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A jumbo loan is a home mortgage loan that exceeds maximum dollar limits set by the Federal Housing Finance Agency (FHFA). Loans that fall within the limits are called conforming loans. Loans that exceed them are jumbo loans.

Jumbo mortgages may be needed by buyers in areas where housing is expensive, and they’re also popular among lovers of high-end homes, investors, and vacation home seekers.

What Is a Jumbo Loan?

To understand jumbo home loans, it first helps to understand the function of Freddie Mac and Fannie Mae. Neither government-sponsored enterprise actually creates mortgages; they purchase them from lenders and repackage them into mortgage-backed securities for investors, giving lenders needed liquidity.

Each year the FHFA sets a maximum value for loans that Freddie and Fannie will buy from lenders — the so-called conforming loans.

Jumbo Loans vs Conforming Loans

Because jumbo home loans don’t meet Freddie and Fannie’s criteria for acquisition, they are referred to as nonconforming loans. Nonconforming, or jumbo, loans usually have stricter requirements because they carry a higher risk for the lender.

Jumbo Loan Limits

So how large does a loan have to be to be considered jumbo? In most counties, the conforming loan limits for 2025 are:

•  $806,500 for a single-family home

•  $1,032,650 for a two-unit property

•  $1,248,150 for a three-unit property

•  $1,551,250 for a four-unit property

The limit is higher in pricey areas. For 2025, the conforming loan limits in those areas are:

•  $1,209,750 for one unit

•  $1,548,975 for two units

•  $1,872,225 for three units

•  $2,326,8875 for four units

Given rising home values in many cities, a jumbo loan may be necessary to buy a home. Teton County, Wyoming, for instance, has an average home value of $2,219,744 and a conforming loan limit of $1,209,750.

Recommended: The Cost of Living By State

Qualifying for a Jumbo Loan

Approval for a jumbo mortgage loan depends on factors such as your income, debt, savings, credit history, employment status, and the property you intend to buy. The standards can be tougher for jumbo loans than conforming loans.

The lender may be underwriting the loan manually, meaning it’s likely to require much more detailed financial documentation — especially since standards grew more stringent after the 2007 housing market implosion and during the pandemic.

Lenders generally set their own terms for a jumbo mortgage, and the landscape for loan requirements is always changing, but here are a few examples of potential heightened requirements for jumbo loans.

•  Your debt-to-income (DTI) ratio. This ratio compares your total monthly debt payments and your gross monthly income. The figure helps lenders understand how much disposable income you have and whether they can feel confident you’ll be able to afford adding a new loan to the mix.

To qualify for most mortgages, you need a DTI ratio no higher than 43%. In certain loan scenarios, lenders sometimes want to see an even lower DTI ratio for a jumbo loan, or they may counter with less favorable loan terms for a higher DTI.

•  Your credit score. This number, which ranges from 300 to 850, helps lenders get a snapshot of your credit history. The score is based on your payment history, the percentage of available credit you’re using, how often you open and close accounts such as credit cards, and the average age of your accounts.

To qualify for a jumbo loan, some lenders require a minimum score of 700 or higher for a primary home, or up to 760 for other property types. Keep in mind that a lower score doesn’t mean you won’t be able to get a jumbo loan. The decision depends on the lender and other factors, such as the loan program requirements, your debt, down payment amount, and reserves.

•  Down payment. Conforming mortgages generally require a 20% down payment if you want to avoid paying private mortgage insurance (PMI), which helps protect the lender from the risk of default.

Historically, some lenders required even higher down payments for jumbo mortgages, but that’s not necessarily the case anymore. Typically, you’ll need to put at least 20% down, although there are exceptions.

A VA loan can be used for jumbo loans. For borrowers with full entitlement, the Department of Veterans Affairs will insure any size loan. For those with partial entitlement, it will insure the part of the loan that falls under conforming loan limits minus anything still owed to the VA. The loan may be available from some lenders with nothing down and no PMI. VA loans have a one-time “funding fee,” though, which is a percentage of the amount being borrowed.

•  Your savings. Jumbo loan programs often require mortgage reserves, money or assets borrowers could use to cover their housing costs. The number of months of PITI house payments (principal, interest, taxes, insurance), plus any PMI or homeowner association fees, needed in reserves after loan closing depends on many factors. For a jumbo loan, some lenders may require reserves of six to 24 months of housing payments.

You don’t necessarily need to have all the money in cash. Part of mortgage reserves can take the form of a 401(k), stock portfolios, mutual funds, money market accounts, and simplified employee pension accounts.

Also, depending on the loan program, a lender may be comfortable with lower cash reserves if you have a high credit score, low DTI ratio, a high down payment, or some combination of these things.

•  Documentation. Lenders want a complete financial picture for any potential borrower, and jumbo loan seekers are no exception. Most lenders operate under the “ability to repay” rule, which means they must make a reasonable, good-faith determination of the consumer’s ability to repay the loan according to their terms. Applicants should expect lenders to vet their creditworthiness, income, and assets.

Jumbo Loan Rates

You might assume that interest rates for jumbo loans are higher than for conforming loans since the lender is putting more money on the line.

But jumbo mortgage rates fluctuate with market conditions. Jumbo mortgage rates can be similar to those of other mortgages, but sometimes they are lower.

Because the absolute dollar figure of the loan is higher than a conforming loan, it is reasonable to expect closing costs to be higher. Some closing costs are fixed, such as a loan processing fee, but others, such as title insurance, are tiered based on the purchase price or loan amount.

Pros and Cons of Jumbo Loans

Benefits

Because a jumbo loan is for an amount greater than a conforming loan, it gives you more options for ownership of homes that are otherwise cost-prohibitive. You can use a jumbo loan to purchase all kinds of residences, from your main home to a vacation getaway to an investment property.

Drawbacks

Due to their more stringent requirements, jumbo loans may be more accessible for borrowers with higher incomes, strong credit scores, modest DTI ratios, and plentiful reserves.

However, don’t assume that jumbo loans are just for the rich. Lenders offer these loans to borrowers with a wide variety of income levels and credit scores.

Lender requirements vary, so if you’re seeking a jumbo loan, you may want to shop around to see what terms and interest rates are available.

The most important factor, as with any loan, is that you are confident in your ability to make the mortgage payments in full and on time over the long term.

How to Qualify for a Jumbo Loan

To qualify for a jumbo loan, borrowers need to meet certain jumbo loan requirements. You’ll likely need to show a prospective lender two years of tax returns, pay stubs, and statements for bank and possibly investment accounts. The lender may require an appraisal of the property to ensure they are only lending what the home is worth.

Is a Jumbo Loan Right for You?

You’ll need to come up with a large down payment on a property that merits a jumbo loan, and some of your closing costs will be higher than for a conventional loan. But depending on where you wish to buy, the cost of the property, and the amount you wish to borrow, a jumbo loan may be your only choice for a home mortgage loan. It’s a particularly attractive option if you have good credit, a low DTI, and a robust savings account. And sometimes jumbo home loans actually have lower interest rates than other loans.

What About Refinancing a Jumbo Loan?

After you’ve gone through the mortgage and homebuying process, it could be helpful to have information about refinancing. Some borrowers choose to refinance in order to secure a lower interest rate or more preferable loan terms.

This could be worth considering if your personal situation or mortgage interest rates have improved.

Refinancing a jumbo mortgage to a lower rate could result in substantial savings. Since the initial sum is so large, even a change of just one percentage point could be impactful.

Refinancing could also result in improved loan terms. For example, if you have an adjustable-rate mortgage and worry about fluctuating rates, you could refinance the loan to a fixed-rate home loan.

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

Jumbo Loan Limits by State

The conforming loan limits set by the Federal Housing Finance Agency can vary based on the county where you are buying a home.

In most areas of the country, the conforming loan limit for a one-unit property increased to $806,500 in 2025 (the amount rises for multiunit properties). The chart below shows exceptions to the $806,500 limit by state and county.

The Takeaway

What’s the skinny on jumbo loans? They’re essential for buyers of more costly properties because they exceed government limits for conforming loans. Luxury-home buyers and house hunters in expensive areas may turn to these loans, but they’ll have to clear the higher hurdles involved.

SoFi can help you save money when you refinance your mortgage. Plus, we make sure the process is as stress-free and transparent as possible. SoFi offers competitive fixed rates on a traditional mortgage refinance or cash-out refinance.

FAQ

What are jumbo loan requirements?

Jumbo loans typically require a credit score of at least 700, a low DTI, and a down payment of at least 20%, although there are always exceptions.

What is the difference between a jumbo loan and a regular loan?

A jumbo loan is a home mortgage loan that exceeds maximum dollar limits set by the Federal Housing Finance Agency. Jumbo loans are typically used by buyers in regions with higher-priced housing but are also popular among luxury homebuyers and investors.

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

SOHL-Q225-175

If you’re buying a home and have a down payment of less than 20% of the purchase price, you may need to pay for private mortgage insurance (PMI) or a mortgage insurance premium (MIP). This insurance protects your lender in the event that you default on your loan. It also presents an additional cost for you — a charge you’ll have to keep paying for part or all of the life of the loan. But it can be worthwhile since, for many aspiring homeowners, it can unlock a chance at homeownership.

Private mortgage insurance may be required for conventional home loans — those not backed by a government program. A mortgage insurance premium is a little different and is always a part of an FHA-insured loan, at least for a number of years. Both are intended to protect lenders against losses if borrowers default on their home loans. Here’s a guide to how they work, how they differ, how much they cost, and when you can possibly escape their hold on you.

What Is Private Mortgage Insurance?

PMI is a type of coverage typically required by lenders on conventional conforming loans. A lender might stipulate PMI when you make a down payment that is less than 20% of an accepted offer or asking price.

Most conventional mortgages are “conforming,” which means they meet the requirements to be sold to Fannie Mae or Freddie Mac. It’s best to consult the lender when you apply for a loan about whether you will have to pay for PMI.

Although PMI adds a cost, it can allow you to qualify for a loan that you otherwise might not get. And it can help you to buy a house without putting 20% down.

How Much Does PMI Cost?

The price of PMI varies, but often is 0.5% to 1% of the total loan amount annually. The cost depends on the type of mortgage you get, your credit score, the loan-to-value (LTV) ratio, and more. It also depends on the amount of PMI that your loan program or lender requires. PMI could run as high as 6% of the amount you borrow.

Usually, homeowners required to pay PMI do so monthly, rather than annually, and it’s included in their mortgage payments. A few may opt for lender-paid mortgage insurance (LMPI), an option where the lender for the home loan pays the cost of mortgage insurance. For that convenience, however, a homebuyer will usually pay a slightly higher interest rate, and more over the life of the loan.

Despite the cost, PMI may be more economical than an FHA loan if you’re a borrower with a FICO® score of around 740 or above who can put 3.5% down.

When Can You Stop Paying PMI?

Buying a home may require you to pay PMI, but there are ways to get to the point where you can stop paying it.

First, there is a legal end to PMI. Under the Homeowners Protection Act, also known as the PMI Cancellation Act, your lender is required to cancel PMI automatically once your mortgage balance is at 78% of the home’s original value. That generally means either the contract sales price or the appraised value of your home at the time you purchased it, whichever is lower (or, if you have refinanced, the appraised value at the time you did so). Which figure is used for the original value can vary by state.

Second, you can have your home reappraised, which will likely result in a new value, and ask your servicer to cancel PMI if you have built equity of 20% or more of the current value. Owners of homes that have appreciated, either over time or thanks to home improvements, may benefit from this. You may need to be proactive with your lender and meet specific eligibility requirements to help make that happen.

Third, you may be able to refinance your mortgage. If you have at least 20% equity, you can possibly qualify for a conventional loan that won’t require PMI.
Finally, the Consumer Financial Protection Bureau notes that if you have stayed current on your payments and reached the halfway point of the loan’s schedule, PMI can be canceled, even if your mortgage balance hasn’t yet reached 78% of the home’s original value.

💡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.

What Is a Mortgage Insurance Premium?

If they’re securing a home loan backed by the Federal Housing Administration, borrowers pay for a different type of coverage, known as a Mortgage Insurance Premium or MIP. When it comes to FHA loans, MIP applies no matter what your loan term or down payment amount.

A key reason people choose FHA loans is the ability to buy a home even with a low down payment — these loans allow you to put down as little as 3.5%. But keep in mind that even with that affordable down payment, this type of loan bears costs and, as a borrower, you’ll want to understand them.

MIP runs for 11 years or the loan’s full term, depending on the borrower’s down payment, the balance owed, and LTV. As the homebuyer, you also pay a one-time upfront MIP premium of 1.75% of the base loan amount, which can be rolled into the loan. On top of that, you’ll have an annual premium that is divided by 12 to determine your payment, which is added to your monthly mortgage payment.

Recommended: Different Types of Mortgage Loans, Explained

How Much MIP Will You Pay on an FHA Loan?

Like a mortgage interest rate, MIP fluctuates. The ongoing annual MIP is calculated with a rate that’s currently around 0.15% to 0.75%. It is divided by 12 and added to your monthly mortgage payment. What you’ll pay in the end depends on your loan-to-value (LTV) ratio — also known as the price minus your down payment — and the length of the loan.

If you take out an FHA loan for the common term of 30 years, or any length of time greater than 15 years, your monthly MIP costs will be determined by calculating the loan’s annual average outstanding balance, based on what banks refer to as its amortization schedule. This figure is then multiplied by the annual MIP rate and divided by 12 to determine a monthly payment.

That is the amount that will be added to your principal payment on your home loan, along with charges like escrow amounts for property taxes and the monthly cost of your homeowner’s insurance.

Here’s an example: Let’s say you borrow less than or equal to $726,200 to buy your home, and make a down payment of 5% or less. You’ll pay an annual MIP of 0.50% on your loan. On a home loan of $300,000, you’ll pay MIP of about $1,500 per year, or $125 per month.

The following chart details approximate monthly payments based on different loan and down payment amounts. Remember, LTV is the total home price, or 100%, minus the percentage you take care of in your down payment.

Some homeowners can pay off their loans more quickly. By choosing a shorter term, such as 15 years, you could take advantage of a lower MIP.

Take the 15-year option, which gives you a better deal with a lower rate. If you were to borrow less than or equal to $726,200 and put down 10% or less as a down payment, you’d pay an annual MIP of just 0.15%. On a $300,000 home loan, that’s more like $450 a year, or $37.50 a month.

This all may seem complicated, but many people find that the flexibility of an FHA loan, if you can secure one, makes it worth paying the MIP.

Thinking about buying a fixer-upper and making it beautiful and functional again? FHA offers the FHA 203(k) home loan for that — something that few lenders do, especially if the home isn’t in good enough shape to be lived in, but it may be worth investigating.

Recommended: FHA Mortgage Loan Calculator

Can You Get Rid of MIP?

Possibly. If you took out an FHA loan before June of 2013, you may be able to cancel your MIP. You would need to now have 22% equity in your home — meaning your loan balance has reached 78% of the purchase price noted on your mortgage paperwork — and have made all payments on time. (FHA lenders do not automatically cancel your MIP once you reach that threshold. You’ll need to ask for it to be stopped.)

If your FHA loan originated more recently than June 2013, however, different rules govern it. If your down payment totals less than 10%, you must pay the MIP for the life of the loan. Made a down payment of 10% or more? MIP expires in 11 years.
Other ways to unburden yourself of MIP include paying off the FHA loan or refinancing it into a conventional loan with a private lender, which will give MIP the heave-ho.

What About Refinancing?

If you have a mortgage that includes PMI or MIP and your property value has increased significantly, the option of refinancing is one to think about.

Some borrowers may find that at a certain point they can qualify for a conventional home loan without mortgage insurance.

Refinancing holds appeal because of the possibility of locking in a better rate and reducing your monthly payment. Equity-rich homeowners sometimes like the option of a cash-out refinance.

But as with your original mortgage, you’ll face closing costs if you refinance.

What about a “no-closing-cost refinance” you might see advertised? You’ll either add the closing costs to the principal or get an increased interest rate.

The Takeaway

Glass half-full: Private mortgage insurance and mortgage insurance premium open the door to homeownership to many who otherwise could not buy a property. Glass half-empty: PMI and MIP can really add up.

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 a better option to put down 20% or to pay PMI?

It’s great to make a down payment of 20% and avoid private mortgage insurance (PMI), but not everyone can afford to do it. It can be particularly hard for first-time homebuyers, who often don’t have income from the sale of another residence to fund their next home purchase. Use a home affordability calculator to look carefully at monthly mortgage payment amounts for various home prices and interest rates. Put down what you can afford and try not to compromise your ability to cover other bills, including the mortgage payment itself.

How long will I pay PMI?

If you’re paying private mortgage insurance, you’ll need to continue until you’ve built up 20% equity in your home (based on the original sale price). At this point, you can request in writing that your loan servicer cancel PMI as long as you’re current on your payments.

How are FHA MIP rates determined?

The FHA reevaluates and updates MIP rates periodically. Changes are based on the condition of its Mutual Mortgage Insurance Fund, and current housing and economic conditions.

Can I cancel my FHA MIP once I’ve reached a certain equity level?

No. Unlike the private mortgage insurance on a conventional loan, which goes away after a homeowner reaches 20% equity, FHA MIPs cannot be canceled.

Are MIP payments tax-deductible?

Unfortunately, no. The Further Consolidated Appropriations Act of 2020 allowed qualified taxpayers to take a tax deduction for MIP and PMI costs for the tax years 2018 through 2021, but the deduction has expired and is no longer available.

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.

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-Q225-186

When you’re a renter, it can feel like all the transformative DIY projects are reserved for homeowners. But just because you rent doesn’t mean you can’t spruce up your space.

That’s right: Rental-friendly upgrades exist. And the best part? Many improvements can have a major impact on your space without blowing your budget.

1. Create an Accent Wall

Spicing up your walls doesn’t have to cost a fortune, nor must it require gallons of paint. For just a few bucks a roll, you can buy washi tape and create a custom accent wall that won’t ruin the paint job. Or, if you’re able to spend a few extra dollars, you could also invest in removable wallpaper.

2. Update Light Fixtures

Light fixtures in rentals are notoriously drab and tend to provide uneven lighting. Fortunately, there is no shortage of lighting options to help you brighten up your space. A recessed lighting conversion kit, for instance, is fairly inexpensive, easy to install, and allows you to hang a pendant or other light fixture. Not sure your landlord would approve? You can always buy some decorative lamps or even string lights to help amp up the brightness and style of any room.

3. Install Radiator Shelving

In older units, rusty radiators can be a renter’s nightmare. But luckily, there are some rental upgrades — like installing radiator shelving — that can disguise even the most unattractive units. You can DIY a custom shelving unit to work around your radiator, upgrade some shelving from a local thrift store, or even order one online.

4. Buy Matching Bookshelves

Bookshelves are a simple way to upgrade the decor and add much-needed storage space. Placing tall, matching shelves on either side of a TV, couch, or even a bed could bring some serious style (and space) to a small room, plus allow you to display photos or art without putting holes in the wall.

5. Apply Contact Paper

Do you have older appliances you’d like to freshen up? For just a couple bucks, you can invest in some stainless steel contact paper to make them at least look shiny and new again! Contact paper also comes in a wide variety of colors and styles that you can use to liven up your cabinets and refresh your countertops.

6. Replace Pulls & Knobs

This is another budget-savvy, rental-friendly upgrade that can add some flair to your home. Replace your door handles, kitchen cabinet knobs, and any other pulls with something more your style. Affordable, stylish knobs can be found on sites (like Etsy and Amazon) and in stores like Lowe’s and Home Depot. Be sure to hang on to the original knobs so you can swap them back in before you move out.

7. Install a Bike Mount

If you own a bike but are short on storage, install a bike mount or other bike storage solution. Just make sure your landlord is okay with the installation since it may require some drilling.

8. Try Large Floor Mirrors

Sometimes more is more. Exhibit A: an oversized leaning mirror (don’t worry; it’s mounted securely though it looks casually propped against a wall). It can serve double-duty as a luxe decoration that brightens a room and a functional mirror.

9. Invest in Houseplants

Want to add some life to your rental — literally? Look no further than a houseplant. If you don’t have a green thumb, explore hardy varieties, like air plants, or even artificial plants.

10. Upgrade Your Showerhead

Installing a new showerhead is a quick, effective way to upgrade your bathroom. You could start reaping the rewards the very first time you turn on the faucet. Make sure to hang on to that original showerhead so you can reinstall it when you move out.

Recommended: How Much Does a Shower Remodel Cost?

11. Set Up Room Dividers

Need to carve out space for a home office? Or maybe even make room for a closet? Buying or creating stylish room dividers can provide an instant rental update. And when you need a larger space, simply close the dividers.

12. Use a Pantry Organization System

Help bring order to the busiest spot in your home: the kitchen. Pantry organization systems come in a variety of shapes, sizes, and varieties, so you should be able to find one that suits your home and the budget you’re working with.

13. Update Your Blinds

It can be easy to forget about window coverings. But freshening up your blinds or curtains can add a new visual element to the room, frame a window, or help brighten the space.

14. Install Sticker Flooring

When you’re considering places to upgrade, don’t forget to look down. Changing up the flooring — even temporarily — can make a room feel brand-new. One option to consider if you have a tile floor: removable tile stickers, which come in a variety of styles, sizes, and price points.

15. Create a Kitchen Backsplash

You can also use removable stickers to freshen up a kitchen backsplash, which is a much easier and cheaper option than replacing the tiles. New to this type of project? There are online video tutorials you can watch that will show you how to get the job done.

Recommended: Renovation vs. Remodel: What’s the Difference?

16. Replace Light Switch Covers

Don’t sleep on the small details — sometimes, they can have a major impact. One example of this is swapping out basic light switch covers with ones that match the decor of your rental. Plus, new covers are generally affordable and easy to install.

17. Buy a New Kitchen Faucet

There’s something to be said for upgrading the items in your rental that you use every day, such as the kitchen faucet. Installing a new faucet is a fairly simple DIY project, provided you know how to shut off the water to your sink and use a wrench. If you’re unsure how to do either, though, you can enlist the help of a plumber. Just be sure to put the old faucet in storage so you can swap it back before moving.

18. Find a Stylish Toilet Seat

Let’s be honest: Most rentals come with a basic toilet seat. When yours just won’t do anymore, it may be time to upgrade to something more modern and comfy. You can find a wide variety of options online or in stores.

19. Paint the Molding and Trim

Before selecting color swatches, you may want to double-check with your landlord that painting is allowed. Many landlords welcome you painting your molding and trim, since it’s an easy, affordable way to update a rental.

20. Invest in Good Rugs

Quality rugs can run well into the thousands of dollars. But there are less expensive options that are also durable and stylish. Besides protecting your flooring, a good rug can also visually anchor a room and help absorb sound.

No matter the price of your rug, you may want to consider purchasing renters insurance to protect it and your other valuables against losses.

Financing Your Home Updates

Some of these home updates may be easily paid for out of your checking or savings account. But others can add up. If you need a quick infusion of cash, you might consider taking out a small home improvement loan.

This is basically an unsecured personal loan, which is typically available at a lower interest rate than a credit card. It gives you a lump sum of cash (perhaps just $1,000 or so, depending on your needs) that is then paid back with interest over a term of one to seven years.

Recommended: How to Apply for a Personal Loan

The Takeaway

When you’re a renter, you may not be able to rip out walls or change out kitchen cabinets. But there are still simple, effective ways to transform your space without breaking the terms of your lease. While these sorts of jobs tend to be affordable, you can easily rack up quite the bill if you plan on tackling several home improvement projects at once. In that case, a personal loan could be a wise move.

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

FAQ

What is a good way to update a rental?

Small, temporary changes can work well. You might choose to create an accent wall with removable wallpaper, or add a floor mirror, which you can take with you when you move.

How can I update a rental home?

Some small moves that will have a big impact include adding new window treatments, lighting, showheads, and toilet seats. Painting or adding peel-and-stick wallpaper are other ways to freshen up a rental home.

What can make rental cabinets look better?

If you want to make cabinets in a rental residence look better, consider putting up vinyl or contact paper to give them a new look. This can be removed when you move out.

Photo credit: iStock/CreativaStudio

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.

SOPL-Q225-090

Whether you’re a first-time homebuyer or you’re thinking about putting your home on the market, it’s critical to know the value of the property. Property valuation also comes into play in home financing, property taxes, real estate investing, and home insurance. But who does the valuation, and how do they determine the value of a home?

The answers to both questions will depend on the situation. Read on to learn more about property valuations, including what they are and why they matter.

What Is a Property Valuation?

Broadly defined, a property valuation is a method of determining how much a property is worth for purposes of pricing it for sale, qualifying for a mortgage, or determining a property tax bill.

Someone selling their home, for example, may use a property valuation to determine how much their house is worth and how much they can charge on the open market.

If you are applying for a mortgage, the lender will typically have a home appraisal done to determine if the price you are paying for the house reflects its actual fair market value. Insurance companies and local tax authorities also do property valuations.

Typically, property valuations are done by an independent third party, such as a licensed appraiser. The lender, buyer, seller, tax authority, and insurer generally cannot have any relationship with the appraiser so that the valuation is unbiased.

The value of a property is determined by many factors, including its location, its size, the condition of the inside and outside of the building, and the current real estate market.

Types of Property Valuations

There are several different types of property valuations. Here are some of the most common you may encounter.

Appraised Value

When you are looking to qualify for a mortgage to buy a home, your lender will usually need to know the appraised value of the house you want to buy. The appraised value of a home is determined by a licensed appraiser who thoroughly evaluates the property’s size and features, market conditions, and comparable sales data. Typically, a lender will offer a loan for no more than 80% of the home’s appraised value (though some lenders and loan programs will allow you to borrow more).

💡 Quick Tip: When house hunting, don’t forget to lock in your mortgage loan rate so there are no surprises if your offer is accepted.

Assessed Value

The assessed value of your home is used in determining your property taxes. Depending on where you live, a municipal or county tax assessor will perform a property value assessment based on a number of factors, which may include sales of similar homes, square footage, current market conditions, and findings from a home inspection.

Local tax officials will use your home’s assessed value to calculate your property taxes. The higher your home’s tax-assessed value, generally the higher your property taxes will be. It is important to note that assessed values may not always accurately reflect the property’s market value, as they can vary depending on the jurisdiction’s assessment practices.

Recommended: Are Property Taxes Included in Your Mortgage Payments?

Fair Market Value

Fair market value of a property refers to the price at which the property would change hands in the open market between a willing buyer and a willing seller, with neither party under any pressure to buy or sell. Put another way, it’s the amount for which you could expect to buy or sell a property based on the current real estate market. This value is considered the most objective and widely used in real estate transactions.

Recommended: The Top Home Improvements to Increase Your Home’s Value

Actual Cash Value and Replacement Cost Value

Actual cash value and replacement cost value are methods used by home insurance companies to determine how they will pay out when you file a claim. Actual cash value takes into account depreciation and wear and tear when determining a property’s value. Replacement cost value estimates the cost of rebuilding or replacing a property with a similar one, considering current construction costs.

What If You Get a Low Appraisal?

If you’re buying a home and the lender’s appraised value is as much as the agreed-upon price or more, the lender will likely move forward with the home loan, assuming that the other aspects of the property and your application are in order.

If the appraisal comes in under the agreed-upon price, the lender may reduce the amount of the loan it’s willing to offer.

At that point, you or the sellers can dispute the appraisal with the lender or ask for a second look. If the value is still too low, there are a few different routes:

•  You can try to get the seller to reduce the price.

•  You can agree to contribute the difference in cash.

•  You and the seller may agree to split the difference.

If the purchase agreement contains an appraisal contingency, you are protected in the case of a low appraisal. This means that If you can’t get the seller to adjust the price or come up with the difference in cash, you can walk away from the sale and get your earnest money deposit returned to you.

Property Valuation Methods

There are different ways to assess the value of a property. Which method will be used will depend on the situation.

Sales Comparison Approach

The sales comparison approach determines a property’s value by comparing it to recently sold properties with similar characteristics in the same area, also known as “comps.” Appraisers make adjustments for differences in size, condition, and amenities to arrive at an estimated value. The sales comparison approach is the one most often used by real estate agents in determining the value of a property for sale.

Income Approach

The income approach is primarily used for investment properties that result in a stream of income, such as rental apartments or commercial buildings. It estimates the property’s value based on its income potential, taking into consideration factors such as expense statements, rental rates, vacancy rates, and market conditions.

Cost Approach

The cost approach evaluates a property’s value by estimating the cost required to rebuild or replace it on its current plot of land. This appraiser determines the replacement cost by considering the cost of materials and labor, then subtracts depreciation and adds in the value of the land to determine the property’s worth. This method is often used by insurance companies.

Automated valuation models (AVMs) are software programs that use data about other properties and sales combined with mathematical or statistical modeling to arrive at an estimate of the value of a property. There are commercial AVM providers, including Equifax®, as well as free AVMs available online, such as Zillow’s “Zestimate.”

Because AVMs are based on existing data, the property valuations they produce are only as good as the information available. An AVM may be inaccurate if the data is outdated or incorrect. While they can be speedy and convenient, at least for the time being, AVMs have not eliminated the need for appraisals or inspections.

The Takeaway

Understanding property valuations is essential for navigating any kind of real estate transaction, whether you are on the buying, selling, investing, or financing side of the deal. There are many different types of home valuations, including appraised value, assessed value, fair market value, actual cash value, and replacement cost value. There are also different ways of doing property valuations, such as the sales comparison approach, income approach, and cost approach. For a quick valuation, you can even use an online computer-generated valuation tool or AVM.

Whatever approach you take, a property valuation can help you confidently make informed decisions and negotiate effectively in the real estate market.

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.

FAQs

How do you determine the value of a property?

The value of a property is typically determined by an independent licensed appraiser who considers factors such as the property’s location, size, condition, amenities, and recent comparable sales data in the area.

What are the 4 ways to value a property?

The four primary ways to value a property are: the market comparison approach, which compares the property to similar recently sold properties in the same area; the income approach, in which the value is estimated based on the property’s income potential; the cost approach, which involves evaluating the cost to replace or rebuild the property on the same land; and the appraised value, in which the value of the property is determined by a qualified appraiser through a comprehensive evaluation.

How does valuation work?

Valuation of a home typically involves having an appraiser inspect the property, analyze relevant data, and apply appropriate valuation methods (such as the market comparison approach or cost approach, for instance). Appraisers will generally assess factors such as location, condition, amenities, recent sales, and market trends to determine the property’s value. A comprehensive report is then prepared, detailing the value, data, and reasoning behind the valuation. Valuation serves as a crucial step in real estate transactions, providing objective estimates of property worth.

*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.

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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.

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Regular home maintenance can help you avoid major household repairs (and their expense), keep your property functioning optimally, and maintain or even build your property value.

For instance, regularly monitoring, cleaning, and caring for your roof, windows, plumbing, and appliances could help avoid costly leaks and breakdowns and make your home more energy-efficient.

Not sure what needs to be done or when to do it? Check out the suggestions on this ultimate house maintenance checklist.

House Maintenance Checklist for Every Season

Many of the tasks on this list should be pretty easy to do yourself. Others might require phoning a friend with the proper tools and know-how. And there’s nothing wrong with calling in a pro if the job is too time-consuming or beyond your capabilities.

Monthly Home Maintenance Tasks

If the only time you remove the gunk from your gutters, garbage disposal, and dryer vent is when you notice they’re no longer working properly, you could be facing a hefty bill to fix the problem and repair any damage to your home.

Doing a little upkeep every month, instead of once or twice a year, can help keep small tasks from becoming major projects. Here are some things that can benefit from monthly maintenance:

•  Check the shower, tub, and sink drains for clogs. (If hair is your main headache, you may want to do this every week or more. Or you might want to consider purchasing a hair catcher for problematic drains.)
•  Clean showerheads and faucet aerators (that little mesh screen the water pours through) to keep sediment from slowing the flow. While you’re at it, check if any faucets are dripping when they shouldn’t and replace washers if necessary.
•  De-gunk the garbage disposal.
•  And give the dishwasher a deep cleaning. Good Housekeeping recommends using dishwasher cleaning tablets according to the label’s directions. Prefer the DIY route? Place a dishwasher-safe bowl filled with one cup of distilled vinegar on the top rack of an empty dishwasher, and run it through the pots-and-pans or heavy (hot) cycle.
•  Check and clean air conditioner and furnace filters, and kitchen and bathroom exhaust fans.
•  Make sure the dryer vent is free of debris. Doing so can help keep it running efficiently. And if there’s a bird’s nest or lint blocking hot air from escaping, it could become a fire hazard. You also may want to have your dryer duct inspected and cleaned once a year. (Most manufacturers recommend cleaning your lint screen, the piece near the door that’s easy to remove, after every dryer load.)
•  Vacuum HVAC registers and vents. Regular maintenance can keep some dust from building up, but you may want to call in a pro for a more thorough duct inspection if you suspect mold or if you have pets.
•  Test smoke alarms and carbon monoxide detectors. Test safety equipment every month and replace the batteries twice a year. (Many people use the change to and from daylight saving time as a reminder.) According to statistics from the National Fire Prevention Association, nearly three out of every five home fire deaths result from fires in properties without working smoke alarms.
•  Check electrical cords and outlets for damage. Replace or repair cords that are showing wear. And if an outlet cover is cracked, the prongs on an electrical cord won’t sit firmly in the outlet, or if the outlet is loose, don’t use it until you have a chance to repair it.

Seasonal Maintenance: Fall Tasks

Spring gets all the love when it comes to going all-in on sprucing up a house, but fall can also be a good time to take care of tasks both inside and out.

•  Do a top-to-bottom tour of the home’s exterior. If it’s a cool, sunny, and dry day, head outside and check out the roof for damaged or missing shingles or tiles. Inspect the exterior of the house (siding or stucco) and the foundation for any problems.
•  Check the chimney for exterior damage and clean the fireplace flue.
•  Give windows a once-over. Seal gaps, and if the windows are old and drafty, it might be time to replace them with a more energy-efficient model. (Keep in mind that you may need to get a building permit to install new windows that are bigger than what you had.)
•  Make sure exterior doors aren’t letting any cold air inside. You can get DIY weatherstripping materials at your local hardware store.
•  Wash windows and siding. If you notice any cracks or gaps during your walking tour, it may help to fix those first, especially if you’re pulling out the power washer. And if you see mildew or a buildup of dirt, check if it’s a symptom of a more serious problem.
•  Clean those gutters. If you’re ladder-phobic, there are pros out there who will be happy to clean your gutters and windows.
•  Winterize exterior plumbing. Drain hoses and sprinkler systems if you live in a colder climate. And drain, clean, and cover your swimming pool.
•  Remove and store or insulate window air conditioning units.
•  Give carpets and floors a thorough cleaning, and get your home ready for the holidays. If you haven’t cleaned your garbage disposal or dishwasher lately, this might be a good time to give them some love. And if you’re hosting Thanksgiving, maybe do a quick check to be sure all appliances are ready for the challenge.
•  Winterize your garden and lawn equipment. Depending on your climate and the type of grass you have, fall (not spring) may be the right time to fertilize your lawn. Bring in any delicate plants you hope to save from the cold. (Make sure no insects come along for the ride.) Clean garden tools. Empty gas-powered equipment before storing.
•  How’s your curb appeal? Raking leaves, aerating the lawn, patching the driveway or walkway, and touching up the exterior paint are fairly simple tasks that can make you house proud, improve your property, deter pests, and keep your family and visitors safe.
•  Flush the water heater and check for leaks. Manufacturers generally recommend flushing your water heater at least once per year to avoid sediment buildup.
•  Reverse ceiling fans to a clockwise rotation. This can help move the cooler air off the floor of your home and push warmer air down. Look for the switch on the fan’s housing, or you may be able to make the change with a remote or by giving the correct command to a smart device.
•  Remember to change the smoke detector batteries.

Seasonal Maintenance: Winter Tasks

If winter weather is a factor in your neck of the woods, prepare to hunker down.

•  Cover the barbecue or store it in the shed or garage.
•  Cover your outdoor air conditioning unit.
•  Store patio furniture and cushions in the garage or shed. If you prefer to leave heavy pieces in place, try to keep them covered.
•  Inspect the roof, gutters, and downspouts for damage after a heavy snow.
•  Check the basement for dampness or leaks when there’s a thaw.
•  Clear the driveway and walkways of snow so passersby can get by safely.
•  Focus on indoor tasks when you’re trapped by the weather. Clean the attic, caulk the tub, paint a room, and/or clean the refrigerator (inside and out, including the drip pans and coils).

Seasonal Maintenance: Spring Tasks

Shake off the winter blues, stow the alpaca throws, and get ready to enjoy warmer weather. Spring is for cleaning up, inside and out.

•  Throw those fall tasks into reverse. As soon as the last of the cold weather is past, uncover the outside air conditioning unit and have it serviced. If you have window air conditioning units, clean and return them to their rightful rooms. Bring the barbecue out from hibernation and make sure it’s in good working order. Prep the pool and outdoor sprinkler system for warm weather use. Return ceiling fans to a counter-clockwise rotation to bring cool air down. (And while you’re up there, maybe give those fans a good dusting).
•  Set up a termite inspection. There’s no wrong time of year to have your house inspected for termites, but since spring is when they tend to swarm, it may be a good way to tell if there’s a problem. It’s also an opportune time to check for carpenter ants, which can damage a home.
•  Clean and refinish the deck.
•  Look into any necessary lawn care. If you live in a warmer climate and have Bermuda, St. Augustine, or some other warm-season grass, it may be time to fertilize your turf.
•  Clean up fallen branches or leaves you missed in the fall. And clean out gutters and downspouts.
•  Inspect the roof, chimney, and siding for any winter damage.
•  Inspect indoor plumbing.
•  Check the attic for uninvited guests. Critters can invade your space almost any time of year, but squirrels, raccoons, bats, and rats are most likely to show up in the spring.
•  Wash windows and screens.
•  Clean patio furniture and cushions.
•  Call a professional about inspecting and pumping the septic tank. Some pros recommend emptying the tank every three to five years, but larger households may need more frequent pumpings.
•  Clear the clutter, and do a traditional spring cleaning. Dust everything. Polish furniture. Clean out closets, and donate or sell anything you no longer need. Clean the refrigerator, pantry, and cabinets. Scrub the floors, or have the carpets cleaned to get rid of late-winter’s muddy mess. Scrub the bathrooms and laundry room. As you go, you can check to see if anything is damaged and needs to be repaired or replaced.
•  Inspect and maintain the garage door opener. Listen for grating noises, and look for a jerky motion when the door goes up and down. Make sure the tracks are clear of debris. Some maintenance may be simple for DIYers (including spraying moving parts with lubricant, or repairing damaged weatherstripping). But if you suspect there’s an operational problem, you might want to bring in a pro.
•  Clear the garage of clutter and possible food sources. The garage may be another home for critters. Clean out the clutter and look for damage from pests, including rodents and ants.
•  Time to change the smoke detector batteries. (Yes, we listed it three times. It’s that important.)

Seasonal Maintenance: Summer Tasks

Because summer is so hot in many parts of the country, it can be a good season for inside repairs and outside jobs that might involve getting wet. For example, you could:

•  Pressure-clean the house, driveway, and walkways.
•  Inspect the pool and pool equipment to be sure everything is clean and running well.
•  Check the sprinkler system to minimize water waste and maximize the benefits to the landscape.
•  Plant trees or shrubs to provide shade for your home, deck, and patio. Or consider installing a canopy or some other type of shade structure.
•  Install curtains, shades, or window film to minimize sun damage to indoor furnishings.
•  Inside, check for leaks around kitchen cabinets, bathroom vanities, and toilets.
•  Keep your air conditioner clean, and consider upgrading for better energy efficiency. Change the filter. Clean air ducts. Make sure nothing is blocking the outside unit.

Recommended: Home Improvement Cost Calculator

You’ll Probably Need Some Tools

Even if you plan to hire pros to take care of most of your home maintenance tasks, it can be a good idea to keep a few basic tools around for DIY jobs. Here are some items that could come in handy:

Basic Tools for Home Maintenance

•  Step ladder or fold-up work platform. Why risk falling off a wobbly chair when a step ladder can give you extra height and stability?
•  Extension ladder. If you’re planning to clean your gutters or get up on the roof, you’ll likely want to borrow or purchase an extension ladder to safely get the height you need.
•  Tape measure.
•  Hammer and assorted nails.
•  Screwdrivers and assorted screws. Both flat-head and Phillips-head screwdrivers (in a few different sizes) will likely get plenty of use; or you can pick up one screwdriver with interchangeable heads.
•  Drill and assorted drill bits. A light-duty, battery-operated drill and a set of bits should be able to handle most beginner-level repair jobs.
•  Indoor and outdoor extension cords.
•  Hacksaw or reciprocating saw. For quick cuts on wood, metal, PVC pipes, tree limbs, and more.
•  Putty knife. You can use it for patching holes, applying drywall mud, and for scraping away paint or dirt.
•  Pliers. Great for holding, bending, or reaching in to grab something.
•  Sandpaper. The grit or coarseness of the paper will vary depending on the job and the results you’re looking for. It may save time to have a few different types on hand.
•  Safety goggles and gloves. These basic pieces of safety equipment could protect you from a DIY disaster.

Paying for Home Improvements

One great reason to keep up with regular home maintenance is to avoid the high cost of major repairs or replacements. But from time to time, you may find you have to — or want to — take on a bigger project.

According to a 2024 study from the home services website Angi, homeowners spent an average of $1,750 on home maintenance projects and $978 on unexpected repairs. If your budget can’t handle those kinds of expenses right now, you may want to look into a home improvement loan, especially if you don’t have a lot of equity built up in your home.

A home improvement loan is an unsecured personal loan that can be used to cover the costs of renovations, upgrades, or repairs. It’s different from a home equity loan or home equity line of credit (HELOC), because you don’t have to use your home as collateral. Instead, the interest rate and amount you qualify for are based largely on the applicant’s credit history, income, and employment.

If you need to move quickly on a project or repair and need to borrow a small sum, such as $3,000 or $5,000, a home improvement personal loan can be especially appealing. The application process is less involved than for a home equity loan or HELOC.

Note that repayment terms are typically shorter than with the other options and will vary with the lender. You may find terms of anywhere from one to seven years or possibly longer. Make sure you understand these details before applying for a personal loan.

Recommended: How Much Does It Cost to Remodel or Renovate a House?

The Takeaway

Maintaining a home is a year-round job, one made easier by taking on a set number of tasks each month or season. The regular monitoring, care, and cleaning of the interior and exterior of your house doesn’t just keep your place looking good — it can also help prevent costly breakdowns and protect your investment. However, even the most vigilant homeowner will likely take on a costly repair at some point. If your budget can’t handle the extra expense, a home improvement personal loan might be a good option.

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

FAQ

What regular home maintenance should be done on a house?

There are many home maintenance moves needed to keep a property in good condition. Some of the most important are checking smoke detectors, looking over the HVAC system and cleaning its filters, examining for termites, inspecting for leaks and roof damage, and cleaning the gutters.

What is the 1% rule of home maintenance?

This rule says that you should set aside 1% of your home’s value for home maintenance every year. For instance, if your home is worth $500,000, you will probably spend $5,000 on home maintenance in a typical year.

How do I create a home maintenance schedule?

To create a home maintenance schedule, list all the tasks that you should do to keep your house well cared for. Then, either divide those into monthly or quarterly lists of tasks to handle. Some people prefer a quarterly, or seasonal, approach, while other people prefer to break home maintenance down into potentially easier-to-tackle monthly action items.

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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