24.
In the event SoFi serves as broker to Spring EQ for your loan, SoFi will be paid a fee.

Checking Your Rates: To check the rates and terms you may qualify for, SoFi conducts a soft credit pull that will not affect your credit score. However, if you choose a product and continue your application, we will request your full credit report from one or more consumer reporting agencies, which is considered a hard credit pull and may affect your credit.

Disclaimer: Many factors affect your credit scores and the interest rates you may receive. SoFi is not a Credit Repair Organization as defined under federal or state law, including the Credit Repair Organizations Act. SoFi does not provide “credit repair” services or advice or assistance regarding “rebuilding” or “improving” your credit record, credit history, or credit rating. For details, see the FTC’s website .

SOHL-Q125-057

Read more