SoFi

As of 2025, only 26% of people say now is a good time to buy a house according to a Gallup poll. This is probably due to high home prices and high interest rates. The median home price currently sits at $438,357 and mortgage rates as of May 2025 are 6.86% for 30-year fixed-rate mortgages and 6.01% for 15-year FRMs.

We’ve seen higher interest rates in the past year, so now may not be the worst time to buy. However, whether or not now is a good time to buy a house depends heavily on your unique financial situation and local market dynamics.

Determining When You’re Ready to Buy

Before you assess the current real estate market and pay close attention to interest rate fluctuations, it’s important to understand your financial and personal situation.

Here are a few factors you may want to consider before deciding if a new home is a good play right now.

Making Room in the Budget

When buying a home, the first thing you’ll need to budget for is a down payment.

While 20% of the home’s value is the benchmark, you may only need 3.5% if you apply for an FHA loan. But even 3.5% can be a chunk of change. If you want to buy a $200,000 house, 3.5% is $7,000.

Your home-buying budget should be large enough to cover a down payment as well as closing costs, which typically include homeowners insurance, appraisal fees, property taxes, and any mortgage insurance.

Remaining Consistent

How long do you plan to live in the city where you’re eyeing a home? If you plan on staying in the home long-term, now could be a good time to buy because staying put will give your home time to appreciate (subject to market fluctuations).

Since mortgage lenders pay close attention to job consistency and a steady income, you may also want to consider your job security. Especially during uncertain times, it’s crucial to feel confident knowing you can make your mortgage payments every month.

💡 Quick Tip: Buying a home shouldn’t be aggravating. Online mortgage loan forms can make applying quick and simple.

Checking Your Financial Profile

It’s a good idea to check your financial profile. Doing so may help you secure better financing terms when you purchase a home. Lenders will review your credit history, debt-to-income ratio, and assets, among other factors, to determine your eligibility for a mortgage.

Lenders review your credit history to gauge your creditworthiness and the level of risk to lend you money. They look at your debt-to-income ratio to indicate how much of your income goes toward debt payments every month.

If your ratio is high, it can show you’re overleveraged, which may mean you’re not in a position to take on more debt like a mortgage. You may also face a higher interest rate.

Last, a mortgage applicant can list assets like cash and investments. The more assets you have, the less risky lenders view you.

Weighing Renting Vs. Buying

You may want to compare renting vs. buying a home.

If renting a home in your community is less expensive than buying, you may want to hold off on a home purchase. Conversely, if renting is more expensive, you may be more eager to purchase a new home.

Overall, if you find that these factors point you in the direction of homeownership, it’s possible you’re ready to buy a home and can begin determining the perfect time to pounce.

Observing Interest Rates

When determining if now is a good time to buy a house, buyers should look closely at interest rates.

Financial institutions charge interest to cover the costs of loaning money when they offer you a mortgage. The interest rate they charge is influenced by the Federal Reserve, but mortgage-backed securities are considered to be the main driver.

When interest rates are low, borrowing money is less expensive for the borrower. As interest rates rise, borrowing money becomes more costly. The government has been holding rates steady recently.

But keep in mind that the rate and terms you qualify for will depend on financial factors including your credit score, down payment, and loan amount.

And, if interest rates go down after you purchase your home, you can always choose to refinance your mortgage in hopes of getting a lower rate.


💡 Quick Tip: A home equity line of credit brokered by SoFi gives you the flexibility to spend what you need when you need it — you only pay interest on the amount that you spend. And the interest rate is lower than most credit cards.

Timing the Real Estate Market

Essentially, to time any market, you want to aim to buy low and sell high. If you’re going to buy a property, you’ll want to ideally buy when there are more sellers than there are buyers—a buyer’s market.

In a buyer’s market, buyers have an abundance of homes to choose from. This may also give you leverage to ask for more concessions from sellers eager to close a deal, such as a seller credit toward your closing costs or help covering the cost of repairs.

Conversely, in a seller’s market, real estate inventory is low and demand is high, which may drive up home prices.

To identify the current market conditions, you may want to visit real estate websites like Zillow, Redfin, Realtor.com®, or Trulia to look at inventory in your area or ZIP code.

Typically, it’s a buyer’s market if you see more than seven months’ worth of inventory.

If you see five to seven months of inventory, you’re in a balanced market that isn’t especially beneficial to buyers or sellers.

It’s a seller’s market when there is less than five months’ worth of inventory.

Recommended: How Does Housing Inventory Affect Buyers & Sellers?

Understanding Local Economics and Trends

Because prices can vary vastly vary from area to area, real estate is often considered a location-driven market. This means that general rules of thumb might not be valid in every region or city.

Also, local economics may play a role in housing demand. For instance, if a large company decides to move its operations to a city, that city may experience a housing boom that creates a spike in home prices.

That’s why hopeful buyers will want to pay close attention to the economic happenings and housing trends in their desired location.

The Takeaway

If you find a home that seems right for you, your employment is stable, and you can get a home loan with a good interest rate, buying may make sense. Then again, with interest rates and home prices still being on the high side, comparing the costs of renting and buying may be called for.

Looking for an affordable option for a home mortgage loan? SoFi can help: We offer low down payments (as little as 3% - 5%*) with our competitive and flexible home mortgage loans. Plus, applying is extra convenient: It's online, with access to one-on-one help.

FAQ

Should I buy a house before rates drop?

House prices are predicted to continue rising, though at a slower rate. If you buy a house later, you’ll probably be paying more for it. If, however, you get a mortgage now and rates go down, you can consider refinancing to get the benefit of the lower rate.

What time of year is it cheapest to buy a house?

Generally speaking, you may be able to get the cheapest deal on a house in the winter. That’s because winter tends to be the slowest season for home sales and that may give you some leverage to bargain with homeowners who are in a hurry to sell. Of course, prevailing market conditions at the time will also play into how good a price you can get.

Is it better to buy a house during a recession?

There may be advantages and disadvantages to buying a house during a recession. The house price and the interest rates are likely to be lower than they might be when the economy is stronger. However, your individual financial position and job security may not be as strong during a recession, which can lead to financial stress.

About the author

Ashley Kilroy

Ashley Kilroy is a seasoned personal finance writer with 15 years of experience simplifying complex concepts for individuals seeking financial security. Her expertise has shined through in well-known publications like Rolling Stone, Forbes, SmartAsset, and Money Talks News. Read full bio.

SOHL-Q225-176

Whether you’re relocating down the block or across the country, a lot of work and planning goes into moving. For current homeowners, there may be more logistics when they’re simultaneously buying and selling houses.

If you’re figuring out how to sell and buy a house at the same time, there are some options to choose from based on your personal budget, situation, and tolerance for risk.

Although this situation can be complex, it is not uncommon. In fact, 61% of home buyers owned their previous residence.

To help you manage this juggling act, this guide will go over potential challenges and outline some alternative options and tips to close on both deals.

Evaluating the Local Housing Market

Taking stock of the local housing market can help inform how you sell and buy a house at the same time. Not only does the market influence home prices, it can also impact how long it takes to close on a sale or purchase.

You may be faced with a housing market that favors buyers over sellers or vice versa. Researching your local housing market ahead of time can help guide your efforts in finding a new house.

When It’s a Buyer’s Market

A buyer’s market has more houses for sale than people actively looking to purchase a home. Generally, finding a new house in areas with a higher concentration of sellers can be easier than selling. At the same time, an accurate listing price and contingencies can factor into the equation.

Since there is less competition in the market, buyers can consider requesting an extended closing to allow time to sell their own house or include other contingencies in their offer. For instance, a home sale contingency can be included in a contract to coordinate a purchase with the sale of the buyer’s house.

A home sale contingency asks for the patience of a seller depending on their situation. Complications may arise in the event that all parties involved are simultaneously buying and selling homes.

On the flip side, sellers in a buyer’s market could benefit from setting a competitive asking price and getting ahead of inspection by buttoning up any lingering home maintenance issues.

When It’s a Seller’s Market

If there are more buyers in the housing market than there are homes for sale, it’s considered a seller’s market. Often, selling a house where there’s a high percentage of homebuyers takes less time and can fetch a higher price.

Sellers may be able to take advantage of the housing scarcity and go with a more ambitious asking price. If this pays off for you, the extra cash could be especially useful if you are shopping for houses in a seller’s market yourself. Making a competitive offer may be helpful if you are trying to beat out other bids and quickly secure a home.

It’s also not uncommon for houses to receive multiple offers in a seller’s market. If this is the case, sellers may have more success negotiating favorable terms that suit their sell and buy situation.

For example, a rent-back agreement allows sellers to lease their former house from the new owners for a set period of time. This gives them more time to find their new home, but may not be an acceptable condition for every prospective buyer.

Recommended: How Does Housing Inventory Affect Buyers & Sellers?

Calculating Home Equity

Getting your finances in order to buy and sell a home isn’t just about counting savings and building budgets. Home equity is another important consideration.

To calculate home equity, subtract the money owed on your mortgage loan from the current market value of your house. For example, if your home is worth $250,000 and you still owe $150,000 on your mortgage loan, you have $100,000 of equity in your home.

Depending on your financial situation, home equity may be necessary to buy a new home. Keep in mind that equity does not become available until the closing is complete. Typically, lenders will limit borrowers to 80% to 90% of their available equity, depending on factors such as credit history and income, among others.

Unless you’re selling a home shortly after buying it, the current market value of a home could likely differ from the initial purchase price. These changes could either increase or decrease your home equity.

Generally speaking, the average home sale price in the United States increases year-to-year, barring notable exceptions like the 2008 financial crisis and subsequent recession. However, these trends don’t account for regional housing booms and busts.

Getting an official valuation from a real estate appraiser, which typically costs between $300 and $400, is one way to get a more accurate idea of your home equity and a feasible sale price. Researching comparable homes that recently sold in your community can give you a ballpark estimate, too.

💡 Quick Tip: You can use money you get with a cash-out refi for any purpose, including home renovations, consolidating other high-interest debts, funding a child’s education, or buying another property.

Prequalification vs Preapproval

Being aware of your personal financial situation is useful for a variety of reasons, especially when buying a house. But if you’re among the majority of buyers who finance their home purchase, your mortgage lender will consider factors beyond your own number crunching and goals when deciding on their loan offer.

For many prospective homebuyers, prequalifying is the first step to getting an estimate of how large a home loan they would likely qualify for. Lenders generally evaluate factors like a buyer’s debt, assets, and income, which may take just a matter of days.

Becoming prequalified does not lock buyers into a set mortgage rate. Rather, it gives them a more accurate picture of their financing options and what houses are in their price range. Before making an offer, it is generally advisable that buyers get prequalified, which they can demonstrate with a letter from their lender. This can signal to the sellers that they are a serious buyer.

To ultimately obtain a mortgage loan, buyers still need to go through preapproval. In this process, lenders perform a more thorough credit and financial background check to arrive at a specific preapproved loan amount.

Sellers may consider offers from preapproved buyers more favorably than those with just prequalification since there is less concern about a rejected mortgage application pending a deal. Preapproval may also get you to the closing table faster, which can be a big plus if you’re in a competitive market.

Selling Before Buying

Whether by intention or pure circumstance, you could find yourself a choice of selling your house before buying your next home.

Selling first can potentially be beneficial for qualifying for a mortgage loan. After the sale closes, you may be able to use that money to finance a down payment on a new home, as well as having a lower debt-to-income ratio.

Yet, selling before buying may create complications like finding a place to stay until you purchase a new home. If the new buyers are not willing or able to do a rent-back agreement, you may end up having to find temporary housing until you buy a new home.

Apartments and rental properties may require signing up for a lease of as much as 12 months. For prospective homebuyers, a lengthy rental commitment with penalties for leaving early may be costly. Instead, finding a month-to-month rental option can grant more flexibility and sync up with a storage unit lease, if needed.

Buying Before Selling

When you find your dream home, you may want to pull the trigger and make an offer right away. But what does that mean if your house hasn’t sold yet?

If your budget allows you to buy a home with cash vs. a mortgage, you may be in a position to move forward with the offer.

For some, making a down payment or home purchase before selling with savings alone is not feasible. In other cases, your debt-to-income ratio and credit may prevent you from getting a feasible.

There are several options available if this is not the case. A home equity line of credit (HELOC) can let prospective buyers borrow against the equity of their current home. A buyer’s credit and existing home equity are taken into account when a lender is evaluating whether they qualify for a HELOC.

If approved, buyers can use the HELOC to access money for a down payment and then pay it off when their house sells. Take note of the repayment terms and interest rate on the HELOC, as these can vary from lender to lender.

Taking out a bridge loan is another possibility. These short-term loans are usually structured to cover a down payment and become due after several months. Bridge loans generally have high interest rates and may require an origination fee. Sellers who cannot unload their house in time may need to request an extension or begin repaying the loan while still paying two mortgages.

Choosing a Real Estate Agent

A savvy real estate agent can help reduce the stress and uncertainty of selling and buying a house at the same time. Their expertise can come in handy for setting a realistic listing price, scheduling showings, and staging a home.

If you had a positive experience with the agent you worked with to buy your home, their familiarity with your property could help expedite the process and give you peace of mind in case you have to move out of the area before selling.

There are benefits to using the same agent for buying and selling when geography allows. For instance, they can simplify the lines of communication and more easily coordinate the closing of both homes with your ideal timeline.

Sometimes it may not be possible to use the same agent. The obvious case is when you’re moving a significant distance to a new area.

The need to use two real estate agents could arise if you’ve chosen a reputable agent who exclusively works with buyers or sellers alone. If you decide to hire such an agent, they may be able to recommend a trusted colleague in their agency to handle your other deal.

Timing Your Closing Dates

There is a lot to consider when selling and buying a house at the same time. The timing of both dates can impact what your financing options are, whether you have to find temporary housing, and it you’ll need to store or move your belongings.

Setting a closing date is part of the negotiating process for any real estate deal, and coordinating closings for the same date can streamline the process.

Still, closings can be delayed due to reasons outside your control. Having a back-up plan, such as a rent-back agreement, can keep you in your home while you find a new house. Putting additional contingencies in a contract can help with rescheduling closings as needed or even walking away without much financial loss.

The Takeaway

Buying and selling houses at the same time may not always be easy, but it is doable. It’s ideal to have both closings the same day. But if that’s not possible, there are still ways you can accommodate either buying a house before you’ve sold your old home, or selling your house before you have a new place to live. Either way can work, but if you sell before you buy, it may be easier to get a mortgage on your new home.

Looking for an affordable option for a home mortgage loan? SoFi can help: We offer low down payments (as little as 3% - 5%*) with our competitive and flexible home mortgage loans. Plus, applying is extra convenient: It's online, with access to one-on-one help.

FAQ

Is it better to sell your house first before buying another?

If you can, it may be more practical to sell your house before you buy the next one. That way, you can use the funds from the sale to finance your new house’s down payment, and you avoid the possibility that you might have to pay two mortgages at once. However, if there’s a gap between when you sell your old house and when you close on your new one, you’ll have to figure out temporary lodgings.

What happens to your mortgage when you sell your house and buy another?

When you sell your house, if there’s still a mortgage outstanding on it, you will have to pay it off at the closing. Typically, your mortgage lender will be paid with some of the money you get for the sale of your house. That’s the usual process whether or not you are buying another house.

What is the minimum credit score for a bridge loan?

Qualifications for bridge loans can be demanding. The minimum credit score for a bridge loan can vary by lender, but typically it will be 700 or or more.

*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 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.

SOHL-Q225-178

If you’re looking into getting a mortgage for the first time, congratulations! You’re about to embark on a brave new adventure, full of highs and lows with (ideally) a wonderful reward, aka your new home, at the finish line.

But before you get there, you’ll need to navigate some challenges. For instance: the somewhat intimidating home-buying terminology: prequalification vs. preapproval, for instance. And what on earth is escrow? And what does amortized mean?

Here, you’ll learn the answer to that last question, quickly and painlessly. Basically, mortgage amortization means that your mortgage loan payments will be spaced out over a period of time (typically 30 years) and will be calculated so that you always pay the same amount per month (if you have a fixed-rate mortgage, not a variable rate mortgage, that is).

That means that if you get a fixed-rate mortgage and your first payment in your first month is $1,500, you know that you’ll pay $1,500 in the last month of your mortgage, years later. If you take out a variable rate mortgage, the amount you pay each month will change periodically as the market rate fluctuates.

Also, as you make mortgage payments at first, most of the money paid goes toward interest and a little to the principal, but that shifts over time to the opposite scenario.
Learn more about mortgage amortization here.

Why Do People Choose Amortized Mortgages?

Mortgage amortization helps ensure that your obligations are predictable, which can make it easier for you to plan. If you take out a 30-year mortgage, then the amortization helps guarantee that in 30 years, you will have finished paying it off. For a fixed-rate mortgage, amortization also keeps all your payments consistently the same amount, rather than different amounts that depend on how much your principal is.

Recommended: The Different Kinds of Mortgages

How to Calculate Amortization Using Tables

In real life, even if you choose an amortized mortgage, you may never need to figure out your 30 years or so of payments yourself. But it’s useful to see what goes into the table of payments (they’re not arbitrary!) and understand how it’s populated. Calculating your amortized mortgage really puts you on the front lines of homebuying.

Let’s say you take out a $300,000 mortgage over 30 years at a 6.50% fixed interest rate. That means your monthly payment will be $1,896. You can then divide your interest rate by 12 equal monthly payments to get your monthly interest rate. That works out to 0.5417% of interest per month. And multiplying that interest rate by your total balance, which at the time of your first payment is $300,000, shows that in the first month of your loan, you’ll pay around $1,625 toward interest and the remaining $271 toward your principal.

Next, to calculate the second month, you’ll need to deduct your monthly payment from the starting balance to get the ‘balance after payment’ for the chart. You’ll also need to put the $1,625 you paid in interest and $271 you paid toward the principal in the chart. Then you can repeat the calculation of your monthly interest and principal breakdown, and continue inputting until you finish completing the chart.

💡 Quick Tip: SoFi’s new Lock and Look* feature allows you to lock in a low mortgage financing rate for up to 90 days while you search for the perfect place to call home.

How to Calculate Amortization Using a Calculator

So you can see that it’s not so much difficult to calculate your amortized payments as it is time-consuming. Fortunately, you can save yourself the trouble by using an online amortization calculator . All you have to do is input info about your mortgage, including the amount you’re borrowing, your term length, and the interest you’re paying, and the calculator will do the math for you.

Recommended: First-Time Homebuyer Guide

What Are the Pros of an Amortized Mortgage?

Here are some of the benefits to consider:

•   You’ll slowly but surely pay off the mortgage principal of your home loan. With every month, you’ll get closer to owning your home outright!

•   It ensures that you pay a set amount for each payment over the life of your loan. With some loans you may end up paying more at the beginning or the end. A balloon mortgage, for example, requires you to pay interest charges monthly during the regular term. You then pay off large parts of the principal at the end of the loan period. (Thus, your payment literally balloons.)

•   You can often get better terms with an amortized loan. And you’ll save money in the long run if you’re paying less interest over the life of your mortgage.

Recommended: What Is PMI and How to Avoid It

What Are the Cons of an Amortized Mortgage?

Next, consider the downsides:

•   Amortized mortgages may favor borrowers who are putting down a larger down payment. To qualify for a competitive interest rate, you’ll probably need to put down 10% (if not 20%).

•   You might not be able to qualify to borrow as much money via an amortized mortgage as you would through an alternative mortgage, such as an interest-only mortgage or a balloon mortgage.

The Takeaway

An amortized mortgage can be a good option for many homebuyers. It provides a steady way to pay down the principal of your home loan.

Looking for an affordable option for a home mortgage loan? SoFi can help: We offer low down payments (as little as 3% - 5%*) with our competitive and flexible home mortgage loans. Plus, applying is extra convenient: It's online, with access to one-on-one help.

FAQ

Is it better to have a longer or shorter mortgage term?

It depends on what you can afford. If you have a shorter mortgage term, your monthly payments will be higher, but you will pay less in interest over the (shorter) life of your loan. If your term is longer, your payments will be smaller, but you will be making them for longer and you’ll pay more in interest over the term.

Why are mortgage loans amortized?

Mortgage loans are amortized so that homeowners will pay the same amount of money every month during the duration of their home loan, even though the balance between how much of that payment is for principal and how much is for interest will change. The predictability makes it easier for both the borrower and the lender to plan.

What is the alternative to an amortized loan?

The alternative is called a nonamortizing loan, meaning a loan for which the payment isn’t paid back gradually, over time, but all at once in a lump sum. Balloon-payment mortgages and interest-only mortgages are nonamortizing mortgages.

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.

If you’re in the market for a mortgage, you may be overwhelmed by all the different options — conventional vs. government-backed, fixed vs. adjustable rate, 15-year vs 30-year. Which one is best?

The answer will depend on how much you have to put down on a home, the price of the home you want to buy, your income and credit history, and how long you plan to live in the home. Below, we break down some of the most common types of home mortgages, including how each one works and their pros and cons.

Fixed-Rate vs. Adjustable-Rate Loans

When choosing the best type of mortgage for your needs, it helps to understand the difference between adjustable-rate mortgages and fixed-rate mortgages. Each option has advantages and disadvantages. Here’s a closer look.

Fixed-Rate Mortgage

With a fixed-rate mortgage loan, the interest is exactly that — fixed. No matter what happens to benchmark interest rates or the overall economy, the interest rate will remain the same for the life of the loan. Fixed loans typically come in terms of 15 years or 30 years, though some lenders allow more options.

This type of mortgage can be a good choice if you think rates are going to go up, or if you plan on staying in your home for at least five to seven years and want to avoid any potential for changes to your monthly payments.

Pro: The monthly payment is fixed and predictable.

Con: If interest rates drop after you take out your loan, you won’t get the lower rate unless you’re able to refinance.

30-Year Fixed-Rate Mortgage

A 30-year fixed-rate home loan is the most common type of mortgage.

Monthly payments are generally lower than they are with shorter-term mortgages because the loan is stretched out over a longer period of time. However, the overall amount of interest you’ll pay is typically higher, since you’re paying interest for longer. Also, interest rates tend to be higher for 30-year home loans than shorter-term mortgages, since the longer term poses more risk to the lender.

15-Year Fixed-Rate Mortgage

A 15-year loan allows you to build equity more quickly and pay less total interest. Loans with shorter terms also tend to come with lower interest rates, since they pose less risk to the lender.

On the flipside, the shorter term means monthly payments may be much higher than a 30-year mortgage. This type of loan can be a good choice for borrowers who can handle an aggressive repayment schedule and want to save on interest.

Adjustable-Rate Mortgage

An adjustable-rate mortgage (ARM) has an interest rate that fluctuates according to market conditions.

Many ARMs have a fixed-rate period to start and are expressed in two numbers, such as 7/1, 5/1, or 7/6. A 7/1 ARM loan has a fixed rate for seven years; after that, the fixed rate converts to a variable rate. It stays variable for the remaining life of the loan, adjusting every year in line with an index rate. A 7/6 ARM, on the other hand, means that your rate will remain the same for the first seven years and will adjust every six months after that initial period. A 5/1 ARM has a rate that’s fixed for five years and then adjusts every year.

Many ARMs have rate caps, meaning the rate will never exceed a certain number over the life of the loan. If you consider an ARM, you’ll want to be sure you understand exactly how much your rate can increase and how much you could wind up paying after the introductory period expires.

Pro: The initial interest rate of an ARM is usually lower than the rate on a fixed-rate loan. This can make it a good deal for borrowers who expect to sell their property before the rate adjusts.

Con: Even if the loan starts out with a low rate, subsequent rate increases could make this loan more expensive than a fixed-rate loan.

💡 Quick Tip: SoFi Home Loans are available with flexible term options and down payments as low as 3%.*

Conventional vs. Government-Insured Loans

Mortgages can also be broken down into two other categories: conventional loans, which are offered by banks or other private lenders, and government-backed loans, which are guaranteed by a government agency. Here’s a breakdown of conventional vs. government-insured loans, including how each works, and their pros and cons.

Conventional Loan

This is the most common type of home loan. Conventional mortgages must meet standards that allow lenders to resell them to the government-sponsored enterprises (GSEs) Fannie Mae and Freddie Mac. This is advantageous to lenders (who can make money by selling their loans to GSEs) but means stiffer qualifications for borrowers.

Pro: Down payments can be as low as 3%, though borrowers with down payments less than 20% have to pay for private mortgage insurance (PMI).

Con: Conventional loans tend to have stricter requirements for qualification than government-backed loans. You typically need a credit score of at least 620 and a debt-to-income ratio less than 36%.

Government-Insured Loan

If you have trouble qualifying for a conventional loan, you may want to look into a government-insured loan. This type of mortgage is insured by a government agency, such as the Federal Housing Administration (FHA), U.S. Department of Agriculture (USDA), or the U.S. Department of Veterans Affairs (VA).

FHA Loan

FHA loans are not directly issued from the government but, rather, insured by the FHA. This protects mortgage lenders, since if the borrower becomes unable to repay the loan, the agency has to handle the default. Having that guarantee significantly lowers risk for the lender.

As a result, qualifying for an FHA loan is often less difficult than qualifying for a conventional mortgage. This makes an FHA mortgage a good choice if you have less-than-stellar credit scores or a high debt-to-income (DTI) ratio.

Pro: With a FICO® credit score of 500 to 579, you may be able to put just 10% down on a home; with a score of 580 or higher, you may qualify to put just 3.5% down.

Con: FHA mortgages require you to purchase FHA mortgage insurance, which is called a mortgage insurance premium (MIP). Depending on the size of your down payment, the insurance lasts for 11 years or the life of the loan.

💡 Quick Tip: Check out our Mortgage Calculator to get a basic estimate of your monthly payment.

VA Loan

The U.S. Department of Veterans Affairs backs home loans for members and veterans of the U.S. military and eligible surviving spouses. Similar to FHA loans, the government doesn’t directly issue these loans; instead, they are processed by private lenders and guaranteed by the VA.

Most VA loans require no down payment. However, you’ll need to pay a VA funding fee unless you are exempt. Although there’s no minimum credit score requirement on the VA side, private lenders may have a minimum in the low to mid 600s.

Pro: You don’t have to put any money down or purchase mortgage insurance.

Con: Only available to veterans, current service members, and eligible spouses.

FHA 203(k) Loan

Got your eye on a fixer-upper? An FHA 203(k) loan allows you to roll the cost of the home as well as the rehab into one loan. Current homeowners can also qualify for an FHA 203(k) loan to refinance their property and fund the costs of an upcoming renovation through a single mortgage.

The generous credit score and down payment rules that make FHA loans appealing for borrowers often apply here, too, though some lenders might require a minimum credit score of 500.

With a standard 203(k), typically used for renovations exceeding $35,000, a U.S. Department of Housing and Urban Development (HUD) consultant must be hired to oversee the project. A streamlined 203(k) loan, on the other hand, allows you to fund a less costly renovation with anyone overseeing the project.

Pro: If you have a credit score of 580 or above, you only need to put down 3.5% on an FHA 203(k) loan.

Con: These loans require you to qualify for the value of the property, plus the costs of planned renovations.

USDA Loan

A USDA loan is a type of mortgage designed to help borrowers who meet certain income limits buy homes in rural areas. The loans are issued through the USDA loan program by the United States Department of Agriculture as part of its rural development program.

Pro: There’s no down payment required, and interest rates tend to be low due to the USDA guarantee.

Con: These loans are limited to areas designated as rural and borrowers who meet certain income requirements.

Conforming vs. Nonconforming Loans

Conventional loans, which are not backed by the federal government, come in two forms: conforming and non-conforming.

Conforming Loan

Mortgages that conform to the guidelines set by the Federal Housing Finance Agency (FHFA) are called conforming loans. There are a number of criteria that borrowers must meet to qualify for a conforming loan, including the loan amount.

For 2025, the ceiling for a single-family, conforming home loan is $806,500 in most parts of the U.S. However, there is a higher limit — $1,209,750 — for areas that are considered “high-cost,” a designation based on an area’s median home values.

Typically, conforming loans also require a minimum credit score of 630­ to 650, a DTI ratio no higher than 45%, and a minimum down payment of 3%.

Pro: Conforming loans tend to have lower interest rates and fees than nonconforming loans.

Con: You must meet the qualification criteria, and borrowing amounts may not be sufficient in high-priced areas.

Nonconforming Loan

Nonconforming mortgage loans are loans that don’t meet the requirements for a conforming loan. For example, jumbo loans are nonconforming loans that exceed the maximum loan limit for a conforming loan.

Nonconforming loans aren’t as standardized as conforming loans, so there is more variety of loan types and features to choose from. They also tend to have a faster, more streamlined application process.

Pro: Nonconforming loans are available in higher amounts and can widen your housing options by allowing you to buy in a more expensive area or purchase a type of home that isn’t eligible for a conforming loan.

Con: These loans tend to have higher interest rates than nonconforming loans.

Reverse Mortgage

A reverse mortgage allows homeowners 62 or older (typically those who have paid off their mortgage) to borrow part of their home equity as income. Unlike a regular mortgage, the homeowner doesn’t make payments to the lender — the lender makes payments to the homeowner. Homeowners who take out a reverse mortgage can still live in their homes. However, the loan must be repaid when the borrower dies, moves out, or sells the home.

Pro: A reverse mortgage can provide additional income during your retirement years and/or help cover the cost of medical expenses or home improvements.

Con: If the loan balance exceeds the home’s value at the time of your death or departure from the home, your heirs may need to hand ownership of the home back to the lender.

Jumbo Mortgage

A jumbo loan is a mortgage used to finance a property that is too expensive for a conventional conforming loan. If you need a loan that exceeds the conforming loan limit (typically $806,500), you’ll likely need a jumbo loan.

Jumbo loans are considered riskier for lenders because of their larger amounts and the fact that these loans aren’t guaranteed by any government agency. As a result, qualification criteria tends to be stricter than with other types of mortgages. Also, in some cases, rates may be higher.

You can typically find jumbo loans with either a fixed or adjustable rate and with a range of terms.

Pro: Jumbo loans make it possible for buyers to purchase a more expensive property.

Con: You generally need excellent credit to qualify for a jumbo loan.

💡 Quick Tip: A major home purchase may mean a jumbo loan, but it doesn’t have to mean a jumbo down payment. Apply for a jumbo mortgage with SoFi, and you could put as little as 10% down.

Interest-Only Mortgage

With an interest-only mortgage, you only make interest payments for a set period, which may be five or seven years. Your principal stays the same during this time. After that initial period is over, you can end the loan by selling or refinancing, or begin to make monthly payments that cover principal and interest.

Pro: The initial monthly payments are usually lower than other mortgages, which may allow you to afford a pricier home.

Con: You won’t build equity as quickly with this loan, since you’re initially only paying back interest.

Recommended: What’s Mortgage Amortization and How Do You Calculate It?

The Takeaway

There are many different types of mortgages, including fixed-rate, variable rate, conforming, nonconforming, conventional, government-backed, jumbo, and reverse mortgages. It’s a good idea to research and compare different loan programs, consult with lenders, and, if needed, seek advice from a mortgage professional to determine the best type of home loan for your specific circumstances.

Looking for an affordable option for a home mortgage loan? SoFi can help: We offer low down payments (as little as 3% - 5%*) with our competitive and flexible home mortgage loans. Plus, applying is extra convenient: It's online, with access to one-on-one help.

FAQ

What are the different types of mortgages?

There are several types of mortgages available to homebuyers, each with its own characteristics and requirements. One of the most common types is the conventional mortgage, which isn’t insured or guaranteed by a government agency. Loans that are government-backed include FHA loans, VA loans, and USDA loans. A jumbo loan is for an amount that’s larger than the loan limits Fannie Mae and Freddie Mac use.

What are the 4 types of qualified mortgages?

Qualified mortgages are mortgages that meet certain criteria set by the Consumer Financial Protection Bureau (CFPB) to ensure borrowers can afford the loans they obtain. The four main types of qualified mortgages are:

•  General qualified mortgages adhere to basic criteria set by the CFPB.

•  Small creditor qualified mortgages have more flexible requirements for small lenders.

•   Balloon payment qualified mortgages allow for a balloon payment at the end of the term.

•  Temporary qualified mortgages This type of qualified mortgage provides a transition period for loans that were eligible for purchase or guarantee by Fannie Mae or Freddie Mac but no longer meet those standards.

Which type of home loan is best?

The best type of home loan depends on your financial situation, goals, and preferences. If you have a significant down payment and strong credit, a conventional mortgage might work well. If, on the other hand, you have limited down payment funds and lower credit scores, you might prefer a Federal Housing Administration (FHA) home loan. VA loans benefit eligible veterans and service members, while USDA loans are for homebuyers in rural areas. Whether to choose a fixed-rate or adjustable-rate mortgage will depend on your long-term plans and tolerance for risk.

^†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.
^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.

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.

SOHL-Q225-066

A home inspection can give homebuyers important information about the condition of a home they’re purchasing, and it may help alert them to any major repairs and expenses down the road.

When the housing market is competitive, some buyers skip all contingencies, including the home inspection, which can be risky. But others are still opting to have an inspection done before making an offer.

In a seller’s market, many properties are sold “as is,” which means sellers won’t negotiate for repairs even after an inspection.

Even so, a home inspection, and a home inspection checklist, could help you avoid buying a home at the top of your budget that will soon need big fixes.

What’s on a House Inspection Checklist?

Here are the common items evaluated in a general professional inspection, according to the American Society of Home Inspectors.

The average cost of a home inspector ranges from $296 to $424, though they can go higher or lower depending on location and house size. What’s more, the inspector might suggest a separate inspection by a specialist if they spot a potential problem but think an expert should evaluate it further.

It’s a good idea to make sure you can accommodate these types of costs in your home-buying budget.

Heating and Air System

Depending on your geographical location and the weather there, a finely tuned heating, ventilation, and air conditioning (HVAC) system might be a top priority on your home inspections list.

Does the house you’re considering have an HVAC system? An older property might not, in which case you may want to research and price the purchase and installation of a system.

If the property does have HVAC, does the system work and how old is it? If it doesn’t work, or work well, you’ll want to find out what it will cost to repair or replace it.

If the system is practically vintage, the Department of Energy says it might be worthwhile to replace it, as newer models are more efficient and likely to lower your energy costs.

Recommended: What Are the Most Common Home Repair Costs?

Plumbing System

It’s easy to forget about pipes when you’re walking through a home. You can’t see them, but they greatly affect daily life and are not always simple to repair.

Ask your home inspector to check all plumbing work for possible leakage. A leaky pipe can lead to water damage and additional repair work. Once you know if there’s a problem and how significant it is, you can determine the cost of fixing a leaky pipe.

An inspector could also check drainage throughout the home, the condition of the garbage disposal and water heater, and overall water pressure. If the home is older and has a septic tank, that could be inspected, too.

Electrical System

A professional home inspection will likely include an evaluation of a property’s entire electrical system, ensuring that it is up to safety standards outlined by the National Electrical Code.

The functioning of the electrical box, outlets, switches, and lighting will be checked, as well as the state of the wiring throughout the home. If major work needs to be done, you can get a quote for the cost of rewiring.

If the house has solar panels, you might want to make sure they’re in working order and ask for the maintenance history.

Roof

No matter the type of roof, the home inspector will check its condition and age.

A roof in good shape helps ensure against leaks and provides some level of insulation. It’s also important to know if you’re buying a home with a roof at the end of its lifespan, so you can set aside money to replace it when needed.

Replacing a roof can run from about $5,867 to $13,209, HomeAdvisor notes.

Floors, Walls, Ceilings

Put the bones of the house on your house inspection checklist.

Structural components like these will likely be looked at in your home inspection. You’ll want to be sure the floors are level. And consider the floors cosmetically. Is the carpeting new? Are there wooden floors that need refinishing?

Look for cracks in the drywall or plaster that make up the walls and ceiling as well. Sometimes cracks are a natural change as walls expand and contract with weather changes. But it’s good to know if all you’ll need is spackle and paint or if repairs will require a lot more time and money. A home improvement calculator could help you figure out the potential cost.

Foundation, Attic, Basement

A home inspector will crawl through a foundation space, checking for stability and that it is up to national safety codes. This is just one of the reasons why failing to get a home inspection is a homebuyer’s mistake to avoid.

A basement will be checked for dampness and good ventilation for moisture control.

And if the home has an attic, your inspector will check to see that the beams and rafters (which support the roof) look secure and distress-free.

Insulation

Homes generally lose heat through the windows, walls, roof, and attic. Proper sealing and insulation can be a good way to prevent this, lowering energy costs.

If your prospective home is quite old, it’s possible it has no insulation, and you might want to consider the cost of adding it. If the home has been insulated, the home inspector will check its condition and look for gaps.

Exterior

Exterior walls will be evaluated, with an eye toward any damaged bricks, shingles, or siding or bubbling paint. Other important exterior components are chimneys, gutters and downspouts, doors, and windows. You might also want to check for moisture.

If water collects and stands anywhere on the property—because of poorly hung gutters or a leaking sprinkler, for example—you may want to nip it in the bud to avoid mold growth and/or water damage. Check for pests like termites or cockroaches as well.

Appliances

If a refrigerator, stove, and washer and dryer are part of the deal, have your inspector make sure they are in good working order.

If the home comes with few to no appliances, determine how much adding them will cost.

Recommended: Guide to Buying, Selling, and Updating Your Home

Choosing a Home Inspector

If you’re using a real estate agent, chances are your agent can recommend a few home inspectors they’ve worked with previously.

Then again, a home inspector your agent referred may feel obligated to go easy on the inspection.

Whether you’re using a buyer’s agent or not, some consumer advocates say it’s a good idea to find your own inspector. You can ask for references if you know someone else who’s bought a home in the area recently. Or you can search a referrals site like Ang or HomeAdvisor for a recommendation. The National Association of Home Inspectors also offers a tool to help you find a home inspector near you.

Other things to put on your house-hunting checklist: Know your credit score and get prequalified and preapproved for a home loan.

The Takeaway

A home inspection checklist can unearth problems that can be a dealbreaker, possibly a negotiating tool, or something a buyer is willing to accept and deal with. The curb appeal may be great, the staging superb, but house inspection lists offer a probing look at what lies beneath.

Looking for an affordable option for a home mortgage loan? SoFi can help: We offer low down payments (as little as 3% - 5%*) with our competitive and flexible home mortgage loans. Plus, applying is extra convenient: It's online, with access to one-on-one help.

FAQ

What’s the biggest red flag in a home inspection?

There are a number of red flags that a home inspection may turn up. Among the top concerns are roof and foundation issues, signs of mold and/or mildew, indications of water damage, and termite or other infestations. All of these can be difficult and expensive to remedy.

How many buyers back out after inspection?

It’s hard to know exactly why buyers decide not to go through with a home purchase, but the number who back out after the home inspection is about 10% to 15%, though it can fluctuate.

How often do homes fail an inspection?

Of homebuyers who get their new homes inspected before buying, 24% report that the properties failed the inspection.The majority (32%) say the inspector found minor issues, while 30% say the house passed the first inspection.

*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 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.

SOHL-Q225-062