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Consider the standard unsung driveway at most U.S. homes. Could it pave the way to something better? While the primary function of driveways is usually parking, they can also offer recreation space for children and pets, increase property values, and enhance curb appeal.

Both building and maintaining a driveway are costs of owning a home that could benefit from financial planning and weighing options for materials, location, and design. Here’s a breakdown of key driveway ideas to help make your home improvement dream a reality.

1. Choosing a New Surface

Figuring out what material to use is a logical starting point when approaching new driveway ideas.

The chosen surface will affect the project’s cost in terms of the material itself, labor to install it, and how it will be maintained for years to come. The local climate is another factor to consider, as it plays into the durability and drainage of certain surface materials.

Let’s take a closer look at the pros, cons, and considerations for some popular driveway surfaces, including what to budget for.

Asphalt

Asphalt is a leading material used for roads and driveways alike for several reasons. The smooth finish to asphalt can present a polished look that is also easy to clean. At the same time, it offers good traction for vehicles, which is a big plus for sloped driveways in particular.

Asphalt comes with some downsides, too. The leading concerns stem from frequency and cost of long-term maintenance, as resurfacing is recommended every two years. Runoff is another potential issue, but adding drainage and landscaping to capture water can help remedy the environmental impact.

The local climate can play a role in picking a material, too. Generally, asphalt is better than other surfaces in colder climates. Specifically, it is advantageous for snow plowing and handling freezing temperatures and ice. Think of it as a way of winterizing your property.

On average, asphalt costs from $7 to $13 per square foot, and much of the price can be attributed to the labor and heavy machinery required.

Concrete

Given its prevalent use in public sidewalks, it may come as no surprise that concrete is also a popular material for driveways.

On the positive side, concrete driveways can be installed quickly, offer good traction, and may last for several decades with proper maintenance, such as annual resealing to prevent cracks. Concrete is also well suited for warmer climates because it doesn’t hold heat as long as asphalt.

Conversely, concrete is not the cheapest material and can be prone to runoff, which is a concern for homeowners in regions with heavy precipitation.

Concrete driveways may range from $4 to $15 per square foot, with an average cost of $6 per square foot, according to HomeAdvisor. Factors that may increase costs include removing an existing driveway or adding reinforcement, which may be necessary if heavy vehicles like RVs are present.

Concrete requires less machinery and is safer to work with than asphalt, so construction-savvy homeowners with smaller driveways may opt to install the component concrete slabs themselves to see further savings.

If concrete doesn’t sound like the ideal aesthetic, there are options to customize a driveway to your liking. Spruce-ups include using stained or tinted concrete, adding a decorative stone border, and integrating a patchwork of unpaved greenery, which can also help with drainage.

Recommended: Home Renovation and Remodeling Cost Calculator

Gravel

Gravel may vary in composition and rock type, but generally speaking, it can be thought of as a mixture of loose stone. It is a common material used in pathways and playgrounds but can be applied to driveways as well.

Of all the surface options, gravel is typically the cheapest and most DIY-friendly. The cost varies by the need to clear land and type of stone, but the expected price is roughly $1 to $2 per square foot without serious excavation.

Though gravel driveways can require some topping up and reconfiguration as stones move around, it is incredibly durable and does not need costly maintenance.

Gravel may be well suited for a rustic aesthetic in rural areas, but it may be less appropriate or feasible in more urban areas and housing developments. Furthermore, gravel may not lend itself to shoveling and plowing snow from the driveway without clearing away stone.

To determine the total gravel needed, a general rule of thumb is to have at least 4 inches of coverage, though more may be necessary for extra drainage.

Stone and Brick

Stone and brick have been used for roads and as building materials for centuries.

Using stone and brick for a driveway can create a historic and refined appearance and raise the property value. Also, the ability to integrate patterns, design elements, and colors into the stone or brickwork can complement the design of a home more than other materials might.

Beyond the visual appeal, the materials can endure for decades, and maintenance can be done one stone or brick at a time instead of resealing or paving the entire surface.

The primary drawback of stone or brick driveways is cost of materials and installation. Depending on the quality of stone or brick, expect to pay between $10 and $30 per square foot. Higher-end stones can fetch a significantly heftier price tag.

Permeable Pavement

Recent advances in engineering have made permeable paved surfaces an affordable reality for parking lots, roadways, and driveways.

Permeable pavement can come in several forms, including porous asphalt and pervious concrete. The pores drain water to the stone bed below, helping the water filtrate toxins naturally instead of running off to pollute waterways via storm drains.

The majority of benefits of asphalt and concrete apply, but permeable pavement can be slightly more expensive to install and needs to be vacuumed with professional-grade equipment every one or two years to remove debris and sediment from the pores. Often, permeable-pavement companies offer vacuuming and inspection services after installation.

In addition to the environmental benefits, homeowners may be eligible for tax rebates and other financial incentives from their local government for pursuing the greener option.

For instance, Palo Alto, California, has a rebate of $1.50 per square foot of permeable pavement installed.

Recommended: 7 Important Factors That Affect Property Value

2. Landscaping

Whether updating a driveway or building a new one, driveway ideas extend beyond the surface itself. Landscaping can be tied in with the project to beautify the space and reduce runoff.

Depending on how ambitious the project is, you may be able to handle part or all of the landscaping yourself. While this is an opportunity to have fun and be creative, maintenance is another important consideration.

For example, choosing perennial plants that regenerate each year and shrubs that will not quickly outgrow the space could add color and greenery without putting hedge trimming and spring planting on your to-do list.

Planting perennial species that develop deep root systems, such as black-eyed Susan and bee balm, can increase the garden’s ability to hold water and prevent flooding. This could also mitigate one of the most common home repair costs — foundation repair. In some cases, those repairs could cost up to $40,000.

3. Adding Lighting

Changing up the lighting in and around the driveway area can create a more stylized setting, as well as enhance safety and functionality for entering and leaving the home.

When choosing the type of lighting, you may want to consider the upfront cost of the unit and operational expenses of electricity and replacement. LED lights are a sustainable and cost-effective driveway idea for the long run, thanks to greater efficiency and a longer lifespan than incandescent and CFL bulbs.

Installing a combination of accent and overhead lighting allows the option to adjust the setting with the flip of a switch. Syncing the lighting with either motion sensors or timers can lower the electric bill and reduce light pollution to keep the neighbors happy.

4. Building a Gate

Topping off a driveway improvement with a gate is another way to highlight a home’s curb appeal and improve safety.

Gates may provide peace of mind by giving control of who enters the home. They can also help ensure that children and pets have a safe area to play in without worry of them venturing into the street.

Convenience and safety can also be added by prominently featuring the house number on the gate or pillar structure, which may help visitors and emergency services find the home more easily.

Spatial considerations, such as distance to the road, driveway width, and landscaping, will influence whether a sliding or swinging gate or vertical lift gate makes the most sense.

5. Maintaining the Driveway

A driveway is an investment, and taking proper care can help retain its value and reduce maintenance costs over time.

Depending on the type of driveway, here are some general measures to stay on top of upkeep:

•   Seal the driveway as recommended to prevent cracks.

•   Remove weeds from cracks in the surface.

•   Clean and fill cracks.

•   Fill in pothole depressions caused by heavy vehicles.

For colder climates, taking care of ice is important for personal safety and driveway maintenance alike. Removing snow promptly and spreading sand, salt, or a de-icing agent helps with traction and prevents ice from forming in driveway cracks.

Checking Local Permitting and Zoning

Local governments and homeowner associations (HOA) may have zoning and permitting guidelines that dictate where a driveway can be placed and what it can look like.

A zoning requirement could specify that a driveway must be at least 5 feet from the property line or that an expansion of an existing driveway requires zoning board approval.

HOA rules can be stricter and more specific. They might govern the type of surface material, adjacent landscaping, and ability to install a gate.

Checking that your desired improvements comply with such regulation could save time, money, and frustration.

Paying for Driveway Improvements

Deciding how to pay for driveway improvements is another important step. Like most home repairs, fixing the driveway could become more expensive as the problem gets worse.

Unexpected repair costs can do a number on a monthly budget. In fact, only 4 in 10 Americans would pay a $1,000 surprise expense from their savings, borrowing that money instead.

If you fall into this category, you still have options. Instead of depleting your savings account or pushing it off for future credit card payments, personal loans could spare you the high interest rates.

For revamping or building a driveway, a home improvement loan is another option to consider.

SoFi offers home improvement loans that don’t require home equity as collateral. Additionally, fixed-rate payments can help keep you on track and align with your budget.

Need to give your driveway a facelift? Learn how a home improvement loan from SoFi could make it happen.

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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.

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.

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

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Getting mortgage preapproval can give you an edge in the home-buying process, especially when the housing market is tight. A mortgage preapproval from a lender lets sellers know that you have tentatively been approved for a specific loan type and amount. Not only does this show that you’re a serious home shopper, it also helps give you a good sense of your budget as you go house-hunting.

Here, you’ll learn the ins and outs of how to get preapproved for a home loan, including:

•   What is mortgage preapproval?

•   How do mortgage preapproval and prequalification compare?

•   What are the pros and cons of mortgage preapproval?

•   How can you improve your chances of getting preapproved for a mortgage loan?

•   What can you do if you aren’t preapproved for a mortgage?

What Is Mortgage Preapproval?

Mortgage preapproval involves a thorough review of your credit and financial history. If you look like a good candidate for a mortgage, a lender will issue a letter stating that you qualify for a loan of a certain loan amount and at a certain interest rate. The letter is an offer, but not a commitment, to lend you a specific amount. It’s good for up to 90 days, depending on the lender.

You’ll want to shop for homes within the price range of your preapproved mortgage. Armed with your preapproval for a home loan, you can show sellers that you are a serious buyer with the means to purchase a property. In the eyes of the seller, preapproval can often push you ahead of other potential buyers who have not yet been approved for a mortgage and make it easier to compete when there are multiple offers on a house.

Once you find a house that you want to buy, you can make an offer immediately based on the loan amount for which you are preapproved. And if the seller accepts, it will be time to finalize your mortgage application. At this point, a loan underwriter will review your application and conduct other due diligence measures, such as having the house appraised to make sure it is valued at the price it’s selling for. If all goes well, the lender will issue another letter called a commitment letter, which officially seals the deal on your loan, and you can schedule a closing date.

When Should I Get Preapproved for a Home Loan?

Preapproval typically lasts for 90 days, at most, so you want to seek it when you are actively in the market for a new home. Maybe you’ve done some initial online research into available properties. Hopefully, you’ve also had a good look at your finances and thought about how much you have available to spend on a down payment as well as what amount of monthly mortgage payments you can afford long-term. It takes around 10 days after you submit a request to be preapproved, so factor that timing into your house search as well.

Mortgage Preapproval vs. Prequalification

If you are house hunting, you will likely hear two different terms regarding early mortgage moves: prequalification vs. preapproval. Prequalification is a simple, less involved view of your financial qualifications for a mortgage. Preapproval for a home loan is a more in-depth review of your finances and an indicator that your loan application will likely move forward smoothly. Each has its advantages, and its moment.

Mortgage Prequalification

Getting prequalified for a home loan involves a review of a few financial details — usually self-reported — such as income, assets, and debt. The lender will then estimate how much of a mortgage you can afford.

Pros of Mortgage Prequalification

•   It’s fast. The process can often be done in minutes, by phone or online.

•   You’ll zero in on house prices. Prequalifying for a home loan quickly gives you an idea of what your monthly payment might be and how much house you can afford.

•   You can shop around. You can prequalify with multiple lenders to see what types of terms and interest rates they offer.

•   It’s easy on your credit score. Prequalification will not affect your credit score because it only requires a “soft inquiry” into your credit record.

Cons of Mortgage Prequalification

•   It’s no guarantee. Because it is an unverified, high-level look at your finances, prequalification doesn’t ensure that you will actually qualify for a mortgage.

•   It won’t help you bargain. Being prequalified won’t help you negotiate a lower price with a seller or compete against other bidders in a competitive market.

Mortgage Preapproval

Requesting a mortgage preapproval is a more complicated process than getting prequalified. You’ll have to fill out an application with your chosen lender and agree to a credit check. The credit check will be a “hard pull” which will ding your credit score by a few points. You’ll also provide information about your income and assets. The evaluation process can take 10 days or more. Again, preapproval doesn’t mean it’s a done deal that you’ll get the loan, but it is a solid indication of your financial situation and ability to purchase a home.

There are a number of advantages to getting preapproval for a home loan, especially if you’re shopping in a fast-moving market.

Pros of Mortgage Preapproval:

•   It gives you an edge. Sellers will see that you are a serious buyer and have assurance that your financing won’t fall through and sink the deal.

•   It helps you get loan shopping done. When you’ve found your dream house, you don’t want to delay putting in an offer because you have to spend time getting your documents together and pursuing a loan. Going through the preapproval process helps you take care of these details before you’re in a fast-moving market.

Cons of Mortgage Preapproval:

•   A mortgage preapproval expires. How long does a mortgage preapproval last? As noted above, the letter is only good for a certain period of time, usually 90 days, so you’ll want to make sure you’re seriously ready to start shopping once you have your mortgage preapproval in hand.

•   The application is time-consuming. You’ll need to provide a lot of documentation to get a mortgage preapproval and agree to a hard credit inquiry, which can drag down your credit score, though usually only by a bit.

•   Nothing is guaranteed. Even though your home loan preapproval letter likely has details on your loan amount and type, it is only tentative approval — you still can’t be 100% sure that you will get the loan.

Here are the basic comparison points of prequalification vs. preapproval:

The Difference Between Prequalification and Preapproval

	Prequalification	Preapproval
Process	•   Simple process that takes only a few minutes online or by phone.	•   You’ll fill out a thorough application and provide documents. The process can take 10 days or more.
Required materials	•   High-level financial details you provide; sometimes a “soft” credit check which won’t impact your rating.	•   Full application and supporting financial documents, as well as a “hard pull” credit check that will ding your rating.
Benefits	•   Can give you an idea of what you can afford as you start the process. •   Lets you compare lenders and rates.	•   Tentatively approves you for a loan amount and type. •   Can provide leverage when you’re ready to get serious about buying.
Drawbacks	•   Won’t give you an advantage in negotiations or a bidding war. •   It’s no guarantee you’ll get a mortgage.	•   Preapproval is good for 90 days so your home-finding timeline may be affected. •   Does not guarantee you’ll get the loan.

Steps to Get Preapproved for a Home Loan

Getting preapproved for a home loan will take some time, so it’s good to get the process started before you are ready to make an offer on a home. Here are some important steps along the way.

Check Your Credit Score

If you’ve established a credit history, a first step before applying for a mortgage is to check your credit reports, which are a history of your credit compiled from sources like banks, credit card companies, collection agencies, and the government.

The information is collected by the three main credit reporting bureaus: TransUnion®, Equifax®, and Experian®. You’ll want to make sure that the information on your credit reports is correct. Ordering the reports is free once a year through AnnualCreditReport.com .

If you find any mistakes in your credit report, contact the credit reporting agencies immediately to let them know. You don’t want any incorrect information weighing down your credit score, putting your chances for preapproval at risk.

The free credit reports provided by the nationwide credit reporting agencies do not include your credit score, a number typically between 300 and 850. You can purchase your score directly from the credit reporting agencies, or from FICO®. Your credit card company also may provide your credit score for free, or you could try a money tracker app that updates your credit score weekly and tracks your spending at no cost.

Calculate Your Potential Mortgage

To help with the prequalification and preapproval process, use the mortgage calculator below to see what your estimated monthly mortgage would be based on down payment, interest rate, and loan terms.

Gather Documentation

Your credit score is only one of many factors a potential lender will consider when deciding on your mortgage qualification. So collect the many other documents you will need to paint a full picture of your financial life. Ask the lender what is needed, specifically. The list will likely include:

•   Recent pay stubs

•   Recent bank and investment account statements

•   Two years of tax returns and/or W2s, possibly more if you are self-employed

•   Verification of alimony or child support payments received and the court documents spelling out the terms of the payments

•   Social Security award letter, if you derive income from Social Security

•   Certificate of Eligibility from the VA, if you are applying for a VA loan

•   Gift letter documenting any money you are receiving from family or other sources toward a down payment

Receive Your Mortgage Preapproval Letter

Your first instinct when you receive preapproval will likely be to jump for joy. Next, take a moment to ask the lender if they made any assumptions about your finances in order to issue the letter, or if they flagged anything that could lead to you being denied a mortgage later on, or that could increase your costs. Doing this could help you head off future problems that might scuttle a deal.

Upping Your Odds of Mortgage Preapproval

There are a number of steps you can take to increase your chances of preapproval or to increase the amount your lender may approve you for.

Build Your Credit

When you apply for any type of loan, lenders want to see that you have a history of properly managing your debt before offering you credit themselves.

You can build your credit history by opening and using a credit card and paying your bills on time. Or you could consider having regular payments, such as your rent, tracked and added to your credit score.

Recommended: What Credit Score Is Needed to Buy a House?

Stay on Top of Debt

Your ability to pay your bills on time has a big impact on your credit score. If your budget allows, you should aim to make payments in full.

If you have any debts that are dragging down your credit score — for example, debts that are in collection — it’s smart to work on paying them off first, as this could help build your score.

Recommended: Fixed-Rate vs. Adjustable-Rate Mortgages

Watch Your Debt-to-Income Ratio

Your debt-to-income ratio is your monthly debt payments divided by your monthly gross income. If you have $1,000 a month in debt payments and make $5,000 a month, your debt-to-income (DTI) ratio is $1,000 divided by $5,000, or 20%.

Mortgage lenders typically like to see a DTI ratio of 36% or less. Some may qualify borrowers with a higher DTI, up to 43%. Lenders may assume that borrowers with a high DTI ratio will have a harder time making their mortgage payments.

If you’re seeking preapproval for a mortgage, it may be beneficial to keep the ratio in check by avoiding large purchases. For example, you may want to hold off on buying a new car until you’ve been preapproved.

Prove Consistent Income

Your lender will want to know that you have enough money coming in each month to cover a potential mortgage payment, so the lender will likely want proof of consistent income for at least two years (that means pay stubs, W-2s, etc.).

For some potential borrowers, such as freelancers, this may be a tricky process since they may have income from various sources. Keep all pay stubs, tax returns, and other proof of income, and be prepared to show those to your lender.

What Happens If Your Mortgage Preapproval is Rejected?

Rejection hurts. But if you aren’t preapproved or you aren’t approved for a large enough mortgage to buy the house you want, you also aren’t powerless. You can ask the lender why it said “no.” This will give you an idea about what you might need to work on in order to secure the mortgage you want.

Then you may want to work on the factors that your lender saw as a sticking point to preapproval. You can continue to work to build your credit score, lower your DTI ratio, or save for a higher down payment.

If you’re able to pay more upfront, you will typically lower your monthly mortgage payments. Once you’ve worked to make yourself a better candidate for a mortgage, you can apply for preapproval again.

The Takeaway

In a competitive market, having a mortgage preapproval letter in hand may give a house hunter an edge. After all, the letter states that the would-be buyer tentatively qualifies for a home loan of a certain amount.

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 happens during the preapproval process?

During the mortgage preapproval process you’ll provide lots of background information on your finances. A potential lender will also check your credit score. If the lender feels you’re a suitable candidate for a loan, you’ll receive a letter that you can show a seller to better your chances when making an offer on a home.

Do preapprovals hurt your credit score?

The lender will do a “hard pull” to obtain your credit score prior to a preapproval. This may cause your rating to drop by a few points, but it should rebound quickly if you pay your bills on time.

How far in advance should I get preapproved for a mortgage?

Get preapproved for a mortgage when you have a sense of the housing costs where you are shopping for a home, and you are ready to start looking in earnest.

Which is better preapproval or prequalification?

Prequalification and preapproval each have a place in the homebuying process. Prequalification is helpful when you are trying to get a sense of what you can afford and which lender might offer the best terms. It’s time for preapproval when you are serious about searching for a home and have researched possible lenders.

Is it OK to get multiple preapprovals?

You only need one preapproval, but it is fine to get a few if you want to see what loan amounts and rates you might qualify for. Make all applications within a 45-day window — the time frame during which multiple lenders can check your credit without each check having an additional impact on your score.

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*SoFi requires Private Mortgage Insurance (PMI) for conforming home loans with a loan-to-value (LTV) ratio greater than 80%. As little as 3% down payments are for qualifying first-time homebuyers only. 5% minimum applies to other borrowers. Other loan types may require different fees or insurance (e.g., VA funding fee, FHA Mortgage Insurance Premiums, etc.). Loan requirements may vary depending on your down payment amount, and minimum down payment varies by loan type.

SoFi 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 for more information.

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.

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 .

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.

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.

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Congratulations on the new home. But hang on. The garbage disposal isn’t working as it should and the hot water doesn’t seem to be hot anymore. A home warranty can ease the headaches and financial strain of fixing or replacing appliances and home systems, but any contract will require much more than a glance.

A policy can be purchased directly from a home warranty company at any time, not just upon a move-in. In some cases, the seller may provide a home warranty with the sale of the home.

Home warranties can help protect new homeowners and existing owners from troubles here and there, but is a home warranty really worth it?

What Exactly Is a Home Warranty?

A home warranty—different from homeowners insurance—covers specific items such as home systems (things like the HVAC system), washers and dryers, kitchen appliances, pool equipment, garbage disposals, and exposed electrical work.

Homeowners insurance, on the other hand, covers theft and damage to a home from perils like fire, wind, and lightning strikes.

While homeowners insurance is typically required by a mortgage company, home warranties are optional.

Price of a Home Warranty

The cost of a home warranty can range from $350 to $600 a year, possibly more for coverage for items not on the stock home warranty list. Extras may include pool systems and septic systems.

Those who purchase a home warranty will pay that annual premium. If they do call in a service provider, they will likely have to pay a fee for service calls, too.

Depending on the extent of the issue, the service call may cost anywhere from $60 to $125.

Recommended: How Much Are Closing Costs on a New Home?

Pros of a Home Warranty

While the above fee may seem pricey, the real pro of having a home warranty is it could save a homeowner a bundle on repairs in the future. HomeAdvisor reports that the average national cost to replace an HVAC system ranges from $5,000-$10,000, and a new water heater ranges from $872-$1,745. Both of these items would likely be covered under a home warranty.

Another benefit of a home warranty is pure convenience. If something breaks, a homeowner calls the warranty company, which will likely have a list of technicians at the ready. This means homeowners won’t have to spend time researching and vetting the right people for a repair or replacement. As the saying goes, time is money.

Then there’s resale value. When selling a home, homeowners with a home warranty may be able to transfer the warranty to the new owner, which could be a bargaining chip for those attempting to sell an older home. (Some home warranties are non-transferable, so it’s up to sellers to do their due diligence when adding this to the deal.)

Cons of a Home Warranty

A downside of a home warranty is that it can be complicated to understand. Every purchaser should carefully read the contract before signing and ask all the questions they need to in order to understand the warranty.

For example, a home warranty may come with a financial limit per repair or per year. If someone ends up having one heck of a year with the appliances, some of those repairs may not be covered.

Recommended: Most Common Home Repair Costs

You may need to request additional coverage for appliances that are considered optional or replaced frequently. And will your Sub-Zero fridge and Wolf range be covered if they go kaput? (Not likely.) Most warranty companies list excluded items on their sample contracts.

Ask: Will the plan repair or replace a broken item? If a repair is considered too expensive, the provider might offer to replace the broken item—but give you only the depreciated value.

Claims can also be denied by the warranty company for a variety of reasons, including if it believes an appliance hasn’t properly been maintained. The warranty company can also ultimately decide if a problem is worth fixing or not, despite how the homeowner feels about the situation.

Home warranties also cannot guarantee timeliness. If something breaks, homeowners may have to wait longer than they’d like to get it fixed.

Home warranties will also likely not cover preexisting conditions. If a person moves into a home with a termite problem, the warranty will likely not cover the cost to repair issues. Before you sign the warranty, the company will probably come inspect all the items covered, and could deny coverage for certain items.

Choosing the Right Home Warranty

Choosing the right home warranty comes down to personal choice and research. It’s important to look into each contract to see what is covered, what isn’t, the cost of services, and more.

While searching for the right home warranty, it may be best to go beyond online reviews. Rather than looking on public listings, head over to websites like the Better Business Bureau and search for individual companies.

Is a Home Warranty Really Worth It?

A home warranty could be the right call for people who are not up for having to perform repairs themselves or don’t have time to hire technicians.

For those buying a new construction, a home warranty may likely be unnecessary as many newer homes come with some type of guarantee. Also, because everything is newer, it may be less likely to break early on.

Individual appliances may also come with their own warranties, so make sure to check each one to see if it’s still protected before spending extra money on it with a home warranty.

One more way to figure out if a home warranty is worth it is to check out the home’s inspection report. If there are red flags about a home’s condition, it may be a good idea to purchase a home warranty to cover any additional expenses that crop up.

Alternatives to Home Warranties

If homeowners are worried about protecting their investment but aren’t sure a home warranty is right for them, there is an alternative: Build up an emergency fund.

Homeowners can start stashing away cash into an emergency savings fund that they can dip into whenever they need repairs done. This acts as their own “home warranty” without having to pay a premium to a company.

To take it one step further, homeowners could also create a spreadsheet with the names of repair workers when they need something fixed.

The Takeaway

Are home warranties worth it? Anyone looking into purchasing one will want to take a close look at the annual cost, the charge for service calls, exactly what is and isn’t included, and how much of a replacement item is covered.

If you’re a new homebuyer, SoFi Protect can help you look into your insurance options. SoFi and Lemonade offer homeowners insurance that requires no brokers and no paperwork. Secure the coverage that works best for you and your home.

Learn more about your homeowners insurance options with SoFi Protect.

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Social Finance, Inc. ("SoFi") is compensated by Experian for each customer who purchases a policy through Experian from the site.

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

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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.

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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Legislation providing for a tax credit for first-time homebuyers was introduced in Congress in 2021 but is still making its way through Congress as of June, 2023. A revamp of the first-time homebuyer tax credit from 2008, the proposed First-Time Homebuyer Act of 2021, would modify the first-time homebuyer tax credit, increasing the allowable dollar amount of the credit from $8,000 to $15,000.

Unfortunately, this bill hasn’t passed, so there is currently no federal tax credit for first-time homebuyers. (A separate bill, the Downpayment Toward Equity Act of 2021, was introduced in the House of Representatives and the Senate in 2021, provides financial assistance specifically to first-generation homebuyers to help them purchase a home that they would occupy. This hasn’t passed either.)

Here’s everything you need to know about the history of the first-time homebuyer credit and what the future may hold.

What Is the First-Time Homebuyer Tax Credit?

The first-time homebuyer tax credit refers to a tax credit given in tax years 2008, 2009, and 2010 worth up to $8,000. It’s possible the term may also be used in the future as legislation for a new first-time homebuyer tax credit was introduced in the House of Representatives in April 2021.

The new proposed first-time homebuyer tax credit would typically be worth up to $15,000 for buyers whose adjusted gross income doesn’t exceed 160% of the median income for the area.

Recommended: The Cost of Living By State

First-Time Homebuyer Act of 2008

For first-time homebuyers who purchased a home between April 9, 2008, and May 1, 2010, a one-time tax credit of 10% of the purchase price, up to $7,500 in 2008 and increased to $8,000 in the next two years, was available. It was part of the Housing and Economic Recovery Act of 2008. The credit was for home purchases of up to $800,000 and phased out for individual taxpayers with higher incomes.

For home purchases made between April 9 and Dec. 31, 2008, the credit had to be repaid over 15 years, making it more of an interest-free loan than a true credit. Homebuyers taking advantage of the tax credit in the following years had repayment of the credit waived. Homebuyers who left the property before a three-year period were required to repay a portion of the credit back to the IRS.

Proposed First-Time Homebuyer Act of 2021

The First-Time Homebuyer Act of 2021 would allow qualified buyers a refundable tax credit of $7,500 for individuals and $15,000 for married couples filing jointly.

This bill amends the 2008 law to allow for higher purchase prices, revises the formulas for income, and revises rules pertaining to recapture of the credit and to members of the armed forces. It was introduced in the House by Rep. Earl Blumenauer of Oregon in April 2021 but is not yet law as of June 2023.

What Can Be Deducted After Buying a Home?

Amounts eligible for the proposed tax credit would include the purchase price of the home. The amount of the credit is 10% of the purchase price.

Given that the maximum is $7,500 per individual and $15,000 per married couple filing jointly, if you and your spouse purchased a home with a mortgage loan of $500,000, the 10% credit would amount to $50,000. You would receive a tax credit of $15,000 if you filed jointly.

If you purchased a home for $102,000 with a spouse, 10% of that would be $10,200. You would be able to claim $10,200 for the credit if you filed jointly.

Here are some possible deductions now for homeowners who itemize, though most taxpayers take the standard deduction instead:

•   Mortgage interest on up to $750,000 of mortgage debt (or up to $375,000 if married and filing separately), including discount points paid to reduce the interest rate on the mortgage.

•   Up to $10,000 of property taxes when combined with state and local taxes.

•   Home office if you’re self-employed or a business owner but not an employee of a company.

If you sell your main home and have a capital gain, you may qualify to exclude up to $250,000 of that gain from your income, or up to $500,000 if you file a joint return with your spouse.

Recommended: Mortgage Interest Deduction Explained

Who Is Eligible for the First-Time Homebuyer Act of 2021?

First-time homebuyers purchasing a principal residence would be eligible for the tax credit. Not your first time buying a house? You may still be able to qualify.

A first-time homebuyer is defined as someone who has not owned an interest in a property for the past three years. So even if you had owned a home in the past, you might be eligible to receive this credit if it hadn’t been in the last three years.

Other qualifications include:

•   A modified adjusted gross income that is under 160% of the area median income.

•   Purchase of a property that is not above 125% of the area median purchase price.

•   Must live in the home as a principal residence for the tax year.

•   Must be over 18 years of age.

To note: If you claimed a first-time homebuyer credit under the 2008 law, you would be able to claim it again. But you could claim the new credit only once, for a first purchase. Also be aware that a copy of the settlement statement must be attached to your taxes.

How Does the Tax Credit Work?

If the bill passed, the new homeowner would file for the first-time homebuyer tax credit on their taxes. The credit would first be used to offset any taxes owed by the homebuyer. Then, as a refundable tax credit, the homebuyer would get money back on top of the amount of the credit after their tax bill had been paid.

For example, if you owed $4,000 in taxes after accounting for withholdings, and you qualified for a $15,000 tax credit, you’d apply that toward the amount you owe in taxes. You would get the rest back ($11,000) from the IRS.

Taxpayers must stay in the home for the duration of the tax year in order to receive the credit. If the property is sold within four years, taxpayers may need to pay a portion of the tax credit back. The amount is subject to a schedule, which is as follows:

•   Dispose of property before the end of Year 1: Repay 100% of the credit

•   Dispose of property before the end of Year 2: Repay 75% of the credit

•   Dispose of property before the end of Year 3: Repay 50% of the credit

•   Dispose of property before the end of Year 4: Repay 25% of the credit

Homebuyer Tax Credit vs Homebuyer Grant

Another first-time homebuyer program has been introduced in Congress to help with the costs of obtaining a home. The Downpayment Toward Equity Act would award a grant of up to $25,000 to first-generation homebuyers who come from socially and economically disadvantaged groups.

The down payment would need to be for a principal residence and would not need to be repaid after 60 months of occupancy. More details on the two proposed programs can be found below:

First-Time Homebuyer Act of 2021	Downpayment Toward Equity Act of 2021 Grant
Available to homeowners who have not owned a home in the last three years	Available to first-generation homebuyers, meaning individuals whose parents do not currently own residential real estate or individuals who have been placed in foster care at any time
Credit against taxes of 10% of the purchase price, up to $15,000, available as a refundable tax credit	Up to $25,000 available, and possibly more for high-cost areas
For buyers whose income doesn’t exceed 160% of the median income for the area	Income may not exceed 120% of the median income for the area, except in high-cost areas, where the limit increases to 180%
Must be a principal residence	Must be principal residence
No specified number of units	1-4 units will qualify
Allowed on purchase amounts up to 125% of the median purchase price of a home	Must come from a socially and economically disadvantaged group
Must not dispose of the residence before the end of the tax year. Has a schedule for amount of the credit that is recaptured if the home is sold in a certain period of time	After 60 months of occupancy, the grant does not need to be repaid
Has been introduced in the House and has been referred to the Ways and Means Committee. Has not passed as of early 2023	Has been introduced in the House but has not passed as of early 2023
Must be at least 18 years of age	Assistance can be used for the costs to acquire the mortgage as well as home modification costs for those with disabilities
Must attach the settlement statement to your taxes	Can be combined with other assistance programs, such as the first-time homebuyer tax credit

Help for First-Time Homebuyers

Although new federal legislation hasn’t yet delivered support to first-time homebuyers, there are other first-time homebuyer programs that can help with costs.

A first-time homebuyers guide will walk you through the process of buying your first home and help answer questions.

Are you crunching numbers? Try this mortgage calculator tool. Keep in mind that some private lenders (like SoFi) allow a down payment for first-time buyers that may be even lower than FHA loans.

The Takeaway

A first-time homebuyer tax credit of up to $15,000 has been proposed for qualified buyers. That would take some of the pressure of taking the plunge into homeownership. But Congress has not passed legislation to put the credit in place.

If home buying remains mysterious, the SoFi loan help center can help clear the fog.

SoFi Mortgages: simple, smart, and so affordable.

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Photo credit: iStock/monkeybusinessimages
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 for more information.

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.

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If you’re working and want to continue school but aren’t sure how to fund it, your employer may offer assistance.
It’s called tuition reimbursement, and it’s how many companies help employees pay for continuing their education. Tuition reimbursement programs are growing in popularity as companies work to attract and retain employees.

What is tuition reimbursement? It’s when companies such as Starbucks, Amazon, Target, and more offer programs to help employees pay for a portion of their educational costs. These programs vary by company. Some may only cover course costs if the path of education is related to your job. Others may require employees to remain with the company for a certain period of time after completing their degree.

If you’re wondering, how does tuition reimbursement work?, read on to learn the tuition reimbursement meaning and to find out the requirements involved.

What Is Tuition Reimbursement?

Tuition reimbursement, or tuition assistance, is an arrangement where an employer pays for part or all of an employee’s continuing education whether undergraduate degrees or graduate school.

How does tuition reimbursement work? Your employment contract may lay out the terms of the tuition reimbursement: how much of your tuition your company will cover, what courses qualify, any minimum GPA requirements, and the minimum time period of employment.

Tuition reimbursement is often offered as an employee benefit on top of a salary package, along with other benefits like health insurance, a 401(k), or transportation expenses.

This is different from student loan repayment assistance, when your company provides some amount of money toward student loans you already have.

Not every company offers tuition reimbursement, but many large ones do provide reimbursement or financial support for continuing education. Some companies may stipulate that courses must relate to your current work.

Recommended: What Are College Tuition Payment Plans and How Do They Work?

Why Companies Offer Tuition Reimbursement

Tuition reimbursement is a perk that helps a company attract and retain employees, while also benefiting the company itself, since the courses you take may provide skills or knowledge you can put into practice at work.

Some companies are upping their educational benefits as a way to stay competitive. They may offer a range of benefits to their employees like refinancing student loans and student loan contributions.

Not sure if your employer offers tuition reimbursement? Check with your HR representative to see what options are available.

Tuition Reimbursement Requirements

The specifics of each company’s tuition reimbursement policy are likely laid out in an employment contract, but it’s common for a company to offer a tuition reimbursement only in accordance with certain eligibility requirements.

You’ll probably have to sign up and pay for the courses yourself first, so you’ll want to budget appropriately. In most cases you’ll need to pay for your courses out of pocket and then provide proof of completion and your grades in order to be reimbursed.

Program requirements

Your employer may limit its reimbursement program to certain institutions. For example, they may provide a list of accredited institutions you can choose from. Or they require that you attend a four-year program.

Coursework Requirements

Your company may reimburse you only for classes pertaining to your current job description.

Other times, companies will approve courses focused on moving you into a management role or on gaining skills you can put toward other future roles or assignments. For example, if you work in project management for a large corporation and are interested in learning how to use data visualization, you might be able to take community college courses in data production and visual graphics.

After understanding what courses qualify for tuition reimbursement, you could then look over the other requirements. For example, there may be minimum GPA or attendance requirements.

Timeframe Requirements

Sometimes a company will also require you to continue working with them for a set amount of time, since they’ve invested in your education and don’t want you to take those new skills to a competitor.

Tuition Reimbursement And the FAFSA®

An employer’s tuition reimbursement program doesn’t preclude you from filling out the Free Application for Federal Student Aid (FAFSA). In most scenarios, an employer is unlikely to cover 100% of tuition costs, and you may still qualify for aid in the form of federal loans and grants.

That said, you will be asked to note how much you are reimbursed for, which may have an effect on how much financial aid you’re offered.

Is Tuition Reimbursement Taxable?

While you should always consult with a licensed tax professional regarding the current tax law, and in no way should any of this information be considered tax advice, the IRS’ website currently states that employers can deduct the cost of tuition reimbursement (up to $5,250 annually). It’s a business expense for them. The IRS website also states that the first $5,250 of tuition reimbursement isn’t considered taxable income for employees. However, anything above that counts as part of your taxable wages and salary. Again, talking to a tax professional is always recommended.

The IRS does have some requirements on tax-free educational assistance benefits — which are not necessarily the same requirements your employer has.

Typically, for the IRS to consider tuition assistance as tax-free, it should be used to pay for tuition, fees, textbooks, supplies, or equipment.

And typically, it can’t be used for meals, lodging, transportation, or any equipment you keep after the course. It’s also not applicable to sports, games, or hobbies — unless they’re a degree requirement or you can prove they’re related to your employer’s business.

Again, consult with an accountant or tax attorney to get the complete picture.

What Are Other Options to Lower Education Costs?

The average cost of attending a four-year public college as an in-state student during the 2022-23 school year was $10,950, and that price tag only goes up for private schools and out-of-state students.

Federal Student Aid

For those who do not qualify for employer offered tuition reimbursement, there are other options that could be worth considering. As mentioned above, students can fill out FAFSA® annually. This allows them to apply for all types of federal student aid, including scholarships and grants, work-study, and federal student loans.

Private Student Loans

Beyond that, some may consider private student loans.

While one of the basics of student loans is that they offer students the opportunity to finance their education, private student loans don’t always have the same borrower protections, like income-driven repayment plans, that are afforded to federal student loans. For this reason, they are most often considered only after all other options.

Recommended: Private Student Loans Guide

Refinancing Existing Student Loans

If you already have student loans, when it comes time to repay you could consider refinancing to a lower interest rate. One of the advantages of refinancing student loans is that it could help you reduce the amount of money paid in interest over the total life of the loan; refinancing at a lower monthly payment could help with budgeting in the short term. However, lowering monthly payments is frequently the result of extending the loan term, which will result in increased cost over the life of the loan.

It’s important to know that there are various federal student loan repayment options and borrower protections (such as deferment or forbearance options). Refinancing federal loans eliminates them from these programs.

The Takeaway

Employers who offer tuition reimbursement programs will cover a portion of tuition costs if the employee meets specific program eligibility requirements. These requirements vary by company, but may include things like maintaining a minimum GPA, doing certain coursework, and stipulations around the length of employment.

Refinancing is another method that might help you lower your education costs. If you’re looking to refinance your student loans now, prequalifying online with SoFi takes just two minutes. SoFi offers student loan refinancing with low fixed and variable rates, flexible terms, and no fees.

Learn more about refinancing your student loans with SoFi.

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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.

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.

This article is not intended to be legal advice. Please consult an attorney for advice.

SoFi Student Loan Refinance
If you are a federal student loan borrower, you should consider all of your repayment opportunities including the opportunity to refinance your student loan debt at a lower APR or to extend your term to achieve a lower monthly payment. Please note that once you refinance federal student loans you will no longer be eligible for current or future flexible payment options available to federal loan borrowers, including but not limited to income-based repayment plans or extended repayment plans.

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.

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.

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