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Putting an offer on a home involves more than naming a price. Assuming you’ve been preapproved for a mortgage and you’ve found a home in your price range, there’s a customary method to follow in submitting an offer that stands out but also protects you.

In a hot market — where you may encounter a bidding war, compete against cash buyers, or be asked to waive a contingency — it can be vital to know the process. But even in a less heated market, it’s important to know the steps involved in making an offer on a house and what to do if you change your mind after making an offer. (it happens!). Read on for tips that will get you from homebuyer to homeowner.

Making an Offer on a House

So let’s say you’ve found that mid-century marvel or stately townhome of your dreams. You’re ready to go for it. Here’s how the process of making an offer in real estate typically goes.

1. Determine Your Offer Price

A home’s listing price is often set by comparing it to similar homes in the area that are for sale, then adjusting up or down based on additional amenities or detrimental issues. But as the old saying goes, “A home is generally worth what someone is willing to pay for it.”

You may find a property that’s fairly well-priced and consider coming in close to asking, or you may want to adjust your offer if you feel that it’s priced too high or needs a lot of work.

There are many things to consider when trying to find the right offer price.

•   A common way to break down a listing amount is by price per square foot, but that often includes only the heated, livable spaces. A home can (and should) be priced higher than average for the area if it includes extra rooms (such as a garage or attic), outbuildings, or extra land, which adds to its value. Superior workmanship or permitting in place for potential changes can also play a role in increasing the price.

•   Check the home’s history on the multiple listing service. It records every transaction related to the house, including property type, square footage, price history, and how long the home has been on the market. It can give you a good idea of where the sellers are coming from in terms of what they paid for the property.

•   Take a look at other properties in the area that have recently sold. Is the price per square foot more or less than the home you have your eye on? One key to an accurate read on the local market is to ensure you’re comparing apples to apples when it comes to the number of bedrooms, bathrooms, square footage, garage space, and other amenities. Your broker can likely provide what are known as “comparables” for the area to help with this process.

Recommended: Mortgage Preapproval Need to Knows

2. Incorporate All the Fees

It can also be important to look at factors not directly related to the price of the property that could affect your overall cash flow. One big consideration is closing costs, which typically average 2%-5% of the total cost of the home. For example, if you’re considering a $400,000 mortgage loan, the closing costs (origination fees, title search, any points, and more) would be between $8,000 and $24,000.

It’s also important to estimate the amount of money you’ll spend making repairs or changes to the property once you move in. As long as the repairs aren’t related to health or safety issues, which could affect financing, one tactic could be to lower your offer price in order to free up cash for future upgrades.

Or you might plan on getting a home improvement loan after buying the house, provided you have enough equity to access those funds.

3. Determine Your Earnest Money Deposit

The next step in making an offer in real estate is to figure out your earnest money. What’s earnest money? It’s a good-faith deposit that buyers place with the offer upfront, usually amounting to around 1%-3% of the offer price, to show that they’re serious, especially when there are multiple offers on a property.

The earnest money is held in escrow by the title company. Showing purchase intent in this way can help you get to the top of the seller’s list.

Customs and laws pertaining to an earnest money deposit can vary from state to state, and even from county to county, so it’s important to understand the rules that determine when the money is (and isn’t) refundable.

4. Protect Yourself With Contingencies

The time between a signed offer and closing day is called the due diligence period, and it’s when you’ll normally set up a home inspection and possibly a land survey or other inspections for specialty items, such as a septic system or a pool, and the lender will order an appraisal.

Because the contract is signed before the inspections and appraisal take place, contingencies give you an out if you discover a deal-breaker.

Here are the most common contingencies when making offers in real estate:

•   Financing: This lays out the specifics of your financing, which the lender must fully approve within the contingency period. This protects you in case financing falls through.

•   Appraisal: If the appraisal comes back lower than the agreed-upon price, you and the seller may find yourselves renegotiating.

•   Inspection: You usually have 10 days after signing the contract to order an inspection, and the contingency remains in place until it comes back without uncovering any major issues with the property that were previously unknown. Based on the findings, you can cancel the contract or negotiate repairs or the purchase price. (If the seller agrees to pay, these are called seller concessions.)

•   Title search: A preliminary title report shows the home’s past and present owners and any liens or judgments against the property. If any title disputes are unable to be resolved before closing, you have the option to exit the sale.

In some situations, the list of contingencies can be long. But once they’re all satisfied and lifted during the given time frames, the option to buy turns into a binding commitment to purchase the home.

5. Submit a Written Offer

In real estate, the best way to make an offer official is to put it in writing. If you’re working with a real estate agent, the agent will have a form that you can fill out together that lists the offer price and contingencies and covers all the state rules and regulations.

If you’re flying solo, working with a real estate lawyer or title company can help ensure that your offer covers all the necessary legal language and is legally valid.

This concept goes both ways. As the buyer, it’s a smart idea to make sure all correspondence, counteroffers, and property disclosures are put in writing by the seller as well.

Recommended: How to Win a Bidding War

6. Move Ahead, Move On, or Move Things Around

Once you submit your written offer, one of three things is likely to happen: The sellers sign the document and enter into a binding contract, they reject the offer outright, or they submit a counteroffer.

In this last case, the sellers may counter with changes that are better suited to them. (If your offer includes a price reduction to accommodate repair costs, for example, the seller might ask for the full asking price and offer a credit back at closing instead.)

A counteroffer puts the ball back in the buyer’s court for approval, rejection, or another counteroffer, and it can keep going back and forth until both parties agree to the terms and sign the document or one party calls it a day.

What if You Change Your Mind About Buying a House?

Contingencies give you a way out in the event of some unforeseen issue, but what if you just decide you don’t want the house? Cold feet can be a real thing!

Although the laws vary by state on this topic as well, in most instances, a buyer is allowed to withdraw an offer until the moment the offer is accepted. However, once the offer document is signed by both parties, it’s considered a binding agreement.

At that point, the sellers may be well within their rights to walk away with your earnest money if you don’t decide to move forward.

The Takeaway

How to make an offer on a house? It pays to understand comps, contingencies, the temperature of the market, earnest money, and counteroffers. You’ll consider your price, keeping track of all fees that will be involved, and make your bid in writing, typically with what’s known as an earnest money deposit. Then sit back and await the seller’s response.

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

Should I use a real estate agent to buy a house?

An agent familiar with the local market can help you determine the right offer amount and hold your hand during the negotiation process, which is especially helpful in a hot (seller’s) market. An agent can also help coordinate everything leading up to the closing and ensure that you (and your financing) meet critical deadlines.

Is a deposit required when making an offer on a house?

Yes, your offer will come with what is called earnest money, a good-faith deposit of 1%-3% of the proposed purchase price. This will be held in escrow during negotiations about the house.

What are real estate contingencies?

Contingencies are essential safeguards in a real estate contract that allow you to withdraw from a purchase if you discover any deal-breaking issues during the due diligence period. These clauses ensure that you aren’t legally bound to a property that has significant undisclosed problems.

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-Q126-218

A short-term bridge loan allows homeowners to use the equity in their existing home to help pay for the home they’re ready to purchase.

But there are pros and cons to using this type of financing, and a bridge loan can prove expensive.

Is a bridge loan easy to get? Not necessarily. You’ll need sufficient equity in your current home and stable finances.

Read on to learn how to bridge the gap between addresses with a bridge loan or alternatives.

What Is a Bridge Loan?

A bridge loan, also known as a swing loan or gap financing, is a temporary loan that can help if you’re buying and selling a house at the same time.

Just like a mortgage, home equity loan, or HELOC, a bridge loan is secured by the borrower’s current home (meaning a lender could force the sale of the home if the borrower were to default).

Most bridge loans are set up to be repaid within a year.

Note: SoFi does not offer bridge loans at this time. However, SoFi does offer HELOC options.

How Does a Bridge Loan Work?

Typically, lenders only issue bridge loans to borrowers who will be using the same financial institution to finance the mortgage on their new home, but even if you prequalified for a new mortgage with that lender, you may not automatically get a bridge loan.

What are the criteria for a bridge loan? You can expect your financial institution to scrutinize several factors — including your credit history and debt-to-income ratio — to determine if you’re a good risk to carry that additional debt.

You’ll also have to have enough home equity (usually 20%) in your current home to qualify for this type of interim financing.

Lenders typically issue bridge loans in one of two ways:

•   One large loan: Borrowers get enough to pay off their current mortgage plus a down payment for the new home. When they sell their home, they can pay off the bridge loan.

•   Second mortgage: Borrowers obtain a second mortgage to make the down payment on the new home. They keep the first mortgage on their old home in place until they sell it and can pay off both loans.

It’s important to have an exit strategy. Buyers usually use the money from the sale of their current home to pay off the bridge loan. But if the old home doesn’t sell within the designated bridge loan term, they could end up having to make payments on multiple loans.

Bridge Loan Costs

A bridge loan may seem like a good option for people who need to buy and sell a house at the same time, but the convenience can be costly.

Because these are short-term loans, lenders tend to charge higher interest rates with more upfront costs to make bridge lending worth their while. You can expect to pay:

•   1% to 5% of the loan amount in closing costs

•   6.00%-12.00% interest rates

Interest rates for bridge loans are generally higher than conventional loan rates.

Repaying a Bridge Loan

Many bridge loans require interest-only monthly payments and a balloon payment at the end, when the full amount is due. Others call for a lump-sum interest payment that is taken from the total loan amount at closing.

A fully amortized bridge loan requires monthly payments that include both principal and interest.

How Long Does It Take to Get Approved for a Bridge Loan?

Bridge loans from conventional lenders can be approved within a few days, and loans can often close within three weeks.

A bridge loan for investment property from a hard money lender can be approved and funded within a few days.

Examples of When to Use a Bridge Loan

Most homebuyers probably would prefer to quickly sell the home they’re in, pay off their current mortgage, and bank the down payment for their next purchase long before they reach their new home’s closing date. They could then go about getting a mortgage on their new home using the down payment they have stashed away.

Unfortunately, the buying and selling process doesn’t always go as planned, and it sometimes becomes necessary to obtain interim funding. Common scenarios when homebuyers might consider a bridge loan include the following.

You’re Moving for a New Job or Downsizing

You can’t always wait for your home to sell before you relocate for work. If the move has to go quickly, you might end up buying a new home before you tie up all the loose ends on the old home.

Or maybe you’ve fallen in love with a smaller home that just hit the market, decided that downsizing your home is the way to go, and you must act quickly.

Your Closing Dates Don’t Line Up as Hoped

Even if you’ve accepted an offer on your current home, the new home’s closing might be weeks or even months away. To avoid losing the contract on the new home, you might decide to get interim funding.

You Need Money for a Down Payment

If you need the money you’ll get from selling your current home to make a down payment on your next home, a bridge loan may make that possible.

Bridge Loan Benefits and Disadvantages

As with any financial transaction, there are advantages and disadvantages to taking out a bridge loan. Here are some pros and cons borrowers might want to consider.

Benefits

The main benefit of a bridge loan is the ability to buy a new home without having to wait until you sell your current home. This added flexibility could be a game changer if you’re in a time crunch.

Another bonus for buyers in a hurry: The application and closing process for a bridge loan is usually faster than for some other types of loans.

Disadvantages

Bridge loans aren’t always easy to get. The standards for qualifying tend to be high because the lender is taking on more risk.

Borrowers can expect to pay a higher interest rate, as well as several fees, while borrowers who don’t have enough equity in their current home may not be eligible for a bridge loan.

If you buy a new home and then are unable to sell your old home, you could end up having to make payments on more than one loan. Worst-case scenario, if you can’t make the payments, your lender might be able to foreclose on the home you used to secure the bridge loan.

Alternatives to Bridge Loans

If the downsides of taking out a bridge loan make you uneasy, there are options that might suit your needs.

Home Equity Line of Credit (HELOC)

Rather than the lump sum of a home equity loan, a home equity line of credit lets you borrow as needed, up to an approved limit, from the equity you have in your house. The monthly payments are based on how much you actually withdraw, and the interest rate is usually variable.

You can expect to pay a lower rate on a HELOC than a bridge loan, but there still will be closing costs. And there may be a prepayment fee, which could cut into your profits if your home sells quickly. (Because your old home will serve as collateral, you’ll be expected to pay off your HELOC when you sell that home.)

Many lenders won’t open a HELOC for a home that’s on the market, so it may require advance planning to use this strategy.

Home Equity Loan

A home equity loan is another way to tap your equity to cover the down payment on your future home.

Because home equity loans are typically long term (up to 30 years), the interest rates available, usually fixed, may be lower than they are for a bridge loan. And you’ll have a little more breathing room if it takes a while to sell the old home.

You can expect to pay some closing costs on a home equity loan, though, and there could be a prepayment penalty. Keep in mind, too, that you’ll be using your home as collateral to get a home equity loan. And until you sell your original home, unless it’s owned free and clear, you’ll be carrying more than one loan.

401(k) Loan or Withdrawal

If you’re a first-time homebuyer and your employer plan allows it, you can use your 401(k) to help purchase a house. But most financial experts advise against withdrawing or borrowing money from your 401(k).

Besides missing out on the potential investment growth, there can be other drawbacks to tapping those retirement funds.

Personal Loan

If you have a decent credit history, a solid income, and typical personal loan requirements, you may be able to find a personal loan with a competitive fixed interest rate and other terms that are a good fit for your needs.

Other benefits:

•   You can sometimes find a personal loan without the origination fees and other costs of a bridge loan.

•   A personal loan might be suitable rather than a home equity loan or HELOC if you don’t have much equity built up in your home.

•   You may be able to avoid a prepayment penalty, so if your home sells quickly, you can pay off the loan without losing any of your profit.

•   Personal loans are usually unsecured, so you wouldn’t have to use your home as collateral.

The Takeaway

A bridge loan can help homebuyers when they haven’t yet sold their current home and wish to purchase a new one. But a bridge loan can be expensive and not all that easy to get. Only buyers with sufficient equity and strong financials are candidates.

If you find yourself looking to bridge the gap between homes, you might also consider a HELOC, a home equity loan, or a personal loan, among other alternatives. With a little due diligence and some paperwork, you’ll soon be financially prepared to purchase your next home.

FAQ

What are the cons of a bridge loan?

It can be harder to qualify for a bridge loan than for a standard home loan, and both costs and interest rates may be higher as well. And taking out a bridge loan means you may have to make payments on two loans if your first property doesn’t sell.

Why would someone get a bridge loan?

A homebuyer who has found their perfect next property but who is in a short-term cash crunch might opt for a bridge loan if they feel very confident that they can sell their current home quickly. This might be especially true in a hot market, where there’s lots of competition for homes and the buyer wants to move quickly.

What’s the difference between an open and closed bridge loan?

An open bridge loan doesn’t have a fixed repayment date, meaning you can repay the loan whenever you have the money. They’re more flexible, but they also come with higher interest rates and fees. Closed loans have a fixed repayment date, such as when you close a house sale, and they often come with lower interest rates.

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-Q126-251

Whether shopping for a home or an investment property, buyers may come across multifamily homes. The first need-to-know, especially for financing’s sake, is that multifamily properties with two to four units are generally considered residential buildings, and those with five or more units are commercial.

This guide explains whether multifamily homes are a good idea for homebuyers or investors.

What Is a Multifamily Home?

Put simply, a multifamily home is in a building that can accommodate more than one family in separate living spaces. Each unit usually has its own bathroom, kitchen, utility meter, entrance, and legal address.

Of the more than 45 million American households that rent, around 60.4% live in multifamily buildings.

Among the different house types are duplexes, which contain two dwelling units, while a triplex and quadruplex consist of three and four units, respectively. A high-rise apartment building is considered a multifamily property.

What about ADUs? A home with an ADU — a private living space within the home or on the same property — might be classified as a one-unit property with an accessory unit, not a two-family property, if the ADU doesn’t have its own utilities and provides living space to a family member.

Multifamily Homes vs Single-Family Homes

On the surface, the differences in property types may seem as straightforward as the number of residential units. But there are other considerations to factor in when comparing single-family vs. multifamily homes as a homebuyer or investor.

Unless you plan to hire a manager, owning a property requires considerable time and work. With either type of property, it’s important to think about how much time you’re able to commit to handling repairs and dealing with tenants.

If you’re weighing your options, here’s what you need to know about single-family and multifamily homes.

Pros and Cons of Multifamily Homes

There are a number of reasons to buy a multifamily home: Rental income and portfolio expansion are two.

Buying real estate is one ticket to building generational wealth. But there are also downsides to be aware of, especially if you plan to purchase a multifamily home as your own residence.

So what are multifamily homes’ pros and cons? That can depend on whether it’s an investment property or a personal residence.

As Investment

Investing in multifamily homes can come with challenges. Take financing.

A mortgage loan for an investment property tends to have a slightly higher interest rate and stricter qualifications, and a down payment of 20% or more is usually required, though there are ways to buy a multifamily property with no money down.

Government-backed residential loans don’t apply to non-owner-occupied property, but there are commercial FHA loans for different situations:

•   Purchasing or refinancing apartment buildings with at least five units that don’t need substantial rehabilitation

•   New construction or substantial rehabilitation of rental or cooperative housing of at least five units for moderate-income families, elderly people, and people with disabilities

•   Residential care facilities

Upfront and annual mortgage insurance premiums (MIP) apply.

Before adding a multifamily home to your real estate portfolio, take note of the pros and cons of this investment strategy.

As Residence

Buyers can choose to purchase a multifamily home as their own residence. They’ll live in one of the units in an owner-occupied multifamily home while renting out the others.

Owners can use rental income to offset the cost of the mortgage, property taxes, and homeowners insurance while building wealth.

Another advantage is financing. With a multifamily home of 2-4 units, an owner-occupant may qualify for an FHA, a VA, or a conventional loan and put nothing down for a VA loan and little down for a conventional or FHA loan. (However, most VA loans require a one-time funding fee, FHA loans always come with MIP, and putting less than 20% down on a conventional loan for an owner-occupied property, short of a piggyback loan or lender-paid mortgage insurance, means paying private mortgage insurance.)

What are multifamily homes’ pros and cons as residences?

It’s worth noting that an owner-occupant can move to a new residence later on and keep the multifamily home as an investment property. This strategy can help lower the barrier to entry for real estate investing, but keep in mind that loan terms may require at least one year of continued occupancy.

Recommended: Tips to Qualify for a Mortgage

Who Are Multifamily Homes Right For?

There are several reasons homebuyers and investors might want a multifamily home.

Multifamily homes can help you enter the real estate investment business or diversify a larger portfolio. It’s important to have the time to commit to being a landlord or the money to pay for a property manager.

For homebuyers in high-priced urban locations, multifamily homes may be more affordable than single-family homes, given the potential for rental income. It might be helpful to crunch some numbers with a mortgage payment calculator.

Multigenerational families who want to live together but maintain some privacy may favor buying a duplex or other type of multifamily home.

What to Look for When Buying a Multifamily Home

There are certain characteristics to factor in when shopping for a multifamily home.

First off, assess what you can realistically earn in rental income from each unit in comparison to your estimated mortgage payment, taxes, and maintenance costs. Besides what the current owner reports in rent, you can look at comparable rental listings in the neighborhood.

When looking at properties, location matters. Proximity to amenities, school rankings, and transportation access can affect a multifamily home’s rental value.

The rental market saturation is another important consideration. Buying a multifamily home in a fast-growing rental market means there are plenty of renters to keep prices up and units filled. The vacancy rate — the percentage of time units are unoccupied during a given year — of a property or neighborhood is an effective way to estimate rental housing demand.

Depending on your financing, the condition of a multifamily home may be critical. With a VA or FHA loan, for instance, chipped paint or a faulty roof could be a dealbreaker.

Read up on mortgage basics to learn about what home loans you might use for a multifamily home and their terms.

Finding Multifamily Homes

Like single-family homes, multifamily homes are featured on multiple listing services and real estate websites. Browsing rental listings during your multifamily home search can help gauge the market in terms of vacancy rates and rental pricing.

Working with a buyer’s agent who specializes in multifamily homes can also help narrow your search and focus on in-demand neighborhoods.

Alternatively, you can look into buying a foreclosed home. This may help you get a deal, but it’s not uncommon for foreclosed properties to require renovations and investment.

The Takeaway

Buying a multifamily home as a residence or investment property can provide rental income and build wealth. It’s also a major financial decision. Whether you’re planning to be an owner-occupant will affect your financing, so seriously consider this option and run the numbers to see if you stand to recoup your costs — and ideally make a profit — from the building’s rental income.

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 is the difference between residential and multifamily?

Some multifamily homes — those with fewer than five units — are considered residential real estate. Larger properties with more than five units are commercial real estate.

What financing options are available for multifamily properties?

Multifamily homes with 2-4 units are often eligible for residential financing, such as conventional, FHA, or VA loans, especially if you plan to be an owner-occupant. Properties with five or more units are generally classified as commercial and require a commercial real estate loan or specific commercial FHA loans.

How long do I need to occupy an owner-occupied multifamily home?

As an owner-occupant, you can eventually move out and convert the property to an investment. However, loan terms typically require at least one year of continued occupancy.

Photo credit: iStock/krzysiek73

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-Q126-252

You may be able to refinance student loans without a cosigner as long as you meet specific lender requirements. Refinancing is when you replace some or all of your existing student loans with a new loan from a private lender like a bank, credit union, or online lender.

A cosigner is an individual with good credit who agrees to repay the loan if you, the primary borrower, cannot. A cosigner may give a student without a strong credit history a better chance of being approved for refinancing and also help them secure a better interest rate on the loan. However, it is possible to refinance loans with no cosigner if you meet certain conditions.

Read on for more information about how to refinance student loans without a cosigner and what the process involves.

Understanding Student Loan Refinancing

With student loan refinancing, a private lender pays off your existing student loans — whether they are private student loans, federal student loans, or a mixture of both — and replaces them with a new private loan. The new loan has a new interest rate and loan terms.

Benefits of Refinancing Student Loans

Ideally, refinancing student loans allows you to get a lower student loan refinancing rate or more favorable loan terms, if you qualify. The loan interest rate, which is a percentage of your principal amount borrowed, is the amount you pay to your lender in exchange for borrowing money. A lower interest rate could help you save money on your monthly student loan payments.

Additionally, when you refinance, you may be able to change the repayment terms of the loan. For instance, if you need more time to repay the loan and smaller monthly payments, you may be able to get a longer loan term. However, this means that you will likely pay more in interest overall since you are extending the life of the loan.

Alternatively, if you are refinancing student loans to save money, you might be able to get a shorter loan term so that you can repay the loan faster, helping you save on interest payments. In this case, your monthly payments will likely be higher.

Refinancing can also help you manage your student loan payments by streamlining the process. Instead of having to keep track of multiple loans with different due dates and balances, you have just one loan to repay with refinancing.

Risks of Refinancing Federal Student Loans

You can refinance federal student loans, but there is one major drawback to be aware of. Refinancing federal student loans means that you’ll lose access to federal benefits such as federal loan forgiveness, income-driven repayment plans, and federal deferment.

Clearly, it’s important to consider when to refinance student loans — and when not to — for the best possible outcome. If you think you may use any of the federal programs and protections, refinancing federal student loans won’t make sense for you.

Refinancing Student Loans Without a Cosigner

When you refinance student loans without a cosigner, you have full control over your new loan and the responsibility of repaying it will be all yours. No one else will be financially liable for the loan. (On the other hand, when you refinance with a cosigner, that person is liable for the loan in the event that you are unable to repay it.)

To qualify for student loan refinancing on your own, you will need to meet specific requirements. These eligibility requirements include:

Qualifying With Your Own Credit

To get approved for student loan refinancing, you typically need a good credit score and a solid credit history. FICO®, the credit scoring model, considers a good credit score to be between 670 to 739. Different lenders have different credit score requirements — some may have a minimum credit score that’s slightly lower than 670 — but a higher score is usually better not only for approval, but also to get the best rates and terms.

Length of credit history — meaning the age of your credit accounts — comprises 15% of your credit score. A longer credit history typically has a positive impact on your credit score.

How to Improve Your Credit Score Before Applying

If your credit score needs some work, there are ways to help build your credit over time. First, make all your payments in full and on time. Payments account for 35% of your FICO score, so this is critical.

In addition, keep your credit utilization — the amount of debt you owe vs. the available credit you have — as low as you can. This can help show that you’re not overspending. And aim to have a balanced mix of credit, such as credit cards and loans, to demonstrate that you can successfully deal with different types of debt.

If your credit history is slim, you could help build it by getting a secured credit card. With this type of card, you put down a deposit to back the card. The deposit is also your credit limit. Use the card only for small purchases and pay the balance in full and on time each month. Establishing credit accounts and handling them responsibly over time shows that you have a track record of borrowing money and repaying it.

Debt-to-Income Ratio

A lender will also look at your debt-to-income (DTI) ratio. This is a percentage that indicates how much of your money goes toward your monthly debts versus how much money you have coming in each month.

You can calculate your DTI by adding up your monthly debts and dividing that figure by your gross monthly income (your income before taxes). Multiply the resulting number by 100 to get a percentage, and that’s your DTI. The lower your DTI is, the less risk you are to lenders because it indicates that you have enough money to pay your debts, including the new loan. Lenders typically prefer a DTI below 50% for student loan refinancing, but a DTI below 40% is even better.

If your DTI is high, such as above 50%, work on paying down the debt you owe before you apply for student loan refinancing. You could also work to boost your income by applying for a promotion or taking on a side hustle.

Employment Status

Generally, lenders look for borrowers who are currently employed and have a steady income, or, in some cases, those who have an offer of employment to start within the next 90 days, in order to approve them for student loan refinance. Check with your lender to learn their specific employment and income criteria.

How to Refinance Student Loans Without a Cosigner

If you’ve decided that refinancing is the right option for you — and you’ve worked on building your credit, lowering your DTI, and you have a stable job or a job offer as noted above— here are a few tips on how to refinance student loans without a cosigner.

•  Gather your personal information. Although the information required varies from lender to lender, you’ll typically need to provide your name, address, employment details, income, and loan amounts, among other things.

•  Shop around with different lenders. Most lenders will let you prequalify for refinancing with a soft credit check that won’t impact your credit score. That way you can review the projected interest rates and terms of a loan and compare it to offers from different lenders.

If your credit is slim and you haven’t had time to build it, you may want to look for a refinancing lender that uses an alternative credit screening process. Some lenders might consider factors such as your grades, degree, career path, and future earning potential to determine whether you qualify for refinancing. However, you may end up with a loan with a higher interest rate if you go this route.

•  Choose a lender and a loan. After you’ve reviewed the offers and settled on the best one for your needs, you’ll need to fill out a formal application and provide supporting documentation such as proof of identity and citizenship, your Social Security number, pay stubs, and statements for the loans you’re refinancing.

•  Sign up for autopay. Once you’re approved for refinancing, consider signing up for autopay if it’s an option. Many lenders offer a rate discount of about 0.25% for borrowers that opt for automatic payments.

Alternatives to Refinancing

If you can’t qualify for student loan refinancing without a cosigner, there are some other options to explore to help manage your student loan payments once your student loan grace period has ended.

Income-driven Repayment Plans

With an income-driven repayment (IDR) plan, your monthly student loan payments are based on your discretionary income and family size. Your monthly payments are typically a percentage of your discretionary income, which usually means you’ll have lower payments. The repayment period is 20 or 25 years, depending on the IDR plan. (Just be aware that with a longer loan term, you’ll pay more in interest overall.) On one of the current plans, the Income-Based Repayment (IBR) plan, your remaining loan balance is forgiven at the end of the repayment term.

Loan Forgiveness Programs

You might qualify for student loan forgiveness through a state-specific or federal program. For instance, borrowers with federal student loans who work in public service may be eligible for the Public Service Loan Forgiveness (PSLF) program. If you work for a qualifying employer such as a not-for-profit organization or the government, PSLF may forgive the remaining balance on your eligible Direct loans after 120 qualifying payments under an IDR plan or the standard 10 year repayment plan. There is also a federal Teacher Loan Forgiveness program for student loan borrowers who teach in low-income schools or educational service agencies.

Be sure to check with your state to find out what loan forgiveness programs may be available. Some state programs even offer forgiveness to private student loan holders.

Federal Student Loan Consolidation

One of the differences between student loan consolidation vs. refinancing is that consolidation is for federal student loans only. Consolidation might be something to consider if you want to take advantage of federal programs or protections.

A federal Direct Consolidation loan allows you to combine all your federal loans into one new loan, which can lower your monthly payments by lengthening your loan term. The interest rate on the loan will be a weighted average of the combined interest rates of all of your consolidated loans. Consolidation can simplify and streamline your loan payments, and your loans remain federal loans with access to federal benefits and protections. However, a longer loan term means you’ll pay more in interest over the life of the loan.

How SoFi Can Help You Refinance

If you want to refinance your student loans, you may want to consider refinancing your loans with SoFi. Borrowers will find competitive fixed or variable interest rates on refinanced student loans, no fees required, and flexible repayment options.

The refinancing process is simple and quick. You can view your rate in just two minutes. Then, you can choose a term and payment that makes sense for your situation. Just remember that refinancing federal student loans makes them ineligible for federal benefits such as income-driven repayment plans.

FAQ

Can I refinance my student loan without my cosigner?

If you can qualify for refinancing on your own, you typically won’t need to include the cosigner on the new loan which will have new loan terms. By qualifying on your own, you are essentially demonstrating to the lender that you have what it takes to make your loan payments. To qualify for refinancing without a cosigner, you’ll generally need a strong credit score and solid credit history, a low debt-to-income ratio, and a stable income.

Is there any way to get a student loan without a cosigner?

Getting a student loan without a cosigner depends on the type of loan it is and your financial situation. Most federal student loans, including Direct Subsidized and Unsubsidized federal loans, don’t require you to have good credit or to prove you have income, so you won’t need a cosigner for those loans. However, if you’re taking out a Direct PLUS loan and you have adverse credit, such as a recent loan default, you will likely need a cosigner for the loan.

If you’re interested in private student loans, private lenders generally have strict qualification requirements regarding your credit score and income. As a student without much of a credit history or a steady income, you may need a cosigner to qualify for a private student loan.

How easy is it to refinance student loans?

Refinancing student loans is quite easy today because in most cases you can do virtually all of it online. Here’s how: Research different lenders that offer refinancing and compare their loan terms and interest rates. Prequalify with a few lenders to see what rate you may be eligible for (this process involves a soft credit check that does not affect your credit score), and then choose the lender that makes the most sense for you. You can typically complete the entire loan application online. Just be aware that you will need to supply documentation like pay stubs and ID.

What credit score do I need to refinance student loans without a cosigner?

You typically need a credit score of at least 670 to qualify for refinancing without a cosigner. You’ll also typically need a low debt-to-income ratio and to be employed with a steady income — or have an offer for employment that starts within 90 days.

What happens to my cosigner when I refinance student loans?

When you refinance student loans without a cosigner, the original loan is paid off by the new loan, which releases the cosigner from all responsibility for the debt. Once you refinance, the cosigner has no responsibility for the new loan — you are solely responsible for repaying the refinanced loan.

However, if you choose to refinance with a cosigner, the cosigner is responsible for the loan if you can’t repay it.

About the author

Melissa Brock

Melissa Brock is a higher education and personal finance expert with more than a decade of experience writing online content. She spent 12 years in college admission prior to switching to full-time freelance writing and editing. Read full bio.

SoFi Student Loan Refinance
Terms and conditions apply. SoFi Refinance Student Loans are private loans. When you refinance federal loans with a SoFi loan, YOU FORFEIT YOUR ELIGIBILITY FOR ALL FEDERAL LOAN BENEFITS, including all flexible federal repayment and forgiveness options that are or may become available to federal student loan borrowers including, but not limited to: Public Service Loan Forgiveness (PSLF), Income-Based Repayment, Income-Contingent Repayment, extended repayment plans, PAYE or SAVE. Lowest rates reserved for the most creditworthy borrowers. Learn more at SoFi.com/eligibility. SoFi Refinance Student Loans are originated by SoFi Bank, N.A. Member FDIC. NMLS #696891 (www.nmlsconsumeraccess.org).

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