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You may feel proud of yourself for paying off a debt early, but doing so could trigger prepayment fees (ouch). The best way to avoid those charges is to read the fine print before you take out a loan that involves this kind of fee.

If you neglected to do that, however, it doesn’t necessarily mean you’re stuck with a prepayment penalty. Read on to learn ways to avoid paying loan prepayment penalties.

What Is a Prepayment Penalty?

A prepayment penalty is when a lender charges you a fee for paying off your loan before the end of the loan term. It can be frustrating that a lender would charge you for paying off a loan too early. After all, many people may think a lender would appreciate being repaid as quickly as possible.

While that’s true in theory, in reality, it’s not that simple. Lenders make most of their profit from interest, so if you pay off your loan early, the lender is possibly losing out on the interest payments that they were anticipating. Charging a prepayment penalty is one way a lender may recoup their financial loss if you pay off your loan early.

Lenders might calculate the prepayment fee based on the loan’s principal or how much interest remains when you pay off the loan. The penalty could also be a fixed amount as stated in the loan agreement.

Can You Pay Off a Loan Early?

Say you took out a $5,000 personal loan three years ago. You’ve been paying it off for three years, and you have two more years before the loan term ends. Recently you received a financial windfall and you want to use that money to pay off your personal loan early.

Can you pay off a personal loan early without paying a prepayment penalty? It depends on your lender. Some lenders offer personal loans without prepayment penalties, but some don’t. A mortgage prepayment penalty is more common than a personal loan prepayment penalty.

Recommended: When to Consider Paying off Your Mortgage Early

Differences in Prepayment Penalties

The best way to figure out how much a prepayment penalty would be is to check a loan’s terms before you accept them. Lenders have to be upfront about how much the prepayment penalty will be, and they’re required by law to disclose that information before you take on the loan.

Personal Loan Prepayment Penalty

If you take out a $6,000 personal loan to turn your guest room into a pet portrait studio and agree to pay your lender back $125 per month for five years, the term of that loan is five years. Although your loan term says it can’t take you more than five years to pay it off, some lenders also require that you don’t pay it off in less than five years.

The lender makes money off the monthly interest you pay on your loan, and if you pay off your loan early, the lender doesn’t make as much money. Loan prepayment penalties allow the lender to recoup the money they lose when you pay your loan off early.

Mortgage Prepayment Penalty

When it comes to different types of mortgages, things get a little trickier. For loans that originated after 2014, there are restrictions on when a lender can impose prepayment penalties. If you took out a mortgage before 2014, however, you may be subject to a mortgage prepayment penalty. If you’re not sure if your mortgage has a prepayment penalty, check your origination paperwork or call your lender.

Checking for a Prepayment Clause

Lenders disclose whether or not they charge a prepayment penalty in the loan documents. It might be in the fine print, but the prepayment clause is there. If you’re considering paying off any type of loan early, check your loan’s terms and conditions to determine whether or not you’ll have to pay a prepayment penalty.

How Are Prepayment Penalties Calculated?

The cost of a prepayment penalty can vary widely depending on the amount of the loan and how your lender calculates the penalty. Lenders have different ways to determine how much of a prepayment penalty to charge.

If your loan has a prepayment penalty, figuring out exactly what the fee will be can help you determine whether paying the penalty will outweigh the benefits of paying your loan off early. Here are three different ways the prepayment penalty fee might be calculated:

1. Interest costs. If your loan charges a prepayment penalty based on interest, the lender is basing the fee on the interest you would have paid over the full term of the loan. Using the previous example, if you have a $6,000 loan with a five-year term and want to pay the remaining balance of the loan after only four years, the lender may charge you 12 months’ worth of interest as a penalty.

2. Percentage of balance. Some lenders use a percentage of the amount left on the loan to determine the penalty fee. This is a common way to calculate a mortgage prepayment penalty fee. For example, if you bought a house for $500,000 and have already paid down half the mortgage, you might want to pay off the remaining balance in a lump sum before the full term of your loan is up. In this case, your lender might require that you pay a percentage of the remaining $250,000 as a penalty.

3. Flat fee. Some lenders simply have a flat fee as a prepayment penalty. This means that no matter how early you pay back your loan, the amount you’ll have to pay will always be the prepayment penalty amount that’s disclosed in the loan agreement.

Recommended: Debt Payoff Guide

Avoiding a Prepayment Penalty

Trying to avoid prepayment penalties can seem like an exercise in futility, but it is possible. The easiest way to avoid them is to take out a loan or mortgage without prepayment penalties. If that’s not possible, you may still have options.

•   If you already have a personal loan that has a prepayment penalty, and you want to pay your loan off early, talk to your lender. You may be offered an opportunity to pay off your loan closer to the final due date and sidestep the penalty. Or you might find that even if you pay off the loan early and incur a penalty, it might be less than the interest you would have paid over the remaining term of the loan.

•   You can also take a look at your loan origination paperwork to see if it allows for a partial payoff without penalty. If it does, you might be able to prepay a portion of your loan each year, which allows you to get out of debt sooner without requiring you to pay a penalty fee.

For example, some mortgages allow payments of up to 25% of the purchase price once a year, without charging a prepayment penalty. This means that while you might not be able to pay off your full mortgage, you could pay up to 25% of the purchase price each year without triggering a penalty.

Some lenders shift their prepayment penalty terms over the life of your loan. This means that as you get closer to the end of your original loan term, you might face lower prepayment penalty fees or no fees at all. If that’s the case, it might make sense to wait a year or two until the prepayment penalties are less or no longer apply.

When it comes to your money, you don’t want to make any assumptions. You still need to do your due diligence by asking potential lenders if they have a prepayment penalty. The Truth in Lending Act (TILA) requires lenders to provide documentation of any loan fees they charge, including a prepayment penalty. Also, under the TILA, consumers have the right to cancel a loan agreement within three days of closing on the loan without the lender taking any adverse action against them.

The Takeaway

A prepayment penalty is one fee that can be avoided by asking questions of the lender and looking at the loan documents with a discerning eye. This may hold true both when you are shopping for a loan and when you are paying your loan off.

Think twice before turning to high-interest credit cards. Consider a SoFi personal loan instead. SoFi offers competitive fixed rates and same-day funding. See your rate in minutes.

SoFi’s Personal Loan was named NerdWallet’s 2024 winner for Best Personal Loan overall.

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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.

Non affiliation: SoFi isn’t affiliated with any of the companies highlighted in this article.

Third Party Trademarks: Certified Financial Planner Board of Standards Center for Financial Planning, Inc. owns and licenses the certification marks CFP®, CERTIFIED FINANCIAL PLANNER®

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.

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Borrowing money online has become one of the fastest and most convenient ways to access funds when you need them — but it’s not something to jump into without understanding how it works. From choosing a reputable lender to comparing interest rates, fees, and repayment terms, there are several important factors that can impact both your wallet and your peace of mind.

Keep reading to learn how to borrow money safely, how to avoid common pitfalls, and what to look for so you can make a confident, informed financial decision.

Why Have Online Lenders Grown in Popularity?

Online lenders have surged in popularity because they offer a faster, more convenient borrowing experience than many traditional banks. Instead of visiting a branch or dealing with long processing times, borrowers can apply, upload documents, and receive decisions entirely online — often within minutes. Here’s what online lenders may offer:

Familiarity, for Some Customers

A growing proportion of consumers is accustomed to using computers for many aspects of daily life, and making online financial transactions is no different. More people may be looking for things like:

•   Online applications

•   Streamlined underwriting processes

•   Automated funds transfers

A Different Kind of Personal Service

Personalization in the past meant having a face-to-face relationship with a banker. Personalization in today’s world can mean information that is relevant to an individual’s financial needs. This might look like:

•   Personalized financial trends in a portfolio so they can make informed decisions about their financial goals

•   Insights about their spending and saving so they can budget monthly income and expenses to meet their needs

Time Saving

Customers may also want an experience that saves time. Automating tasks is a timesaver that can easily be done with online financial tools. In the case of online lending, the option to set up automatic bill payments and automate other tasks are likely to be considerations when a customer is choosing an online financial company.

💡 Quick Tip: Some lenders can release funds as quickly as the same day your loan is approved. SoFi personal loans offer same-day funding for qualified borrowers.

Where to Borrow Money Online

When looking for an online lender, you should consider the reputation of the lender, safety precautions the lender has in place, and types of loan products offered. In addition, each person should determine their individual comfort level of doing business with or without personal interaction. Here’s where you can borrow money online:

Banks

Borrowing money online from a bank typically involves a streamlined digital application that allows you to complete the entire process from your computer or phone. Most banks offer online personal loans, where you provide basic information such as your income, employment details, and desired loan amount. The bank then performs a credit check and may request additional documentation, like pay stubs or bank statements, which you can upload directly through a secure portal.

If approved, you’ll receive the loan terms electronically and can sign the agreement using e-signature. Funds are usually deposited directly into your bank account within a few business days.

Recommended: How to Apply for a Personal Loan

Credit Unions

Credit unions generally have physical locations, but may also have online services. Financial services offered by credit unions are similar to banks and other financial institutions, but there are usually specific requirements to be a member of a credit union, such as employment-related or residence in a particular region. Credit unions may offer member benefits such as low fees, high savings rates, and low loan rates.

Peer-to-Peer Lending

Peer-to-peer (P2P) lending is a type of online borrowing where individuals can obtain loans directly from other individual investors rather than from a traditional bank or credit union. Through a digital platform, borrowers submit an application, and investors choose to fund all or part of the loan in exchange for earning interest on the repayments.

Online Lenders

You can borrow money from online lenders by completing a fully digital application that typically takes just a few minutes. These lenders allow you to upload documents, verify your identity, and receive approval without visiting a branch. Many use automated underwriting systems that review your credit, income, and banking activity quickly, which can speed up the approval process.

Once approved, funds are usually deposited directly into your bank account, sometimes as fast as the same day or the next business day.

Options to Think Twice About

Along with favorable options for lending that are available, there are some that may not bring about the best financial outcomes.

Credit Cards

At its core, a credit card is a short-term loan — specifically, a line of credit. If the account balance is paid in full before each month’s due date, it’s a no-interest loan. Financial drawbacks arise, however, when that balance is not paid in full each month, carrying over a balance due.

Credit card interest rates tend to be high, and they accrue on any unpaid balance, compounding what is owed in the next billing cycle. The average credit card annual percentage rate (APR) is currently 24.04% for new credit card offers. It’s easy to see how this can lead to a cycle of debt. Paying off a loan over time is probably more efficiently done with other financial tools.

Recommended: Personal Loan Calculator

Predatory Lenders

It’s important to be aware of predatory lending, which is the practice of offering loans with unfair, deceptive, or abusive terms that exploit borrowers and make repayment difficult or impossible. Both payday loans and title loans are a type of predatory lending. Repeat borrowing is common with these types of loans.

•   Payday loans are short-term loans, typically to be paid off in the borrower’s next payday. Interest rates are extremely high, often 400% or more.

•   Title loans, or pawn loans, use a borrower’s vehicle or other item of value as collateral. The APR on a title loan can be as much as 300%, and lenders often charge additional fees.

💡 Quick Tip: Just as there are no free lunches, there are no guaranteed loans. So beware lenders who advertise them. If they are legitimate, they need to know your creditworthiness before offering you a loan.

The Takeaway

Borrowing money online has never been more accessible, but it’s important to approach the process with clarity and caution. By understanding the different types of ways to borrow money online, comparing interest rates and terms, and checking for reputable, transparent practices, borrowers can confidently choose the option that best aligns with their financial situation.

Think twice before turning to high-interest credit cards. Consider a SoFi personal loan instead. SoFi offers competitive fixed rates and same-day funding. See your rate in minutes.

SoFi’s Personal Loan was named NerdWallet’s 2024 winner for Best Personal Loan overall.

FAQ

Can I borrow money online instantly?

Yes, you can borrow money online instantly through various lenders offering quick loans. These include payday loans, personal loans, and credit card cash advances. However, be cautious of high interest rates and fees, and ensure the lender is reputable and licensed. Always read the terms and conditions carefully.

How can you protect yourself when borrowing money online?

To protect yourself when borrowing money online, verify the lender’s legitimacy, check for a secure website (https), read the terms and conditions, and understand fees and interest rates. Use reputable credit reporting agencies to check the lender’s history and consider consulting a financial advisor.

Why have online lenders become more popular?

Online lenders have become more popular due to their convenience, quick approval processes, and accessibility. They often offer a wider range of loan products and can be more flexible with credit requirements. Additionally, the ability to compare multiple lenders easily and apply from anywhere has attracted many borrowers.

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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.

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.

Third Party Trademarks: Certified Financial Planner Board of Standards Center for Financial Planning, Inc. owns and licenses the certification marks CFP®, CERTIFIED FINANCIAL PLANNER®

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Maybe you’ve already tried to apply for a regular personal loan — only to be turned down. If so, a guarantor loan might be an option worth looking into. With this type of loan, the guarantor (often a close friend or family member) agrees to repay the loan if the borrower can’t. Since this reduces risk to the lender, guarantor loans can make it possible for those with poor or limited credit to qualify for an unsecured personal loan.

However, guarantor loans come with risks and costs — for both the borrower and the guarantor. Here are some things to consider before you apply for a guarantor loan.

What Is a Loan With a Guarantor

A guarantor loan is typically an unsecured personal loan that requires the primary borrower to have a financial backer, or guarantor. A guarantor may be required because the borrower has not yet established credit or has had credit issues in the past (such as a history of late or missed debt payments). It’s still considered the borrower’s loan, but the guarantor is legally obligated to cover payments and any other fees if the borrower defaults on the agreement.

This guarantee reduces the lender’s risk and enables them to advance the money at a reasonable annual percentage rate (APR). However, APRs for guarantor loans are generally higher than APRs for regular personal loans.

How Do Guarantor Loans Work?

Guarantor loans work in the same way as other types of personal loans — you borrow a lump sum of money from a lender, which you are able to use for virtually any purpose. You then pay it back (plus interest) in monthly installments over a set period of time, which may be anywhere from one and seven years.

The only difference is that a third party (your guarantor) is part of the loan agreement. The guarantor is legally bound to make payments on the loan in the event that you default. A loan default is generally defined as missing payments for several months in a row but the exact meaning will depend on the lender.

While the guarantor bears responsibility for repaying the debt, this individual doesn’t have any legal right to the loaned money or anything purchased with the loan proceeds.

Are You Guaranteed to Get a Loan With a Guarantor?

Although it can certainly help your case, there’s no guarantee that you’ll qualify to take out a loan with a guarantor. Approval depends on the financial profiles of you and your guarantor and the eligibility requirements of the lender.

Who Can Be a Guarantor for Loans?

A guarantor doesn’t need to be anyone specific — it could be a parent, sibling, friend, or even a colleague. You generally want to choose someone you trust and feel comfortable openly discussing your finances with. That’s most likely going to be a family member or a close friend.

Guarantors also need to have a good credit history and typically be at least age 18 (though some lenders require a higher minimum age). Some lenders also require the guarantor to be a homeowner. As part of the application process, guarantors will need to undergo a credit check and provide proof of identification and income, as well as bank details and statements.

What Should I Look for in a Guarantor Loan?

Like any other loan, it’s generally a good idea to look for a guarantor loan with a competitive personal loan interest rates and low or no fees. You’ll also want to carefully consider the monthly payments and be sure you can comfortably afford to make them. While this is crucial with any loan, it’s particularly important with a guarantor loan, since your guarantor will be on the hook for repayment if you fall behind. This could impact your credit as well as put a significant strain on your relationship with your guarantor.

How Much Can I Borrow for a Guarantor Loan?

Many lenders offer personal loan amounts ranging anywhere from $500 to $50,000 (and sometimes up to $100,000 for borrowers with excellent credit). Loan amounts for guarantor loans will depend on which lender you choose as well as your financial situation and your guarantor’s credentials (such as their credit score and income).

Guarantor Loan Requirements

Guarantor loans have eligibility requirements such as minimum credit scores and income thresholds that the guarantor will have to meet. Here’s a closer look.

Credit Score

While the borrower’s credit score might be poor or fair, the guarantor’s credit score should be considerably higher in order to secure the loan.

Proof of Residency

A guarantor will need to provide proof of residency. This can be done by showing documents such as a utility bill, a mortgage or rental agreement, or bank statements.

Income

The guarantor will need to verify a consistent income that’s sufficient to make payments on the loan if the primary borrower cannot. They will need to be able to show proof of income through bank account statements, pay stubs, invoices, and/or tax returns.

Age Requirements

The guarantor must be at least 18 years old, though some lenders have an age requirement of 21 or 22. They will need to show proof of age (and identity) with a government-issued photo ID.

Recommended: How to Apply for a Personal Loan

Types of Guarantors

Guarantors aren’t just for personal loans, and they don’t always take on the full financial responsibility of the agreement they’re entering into. Here’s a look at some different types of guarantors.

Guarantors as Certifiers

A guarantor may act as a certifier for someone looking to land a job or get a passport. These guarantors pledge that they know the applicant and they are who they say they are.

Limited vs Unlimited

Acting as a guarantor doesn’t always mean you’re responsible for the entire loan if the primary borrower fails to repay it. Limited guarantors are liable for only part of the loan or part of the loan’s timeline. Unlimited guarantors, however, are responsible for the full amount and full term of the loan.

Lease Guarantor

A guarantor may be required to cosign an apartment lease if the renter has limited credit and income history. In the event that the tenant is unable to pay the rent or prematurely breaks the lease agreement, the guarantor is responsible for paying any money owed to the landlord.

Guarantors vs Cosigners

Guarantors and cosigners play similar roles in a lending agreement — they pledge their financial responsibility for the debt to strengthen the primary borrower’s application. And, in both cases, these individuals may become responsible for repaying the debt.

However, there are some key differences between a guarantor and a cosigner. The main one is that a cosigner is responsible for repayment of the debt as soon as the agreement is final and will need to cover any missed payments. A guarantor, on the other hand, is only responsible for repayment of the debt if the primary borrower defaults on the loan.

There are also differences in terms of credit impacts. A cosigner will have the loan added to their credit report and any positive or negative payment information that the lender shares with the consumer credit bureaus can have a positive or negative impact on their credit. Becoming a guarantor, on the other hand, will typically not have an impact on an individual’s credit unless the primary borrower defaults on the loan. At that point, the loan will appear as part of the guarantor’s credit report.

Pros and Cons of Guarantor Loans

Pros of Guarantor Loans	Cons of Guarantor Loans
Offers a lending option for people who cannot qualify for a loan on their own	Can be more expensive when compared to a standard personal loan
Helps borrowers avoid expensive and risky predatory loan products	Less choice of lenders compared with the wider personal loan market
Can help borrowers build their credit	Defaulting on the loan could strain your relationship with the guarantor

A guarantor loan can allow you to borrow money even if you have limited or less-than-ideal credit. It can also help you avoid expensive and risky subprime loans that are marketed to borrowers with bad credit. In addition, the proceeds of a guarantor loan can be used for virtually any purpose, including emergency expenses (such as a car repair or medical bill) and lifestyle expenses (like a wedding or home improvement project).

As with all forms of credit, getting a guarantor loan can help you establish or build your credit, provided you manage the debt responsibly and keep up with your payments. Stronger credit can give you access to loans with better rates and terms in the future, without the need for a guarantor.

But these loans also come with some downsides. For one, guarantor loans can be expensive, often with higher APRs than other types of personal loans. Also, you’ll want to make sure you can keep up with the payments. Should you default, you’ll not only be hurting yourself but also the person who signed on as your guarantor.

Another downside is that there are fewer guarantor loans on the market than traditional personal loans. This can lead to less choice of lenders, making it harder to shop around and find a good deal.

What Happens if a Guarantor Cannot Pay?

A guarantor is legally obligated to repay the loan if the primary borrower defaults. If the borrower defaults and the loan is a secured loan, then the guarantor’s home could be at risk if the borrower defaults on the repayments and the guarantor is also unable to pay. This is not the case for unsecured guarantor loans, but the lender will still pursue the guarantor for the repayment of the debt, possibly through the courts.

Alternative Options to a Guarantor Loan

What if you don’t have a trusted person to ask to be your guarantor or you don’t want to ask anyone to take on this responsibility? Here are some alternatives to a guarantor loan that you could consider.

•   Secured credit card: If you have some cash, you could pledge that as collateral on a secured credit card. Responsible use of this type of credit card could help you build your credit history so you can improve your chances of future loan approval. Interest rates on secured credit cards can be higher than regular credit cards, and there may be fees associated with their use.

•   Flex loan: A line of credit that is similar to a credit card, a flex loan can also be used to build credit. Borrowers can use funds up to their credit limit, repay those funds, and borrow them again. Interest rates on flex loans tend to be high, and there may be fees assessed daily or monthly or each time the loan is used.

•   Loan from a friend or family member: Perhaps the person you ask to be a guarantor doesn’t want to take on that responsibility, but they are willing to directly loan you the money. A loan from family or a friend can be an option to consider, but you’ll want to be sure to have a written agreement outlining the expectations and responsibilities of both parties. This will go a long way to minimizing miscommunication and hurt feelings. Keep in mind that this is not an option that will help you build your credit history.

The Takeaway

Getting approved for an unsecured personal loan is more likely if you have a solid credit history, an above-average credit score, and sufficient income to satisfy a lender’s qualification requirements. If you’re lacking one or more of these things, you might consider other types of loans, which might include a guarantor loan. SoFi does not currently offer guarantor loans.

Think twice before turning to high-interest credit cards. Consider a SoFi personal loan instead. SoFi offers competitive fixed rates and same-day funding. See your rate in minutes.

SoFi’s Personal Loan was named NerdWallet’s 2024 winner for Best Personal Loan overall.

FAQ

What are guarantor loans?

A guarantor loan is typically a type of personal loan that requires the primary borrower to have a financial backer, or guarantor. The guarantor agrees to pay the debt if the primary borrower defaults on the loan agreement.

How do I get a guarantor for a loan?

You might consider asking a trusted friend or family member to be a guarantor. This person should be someone who has solid credit and sufficient income to cover the loan payments should you default on the loan.

Are you guaranteed to get a loan with a guarantor?

No. Having a guarantor may strengthen a loan application, but it’s up to each individual lender to assess the qualifications of both parties.

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Photo credit: iStock/fizkes

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.

*Awards or rankings from NerdWallet are not indicative of future success or results. This award and its ratings are independently determined and awarded by their respective publications.

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 .

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.

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The housing market is rising in some areas of America and falling in others. If you find yourself in a hot seller’s market, it can be challenging to buy a house, but doing so, even with a low down payment, is possible.

Lenders are willing to approve mortgages with lower down payment requirements if you qualify and are comfortable with paying mortgage insurance.

Read on for advice on navigating the real estate market if you have a small down payment but a fair amount of competition from other prospective buyers.

What Is Considered a Low Down Payment?

While many people believe you need at least a 20% down payment to buy a house, the average down payment by a first time homebuyer at the end of 2025 was 10%. And low-down-payment mortgage loans — even home loans with zero down payment — do exist.

Given the wide range above, what’s actually considered a low down payment? Popular mortgage programs out there may require as little as 3% down, and a couple of more specific home loan programs allow 0% down.

The reason why that 20% down payment figure keeps popping up is that any amount less than that will likely entail some form of mortgage insurance, an ongoing fee charged by most lenders.

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

Challenges of Buying in a Seller’s Market With a Small Down Payment

If you’re wondering how to buy a house with a low down payment, it’s important to acknowledge a painful truth in today’s housing market: There’s truth to the saying “cash is king,” and that continues to be evident in a seller’s market, where real estate investors who pay all cash frequently outbid prospective first-time homebuyers. All-cash sales have risen to a historic high of 26% in 2025, according to the National Association of Realtors. Be ready for these potential challenges if you intend to buy a house with a small down payment.

Longer Closing Time

Closing on a home with a mortgage-contingent offer to buy takes longer than closing with a cash offer. There’s often more paperwork, and underwriters will require time to ensure that your financials are in order before green-lighting your mortgage.

Lenders May Disagree With Mortgage Minimums

Just because a mortgage loan program allows for low-down-payment mortgage loans for qualified buyers doesn’t mean a lender will accept a down payment of 3%. Lenders have wide latitude to dictate their own terms, and it’s fairly common for them to set their own minimum down payment requirement somewhere above what the stated minimum for the program is.

Home Sellers May Be Nervous About Your Ability to Close

While it’s true that all funds from your down payment and mortgage transfer to the seller at closing, many sellers still buy into the old “bird in hand” adage when it comes to accepting offers. A higher down payment signals a buyer’s financial capacity and is, therefore, more attractive in the eyes of the homeowner.

If sellers accept a bid with a low down payment, they may run an increased risk of the buyer being rejected at the last minute by the mortgage lender.

In a deal involving a mortgage backed by the Federal Housing Administration (FHA), if the home is appraised for less than the agreed-upon price, the sellers must match the appraised price or the deal will fall through. FHA guidelines require home appraisers to look for certain defects. If any are found, the sellers may have to repair them before the sale.

Struggles With Competitive Offers and Bidding Wars

When your down payment is limited, you may find it difficult to compete in a bidding war. To help your case, if you are obtaining a conventional loan, seek out mortgage preapproval before beginning your home search in earnest. And consider writing a “love note” to the seller in your offer letter. Compliment something you especially like about the house and try to find some common ground with the seller that will appeal to their emotions. Thank the seller for considering your offer.

Recommended: Private Mortgage Insurance (PMI) vs. Mortgage Insurance Premium (MIP)

Types of Low-Down-Payment Mortgages

If you’re trying to score a home with a small down payment, there are some ways you can approach it to increase your odds. Some of the most popular low-down-payment mortgage programs are:

FHA Loans

FHA loans backed by the Federal Housing Administration, allow for a down payment as low as 3% to 5%. The government guarantee makes these loans more palatable for mortgage lenders and easier for a homebuyer to afford.

Fannie Mae HomeReady

Buyers who are within 80% of area median income for the census tract where a home is located can put down just 3% with this program. You don’t need to be a first-time buyer to take advantage of this program, however if all buyers are first-timers, you may be required to take a homebuyer education class.

Conventional 97 Loan

This loan allows first-time homebuyers of any income level to put only 3% down and finance the other 97% of their purchase with a fixed-rate mortgage with a term of up to 30 years. A credit score of 620 is required, although it will take a score of 680 to take full advantage of the features of this loan. At least one buyer must be a first-timer, and if all buyers are first-time homebuyers, a homeowner education course is usually required.

Conventional Mortgage

If you don’t qualify as a first-time homebuyer you can still obtain a low-down-payment home loan with a down payment as low as 5%. Conventional mortgage loans can be either fixed or adjustable rate, and you could take anywhere from 10 to 30 years to repay what you owe, depending on the mortgage term you choose. You’ll need a credit score of 620, and the higher your score, the better the interest rate you will likely be offered. If you put down less than 20%, you’ll need to pay for private mortgage insurance (PMI) with your monthly payment until you have 20% equity in your home.

Recommended: Home Affordability Calculator

Types of No-Down-Payment Mortgages

It is also possible to buy a house with no money down at all. Here are two common no-down-payment mortgages you may want to explore:

VA Loan

A VA loan backed by the U.S. Department of Veterans Affairs, allows eligible active-duty military members, veterans, reserve members, National Guard members, and certain surviving spouses to purchase a home with a zero-down-payment mortgage. If you think you might be eligible for a VA loan, your first step is to obtain a Certificate of Eligibility from the VA. Then you’ll obtain the loan from a lender (most will require a 620 credit score or better). While there is no mortgage insurance required, there is usually a VA funding fee.

USDA Loan

USDA loans are for low- and moderate-income buyers living in rural areas. The fixed-rate loan allows for the purchase of a new home but also allows borrowers to wrap some renovation costs into a home purchase. The loan can be used for modular or manufactured housing. There is no down payment or minimum credit score required for this loan.

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

Pros and Cons of Zero-Down-Payment Mortgage Loans

There are both benefits and disadvantages to going into homeownership with no down payment. Here are a few points to think about.

Recommended: Home-Buying Process Checklist

How Down Payment Assistance Can Help

If you’re struggling to come up with a down payment and a zero-down-payment loan isn’t an option, you may be able to get help. Consider exploring both of these options:

Down Payment Assistance (DPA) Programs

Many governments and nonprofits offer down payment assistance programs for first-time homebuyers — those who have not owned a principal residence in the past three years. The funds may come in the form of a loan or a grant. Some lenders can even assist you in qualifying for these programs to help offset the upfront costs of homebuying.

Cash Gift for Down Payment

Finally, you can also ask a family member, or sometimes a domestic partner, close friend, or employer, to help with the down payment by contributing gift money. The money can’t come with any strings attached, and a gift letter will likely be required by the lender. This is a popular option for parents and in-laws who want to help their children buy a first home.

Low- or No-Down-Payment Considerations

Mortgage Insurance

Buyers who put down less than 20% on a home purchased with a conventional mortgage can expect to have to pay for private mortgage insurance until they reach 20% equity in their home. Those who finance their home with an FHA loan will need to pay an upfront and annual mortgage insurance premium for the life of the loan. Some other government-backed loans also have similar fees.

Higher Cost Overall

Home loans cost money, in the form of interest. And because more of the home’s price must be financed when you put down a low down payment (or none at all), the total cost of the home will be greater than if some or all of the home purchase was covered by cash.

Less Equity Initially

The larger the down payment on a home, the more equity the buyer has on move-in day. Of course, you will build equity with your monthly mortgage payments, but in a process called mortgage amortization, a greater proportion of your monthly payment goes toward interest in the early years of a home loan, with less going to pay down the principal. The balance shifts gradually over the years of your loan, but you build equity slowly at the outset of a home loan.

The Takeaway

Buying a home with a small down payment is possible, even in a seller’s market. With preparation and the right mortgage lender, you may be able to land a place to call your own even with a low down payment — or no down payment at all.

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 mortgage has the lowest down payment?

Homebuyers who qualify can get a VA mortgage (backed by the U.S. Department of Veterans Affairs) or a USDA loan (from the U.S. Department of Agriculture) with no down payment at all. For other loan types, the lowest down payment amount is 3%.

Are zero-down mortgages a good idea?

Zero-down-payment home loans can help you get settled into a home sooner, but there are a few things to consider: You will not have any equity in your home at the outset, and equity builds slowly in the earliest years of a home loan. Your zero-down-payment loan will also be larger than the loan you would have if you made a down payment, so over the long haul, you will pay more for the home. However, if buying with no down payment allows you to take advantage of low interest rates, it might be worthwhile.

Is it harder to get your offer accepted with a small down payment?

If a seller is considering similar offers, the buyer with the larger down payment might have an edge. Being preapproved for a home loan can give you an advantage, however. If you can’t make a large down payment, consider obtaining preapproval.

Can a low down payment affect your mortgage rate?

Lenders may perceive buyers with lower down payments to be a greater risk, so a low down payment can sometimes result in a higher interest rate.

Are there programs to help first-time buyers compete in a seller’s market?

There are both national and local programs to help first-time homebuyers, including first-time homebuyer loan programs and down payment assistance programs. While these programs are not designed specifically to help buyers in a seller’s market, they certainly can’t hurt.

Should I wait for a buyer’s market if I only have a small down payment?

Whether or not to wait for a buyer’s market will depend on how soon you wish to buy a home and which local market you’re searching in. If waiting will allow you to build money for a larger down payment or improve your credit score, it might be worthwhile. The same is true if you foresee any reason the market might cool in the future. But if you need to settle down now, consider exploring nearby housing markets that might be a little less heated. And line up your mortgage preapproval to position yourself for success.

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Photo credit: iStock/sturti

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.
^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. ^†Veterans, Service members, and members of the National Guard or Reserve may be eligible for a loan guaranteed by the U.S. Department of Veterans Affairs. VA loans are subject to unique terms and conditions established by VA and SoFi. Ask your SoFi loan officer for details about eligibility, documentation, and other requirements. VA loans typically require a one-time funding fee except as may be exempted by VA guidelines. The fee may be financed or paid at closing. The amount of the fee depends on the type of loan, the total amount of the loan, and, depending on loan type, prior use of VA eligibility and down payment amount. The VA funding fee is typically non-refundable. SoFi is not affiliated with any government agency. Third Party Trademarks: Certified Financial Planner Board of Standards Center for Financial Planning, Inc. owns and licenses the certification marks CFP®, CERTIFIED FINANCIAL PLANNER®

SOHL-Q425-198

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In the ever-evolving landscape of real estate, the U.S. foreclosure market often unveils key trends that will shape the future of homeownership. According to property data provider ATTOM, the number of housing units with foreclosure filings in October was 36,766, up 3% from the prior month and 19% from a year ago. Rob Barber, CEO of ATTOM, notes that “Foreclosure activity continued its steady upward trend in October, the eighth straight month of year-over-year increases.”

Nationwide, one in every 3,871 housing units had a foreclosure filing in October 2025. Foreclosure starts increased nationwide by nearly 20% from last year. States with the greatest number of foreclosure starts in October 2025 included Florida, Texas, California, Illinois, and New York. Borrowers should stay up to date on their mortgage payments and work closely with their lenders to explore options for assistance if needed.

Read on for the foreclosure rates in October 2025 – plus the top three counties with the worst foreclosure rates in each state.

50 State Foreclosure Rates

As previously noted, foreclosure rates saw an increase compared to the previous month and year. Read on for the October 2025 foreclosure rates for all 50 states — beginning with the state that had the lowest rate of foreclosure filings per housing unit.

50. South Dakota

The Mount Rushmore State nabbed the 50th spot once more for its foreclosure rate in October. Having 398,903 total housing units, the fifth-least populous state had a foreclosure rate of one in every 26,594 households with 15 foreclosures. The counties with the most foreclosures per housing unit were (from highest to lowest): Minnehaha, Yankton, and Pennington.

49. Montana

Listed as 44th in population, the Treasure State rated 49th for its foreclosure rate in October. With 25 foreclosures out of 522,939 housing units, Montana’s foreclosure rate was one in every 20,918 homes. The counties with the most foreclosures per housing unit were: Blaine, Sweet Grass, and Dawson.

48. Vermont

In 49th place for population, the Green Mountain State ranked 48th for its foreclosure rate in October. Of the state’s 337,072 housing units, 19 homes went into foreclosure at a rate of one in every 17,741 households. The three counties in the state with the most foreclosures were: Rutland, Addison, and Windham.

47. Mississippi

Ranked 34th in population, the Magnolia State experienced 93 foreclosures out of 1,332,811 total housing units. This puts the foreclosure rate at one in every 14,331 homes and into the 47th spot in October. The counties with the most foreclosures per housing unit were (from highest to lowest): Wayne, Jefferson, and Copiah.

46. West Virginia

Ranked 39th in population, the Mountain State claimed the 46th spot for the month of October. It has a total of 859,653 housing units, of which 65 went into foreclosure. This means that the foreclosure rate was one in every 13,225 homes. The counties with the most foreclosures per housing unit were (from highest to lowest): Jefferson, Berkeley, and Wetzel.

45. North Dakota

The Peace Garden State’s foreclosure rate was one in every 9,865 homes. This puts the fourth-least populous state — with 374,866 housing units and 38 foreclosures — into 45th place. The counties with the most foreclosures per housing unit were (from highest to lowest): Hettinger, Bowman, and McIntosh.

44. Kansas

The Sunflower State ranked 44th for highest foreclosure rate in October. With 1,285,221 homes and a total of 136 housing units going into foreclosure, the 35th most populous state’s foreclosure rate was one in every 9,450 households. The counties with the most foreclosures per housing unit were (from highest to lowest): Anderson, Ottawa, and Decatur.

43. Wisconsin

With 304 foreclosures out of 2,750,750 total housing units, America’s Dairyland and the 20th most populous state secured the 43rd spot with a foreclosure rate of one in every 9,049 households. The counties with the most foreclosures per housing unit were (from highest to lowest): Kewaunee, Langlade, and Marquette.

42. New Hampshire

The Granite State, and the 41st most populous state in the U.S., ranked 42nd for highest foreclosure rate. New Hampshire saw 72 of its 644,253 homes go into foreclosure, making for a foreclosure rate of one in every 8,948 households. The counties with the most foreclosures per housing unit were (from highest to lowest): Coos, Hillsborough, and Rockingham.

41. Rhode Island

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The eighth-least populous state placed 41st for highest foreclosure rate in October. A total of 58 homes went into foreclosure out of 484,615 total housing units, making the foreclosure rate for the Ocean State one in every 8,355 households. The counties with the most foreclosures per housing unit were (from highest to lowest): Washington, Providence, and Kent.

40. Oregon

The 27th most populous state ranked 40th for highest foreclosure rate in October. Of the Pacific Wonderland’s 1,838,631 homes, 234 went into foreclosure, making for a foreclosure rate of one in every 7,857 homes. The counties with the most foreclosures per housing unit were (from highest to lowest): Lake, Umatilla, and Clackamas.

39. Nebraska

Ranking 37th in population, the Cornhusker State placed 39th in October with a foreclosure rate of one in every 7,506 homes. With a total of 855,631 housing units, the state had 114 foreclosure filings. The counties with the most foreclosures per housing unit were (from highest to lowest): Red Willow, Webster, and Wayne.

Recommended: Tips on Buying a Foreclosed Home

38. Minnesota

Ranked 22nd for most populous state, the Land of 10,000 Lakes obtained the 38th spot for highest foreclosure rate in October. It has 2,519,538 housing units, of which 365 went into foreclosure, making the state’s foreclosure rate one in every 6,903 households. The counties with the most foreclosures per housing unit were (from highest to lowest): Isanti, Wadena, and Wabasha.

37. Hawaii

The Paradise of the Pacific, and the 40th most populous state, came in 37th for highest foreclosure rate. Of its 564,905 homes, 84 went into foreclosure, making for a foreclosure rate of one in every 6,725 households. Only three of the five counties in the state saw foreclosures. They were (from highest to lowest): Hawaii, Honolulu, and Kauai.

36. Washington

Sorted as 13th in population, the Evergreen State ranked 36th for its foreclosure rate in October. Of its 3,262,667 housing units, 496 went into foreclosure, making the state’s foreclosure rate one in every 6,578 households. The counties with the most foreclosures per housing unit were (from highest to lowest): Garfield, Clallam, and Franklin.

35. Alabama

Listed as 24th in population, the Yellowhammer State came in 35th for highest foreclosure rate in October. Of its 2,316,192 homes, 361 went into foreclosure, making for a foreclosure rate of one in every 6,416 homes. The counties with the most foreclosures per housing unit were (from highest to lowest): Jefferson, Geneva, and Chilton.

34. New Mexico

The 36th most populous state claimed the 34th spot for highest foreclosure rate in October. Of the Land of Enchantment’s 949,524 homes, 151 went into foreclosure, making for a foreclosure rate of one in every 6,288 homes. The counties with the most foreclosures per housing unit were (from highest to lowest): Valencia, Torrance, and Chaves.

33. Missouri

Coming in at 19th in population, the Show-Me State took the 33rd spot for highest foreclosure rate in October. Of its 2,809,501 homes, 459 went into foreclosure, making for a foreclosure rate of one in every 6,121 homes. The counties with the most foreclosures per housing unit were (from highest to lowest): Scott, Mississippi, and Barton.

Recommended: What Is a Short Sale?

32. Kentucky

With a total of 2,010,655 housing units, the Bluegrass State saw 329 homes go into foreclosure, thus landing in 32nd place in October. This puts the foreclosure rate for the 29th most populous state at one in every 6,111 households. The counties with the most foreclosures per housing unit were (from highest to lowest): Whitley, Bath, and Grant.

31. Tennessee

Ranked 16th in population, the Volunteer State endured 521 foreclosures out of its 3,095,472 housing units. This puts the foreclosure rate at one in every 5,941 households and in 31st place for the month of October. The counties with the most foreclosures per housing unit were (from highest to lowest): Lake, Crockett, and Hawkins.

30. Virginia

With 620 homes going into foreclosure, the 12th most populous state ranked 30th for highest foreclosure rate in October. Having 3,654,784 total housing units, the Old Dominion saw a foreclosure rate of one in every 5,895 households. The counties with the most foreclosures per housing unit were (from highest to lowest): Staunton City, Emporia City, and Buena Vista City.

29. Pennsylvania

The Keystone State had the 29th highest foreclosure rate. The fifth-most populous state saw 995 homes out of 5,779,663 total housing units go into foreclosure, making the state’s foreclosure rate one in every 5,809 households. The counties with the most foreclosures per housing unit were (from highest to lowest): Monroe, Philadelphia, and Snyder.

28. Wyoming

The country’s least populous state claimed the 28th spot for highest foreclosure rate in October. With 275,131 housing units, of which 50 went into foreclosure, the Equality State’s foreclosure rate was one in every 5,503 households. The counties with the most foreclosures per housing unit were (from highest to lowest): Carbon, Campbell, and Sublette.

27. Alaska

The Last Frontier saw 59 foreclosures in October, making the foreclosure rate one in every 5,406 homes. This caused the third-least populous state, with a total of 318,927 housing units, to claim the 27th spot. The boroughs with the most foreclosures per housing unit were (from highest to lowest): Dillingham, Haines, and Bethel.

26. Massachusetts

The 15th most populous state ranked 26th for highest foreclosure rate in October. Of the Bay State’s 3,014,657 housing units, 591 went into foreclosure, making for a foreclosure rate of one in every 5,101 homes. The counties with the most foreclosures per housing unit were (from highest to lowest): Hampden, Berkshire, and Dukes.

25. Michigan

Ranked 10th in population, the Wolverine State secured the 25th spot with a foreclosure rate of one in every 4,776 homes. With a total of 4,599,683 housing units, the state had 963 foreclosure filings. The counties with the most foreclosures per housing unit were (from highest to lowest): Muskegon, Monroe, and Hillsdale.

24. New York

With 1,792 out of a total 8,539,536 housing units going into foreclosure, the Empire State claimed the 24th spot in October. The fourth-most populous state’s foreclosure rate was one in every 4,765 households. The counties with the most foreclosures per housing unit were (from highest to lowest): Broome, Orange, and Tioga.

23. Arkansas

Listed as the 33rd most populous state, the Land of Opportunity ranked 23rd for highest foreclosure rate in October. The state contains 1,382,664 housing units, of which 293 went into foreclosure, making its latest foreclosure rate one in every 4,719 households. The counties with the most foreclosures per housing unit were (from highest to lowest): Cleveland, Poinsett, and Van Buren.

22. Louisiana

Sorted as 25th in population, the Pelican State placed 22nd for highest foreclosure rate in October. Louisiana had a foreclosure rate of one in every 4,602 households, with 455 out of 2,094,002 homes going into foreclosure. The parishes with the most foreclosures per housing unit were (from highest to lowest): Iberville, Ascension, and Beauregard.

Recommended: Are You Ready to Buy a House? — Take The Quiz

21. Colorado

The 21st most populous state ranked 21st for highest foreclosure rate in October. Of the Centennial State’s 2,545,124 housing units, 562 went into foreclosure, making for a foreclosure rate of one in every 4,529 homes. The counties with the most foreclosures per housing unit were (from highest to lowest): Morgan, Sedgwick, and Pueblo.

20. Indiana

The 17th largest state by population, the Crossroads of America landed the 20th spot in October with a foreclosure rate of one in every 4,421 homes. Of its 2,953,344 housing units, 668 went into foreclosure. The counties with the most foreclosures per housing unit were (from highest to lowest): Blackford, Noble, and Jasper.

19. Arizona

Sorted as 14th in population, the Grand Canyon State withstood 722 foreclosures out of its total 3,142,443 housing units. This puts the foreclosure rate at one in every 4,352 homes and into the 19th spot in October. The counties with the most foreclosures per housing unit were (from highest to lowest): Pinal, Yuma, and Cochise.

18. North Carolina

The ninth-most populous state claimed 18th place for highest foreclosure rate. Out of 4,815,195 homes, 1,135 went into foreclosure. This puts the Tar Heel State’s foreclosure rate at one in every 4,242 homes. The counties with the most foreclosures per housing unit were (from highest to lowest): Camden, Pender, and Rowan.

17. Maine

Ranked 42nd in population, the Pine Tree State placed 17th for highest foreclosure rate in October. With a total of 746,552 housing units, Maine saw 177 foreclosures for a foreclosure rate of one in every 4,218 homes. The counties with the most foreclosures per housing unit were (from highest to lowest): Sagadahoc, Waldo, and Penobscot.

16. Connecticut

With 376 of its 1,536,049 homes going into foreclosure, the Constitution State had the 16th-highest foreclosure rate at one in every 4,085 households. In this 29th most populous state, the counties that had the most foreclosures per housing unit were (from highest to lowest): Greater Bridgeport, Northeastern Connecticut, and Naugatuck Valley.

15. Georgia

Ranked eighth in population, the Peach State took the 15th spot for highest foreclosure rate in October. Of its 4,483,873 homes, 1,101 were foreclosed on. This puts the state’s foreclosure rate at one in every 4,073 households. The counties with the most foreclosures per housing unit were (from highest to lowest): Johnson, Newton, and Wilkes.

14. Oklahoma

The Sooners State landed the 14th spot in October. With housing units totaling 1,763,036, the 28th most populous state saw 462 homes go into foreclosure at a rate of one in every 3,816 households. The counties with the most foreclosures per housing unit were (from highest to lowest): Canadian, Jackson, and Marshall.

13. Idaho

Ranked 38th in population, the Gem State received the 13th spot due to its 206 housing units that went into foreclosure in October. With 776,683 total housing units, the state’s foreclosure rate was one in every 3,770 households. The counties with the most foreclosures per housing unit were (from highest to lowest): Washington, Gooding, and Gem.

12. New Jersey

With a foreclosure rate of one in every 3,716 homes, the Garden State ranked 12th for highest foreclosure rate in October. The 11th most populous state contains 3,775,842 housing units, of which 1,016 went into foreclosure. The counties with the most foreclosures per housing unit were (from highest to lowest): Sussex, Cumberland, and Atlantic.

11. Texas

The Lone Star State withstood 3,441 foreclosures in October. With a foreclosure rate of one in every 3,456 households, this puts the second-most populous state in the U.S., with a whopping 11,890,808 housing units, into 11th place. The counties with the most foreclosures per housing unit were (from highest to lowest): Liberty, San Jacinto, and Franklin.

Recommended: Your 2025 Guide to All Things Home

10. California

The country’s most populous state ranked 10th for highest foreclosure rate in October. Of its impressive 14,532,683 housing units, 4,265 went into foreclosure, making the Golden State’s foreclosure rate one in every 3,407 households. The counties with the most foreclosures per housing unit were (from highest to lowest): Shasta, Mendocino, and Kings.

9. Utah

The Beehive State placed ninth for highest foreclosure rate in October. Of its 1,193,082 housing units, 364 homes went into foreclosure, making the 17th most populous state’s foreclosure rate one in every 3,278 households. The counties with the most foreclosures per housing unit were (from highest to lowest): Tooele, Millard, and Box Elder.

8. Maryland

Ranked 18th for most populous state, America in Miniature took eighth place for highest foreclosure rate in October. With a total of 2,545,532 housing units, of which 778 went into foreclosure, the state’s foreclosure rate was one in every 3,272 households. The counties with the most foreclosures per housing unit were (from highest to lowest): Baltimore City, Calvert, and Somerset.

7. Iowa

The Hawkeye State had the seventh highest foreclosure rate in October. With 443 out of 1,427,175 homes going into foreclosure, the 31st most populous state’s foreclosure rate was one in every 3,222 homes. The counties with the most foreclosures per housing unit were (from highest to lowest): Wapello, Tama, and Cherokee.

6. Ohio

The Buckeye State placed sixth in October with a foreclosure rate of one in every 3,079 homes. With a sum of 5,271,573 housing units, the seventh-most populous state had a total of 1,712 filings. The counties with the most foreclosures per housing unit were (from highest to lowest): Fayette, Knox, and Seneca.

5. Nevada

Ranked 32nd in population, the Silver State took the fifth spot for highest foreclosure rate in October. With one in every 2,747 homes going into foreclosure, and a total of 1,307,338 housing units, the state had 476 foreclosure filings. The counties with the most foreclosures per housing unit were (from highest to lowest): Lyon, Churchill, and Mineral.

4. Delaware

The sixth-least populous state in the country, the Small Wonder nabbed fourth place in October. With one in every 2,710 homes going into foreclosure and a total of 457,958 housing units, the state saw 169 foreclosures filed. Having only three counties in the state, the most foreclosures per housing unit were (from highest to lowest): Kent, New Castle, and Sussex.

3. Illinois

The Land of Lincoln had the third-highest foreclosure rate in all 50 states in October. Of its 5,443,501 homes, 2,118 went into foreclosure, making the sixth-most populous state’s foreclosure rate one in every 2,570 households. The counties with the most foreclosures per housing unit were (from highest to lowest): Clinton, Lee, and Coles.

2. South Carolina

The 23rd most populous state had the second-highest foreclosure rate in October with one in every 1,982 homes going into foreclosure. Of the Palmetto State’s 2,401,638 housing units, 1,212 were foreclosed on in October. The counties with the most foreclosures per housing unit were (from highest to lowest): Dorchester, Lee, and Spartanburg.

1. Florida

The third-most populous state in the country has a total of 10,082,356 housing units, of which 5,512 went into foreclosure. This puts the Sunshine State’s foreclosure rate at one in every 1,829 homes and into first place in October. The counties with the most foreclosures per housing unit were (from highest to lowest): Osceola, Charlotte, and Okeechobee.

The Takeaway

Of all 50 states, Florida had the most foreclosure filings (5,512), and South Dakota had the least (15). As for the states with the highest foreclosure rates, Florida, South Carolina, and Illinois took the top three spots.

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.

---

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

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

*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.

External Websites: The information and analysis provided through hyperlinks to third-party websites, while believed to be accurate, cannot be guaranteed by SoFi. Links are provided for informational purposes and should not be viewed as an endorsement.

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