SoFi

When looking for a property to buy, you might consider a single-family detached home, a townhouse, a condo, a co-op apartment, or something else.

Let’s look at the pros and cons of buying a townhouse vs. a condo.

What Is a Townhouse?

At first glance, a townhouse might look like a typical house, but a closer look will show that it’s attached to at least one similar unit.

Townhouses are often found in urban areas where space is at a premium. They often come with a front or back yard. Owners own the inside and outside of their unit and the land it sits on.

The townhome community may have a homeowners association (HOA) and maintenance fees. You’ll want to make sure you understand the costs of the HOA and its rules before signing a contract and getting a home mortgage loan.

Benefits of Buying a Townhouse

There are at least three upsides to purchasing a townhouse.

Owner Rights

Because people who buy a townhouse own the land it’s on, they have more freedom in how to use the yard. A yard or patio can open possibilities for a grilling spot or dog or child play area.

They also have at least some freedom of choice about the appearance of the inside and outside of the structure, although HOAs may have rules about all of the above.

Price

In communities with high home prices, townhouses may be an affordable alternative for first-time homebuyers.

House hunters from millennial homebuyers to empty-nesters may also find a townhouse a sweet spot between a condo and a traditional detached home with yard.

Plus, because lots tend to be smaller than ones with detached homes on them, property taxes are usually lower as well.

Low Maintenance

Smaller yards mean less yardwork, ideal for busy people and those who are downsizing their home and responsibilities.

The townhouse complex may be gated and have security, and some have pools, gyms, and other shared recreational spaces whose maintenance is covered by homeowner fees.

Disadvantages of Buying a Townhouse

When you think of townhouse living, keep in mind the close quarters with neighbors and possible HOA fees and rules.

HOA

Townhouse communities are less likely to have an HOA than condominiums are, but if they do, the resident-led board will collect ongoing fees to cover common areas and any community perks such as a pool. The HOA will also enforce community rules.

Lack of Privacy

Because of the shared walls, a townhouse provides less privacy than a detached home (although it may offer more privacy than many condo buildings, where you may have a unit above and below yours). Townhouse living may therefore create some challenges for families with young children.

What Is an Apartment?

An apartment is a room or set of rooms within a building. In major cities, some people refer to buying a condo or co-op shares as buying an apartment.

Condo owners own everything within their unit and have an interest in the common elements. “Buying a co-op apartment” really means holding shares in the housing cooperative that owns the property.

Then there are people and companies that buy a multifamily property like an apartment building and rent out the units. An owner could decide to live in one of the units and serve as an on-site landlord.

Benefits of Living in an Apartment

Let’s look at some benefits of buying a condo or a co-op.

Low Maintenance

You won’t typically need to make many repairs, mow the grass, or paint. That’s covered by the monthly or quarterly fees you’ll pay.

Low Utilities

First, condos tend to be smaller than single-family homes, which can reduce the cost of heating and cooling the space, and take less electricity to keep it well lit.

HOA

If the building has an HOA (which may be called a condo or co-op association), the association will take care of property maintenance and enforcement of rules.

Disadvantages of Living in an Apartment

Apartment life can come with disadvantages, too. Here are a few.

Parking

You may or may not have a parking space set aside for you, and street parking isn’t always a given in busy locales. Even if you have a parking spot, if people come to visit, they may not easily find anywhere to park.

Noisy or Nosy Neighbors

If you appreciate quiet calmness, you may not find all you’d like in condo living. Neighbors are nearby and they can be noisy. If you’re in a crowded city, surrounding events can contribute to the jostling and noise.

Limited Space

If you’re used to living in a house, you could find a more compact apartment to be challenging as you try to fit in your belongings. Plus, apartments often lack yard space or a patio, which further limits the amount of space you have to use and enjoy.

Differences Between a Townhouse and an Apartment

When comparing apartment or condo vs. townhouse, keep in mind these differences.

Townhouse	Apartment/Condo
Single-family unit that shares one or more walls with another home	Room or rooms within a building
May have a small yard or patio	May be less likely to have outdoor space
Gives owner some control over how to change the exterior and use yard	Any exterior space is often shared and cared for by HOA
Can be more affordable than traditional detached homes in markets with high prices	Can also be more affordable than traditional detached homes
If there’s an HOA, fees are usually lower because owners are responsible for much of their own upkeep	If an HOA is in place, it will collect fees to cover most maintenance and condo fees can be higher than those for townhouses.
May not provide as much privacy as a freestanding house	May not provide as much privacy as a freestanding house
Thanks to the land ownership, financing is similar to a traditional mortgage	It can be harder to finance a condo than a townhouse

The Takeaway

Buying a townhouse or an apartment can give you many of the pleasures of homeownership with less of the associated upkeep. But there are unique qualities to each and potential downsides, too. Make sure you understand the role a homeowner’s association might play in any property you purchase before you make an offer and nail down your financing.

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

Do townhomes appreciate as much as houses?

In general, townhomes do not appreciate as quickly as single-family detached homes, thanks to the amount of land that comes with traditional stand-alone homes.

Are townhouses a bad investment?

In some circumstances, a townhouse may be a good investment. The price, current market conditions, and location are factors.

Are fees higher for a townhouse or condo?

Condo HOA dues are typically a lot higher than townhouse fees (if the townhouse community even has an HOA). Condo communities usually have many more amenities to maintain.

---

Photo credit: iStock/Auseklis

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

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

*SoFi requires Private Mortgage Insurance (PMI) for conforming home loans with a loan-to-value (LTV) ratio greater than 80%. As little as 3% down payments are for qualifying first-time homebuyers only. 5% minimum applies to other borrowers. Other loan types may require different fees or insurance (e.g., VA funding fee, FHA Mortgage Insurance Premiums, etc.). Loan requirements may vary depending on your down payment amount, and minimum down payment varies by loan type.
Financial Tips & Strategies: The tips provided on this website are of a general nature and do not take into account your specific objectives, financial situation, and needs. You should always consider their appropriateness given your own circumstances.

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

SOHL-Q125-023

Read more

Did you know you can use a home loan for renovations? Renovation home loans cover the cost of purchasing and renovating a home. If you’re familiar with construction loans, renovation loans are similar. Also called “one-close” loans or renovation mortgages, renovation loans can offer buyers simplified financing for transforming a fixer-upper into an attractive, modernized home.

We’ll explain how to add renovation costs to your home loan. We’ll also cover other ways you can fund your home project, including ways to use your existing home equity to help you pay for renovations.

What Is a Renovation Home Loan?

A renovation home loan combines the cost of a home purchase and money for renovations in one mortgage. There’s only one closing and one loan when buying a new home or refinancing an existing home. The lender has oversight of the renovation funds, including the budget, vetting of the contractor, and disbursement of funds for renovation work as it is completed.

The borrower, their property, and their lender must all meet criteria set out by the remodel home loan program to qualify, which can present a challenge. Qualifying lenders in particular can be hard to find. That’s because most lenders must maintain a custodial account for the renovations over the course of an entire year, which requires extra work and resources. However, if you can find a lender that can handle the process, renovation loans can be a convenient way to improve a promising fixer-upper.

Types of Home Loans That Can Include Renovations

Most mortgages will not include renovations in the loan amount. Renovation mortgages are niche products serviced by a fraction of lenders. Buyers and properties must also meet certain requirements, which we’ll outline below.

There are several different types of home loans you can apply for that are eligible for adding renovation costs to the mortgage.

1. FHA 203K

An FHA 203(k) is a mortgage serviced by the Federal Housing Authority in which the cost of repairs is combined with the mortgage amount. It’s different from a traditional FHA loan that does not include improvement expenses, but qualifications (credit score, down payment, etc.) are very similar.

Interest rates and terms are also similar to what you see in a standard FHA loan. However, you can expect additional lender fees to cover the extra oversight needed on a renovation loan.

The amount you can borrow is equal to either the value of the property plus the cost of renovations or 110% of the projected value of the property after rehabilitation. Borrowers must use an FHA-approved lender for this type of mortgage.

Eligible properties must be one to four units. Repairs can include those that enhance the property’s appearance and function, the elimination of health and safety hazards, landscape work, roofing, accessibility improvements, energy conservation, and more. A limited 203(k) is also available for repairs costing $35,000 or less.

2. Fannie Mae HomeStyle

The Homestyle Renovation loan from Fannie Mae takes into account the value of the property after renovations are complete. The amount of allowable renovation money can equal 75% of the value of the property after renovations are complete.

In the world of home loans, the loan-to-value ratio (LTV) is the percentage of your home’s value that is borrowed. Many lenders limit your LTV to 80% to 85%.

A HomeStyle loan allows an LTV of up to 97%. This means it’s possible to put as little as 3% down. Some investment properties are also eligible for this type of loan. Renovations are eligible as long as they are permanently affixed to the property. Work must be completed within 15 months from the closing date of the loan.

3. Freddie Mac CHOICERenovation

The Freddie Mac CHOICERenovation program is virtually identical to the Fannie Mae HomeStyle program. This renovation loan is for buyers who want a loan with more flexibility than an FHA renovation loan.

Like HomeStyle, renovations that are permanently affixed to the property are eligible in one- to four-unit residences, one-unit investment properties, second homes, and manufactured homes. The maximum allowable renovation amount is 75% of the “as-completed” appraised value of the home — meaning the appraised value of the home before renovations but accounting for all planned changes. The maximum loan-to-value (LTV) ratio is 95% (97% for HomePossible or HomeOne loans).

The Freddie Mac CHOICEReno eXPress Mortgage is an extension of the CHOICERenovation mortgage. The CHOICEReno eXPress mortgage is a streamlined mortgage for smaller-scale home renovations. Renovation amounts are limited to 10% or 15% of the “as-completed” appraised value of the home. Borrowers need to work with an approved lender to apply for one of these programs.

4. USDA Purchase with Rehabilitation and Repair Loan

A USDA Purchase with Rehabilitation and Repair Loan assists moderate- to very-low-income households in rural areas with repairs and improvements to their homes. Buyers can secure 100% financing with this loan.

For very low-income borrowers, there’s a separate loan you can qualify for with a subsidized, fixed interest rate set at 1% with a 20-year term. This makes borrowing incredibly affordable.

To apply, you must have a household income that qualifies as low to moderate in your county per USDA standards. The property must be your primary residence (no investments), and rehab funds cannot be used for luxury items, such as outdoor kitchens and fireplaces, swimming pools and hot tubs, and income-producing features. Manufactured homes, condos, and homes built within the last year are not eligible.

5. VA Alteration and Repair Loan

The VA allows qualified service members to bundle repairs and alterations with the purchase of a home. As with all VA loans, 100% financing is available on these low-interest loans.

Alterations must be those “ordinarily found” in comparable homes. Renovations are also required to bring the property up to the VA’s minimum property standards.

The loan amount can include the “as completed” value of the home as determined by a VA appraiser. Leftover money from the home loan after renovations are complete is applied to the principal.

Note: SoFi does not offer the five types of home renovation loans on this list, although it does offer other types of FHA loans and VA add loans.

Home Style Quiz

Other Options for Financing Home Renovations

While a renovation home loan is a great way to finance a renovation, it’s not your only option for borrowing money for home improvements. Nor is it the most flexible. Alternative loans — such as cash-out refis, home renovation personal loans, and home equity loans -– may provide more flexibility.

Cash-out Refinance

A cash-out refinance is useful for those who already own their home. You replace your old mortgage with a new mortgage, and the equity (here, the “cash”) is refunded to you. You will have closing costs with a refinance, but you won’t have separate financing costs for the money you’re using for renovations.

Personal Loan

Personal loans are often used for a home remodel or renovation. Because the funds are not secured by your property, you’ll likely have to pay a higher interest rate. The bright side of funding this way means you won’t lose your home if you have a financial setback and need to stop paying back the loan.

This type of loan comes with a shorter repayment period, higher monthly payment, and lower loan amount. You can find these loans through banks, credit unions, and online lenders.

Home Equity Loan

A home equity loan is a secured loan that uses your home as collateral. That means the lender can foreclose on the home if you stop paying the loan, and so interest rates are typically lower. A home equity loan also comes with a longer repayment period than a personal loan.

Home Equity Line of Credit (HELOC)

A HELOC is a line of credit that lets homeowners borrow money as needed, up to a predetermined limit. As the balance is paid back, homeowners can then borrow up to the limit again through the draw period, typically 10 years. The interest rate is usually variable, and the borrower pays interest only on the amount of credit they actually use.

After the draw period ends, borrowers can continue to repay the balance, typically over 20 years, or refinance to a new loan.

Recommended: A Personal Line of Credit vs. a HELOC

Private Loan

A private loan is a loan made without a financial institution. Loans made from a family member, friend, or peer-to-peer source are considered private loans. Qualification requirements will depend on the individual or group lending the money. There are some serious drawbacks to obtaining funding from a private source, but these loans can help some borrowers in buying a home.

Government or Nonprofit Program

It is possible to finance the cost of remodeling with the help of government programs. Federal programs like the U.S. Department of Housing and Urban Development (HUD) have financing options for renovations, as do some state and local government agencies.

Recommended: What Is HUD?

The Takeaway

Homeowners have a lot of options for financing renovations, especially in an era when home equity is higher than ever before. Renovation home loans allow borrowers to purchase and renovate a property with one loan, but that’s not the only way you can remodel a fixer-upper. Some alternatives to renovation home loans include home equity loans, HELOCs, and personal loans.

SoFi now partners with Spring EQ to offer flexible HELOCs. Our HELOC options allow you to access up to 90% of your home’s value, or $500,000, at competitively lower rates. And the application process is quick and convenient.

Unlock your home’s value with a home equity line of credit brokered by SoFi.

FAQ

How do renovation mortgages work?

Home renovation loans are known for combining the cost of financing a renovation or remodel with the cost of purchasing the home into a single-closing transaction. Lenders calculate the amount to be borrowed based on the value of the home after renovations are complete.

Can you include renovation costs in a mortgage?

A home loan can include renovations, but you must work with your lender to be approved for specific renovation loan programs.

Can you add renovation costs to your mortgage?

You cannot add renovation costs to an existing mortgage, but you can refinance your mortgage with a cash-out refinance that provides you with funds you can use however you wish. You can also take out a home equity loan or open a home equity line of credit (HELOC) which would provide you with renovation money and would, technically, be a second mortgage.

---

Photo credit: iStock/Hispanolistic

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

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

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

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

Third-Party Brand Mentions: No brands, products, or companies mentioned are affiliated with SoFi, nor do they endorse or sponsor this article. Third-party trademarks referenced herein are property of their respective owners.

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

^¹FHA loans are subject to unique terms and conditions established by FHA and SoFi. Ask your SoFi loan officer for details about eligibility, documentation, and other requirements. FHA loans require an Upfront Mortgage Insurance Premium (UFMIP), which may be financed or paid at closing, in addition to monthly Mortgage Insurance Premiums (MIP). Maximum loan amounts vary by county. The minimum FHA mortgage down payment is 3.5% for those who qualify financially for a primary purchase. SoFi is not affiliated with any government agency.
^†Veterans, Service members, and members of the National Guard or Reserve may be eligible for a loan guaranteed by the U.S. Department of Veterans Affairs. VA loans are subject to unique terms and conditions established by VA and SoFi. Ask your SoFi loan officer for details about eligibility, documentation, and other requirements. VA loans typically require a one-time funding fee except as may be exempted by VA guidelines. The fee may be financed or paid at closing. The amount of the fee depends on the type of loan, the total amount of the loan, and, depending on loan type, prior use of VA eligibility and down payment amount. The VA funding fee is typically non-refundable. SoFi is not affiliated with any government agency.
^²SoFi Bank, N.A. NMLS #696891 (Member FDIC), offers loans directly or we may assist you in obtaining a loan from SpringEQ, a state licensed lender, NMLS #1464945.
All loan terms, fees, and rates may vary based upon your individual financial and personal circumstances and state.
You should consider and discuss with your loan officer whether a Cash Out Refinance, Home Equity Loan or a Home Equity Line of Credit is appropriate. Please note that the SoFi member discount does not apply to Home Equity Loans or Lines of Credit not originated by SoFi Bank. Terms and conditions will apply. Before you apply, please note that not all products are offered in all states, and all loans are subject to eligibility restrictions and limitations, including requirements related to loan applicant’s credit, income, property, and a minimum loan amount. Lowest rates are reserved for the most creditworthy borrowers. Products, rates, benefits, terms, and conditions are subject to change without notice. Learn more at SoFi.com/eligibility-criteria. Information current as of 06/27/24.
In the event SoFi serves as broker to Spring EQ for your loan, SoFi will be paid a fee.

SOHL-Q125-007

Read more

Mortgage bankers originate, sell, and service residential mortgages for consumers on behalf of the lender they work for. They also may provide escrow services. A mortgage banker plays a central role as people navigate the complexities of applying for a mortgage.

Mortgage bankers are often the first and last point of contact. Getting an interest rate and terms that work for your financial situation, as well as saves you money, is incredibly valuable.

What Is a Mortgage Banker?

An individual or an institution that originates, sells, or services a home mortgage loan can be considered a mortgage banker.

Individual mortgage bankers work for a single lending institution and help applicants sort through the different mortgage types. Mortgage bankers are also called mortgage lenders or mortgage loan officers when referred to in this way.

Customers who want help understanding mortgages or who have questions about mortgages can be assisted by mortgage bankers.

Mortgage bankers can get homebuyers on the right road with mortgage preapproval. They serve as the primary point of contact for buyers’ lending needs.

A mortgage banker can also be an institution, such as a bank, credit union, or other direct mortgage lender. When talking about a mortgage banker that services a loan, for example, it’s in reference to the institution.

A mortgage loan originator employed by a credit union, bank, or a subsidiary of a bank does not have to obtain a loan originator license. Nonbank mortgage loan originators must be licensed in the states where they do business and must be registered with the Nationwide Multistate Licensing System & Registry.

The licensing requirements were put in place after the mortgage meltdown of 2008 to protect consumers from predatory lending and to prevent fraud.

Recommended: Home Loan Help Center

Services Offered by a Mortgage Banker

At their core, mortgage bankers have the ability to create or sell a new mortgage loan. They also have the ability to service it once the loan closes. Here are the details of the mortgage banker’s role:

Originate Loans

Mortgage bankers originate loans, meaning they take an application and create a new mortgage for a residential home. Conforming loans are usually sold to Fannie Mae or Freddie Mac.

Sell Loans

Mortgage bankers sell loans so they can engage in more lending. If it’s a conventional loan, conforming loan, the sale typically goes to the government-backed enterprises, Fannie Mae or Freddie Mac. This increases lenders’ liquidity so they can originate more loans to more customers instead of carrying the amount of the loan on their books.

Service Loans

Once the mortgage has closed, the lender needs to be paid every month. This is what mortgage servicers do: They take on the day-to-day task of making sure your payment gets to all parties that need to be paid. Servicing loans is usually in reference to the mortgage banker as an institution, not the individual mortgage loan officer.

How Do Mortgage Bankers Make Money?

Individual mortgage bankers may make money from a salary, commission, or a combination.

Institutional mortgage bankers make money from origination fees, mortgage points, mortgage servicing, mortgage-backed securities, and the yield spread premium. The yield spread premium is how much money they make based on what they charge a customer relative to how much it costs to obtain that financing.

Differences Between a Mortgage Banker and a Loan Officer

Mortgage banker and loan officer, or loan originator: These terms are often used interchangeably.

However, while a mortgage banker can refer to both individuals and institutions, a loan officer is always an individual.

Differences Between a Mortgage Banker and a Mortgage Broker

In your research to get the best mortgage, you may have also come across mortgage brokers. Though applying for a mortgage will have the same requirements whether you go through a mortgage broker or a mortgage banker, a mortgage banker is different from a mortgage broker in who they work for and how they obtain your mortgage.

A mortgage banker works for a single lending institution that makes loans directly to consumers. The lending decision and underwriting are typically made at the bank level, which can streamline the process.

A mortgage broker works with many different lenders. This is helpful if you want to shop around and don’t have time to do the legwork or need to find a specialty loan not offered by all lenders.

Recommended: Mortgage Calculator

When Is It Better to Have a Mortgage Banker Than a Broker?

Your best bet for finding a home loan with terms most favorable to your financial situation is to shop around for a mortgage. A mortgage banker is closer to the lending process than a mortgage broker, but a broker has access to a greater number of lenders.

Be sure you’re comparing apples to apples on the mortgages offered to you by studying the loan estimate you’re given by each lender after applying. You should take into account both the interest rate and fees being charged for the loan.

The Takeaway

A mortgage banker can play a major role in getting you to the closing table with the right loan. By any name — mortgage banker, loan officer, loan originator — the person who guides you through the loan process is a key part of the home-buying journey.

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 does a mortgage banker do?

A mortgage banker can originate, sell, and service loans for customers.

Is a mortgage banker similar to a mortgage broker?

Not really. A mortgage banker works for a single lender and makes loans directly to you. Mortgage brokers do not lend money but instead find a lender to work with their buyer.

How do you choose a mortgage banker?

Compare rates and terms from different lenders by getting prequalified for a mortgage. As you communicate with the mortgage banker at various lenders, consider the speed and clarity of communications and how knowledgeable the person seems to be and how much attention they pay to your needs.

---

Photo credit: iStock/Lacheev

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

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

*SoFi requires Private Mortgage Insurance (PMI) for conforming home loans with a loan-to-value (LTV) ratio greater than 80%. As little as 3% down payments are for qualifying first-time homebuyers only. 5% minimum applies to other borrowers. Other loan types may require different fees or insurance (e.g., VA funding fee, FHA Mortgage Insurance Premiums, etc.). Loan requirements may vary depending on your down payment amount, and minimum down payment varies by loan type.
Financial Tips & Strategies: The tips provided on this website are of a general nature and do not take into account your specific objectives, financial situation, and needs. You should always consider their appropriateness given your own circumstances.

Third-Party Brand Mentions: No brands, products, or companies mentioned are affiliated with SoFi, nor do they endorse or sponsor this article. Third-party trademarks referenced herein are property of their respective owners.

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

SOHL-Q125-031

Read more

You may know someone who lost a home to foreclosure, but you might not know all the ins and outs of the process.

When the lender takes back a property after the mortgage has gone unpaid for a specified period of time, that’s a mortgage foreclosure. The process varies by state and by lender, but there are things you can do to avoid it.

Here’s what you need to know about foreclosure and moves you can make if you’re facing it.

What Does Foreclosure Mean?

When a buyer finances a home, the home mortgage loan is secured with the property, meaning the property is used as collateral on the loan. If the homeowner fails to make the agreed-upon payments on the due dates, the lender can take the property back. This is why it’s so important to think about what ifs as you go through the mortgage prequalification and mortgage preapproval process. How would you keep up payments in the event of a job loss? Do you have an emergency fund in place?

Each state has its own laws regarding foreclosure and its own state foreclosure rate. Where you live will determine how properties are foreclosed. There are two main types of mortgage foreclosure.

Recommended: Help Center for Mortgages

Types of Mortgage Foreclosure

In some states, the lender is required to go through the court system to foreclose on a property. This is known as judicial foreclosure. In other states, the lender does not have to go through the court process.

Judicial

With a judicial foreclosure, a lender must get a court order to foreclose on a property. The lender must file a complaint with the court, which is also sent to the homeowner and any other lienholders. Generally, the mortgage note must also be filed with the court.

Some states require loss mitigation efforts before a suit can be filed, meaning the mortgage servicer must work with the borrower to help them avoid foreclosure. Most of these foreclosures are not contested, resulting in a default judgment against the homeowner.

After this, the property may be scheduled for sale (usually a foreclosure sale or sheriff’s auction). The homeowner may appeal the foreclosure judgment.

Nonjudicial

In a nonjudicial foreclosure, deeds of trust can be foreclosed without going through the court system. Lenders must give special notice to the property owner and wait a specified amount of time before auctioning the property off.

Some states allow both judicial and nonjudicial foreclosure, while others may only allow one or the other. Below is a summary of states and what process they follow for mortgage foreclosure.

State	Foreclosure process
Alabama	Primarily nonjudicial
Alaska	Primarily nonjudicial
Arizona	Primarily nonjudicial
Arkansas	Primarily nonjudicial
California	Primarily nonjudicial
Colorado	Primarily nonjudicial
Connecticut	Primarily judicial
Delaware	Primarily judicial
District of Columbia	Primarily nonjudicial
Florida	Primarily judicial
Georgia	Primarily nonjudicial
Hawaii	Primarily judicial
Idaho	Primarily nonjudicial
Illinois	Primarily judicial
Indiana	Primarily judicial
Iowa	Primarily judicial
Kansas	Primarily judicial
Kentucky	Primarily judicial
Louisiana	Primarily judicial
Maine	Primarily judicial
Maryland	Primarily nonjudicial
Massachusetts	Primarily nonjudicial
Michigan	Primarily nonjudicial
Minnesota	Primarily nonjudicial
Mississippi	Primarily nonjudicial
Missouri	Primarily nonjudicial
Montana	Primarily nonjudicial
Nebraska	Primarily nonjudicial
Nevada	Primarily nonjudicial
New Hampshire	Primarily nonjudicial
New Jersey	Primarily judicial
New Mexico	Primarily judicial
New York	Primarily judicial
North Carolina	Primarily nonjudicial
North Dakota	Primarily judicial
Ohio	Primarily judicial
Oklahoma	Primarily nonjudicial
Oregon	Primarily nonjudicial
Pennsylvania	Primarily judicial
Puerto Rico	Primarily judicial
Rhode Island	Primarily nonjudicial
South Carolina	Primarily judicial
South Dakota	Primarily nonjudicial
Tennessee	Primarily nonjudicial
Texas	Primarily nonjudicial
Utah	Primarily nonjudicial
Vermont	Primarily judicial
Virginia	Primarily nonjudicial
Washington	Primarily nonjudicial
West Virginia	Primarily nonjudicial
Wisconsin	Primarily judicial
Wyoming	Primarily nonjudicial

When Does Mortgage Foreclosure Begin?

Mortgage foreclosure begins with the first missed payment, though a lender’s actions will escalate the more payments a homeowner misses. With the first missed payment, the mortgage lender won’t take the property back, or even issue a notice of default, but will reach out to the borrower to help them get payments back on track.

The lender will also report a nonpayment or late payment to the credit bureaus and issue a late fee.

Typically, lenders won’t issue a notice of default until the borrower defaults on three missed payments, or 90 days past due (this is standard practice, but lenders can issue a notice of default sooner than 90 days). Default is the precursor to foreclosure.

Recommended: Home Loan Help Center

Foreclosure Timeline: How Long Does Mortgage Foreclosure Take?

Once the notice of default arrives after 90 days past due, the time it takes to complete the foreclosure will vary by state. In some states, it can be a matter of months. In others, much longer. In the last quarter of 2024, the average time a property took to complete foreclosure was 762 days.

In jurisdictions where each step of the process requires court approval (judicial foreclosures), court backlogs can delay the foreclosure processes for years.

Why Do Foreclosures Happen?

Foreclosure occurs in a number of situations. Some of the most common:

•   Being underwater. When a homeowner has negative equity in the home, the property is more likely to be foreclosed on. Having an underwater mortgage is the most common reason for foreclosure.

•   Rising interest rates. When a borrower’s loan has an adjustable interest rate, a sudden rise in the amount owed each month can lead down the path to foreclosure. With the 5/1 ARM, for example, the interest rate is fixed for the first five years and then adjusts once a year.

•   Mortgage types. Sometimes even the different kinds of mortgages can contribute to default. With an interest-only mortgage, for instance, after five or 10 years of interest payments, principal and interest kick in, resulting in higher payments.

•   Personal situations. When the payment on a mortgage loan becomes too much or when a life event (hospitalization, death, divorce, layoff) prevents homeowners from making monthly payments, they can slip into default and eventually foreclosure.

If the homeowner doesn’t work with the lender to make a plan for repayment of the missed payments, the mortgage servicer can seek foreclosure.

Can You Avoid Foreclosure?

Homeowners have options if they’re facing foreclosure, and the sooner they contact their mortgage lender or servicer, the more they will have. Some of these include:

•   Reinstatement. If you’re able to pay off the past due amounts and any penalty fees, the lender will stop the foreclosure process.

•   Repayment plan. A repayment plan allows you to tack on a portion of your past-due payments to your regular payment each month. This makes sense if you’ve only missed a small number of payments and will no longer have trouble making a monthly mortgage payment.

•   Forbearance. If you qualify for mortgage forbearance, your lender might pause or lower monthly mortgage payments for a short amount of time. When you start making payments again, you’ll add portions of your missed payments to your regular payment to catch up.

•   Loan modification. With a loan modification, the lender permanently alters the terms of the mortgage contract, so the payment is more manageable. This can include a reduced interest rate, adding missed payments to the loan balance, extending the term of the mortgage, or even canceling part of the mortgage debt.

•   Filing for bankruptcy. Filing for Chapter 13 bankruptcy may allow you to keep certain assets like a house or car. A court must approve your repayment plan. It stays on your credit report for seven years. You might want to consult with a bankruptcy attorney if you’re thinking about going this route.

•   Selling your home. If you have enough equity in your home to pay off the mortgage and pay for the cost of selling your home, you may be able to sell your home to avoid foreclosure.

•   Deed in lieu of foreclosure. A deed in lieu of foreclosure is essentially when you hand over the title of your home to the lender instead of going through a foreclosure. It is less damaging to your credit than a foreclosure. (Note: SoFi does not offer a Deed in Lieu at this time.)

•   Short sale. If the lender agrees to a short sale, it is agreeing to allow the home to be sold for less than what is owed. The deficit is taxable if the mortgage terms hold the borrower liable for the full amount of the loan.

Recommended: A Guide to Mortgage Relief Programs

Consequences of Foreclosure

Foreclosure has a huge impact on your credit. It will stay on your credit report for seven years after the first missed payment, and the multiple delinquent payments are a further knock against your credit scores, making it hard to go shopping for another mortgage and other loans.

After a foreclosure, it could take two to seven years to get a new conventional or government-backed mortgage.

But there are ways to deal with financial hardship. And a key first step where foreclosure is concerned is to reach out to your mortgage servicer and discuss a plan.

The Takeaway

Facing mortgage foreclosure is one of the toughest things a homeowner can go through. As the financial landscape shifts, knowledge is power. Foreclosure can be avoided if you work with your mortgage servicer and get help managing your debts. With time and a disciplined strategy in place, you can get on a solid financial footing again.

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

Can I stop the foreclosure process?

Possibly. The sooner you contact your mortgage servicer, the more options you will have.

How will foreclosure hurt my credit score?

The lender reports each missed payment, and the further behind a borrower gets, the more delinquent they become. The credit score lowers with each report. A foreclosure stays on a credit report for seven years, which makes it harder to apply for other credit lines and loans.

Am I supposed to pay property taxes when my house is in foreclosure?

It’s true that a missed tax payment can also lead to foreclosure proceedings, but it depends on where you are in the process. If you’re working with your lender to get your missed payments back on track to avoid foreclosure, then your escrow account will be replenished and the mortgage servicer will pay your taxes. If you’re in foreclosure and not able to get your payments back on track, paying your taxes won’t help you get your house back. You’re better off working with your lender to put that money toward missed mortgage payments.

Do I have to move out of my house when it is in foreclosure?

The Federal Trade Commission advises staying in the house as long as possible if you’re facing foreclosure. You may not qualify for certain types of assistance if you move out.

---

Photo credit: iStock/jhorrocks

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

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

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

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

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

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

Disclaimer: Many factors affect your credit scores and the interest rates you may receive. SoFi is not a Credit Repair Organization as defined under federal or state law, including the Credit Repair Organizations Act. SoFi does not provide “credit repair” services or advice or assistance regarding “rebuilding” or “improving” your credit record, credit history, or credit rating. For details, see the FTC’s website .

SOHL-Q125-032

Read more

If you’re interested in living on a houseboat or just pleasure cruising, you’ll want to know the advantages and disadvantages of owning a houseboat.

Here’s a deep dive into the world of houseboats to help you understand what they are, how they work, and whether buying one is the right choice for you.

What Is a Houseboat?

A houseboat is a vessel built or modified to function primarily as a dwelling rather than just transportation.
When comparing houseboats to traditional boats, you can expect houseboats to have the features of a home, including one or more bathrooms, sleeping quarters, and a kitchen.

Houseboats, among the less common types of homes, are distinguished from other boats by their intended use as a dwelling.

Depending on how large the houseboat is and how much the owner is willing to invest, houseboats can range from barebones to luxurious.

Characteristics of a Houseboat

A houseboat stands out in the fleet of traditional boats.

Houseboats	Regular boats
Built or modified to function primarily as a residence	Built primarily for transportation or recreational purposes
Intended to function as a permanent shelter	Generally designed for transport or temporary accommodations
Less maneuverable than regular boats	Maneuverable and self-propelled in most cases

Expect houseboats to be less seaworthy than boats specifically designed for transportation. The vast majority of houseboats are intended to be confined to lakes, rivers, and small bodies of water, not the open seas.

Houseboat vs. Floating Home

A houseboat and a “floating home” are different. Floating homes are meant to stay in one place, lacking an engine or navigation system. They usually have a floating concrete foundation.They’re generally much bigger than houseboats and cost more.

Even though some houseboats also dock in one place, most can motor to another location when needed or desired.

Houseboat Design

Houseboats may stretch from 20 feet to over 90 feet. A veranda or flybridge may help occupants make the most of outdoor views.

Hull design and materials vary. Here are some styles.

Pontoon: Flat-bottomed boat that’s supported by two to three floats, or pontoons, for buoyancy. This is common houseboat construction.

Full hull: Conventional boat hull with a large bilge that sits partly in the water and offers more space below deck.

Planing hull: Similar design to full hull but is designed to glide on top of the water at speed.

Catamaran hull: Parallel twin-hulled design that joins two hulls of equal size with a solid frame. The wide beam gives it better stability and handling.

Barge: Large flat-bottomed boat designed to handle heavy loads and operate in rivers and canals.

When researching the type of houseboat you want, you’ll want to make an informed choice when weighing livability and seaworthiness.

Pros and Cons of a Houseboat

It takes a special type of person to live on a houseboat. Here are some of the pros and cons of houseboat living to help you decide if you fall into this category.

Pros

•   Reduced living costs: The lack of land to maintain means you won’t have to worry about shoveling snow or mowing the lawn. You can also expect lower utility costs due to the square footage, which could be enticing to people wanting to downsize their home.

•   Nice views: You can’t get closer to waterfront living. Houseboat living offers the possibility of gorgeous lakeside or riverside views every day you wake up and go to bed.

•   Water activities: Depending on the season and local ordinances, you may be able to fish, canoe, and enjoy all the perks of life on the water without having to take extra time off for a vacation.

•   Lower rent or mortgage: Compared with the average stand-alone house, a houseboat may cost less to buy or rent.

•   Possible tax advantages: Houseboat owners may not have to pay property taxes (although a deeded slip in some areas is considered real property), but they may live in a state, county, or city that imposes personal-property taxes. Also, the IRS says a boat can be your main or secondary residence, entitling you to take advantage of the same tax deductions as the owner of a typical house.

Cons

•   Reduced living space: A modest houseboat may be smaller than most traditional homes.

•   Marina or HOA fees: If you want to remain moored and plugged into the grid, you’ll need to pay slip fees or homeowners association fees.

•   Maintenance: Expect to trade land maintenance expenses for boat maintenance costs. In some cases, you’ll need to find a contractor for repairs or an inspection.

•   Lack of permanence: If you intend to sail from dock to dock, you’ll need to make compromises when it comes to having a permanent mailing address or regular friends and neighbors.

How to Finance a Houseboat

Used houseboats start at a few thousand dollars. New houseboats may range from $250,000 to $750,000.

Can you get a mortgage loan for a houseboat? No. But you may be able to get another kind of loan if you have a credit score in at least the “good” range on the FICO® credit rating scale and meet other lender criteria.

Some banks, credit unions, and online lenders offer boat loans. A marine loan broker can help you find and negotiate a boat loan, but the broker fee is often 10% or more of the houseboat purchase price. The loan might require 10% to 20% down. Note: SoFi does not offer boat loans, although it does offer personal loans, which are another financing option. Most personal loans are unsecured, meaning no collateral is needed.

A personal loan is another option. Personal loans of up to $100,000 are offered by a few lenders. Most are unsecured, meaning no collateral is needed.

A marine loan broker can help you find and negotiate financing, but the broker fee is often 10% or more of the houseboat purchase price. The loan might require 10% to 20% down.

If mortgage rates are ebbing, a cash-out refinance can work for some homeowners.

Other homeowners with sufficient home equity can apply for a home equity line of credit (HELOC) or home equity loan and use that money to buy a houseboat. The rate will typically be lower for an equity product using your home as collateral than that for an unsecured personal loan.

What if your credit isn’t good? So-called bad credit boat loans are afloat out there. They come with a high interest rate. Note: SoFi does not offer bad credit boat loans.

Just as you would shop around for the best mortgage loan offer, you will want to compare a number of houseboat financing options.

Finding a Houseboat to Buy vs. Building One

The cost of buying vs. building a house depends on size, location, the cost of labor and materials, and your taste, and the same holds true of houseboats.

Clearly, buying a used houseboat is almost always quicker and more convenient than trying to build one from scratch. However, if you have the knowhow to build your own houseboat, you’ll have much more freedom when it comes to how you want to design things.

If you’re deciding whether to buy or build a houseboat, you’ll want to consider your budget, time, availability, expertise, facilities, and tools.

Also consider how you would transport the houseboat from land to water when it’s done.

As for the question of time, most custom houseboat builds take months, if not more than a year, to complete. It’ll be much faster and easier to jump into houseboat living with an existing houseboat.

The Takeaway

Houseboats are a novel option for water lovers, including downsizers, retirees, and free spirits. Living on a houseboat can be cheaper than in a traditional home, but you’ll want to make sure you understand the advantages and disadvantages of living on a houseboat before committing. If you are ready to take the plunge, two options for financing your houseboat include a personal loan or a HELOC.

SoFi now partners with Spring EQ to offer flexible HELOCs. Our HELOC options allow you to access up to 90% of your home’s value, or $500,000, at competitively lower rates. And the application process is quick and convenient.

Unlock your home’s value with a home equity line of credit brokered by SoFi.

FAQ

Can you live on a houseboat year-round?

Yes, but you’ll need to compensate for changes in the weather, particularly if the waters where you’re docked tend to freeze during the winter months. This includes ensuring that your houseboat is insulated and heated through the winter.

How long does it take to build a houseboat?

Construction could take 12 to 18 months to complete, depending on whether you’re building a custom houseboat on your own or enlisting the help of professionals.

Can you get a loan for a houseboat?

Yes, but not a traditional mortgage. Options include a boat loan, a personal loan, a home equity loan, and a HELOC.

How does a toilet work on a houseboat?

A marine toilet usually empties into a black-water holding tank until the boat reaches a marina pumping station, or the tank treats the waste and it’s eventually released in a designated discharge area. Noncruising houseboats usually have a hookup that takes out waste through a sewage line.

---

Photo credit: iStock/wayra

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

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

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

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

^²SoFi Bank, N.A. NMLS #696891 (Member FDIC), offers loans directly or we may assist you in obtaining a loan from SpringEQ, a state licensed lender, NMLS #1464945.
All loan terms, fees, and rates may vary based upon your individual financial and personal circumstances and state.
You should consider and discuss with your loan officer whether a Cash Out Refinance, Home Equity Loan or a Home Equity Line of Credit is appropriate. Please note that the SoFi member discount does not apply to Home Equity Loans or Lines of Credit not originated by SoFi Bank. Terms and conditions will apply. Before you apply, please note that not all products are offered in all states, and all loans are subject to eligibility restrictions and limitations, including requirements related to loan applicant’s credit, income, property, and a minimum loan amount. Lowest rates are reserved for the most creditworthy borrowers. Products, rates, benefits, terms, and conditions are subject to change without notice. Learn more at SoFi.com/eligibility-criteria. Information current as of 06/27/24.
In the event SoFi serves as broker to Spring EQ for your loan, SoFi will be paid a fee.

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.

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.

SOHL-Q125-039

Read more