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When preparing to buy a home, understanding the early steps in the mortgage process can make the search more focused and effective.

Two common terms are prequalification and preapproval. Each gives lenders and home sellers information about a buyer’s borrowing potential, but they differ in how they evaluate finances and how much confidence they provide in the ability to secure a loan.

Knowing the difference helps buyers set a realistic budget, compare lenders, and submit stronger offers.

What Does Prequalified Mean?

Getting prequalified is an early way to estimate how much a buyer might borrow for a home and what the monthly payments could be.

Where to Get Prequalified for a Mortgage

A buyer can request prequalification from:

•   A mortgage lender or bank

•   An online mortgage lender

•   A credit union

•   A mortgage broker that compares multiple lenders

Many lenders allow buyers to start online. The application typically asks for the estimated purchase price, down payment, your annual income, employment information, existing debts, and contact details. Some lenders may also request a Social Security number and date of birth.

The lender uses this information, which may not be verified, to estimate a potential loan amount, interest rate, and monthly payment. Prequalification is often free, although buyers should confirm whether a lender charges an application or credit-report fee.

Lenders may use a soft credit inquiry for prequalification. A soft inquiry does not affect your credit scores. The process can be completed quickly when the buyer has the required information available, but timing varies by lender and application.

Buyers can request prequalification from several lenders to compare estimated payments and interest rates, which vary by repayment term. Because the information has not been fully verified, prequalification is not a loan commitment or a guarantee that the lender will approve the mortgage.

You can use a home affordability calculator to estimate a comfortable purchase price before requesting prequalification.

What Does It Mean to Be Preapproved?

Mortgage preapproval is a more detailed review of a buyer’s finances. The lender may verify income, employment history, debts, assets, and credit history before conditionally approving a specific loan amount.

A buyer can seek preapproval from a bank, credit union, mortgage broker, or online mortgage lender. Buyers can also review SoFi’s mortgage loan options.

Online, Fixed-Rate, Conventional, and First-Time Buyer Preapproval

A buyer seeking an online preapproval can usually begin by completing a lender’s digital application and uploading financial documents. The same process may support a fixed-rate purchase mortgage, a conventional purchase loan, and a mortgage for a first-time homebuyer, if the lender offers that loan type.

First-time buyers generally provide the same core financial documents as other applicants. A lender may also request information about down payment assistance, gifts, housing history, and homebuyer programs. FHA financing is another option some buyers compare when they have a smaller down payment or different qualification needs. Buyers can review FHA home loan information before discussing available options with a lender.

A preapproval for a fixed-rate mortgage confirms the lender’s preliminary assessment for that loan structure. It does not lock the interest rate unless the lender separately provides a rate lock. Buyers should ask whether the preapproval applies to a conventional, FHA, VA, or another type of purchase loan.

Documents Lenders May Request

When seeking preapproval, buyers will likely complete an application and provide some of the following:

•   Social Security number and card

•   Photo identification

•   Recent pay stubs

•   Tax returns, including W-2 statements, for the past two years

•   Two to three months of checking and savings account statements

•   Recent investment account statements

•   A list of recurring debts

•   Residential addresses from the past two years

•   The planned down payment and a gift letter when applicable

The lender may request additional documentation for certain income types. Freelancers may need to provide 1099 forms, a profit and loss statement, a client list, or work contracts. Rental property owners may need to provide lease agreements.

Approval can take longer when documents are incomplete, income is difficult to verify, assets have unexplained deposits, or credit reports contain negative information. Buyers can reduce delays by submitting legible documents and explaining unusual account activity promptly.

A buyer can review free credit reports before applying at AnnualCreditReport.com. A credit report lists balances, payment history, and derogatory information, but it does not include credit scores.

Getting a Preapproval Letter

After reviewing the application and supporting documents, the lender may issue a preapproval letter. The letter generally states the estimated loan amount and describes conditions that must be met before final approval.

A buyer can ask the lender for a preapproval letter as soon as the lender completes its initial review. The time required depends on the lender, the completeness of the application, and the complexity of the buyer’s finances. A fast preapproval is more likely when the buyer has current documents ready and responds quickly to follow-up requests.

The letter can strengthen an offer, especially when a seller receives multiple offers. Some sellers may disregard an offer without a preapproval letter, although requirements vary by market and seller.

A preapproval letter usually remains valid for a limited period set by the lender. Buyers should ask how long the letter lasts and whether the lender must update income, asset, or credit information before an offer is submitted.

Learn more about how long mortgage preapproval lasts before beginning your home search.

Credit-Score Impact

Prequalification may use a soft credit inquiry, which does not affect credit scores. Preapproval often includes a hard credit inquiry, but the exact process depends on the lender and the type of application.

Mortgage shoppers should ask each lender which credit inquiry it uses and which credit-scoring model applies. Multiple mortgage inquiries made within a short shopping period may be treated as a single inquiry by some scoring models, but the applicable period varies by model.

Buyers can learn more about how to check a credit score without paying before applying.

Choosing a Comfortable Loan Amount

A buyer does not have to spend the full amount shown on a preapproval letter. Preapproval identifies the maximum amount the lender may be willing to lend based on the information reviewed. It does not determine what the buyer can comfortably afford each month.

A lower-priced home may leave more room for:

•   Emergency savings

•   Property taxes and homeowners insurance

•   Maintenance and repairs

•   Retirement contributions

•   Other financial goals

Buyers should account for the down payment, closing costs, monthly debts, and expected housing expenses when setting a purchase budget. Review this guide to first-time home buying before setting a target price.

How Prequalification and Preapproval Compare

Prequalification and preapproval serve different purposes. Prequalification helps a buyer explore a price range early. Preapproval provides a more detailed lender assessment before the buyer makes an offer.

Consideration	Prequalification	Preapproval
Information supplied	Basic, often self-reported income, debt, asset, and down payment information	Financial information supported by documents
Verification level	Limited or none	More extensive review of income, assets, employment, debts, and credit
Credit inquiry	Often a soft inquiry, depending on the lender	May involve a hard inquiry, depending on the lender
Output	Estimated loan amount, interest rate, and payment	Conditional loan amount and a potential preapproval letter
Reliability	General planning estimate	More reliable estimate based on verified information
Use with sellers	Helps a buyer understand a budget	Often more useful when submitting an offer
Timing	Usually an early step	Usually completed before making an offer
Next step	Compare mortgage options and prepare documents	Shop for a home, submit an offer, and complete underwriting

The two terms do not have one universal definition. Some lenders use “prequalification” for a document-based review, while others use it for an automated estimate. Buyers should ask what the lender verifies and what the resulting letter represents.

When a Letter Is Needed

A buyer does not need prequalification to purchase a home. A preapproval letter is also not required for every offer, but an agent or seller may request one.

Preapproval can help because:

1.    It identifies a specific potential loan amount. The buyer has a clearer budget from a particular lender.

2.    It can prepare the buyer for underwriting. Mortgage underwriting is the lender’s final review after the buyer finds a home, agrees on a price, and submits a mortgage application.

3.    It shows that the buyer has completed an initial financial review. This can make the offer easier for a seller to evaluate.

The preapproval remains conditional. The lender still needs to review the property, confirm the final application details, and complete underwriting before issuing a final approval.

The Takeaway

Prequalification provides an early estimate based on basic financial information. Preapproval requires more documentation and usually gives the buyer a stronger estimate of the amount a lender may approve. A buyer can begin with prequalification to explore prices and compare lenders. Before making an offer, obtaining preapproval and a current preapproval letter can help the buyer move faster and present a more complete offer.

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

SoFi Mortgages: simple, smart, and so affordable.

FAQ

What is mortgage prequalification?

Mortgage prequalification is an early estimate of how much a buyer might borrow. The lender generally uses basic financial information supplied by the buyer and may use a soft credit inquiry. Because the information may not be verified, prequalification is not a loan commitment.

What does mortgage preapproval mean?

Mortgage preapproval is a conditional assessment based on a more detailed review of income, debts, assets, employment, and credit. The lender may issue a letter stating the potential loan amount, but final approval still depends on the property, updated documents, and underwriting.

Who provides mortgage preapproval?

Banks, credit unions, mortgage brokers, and online mortgage lenders may provide preapproval. Buyers should ask about application fees, credit-report fees, appraisal fees, and other costs before applying.

Which lender offers the easiest home-purchase preapproval?

No lender has the easiest process for every buyer. Buyers should compare lenders based on the documents required, loan types available, rate and fee estimates, communication, online application options, and the time needed to issue a letter. A lender that clearly explains conditions and responds promptly may provide a smoother process for a particular buyer.

Is a preapproval a loan guarantee?

No, a preapproval is conditional and does not guarantee a mortgage. The lender must still verify the final financial information, evaluate the property, confirm the loan program, and complete underwriting.

How long is a preapproval letter valid?

The validity period varies by lender. Income, assets, debts, and credit may need to be updated if the letter expires before the buyer submits an offer or completes the loan application. Buyers should request an updated letter when their financial circumstances change or the lender’s stated validity period ends.

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This content is for educational and informational purposes only. The products, services, or features discussed may not currently be available via the SoFi platform. Any references to third-party products, services, or companies do not constitute an endorsement, recommendation, or solicitation by SoFi. Readers should independently evaluate their options and consider their individual financial needs and circumstances before making any decisions. ©2026 SoFi Technologies, Inc. All rights reserved.

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A mortgage preapproval is typically valid for 60 to 90 days, although some lenders issue letters that expire after 30 or 45 days. The exact period depends on the lender, loan type, and terms stated in the letter. The clock usually starts on the letter’s issue date, so buyers should confirm the expiration date before making an offer.

A preapproval letter is different from an interest-rate lock. A lender may lock a rate for a specific period, but the preapproval and rate lock can have different expiration dates.

A mortgage preapproval can help buyers set a realistic budget and show sellers that a lender has reviewed their finances. The Consumer Financial Protection Bureau notes that lenders typically check credit before issuing a preapproval letter and that the letter usually includes an expiration date.

What Is a Mortgage Preapproval Letter?

A mortgage preapproval letter is a conditional statement from a lender that estimates how much the borrower may qualify to borrow. The lender reviews the borrower’s credit history, credit score, income, debts, and assets before issuing the letter.

The letter may include:

•   The estimated loan amount

•   The proposed loan type

•   The expected interest rate or rate assumptions

•   Conditions the borrower must satisfy

•   The date the preapproval expires

A preapproval letter shows sellers that a lender has reviewed the buyer’s financial information and considers the buyer likely to qualify for a mortgage. It does not guarantee that the lender will approve the final loan or that the buyer will receive the home.

A lender can still require an appraisal, title review, additional documentation, and a final underwriting decision. A buyer’s financial circumstances must also remain substantially consistent through closing.

Mortgage preapproval has become an important part of the home-buying process. Real estate agents and sellers often want to see a preapproval letter before accepting an offer, including from a first-time homebuyer.

Note: A SoFi Verified Preapproval Letter is valid for 90 days.

How the Mortgage Preapproval Process Works

The mortgage process often starts with an estimate of how much the buyer can afford. This allows the buyer to set their budget and house-hunting parameters according to an official determination of how much of a mortgage they can afford.

Steps to Get Preapproved

A borrower generally follows these steps:

•   Review loan options. Consider different types of mortgage loans, such as fixed-rate, adjustable-rate, conventional, FHA, VA, USDA, and jumbo loans.

•   Compare lenders. Review interest rates, APRs (annual percentage rates), lender fees, loan terms, closing timelines, and preapproval policies.

•   Submit an application. The lender requests personal and financial information.

•   Provide documentation. Documents may include:

○   Recent pay stubs

○   W-2 forms and tax returns, often covering the past two years

○   Bank and investment account statements

○   Information about current debts and monthly payments

○   Proof of additional income

○   Identification and employment history

○   Profit-and-loss statements and business records for many self-employed borrowers

•   Complete a credit review. Each lender may perform a hard credit inquiry.

•   Review the letter. Check the loan amount, loan type, conditions, interest rate information, and expiration date.

It usually takes seven to 10 business days to receive a preapproval letter after the lender receives all requested information. The time can increase when documents are missing or the application requires additional review.

Where to Get Preapproved

Buyers can seek preapproval from a bank, credit union, or mortgage lender (either online or bricks-and-mortar). A buyer may contact one lender or compare several lenders before choosing a loan.

When comparing lenders, review:

•   The interest rate and APR (which includes lender fees)

•   Origination charges and other lender fees

•   Loan programs available for the buyer’s situation

•   Minimum down payment and reserve requirements

•   The lender’s document and credit-review process

•   The preapproval letter’s expiration period

•   Whether the lender offers rate locks and how long they last

•   Communication, processing, and closing support

A preapproval from one lender does not obligate the buyer to use that lender. Buyers can compare loan estimates after making an offer and selecting a property.

Mortgage Preapproval and Credit Inquiries

Preapproval commonly involves a hard credit inquiry, which may cause a temporary decrease in a credit score. Multiple mortgage inquiries made within a 14- to 45-day period may be treated as one inquiry by commonly used scoring models, depending on the model and the timing. Buyers should ask each lender how it handles credit inquiries before submitting applications.

Recommended: How Mortgage APR Works

How Long Does Mortgage Preapproval Last?

Most mortgage preapprovals last 60 to 90 days. Some lenders issue letters for 30 or 45 days, while others may use a different period based on the loan program or borrower’s circumstances.

The expiration date normally appears on the letter and generally starts on the date of issue. Buyers should not assume that the letter remains valid for the full home search if the search takes longer than expected. Contact the lender before the expiration date to confirm whether the letter can be renewed or extended.

A preapproval can expire while the buyer is still searching for a home. In that situation, the buyer may need to provide updated financial documents and receive a new letter before submitting an offer. A lender may also review credit again.

A lender’s preapproval period and interest-rate lock period are separate:

Item	What it covers	Typical timing
Mortgage preapproval	The lender’s preliminary review of the borrower’s ability to qualify	Often 60 to 90 days, depending on the lender
Interest-rate lock	The period during which a lender agrees to honor specified rate terms	Varies by lender and transaction
Final loan approval	The completed underwriting decision for a specific property	After the buyer has an accepted offer and the lender completes its review

A preapproval letter does not automatically lock an interest rate. Buyers should confirm both dates and conditions with the lender.

Recommended: Home Mortgage Calculator With Taxes and Insurance

Mortgage Prequalification, Preapproval, and Final Approval

Prequalification and preapproval describe different stages of the mortgage process. Final approval occurs later, after the buyer chooses a property.

Stage	Information reviewed	Credit inquiry	What the buyer receives
Prequalification	Self-reported income, assets, debts, and other basic information	Often a soft inquiry, though lender policies vary	A preliminary estimate of borrowing capacity
Preapproval	Documents such as pay stubs, tax returns, account statements, and credit history	Often a hard inquiry	A conditional letter stating the estimated loan amount
Final approval	The borrower’s verified finances and the chosen property	Further review may occur	A final underwriting decision and conditions for closing

Prequalification is often available immediately or within a day or two. It helps a buyer estimate a price range, but it does not mean the lender has verified the information or committed to a loan.

The mortgage preapproval process requires more documentation. To determine whether a borrower may qualify for a mortgage, lenders generally review the following:

•   Income: Employees may provide pay stubs, W-2s, and tax returns from the past two years. Additional income, such as bonuses, may require separate documentation. Self-employed borrowers often provide business records and a year-to-date profit-and-loss statement.

•   Assets and liabilities: Bank statements, investment account records, property information, and debt statements help the lender assess the down payment, closing costs, and cash reserves. Buyers can review ways to afford a down payment on a first home.

•   Debt-to-income ratio: Lenders compare monthly debt obligations with gross monthly income to calculate the borrower’s debt-to-income ratio.

•   Credit history: The lender reviews the borrower’s credit history and score as part of the risk assessment.

Receiving preapproval from a lender does not guarantee final approval. The lender may approve the application, suspend it while requesting more information, or deny it.

Estimate the Mortgage Payment

Before seeking prequalification or preapproval, a buyer can use a mortgage calculator to compare estimated payments based on:

•   Down payment

•   Interest rate

•   Loan amount

•   Loan term

•   Property taxes and insurance

A lender’s maximum loan amount may exceed the payment amount that fits comfortably within the buyer’s budget. Buyers should consider the full monthly housing cost, including mortgage principal and interest, property taxes, homeowners insurance, mortgage insurance, homeowners association dues, and maintenance.

What to Do After Receiving a Preapproval

A preapproval letter helps the buyer focus on homes within the approved price range. After receiving one, the buyer should:

•   Confirm the letter’s expiration date and loan conditions.

•   Set a purchase budget below the maximum amount if needed.

•   Avoid taking on new debt or applying for unnecessary credit.

•   Keep employment and income information stable when possible.

•   Continue saving for the down payment, closing costs, and cash reserves.

•   Ask the lender how changes in income, assets, debts, or employment could affect approval.

•   Include the preapproval letter with an offer when the seller or agent requests it.

•   Notify the lender after an offer is accepted so underwriting can begin.

The preapproval amount is not the same as a required purchase price. Buyers can make an offer below that amount and should account for costs that the initial preapproval may not include.

What Happens When a Preapproval Expires?

Lenders set expiration dates because a borrower’s financial information can change. When a preapproval expires, the lender may request updated:

•   Pay stubs and employment information

•   Bank and investment account statements

•   Debt balances and monthly payments

•   Tax returns or self-employment records

•   Credit information

•   Down payment and reserve documentation

The lender may issue a renewed letter if the borrower still qualifies. It may also change the approved amount, interest-rate assumptions, loan program, or conditions if the borrower’s finances or market conditions have changed.

To reduce delays, buyers should contact the lender before the expiration date and ask:

•   Whether the existing application can be renewed

•   Which documents need to be updated

•   Whether a new credit inquiry is required

•   Whether the loan amount or conditions will change

•   How long the renewed letter will remain valid

A buyer who is no longer actively shopping may want to wait before requesting another preapproval. A renewal can involve another credit review, depending on the lender.

Finalizing the Mortgage

After a seller accepts an offer, the buyer can select a lender and complete the mortgage process. The lender may verify that the buyer’s financial situation has not changed since preapproval.

The mortgage underwriter reviews the borrower’s documentation and the property. The lender may order:

•   An appraisal

•   A title search and preliminary title report

•   Additional income or asset verification

•   Updated credit or debt information

•   Proof of homeowners insurance

The lender may approve the loan, suspend it while requesting more documents, or deny it. Final approval requires the borrower to satisfy the lender’s conditions and the property to meet the lender’s requirements.

A final commitment letter confirms approval for the specific transaction. The buyer can then schedule closing. It generally takes 42 days to close on a house, although some transactions close in as little as 20 days.

Buyers should avoid changes that could affect underwriting, such as applying for new credit, taking out a loan, missing payments, changing jobs, or moving money between accounts without documentation.

The Takeaway

Mortgage preapprovals are generally good for 60 to 90 days, although some lenders issue letters that last 30 or 45 days. The preapproval period usually begins when the lender issues the letter.

A preapproval letter can help buyers understand their budget and support an offer, but it does not guarantee final loan approval. Buyers should compare lenders, keep their financial information current, and ask about renewal requirements before the letter expires.

Looking for an affordable home mortgage loan? SoFi Mortgage offers home loans with down payments as low as 3% to 5% for eligible borrowers. Applications are available online, with access to one-on-one help.

SoFi Mortgages: simple, smart, and so affordable.

FAQ

Does mortgage preapproval guarantee final loan approval?

No, mortgage preapproval is conditional and based on the information available when the lender reviews the application. Final approval depends on underwriting, property appraisal, title review, verification of income and assets, and confirmation that the borrower’s financial situation has not changed.

Can a mortgage preapproval be extended or renewed?

Often, yes. The borrower usually must provide updated income, asset, debt, employment, and credit information. The lender may issue a new letter, change the loan amount or conditions, or require a new credit inquiry. Renewal policies vary by lender, so borrowers should ask before the original letter expires.

How many times can someone get preapproved for a mortgage?

There is no universal limit on the number of times a borrower can seek mortgage preapproval. A buyer may compare multiple lenders and request a new preapproval after an earlier letter expires. Each application can involve a hard credit inquiry and additional documentation. Mortgage inquiries made within the applicable shopping period may be grouped for scoring purposes, but the timing rules depend on the credit-scoring model. Buyers should submit applications within a short period — from 14 to 45 days — and ask each lender how it reports inquiries.

How does mortgage preapproval affect a credit score?

A hard credit inquiry during preapproval may cause a temporary decrease in a credit score. Multiple mortgage inquiries made within a short shopping period may count as one inquiry under some scoring models. Buyers should avoid unnecessary credit applications and confirm the lender’s process before applying.

What can cause a mortgage preapproval to change or be revoked?

A lender may change or withdraw a preapproval if the borrower:

•   Takes on new debt

•   Misses a payment

•   Changes jobs or loses income

•   Provides different income or asset information

•   Moves money without documentation

•   Experiences a credit-score change

•   Chooses a property that does not meet the lender’s requirements

The lender may review these factors again during underwriting before issuing final approval.

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This content is for educational and informational purposes only. The products, services, or features discussed may not currently be available via the SoFi platform. Any references to third-party products, services, or companies do not constitute an endorsement, recommendation, or solicitation by SoFi. Readers should independently evaluate their options and consider their individual financial needs and circumstances before making any decisions. ©2026 SoFi Technologies, Inc. All rights reserved.

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The U.S. Department of Veterans Affairs (VA) offers a mortgage financing program known as VA loans. It’s designed to help veterans, active-duty service members, and surviving spouses get financing for a home loan.

When applying for any mortgage, there are additional costs on top of the purchase price of the property. These costs can be complex to figure out for first-time homebuyers, so there are calculators available to help.

A loan closing costs calculator is used to estimate the closing expenses associated with a mortgage loan such as a VA loan. These costs can include appraisal fees, loan origination fees, title and homeowners insurance, recording fees, and property taxes. The calculator takes into account the amount of the loan, the term of the loan, the interest rate, and the purchase price.

This guide will help you understand these costs and calculate what these expenses might look like for your loan.

Why Use a VA Loan Closing Costs Calculator Table?

A VA loan closing costs calculator is a useful tool for anyone looking into applying for a VA loan. Because, yes, you do pay closing costs with a VA loan.

Although calculators only provide an estimate and not the final closing costs, you can enter the property and loan details and immediately get an idea about the total closing expenses you will be paying if you go through with the loan.

This helps with budgeting, comparing the cost of living in different locations, looking at different properties and loan options, and negotiation. It also helps educate borrowers about the loan process.

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

How to Calculate Your VA Loan Closing Costs

Whether you are a first-time homebuyer or have been through the process before, it can be a good idea to acquaint yourself in advance with the fees you’ll pay when you get a home mortgage. The following are some of the common costs associated with VA loans:

•   VA funding fee: This is a required fee calculated as a percentage of the loan amount. The amount of this fee depends on factors such as the down payment amount and whether you’ve used a VA loan before. Worth noting: This is the one fee that you may be able to roll into the loan vs. pay separately.

Also, some people may be exempt from paying a funding fee, such as those who receive compensation for a service-related disability, among other scenarios.

•   Loan origination fee: This is a fee for processing the loan application (it’s charged by the lender, not the VA) and is generally a percentage of the loan amount. With a VA loan, it is typically 1% of the loan value.

•   Discount points: These are upfront payments that can be made to reduce the loan’s interest rate. Each percent of the loan amount is equal to one point.

•   Credit report fee: This is a fee for obtaining a credit report, which is used to determine the borrower’s creditworthiness. Having good credit is just one important part of qualifying for a home loan.

•   Appraisal fee: There is a fee for hiring an appraiser, who determines the value of the property being purchased.

•   Homeowners insurance: This is to secure the property against damage and losses. Borrowers generally pay the first year up front.

•   Real estate taxes: If there are any unpaid property taxes, some or all may need to be paid at closing.

•   State and local taxes: Some states or cities may impose taxes or property transfer fees.

•   Title insurance: Title insurance protects against issues with the property’s title and is generally required by lenders.

•   Recording fee: This fee covers the cost of recording the mortgage and any related documents with the government.

Worth noting: With VA loans, you can save big because private mortgage insurance (PMI) isn’t required for those putting down less than 20%, as it might be with other kinds of home loans.

💡 Quick Tip: A VA loan can make home buying simple for qualified borrowers. Because the VA guarantees a portion of the loan, you could skip a down payment. Plus, you could qualify for lower interest rates, enjoy lower closing costs, and even bypass mortgage insurance.†

2026 VA Loan Funding Fee Calculator Table

Now that you understand the different fees that may be assessed when you take out a mortgage, take a closer look at what some of these fees look like for a typical VA loan. (Rates may differ for other types of VA loans, such as those for manufactured homes or that are part of the Native American Direct Loan program.)

Down Payment (%)	Funding Fee (1st Time)	Subsequent Funding Fee
Less than 5%	2.15%	3.30%
5% or more	1.50%	1.50%
10% or more	1.25%	1.25%

Examples of VA Loan Closing Costs Calculations

Below are a few examples of closing costs for a VA loan in 2026:

Example 1: First-time homebuyer with no down payment

Loan amount: $250,000
Down payment: 0% (no down payment)
Funding fee: 2.15% (first-time user)
Other closing costs: $5,000

Closing costs calculation:

Funding fee: $250,000 x 2.15% (0.0215) = $5,375
Other closing costs: $5,000
Total closing costs: $5,375 (funding fee) + $5,000 (other closing costs) = $10,375

Example 2: First-time homebuyer with a 5% down payment

Loan amount: $300,000
Down payment: 5% ($15,000)
Funding fee: 1.50% (first-time user)
Other closing costs: $6,500

Closing costs calculation:

Funding fee: ($300,000 – $15,000) x 1.50% (0.015) = $4,275
Other closing costs: $6,500
Total closing costs: $4,275 (funding fee) + $6,500 (other closing costs) = $10,775

Example 3: Subsequent homebuyer with a 15% down payment

Loan amount: $400,000
Down payment: 15% ($60,000)
Funding fee: 1.25% (subsequent user)
Other closing costs: $7,000

Closing costs calculation:

Funding fee: ($400,000 – $60,000) x 1.25% (0.0125) = $4,250
Other closing costs: $7,000
Total closing costs: $4,250 (funding fee) + $7,000 (other closing costs) = $11,250

Recommended: The Cost of Living in California

Reasons to Calculate Your VA Loan Closing Costs First

Calculating VA loan closing costs is beneficial for a few reasons:

1.    Financial planning: Calculating the closing costs for a VA loan up front helps with planning finances and budgeting to make sure you have enough money to afford purchasing a home. It prevents unforeseen expenses and reduces stress throughout the buying process.

2.    Analyzing affordability: Knowing the closing costs can help you determine whether you can afford a property.

3.    Comparison shopping: Calculating closing expenses also helps with comparing various home mortgage loans so you can choose the terms that work best for you and potentially save money. While VA loans are one option, there are many types of mortgage loan choices that may be a good fit depending on your individual circumstances.

4.    Negotiation: Understanding closing costs provides a starting point for negotiation. Certain fees or terms may be negotiable, and having this knowledge provides you, the borrower, with the information needed to get the best deal.

5.    Avoiding surprises: Planning ahead can help prevent unforeseen costs that may arise during the closing process. It also allows you to compare the estimate to the final closing costs to make sure they are all accurate.

Recommended: How Long Does It Take to Close on a House?

Tips on How to Save on Your VA Loan Closing Costs

Here are some tips for how to save on VA loan closing costs:

•   Shop around for lenders. Compare closing cost estimates from various lenders by requesting quotations from them all. It’s important to shop around for a mortgage and look into different options to find the best rates and terms.

•   Negotiate with the lender. Don’t hesitate to ask for lower fees and discuss terms. Eligible borrowers with good credit may be able to negotiate loan conditions.

•   Consider seller concessions. In some cases, it may be possible to persuade the seller of the home to cover some of the closing costs. Consult with the real estate agent during the negotiation process about this possibility to reduce costs.

•   Utilize VA loan programs and benefits. Take advantage of the benefits offered by the VA loan program. For instance, the VA funding fee can be rolled into the loan amount, and the VA has restrictions on fees which can help keep closing costs down.

•   Consider rate options. Evaluate different interest rate options and the impact they have on closing costs. For instance, a higher interest rate may offer lender credits that can be applied to closing costs. If one intends to live in the house for a long time, this may be a good option.

•   Read the Closing Disclosure (CD) carefully. The final closing costs are listed in the Closing Disclosure document. It’s important to carefully review this document to make sure there are no errors or unforeseen closing costs.

The Takeaway

VA loan closing costs include the financing fee, credit report fees, appraisal fees, title insurance, and other expenses associated with obtaining a VA loan. It’s important for borrowers to calculate their estimated closing costs in advance to compare loan options, negotiate fees, and prepare themselves financially for buying a home.

It’s also wise to consider a variety of loan options, from the VA or not, to make sure you are getting the right fit for your financial needs.

SoFi offers VA loans with competitive interest rates, no private mortgage insurance, and down payments as low as 0%. Eligible service members, veterans, and survivors may use the benefit multiple times.

Our Mortgage Loan Officers are ready to guide you through the process step by step.

FAQ

What is the VA funding fee for 2026?

The VA funding fees for 2026 are dependent on your down payment amount. For first use, if your down payment is less than 5%, the VA funding fee is 2.15%, after which it shifts to 3.30%. If your down payment is 5% or more, the rate is 1.50%, and if your down payment is 10% or more, the rate is 1.25%.

What percentage of closing costs can be included in a VA loan?

There is no specific limit on the percentage of closing costs that can be included in the loan amount, but the VA restricts the seller’s concessions. The VA has a 4% rule, which states that the total allowable closing costs and fees paid by the seller cannot exceed 4% of the home’s value.

What is an example of a VA funding fee?

The VA funding fee is a one-time fee paid by borrowers using a VA loan, and the amount is calculated based on factors such as the loan amount, down payment, and the borrower’s service category. For example, a first-time borrower with a $300,000 loan amount and no down payment may have a funding fee of 2.15%, resulting in a fee of $6,450.

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Photo credit: iStock/Ole Schwander

^†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.

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Financial Tips & Strategies: The tips provided on this website are of a general nature and do not take into account your specific objectives, financial situation, and needs. You should always consider their appropriateness given your own circumstances.

SOHL-Q226-167

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Conventional loans are the most popular kind of mortgage, but a government-backed mortgage such as an FHA loan is easier to qualify for and may have a lower interest rate. FHA home loans have attractive qualities, but borrowers should know that mortgage insurance usually tags along for the life of the loan.

What Is an FHA Loan?

The Federal Housing Administration has been insuring mortgages originated by approved private lenders for single-family and multifamily properties, as well as residential care facilities, since 1934.

The FHA backs a variety of loans that cater to the specific needs of a borrower, such as FHA reverse mortgages for people 62 and older and FHA Energy Efficient Mortgages for those looking to finance home improvements that will increase energy efficiency (and therefore lower housing costs).

But FHA loans are most popular among first-time homebuyers, in large part because of the relaxed credit requirements.

Recommended: Tips to Qualify for a Mortgage

FHA Loan Requirements

If you’re interested in an FHA home loan to buy a single-family home or an owner-occupied property with up to four units, here are the details on qualifying.

FHA Loan Credit Scores and Down Payments

Borrowers with FICO® credit scores of 580 or more may qualify for a down payment of 3.5% of the sales price or the appraised value, whichever is less.

Those with a poor credit score range of 500 to 579 are required to put 10% down.

The FHA allows your entire down payment to be a gift from a family member, close friend, employer or labor union, charity, or government homebuyer program. The money will need to be documented with a mortgage gift letter.

FHA Loan DTI

Besides your credit score, lenders will look at your debt-to-income ratio, or your monthly debt payments compared with your monthly gross income.

FHA loans allow a DTI ratio of up to 50% in some cases, vs. a typical 43% maximum for a conventional loan.

FHA Mortgage Insurance

FHA loans require an upfront mortgage insurance premium (MIP) of 1.75% of the base loan amount, which can be rolled into the loan. On top of that, as of 2025, the annual MIP for new homebuyers is 0.15%-0.75% of the loan balance.

For a $300,000 mortgage balance with a loan-to-value ratio of more than 95% and a loan term greater than 15 years, that’s an upfront MIP of $5,250 and a monthly MIP of $137.50 at a 0.55% rate.

That reality can be painful, but MIP becomes less expensive each year as the loan balance is paid down.

There’s no getting around mortgage insurance with an FHA home loan, no matter the down payment. And it’s usually only shed by refinancing to a conventional loan or selling the house.

FHA Loan Limits

In 2026, FHA loan limits in most of the country are as follows:

•   Single unit: $541,287

•   Duplex: $693,050

•   Three-unit property: $837,700

•   Four-unit property: $1,041,125

The range in high-cost areas is $1,249,125 (for a single unit) to $2,402,625 (for a four-unit property). For Alaska, Hawaii, Guam, and the U.S. Virgin Islands, the range is $1,873,625 (for a single unit) to $3,603,925 (for a four-unit property).

FHA Interest Rates

FHA loans usually have lower rates than comparable conventional loans.

The annual percentage rate (APR) — the annual cost of a loan to a borrower, including fees — may look higher on paper than the APR for a conventional loan because FHA rate estimates include MIP, whereas conventional rate estimates assume 20% down and no private mortgage insurance.

The APR will be similar, though, for an FHA loan with 3.5% down and a 3% down conventional loan.

FHA Income Requirements

There are none. High and low earners may apply for an FHA loan, but they must have at least two years of employment history.

Recommended: How to Afford a Down Payment on Your First Home

Types of FHA Home Loans

Purchase

That’s the kind of loan that has been described.

FHA Simple Refinance

By refinancing, FHA loan borrowers can get out of an adjustable-rate mortgage or lower their interest rate.

They must qualify by credit score and income and have an appraisal of the property. Closing costs and prepaids can usually be rolled into the new loan.

FHA Streamline Refinance

Homeowners who have an FHA loan also may lower their interest rate or opt for a fixed-rate FHA loan with an FHA Streamline Refinance. Living up to the name, this program does not require a home appraisal or verification of income or credit.

The new loan may carry an MIP discount, but you’ll pay the upfront MIP in addition to monthly premiums. An exception: The upfront MIP fee of 1.75% is applied as a partial credit to the new loan if you refinance into an FHA Streamline Refinance or FHA Cash-out Refinance within three years of closing on your FHA home loan.

Closing costs are involved with almost any refinance, and the FHA doesn’t allow lenders to roll them into a Streamline Refinance loan. If you see a no closing cost refinance for an FHA loan, that means that instead of closing costs, a lender will charge a higher interest rate on the new loan.

You’ll continue to pay MIP after refinancing unless you convert your FHA loan to a conventional mortgage.

FHA Cash-Out Refinance

You don’t need to have an FHA loan to apply for an FHA Cash-Out Refinance. Whatever kind of loan the current mortgage is, if the eligible borrower has 20% equity in the home, the refinanced loan, with cash back, becomes an FHA loan.

The good news: Homeowners with lower credit scores may be approved. The not-great news: They will have to pay mortgage insurance for 11 years.

Any cash-out refi can trigger mortgage insurance until a borrower is back below the 80% equity threshold.

FHA 203(k) Loan

In addition to its straightforward home loan program, the FHA offers FHA 203(k) loans, which help buyers of older residences finance both the home purchase and repairs with one mortgage.

An FHA 203(k) loan can be a 15- or 30-year fixed-rate or adjustable-rate mortgage.

Some homeowners take out an additional home improvement loan when the need arises.

Note: SoFi does not offer FHA 203(k) loans at this time. However, SoFi does offer FHA Streamline Refinance, FHA Cash-Out, and FHA purchase loan options.

FHA vs Conventional Loans

Is an FHA loan right for you? If your credit score is between 500 and 620, an FHA home loan could be your only option. But if your credit score is 620 or above, you might look into a conventional loan with a low down payment.

You can also buy more house with a conventional conforming loan than with an FHA loan. Conforming loan limits in 2026 are $832,750 for a one-unit property and $1,249,125 in high-cost areas.

Borrowers who put less than 20% down on a conventional loan may have to pay private mortgage insurance (PMI) until they reach 20% loan-to-value. But borrowers with at least very good credit scores may be able to avoid PMI by using a piggyback mortgage and others by opting for lender-paid mortgage insurance.

One perk of an FHA loan is that it’s an assumable mortgage. That can be a draw to a buyer in a market with rising rates.

The Takeaway

An FHA home loan can secure housing when it otherwise could be out of reach, and FHA loans are available for refinancing and special purposes. But mortgage insurance often endures for the life of an FHA loan.

Some mortgage hunters might be surprised to learn that they qualify for a conventional purchase loan with finite mortgage insurance instead. And some FHA loan holders who have gained equity may want to convert to a conventional loan through mortgage refinancing.

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

SoFi Mortgages: simple, smart, and so affordable.

FAQ

What credit score do you need for a government loan?

A borrower with a credit score of 580 or more may be able to qualify for an FHA loan with a 3.5% down payment. Someone with a score of 500 to 579 may still be able to take out a loan, but only with a down payment of at least 10%.

Is there an income limit for FHA loans?

There are no income minimums or maximums to receive an FHA loan. People of any income can apply.

Are FHA loans hard to get approved for?

For many borrowers, it may be easier to get approved for an FHA loan than for a conventional loan. This is because the credit score and debt-to-income ratio requirements are typically lower, and FHA loans don’t require large down payments.

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Photo credit: iStock/Ihor Lukianenko

This content is for educational and informational purposes only. The products, services, or features discussed may not currently be available via the SoFi platform. Any references to third-party products, services, or companies do not constitute an endorsement, recommendation, or solicitation by SoFi. Readers should independently evaluate their options and consider their individual financial needs and circumstances before making any decisions. ©2026 SoFi Technologies, Inc. All rights reserved.

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

SOHL-Q326-088

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For many people, a monthly mortgage payment is their biggest recurring bill. It may be the main expense that guides the development and management of their monthly budget because it is an important bill to pay on time.

Prevailing wisdom says that your mortgage payment shouldn’t be more than 28% of your gross (pretax) monthly pay. But whatever that sum actually is, you may be wondering how to shave down the amount. Think about it: A lower mortgage payment could reduce your financial stress. And it can also open up room in your budget to allocate more money toward shrinking other debt, pumping up your emergency fund, and saving for retirement or other goals.

Below, you’ll learn more about your mortgage payment and possible ways to lower it.

Pros and Cons of Lowering Your Mortgage Payments

There are upsides and downsides to lowering your mortgage payments.

On the one hand, learning how to lower your monthly mortgage payment means you could have more money to apply elsewhere. You might apply the freed-up funds toward:

•   Paying down other debt

•   Building up your emergency fund

•   Putting more money in your retirement savings

•   Covering discretionary spending

On the other hand, there are downsides to consider too:

•   You might wind up paying a lower amount over a longer period of time, meaning your debt lasts longer.

•   You could pay more in interest over the life of the loan.

•   If a lower monthly payment means you are not paying your full share of interest due, you could wind up in a negative amortization situation, in which the amount you owe is going up instead of down.

How to Lower Your Mortgage Payments

Now that you know a bit about how mortgage payments work and the pros and cons of lowering your mortgage payments, consider these ways you could minimize your monthly amount due.

Recommended: How to Pay Off a 30-Year Mortgage in 15 Years

1. Refinance Your Mortgage

One of the best ways to reduce monthly mortgage payments is to refinance your mortgage. A refinance (not to be confused with a reverse mortgage) means replacing your current mortgage with a new one, with terms that better suit your current needs.

There are a number of signs that a mortgage refinance makes sense, such as lower interest rates being offered or the desire to secure a fixed rate when you have an adjustable-rate mortgage. If your credit score has improved markedly since you purchased your home, you may qualify for a better rate than you were able to obtain initially.

Refinancing can result in a more favorable interest rate, a change in loan length, a reduced monthly payment, and a substantial reduction in the amount you owe over the life of your mortgage. Do note, however, that there are often fees for refinancing your mortgage.

A cash-out refinance can refinance your loan and provide you with a lump sum to use for home improvement projects. It’s often less costly than taking out a separate home improvement loan. (You can use a Home Improvement Cost Calculator to get an idea of what your project will cost.)

2. Recast Your Mortgage

If refinancing isn’t for you, study up on how to lower mortgage payments without refinancing — specifically, by doing a recast. If you get a bonus or other windfall, consider throwing some of that money at your mortgage. If you are in a position to make a major lump-sum payment toward the loan principal on your home loan, you may benefit from mortgage recasting.

With recasting, your lender will reamortize the mortgage but retain the interest rate and term. The new, smaller balance equates to lower monthly payments. Worth noting: Many lenders charge a servicing fee and have equity requirements to recast a mortgage, but fees are significantly lower than they would be for a refinance, and you don’t have to worry about what current mortgage rates might be.

If you don’t have a large sum on hand to use for a recast, you can also make extra payments on a schedule or whenever you can. Just make sure you tell your lender to apply the extra funds to the principal and not the interest. Paying extra toward the principal provides two benefits: It will slowly reduce your monthly payment, and it will pare the total interest paid over the life of the loan.

3. Extend the Term of Your Mortgage

If your goal is to reduce your monthly payment, though not necessarily the overall cost of your mortgage, you may consider extending your mortgage term. For example, if you refinanced a 15-year mortgage into a 30-year mortgage, you would amortize your payments over a longer term, thereby reducing your monthly payment.

This technique could lower your monthly payment but will likely cost you more in interest in the long run.

(That said, just because you have a new 30-year mortgage doesn’t mean you have to take 30 years to pay it off. You’re often allowed to pay off your mortgage early without a prepayment penalty by paying more toward the principal.)

4. Get Rid of Mortgage Insurance

Mortgage insurance, which is needed for some loans, can add a significant amount to your monthly payments. Luckily, there are ways to eliminate these payments, depending on which type of mortgage loan you have.

Getting rid of the FHA mortgage insurance premium (MIP): Consider your loan origination date, which impacts when you can get rid of the extra expense of mortgage insurance:

•   July 1991 to December 2000: If your loan originated between these dates, you can’t cancel your MIP.

•   January 2001 to June 3, 2013: Your MIP can be canceled once you have 22% equity in your home.

•   June 3, 2013, and later: If you made a down payment of at least 10%, MIP will be canceled after 11 years. Otherwise, MIP will last for the life of the loan.

Another way to shed MIP is to refinance to a conventional loan with a private lender. Many FHA homeowners may have enough equity to refinance.

Getting rid of private mortgage insurance (PMI): If you took out a conventional mortgage with less than 20% down, you’re likely paying PMI. Ditching your PMI is an excellent way to reduce your monthly bill.

To request that your PMI be eliminated, you’ll want to have 20% equity in your home, whether through your own payments or through home appreciation. Your lender must automatically terminate PMI on the date when your principal balance reaches 78% of the original value of your home. Check with your lender or loan program to see when and if you can get rid of your PMI.

5. Appeal Your Property Taxes

Here’s another of the seven ways to lower your mortgage payment: Take a closer look at your property taxes. Your property taxes are based on an assessment of your house and land conducted by your county’s tax assessor. The higher they value your property, the more taxes you’ll pay.

If you think you’re paying too much in taxes, you can appeal the assessment. If you do, be prepared with examples of comparable properties in your area valued at less than your home. Or you may also show a professional appraisal.

To challenge an assessment, you can call your local tax assessor and ask about the appeals process.

Recommended: First-Time Homebuyer Programs

6. Modify Your Loan

Getting a loan modification from your lender is different from a refinance and is often a solution for homeowners who wouldn’t qualify for a new loan because they are experiencing financial difficulties. A modification changes the terms of a loan to make monthly payments more affordable. It’s a tactic that is usually used to provide relief to homeowners who are struggling to make their loan payments. If this is your situation, you can ask your lender for a new repayment timetable, a lower interest rate, or a switch from an adjustable rate to a fixed rate. Lenders aren’t obligated to agree, but if you can show proof of financial hardship, such as bank statements and tax returns, this may be an option.

7. Shop for a Lower Homeowners Insurance Rate

Many homeowners take a “set it and forget it” approach to homeowners insurance and pay for their insurance through their monthly mortgage payment. It’s smart to assess your coverage annually to make sure it is adequate. Take this opportunity to shop around for a lower rate. Three ways to potentially lower your insurance costs: Increase your deductible, buy your home and auto policies from the same insurer, and explore whether making your home more secure or storm-resistant might qualify you for a lower rate. Just remember: If you are getting a new policy, make sure it is fully in place before you cancel your old one.

The Takeaway

How to lower your mortgage payment? There are several possible ways. And who wouldn’t love to shrink their house payment? You might look at strategies to build equity and ditch mortgage insurance, extend the term of your loan, or refinance to reduce your monthly payment.

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.

A new mortgage refinance could be a game changer for your finances.

FAQ

What is the average mortgage payment?

According to the Federal Housing Finance Agency’s National Mortgage Database, the median monthly mortgage payment in the U.S. (excluding property taxes and homeowners insurance) is $2,023 as of Q1 2026. But if you want a lower monthly payment, you could pursue a mortgage refinance or ask your lender to recast your mortgage after paying a lump sum toward your principal.

Can you pause or temporarily reduce mortgage payments?

If you can demonstrate that you are experiencing sudden financial hardship, a lender may allow you to pause or temporarily reduce your mortgage payments for 12 months or so through a process called mortgage forbearance. You’ll continue to accrue interest on your loan during this time, but requesting and being granted forbearance can help prevent foreclosure and damage to your credit.

Does refinancing always lower monthly mortgage payments?

Refinancing doesn’t always lower your mortgage payment amount. Borrowers who do a cash-out refinance (borrowing against their home equity to get a lump sum they can use for education expenses, for example) might emerge from the refi with higher monthly payments. Another possible scenario: If you obtain a lower interest rate with a refi but choose a shorter loan term (10 or 15 years, for example), your monthly payment amount might increase.

Can rental income help with monthly mortgage payments?

Taking on a roommate or building an accessory dwelling unit (ADU) on your property that you rent out can certainly help defray monthly mortgage expenses. It won’t lower what you owe on your mortgage, but it will reduce your actual out-of-pocket cost.

What credit score do you need to refinance for a lower mortgage payment?

If you’re refinancing a conventional mortgage, you’ll typically need a minimum FICO® credit score of 620, although a score of 740 or more qualifies borrowers for the best interest rates. If you have a government-backed FHA loan, you’ll need a score of 580 or more. Whether refinancing will result in a lower mortgage payment will depend on the interest rate on your original mortgage, current interest rates, and the type of refi you choose, as well as your credit score.

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This content is for educational and informational purposes only. The products, services, or features discussed may not currently be available via the SoFi platform. Any references to third-party products, services, or companies do not constitute an endorsement, recommendation, or solicitation by SoFi. Readers should independently evaluate their options and consider their individual financial needs and circumstances before making any decisions. ©2026 SoFi Technologies, Inc. All rights reserved.

Tax Information: This article provides general background information only and is not intended to serve as legal or tax advice or as a substitute for legal counsel. You should consult your own attorney and/or tax advisor if you have a question requiring legal or tax advice.

Checking Your Rates: To check the rates and terms you may qualify for, SoFi conducts a soft credit pull that will not affect your credit score. However, if you choose a product and continue your application, we will request your full credit report from one or more consumer reporting agencies, which is considered a hard credit pull and may affect your credit.

SOHL-Q326-092

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