couple standing outside of their home

Preapproved vs Prequalified: What’s the Difference?

What does it mean to be prequalified or preapproved for a mortgage? One lets a future homebuyer dream, and the other adds reality to the dream.

Here’s a look at how these two steps vary, how each can play a part in a home-buying strategy, and how one in particular can increase the chances of having a purchase offer accepted.

What Does Prequalified Mean?

Getting prequalified by phone or online usually takes just minutes.

You provide a few financial details to mortgage lenders. The lenders use this unverified information, usually along with a soft credit inquiry, which does not affect your credit scores, to let you know how much you may be able to borrow and at what interest rate.

Getting prequalified can give homebuyers a general idea of loan programs, the amount they may be eligible for, and what monthly payments might look like, the way a home affordability calculator provides an estimate based on a few factors.

You might want to get prequalified with several lenders to compare monthly payments and interest rates, which vary by mortgage term. But because the information provided has not been verified, there’s no guarantee that the mortgage or the amount will be approved.

What Does It Mean to Be Preapproved?

Everyone talks about what direction the housing market is taking, but the reality is that millions of Americans buy homes in any given year. They brush up on types of mortgage loans, and many face the probe known as mortgage preapproval.

Preapproval requires an investigation of your income sources, debts, employment history, assets, and credit history.

Verification of this information, along with a hard credit pull from all three credit bureaus, which may cause a small, temporary reduction in your credit scores, allows the lender to conditionally preapprove a mortgage before you shop for homes.

A preapproval letter from a lender stating that you qualify for a loan of a specific amount can be useful or essential in a competitive real estate market.

When sellers are getting multiple offers, some will disregard a purchase offer if it isn’t accompanied by a preapproval letter.

When seeking preapproval, besides filling out an application, you will likely be asked to submit the following to a lender for verification:

•   Social Security number and card

•   Photo ID

•   Recent pay stubs

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

•   Two to three months’ worth of documentation for checking and savings accounts

•   Recent investment account statements

•   List of fixed debts

•   Residential addresses from the past two years

•   Down payment amount and a gift letter, if applicable

The lender may require backup documentation for certain types of income. Freelancers may be asked to provide 1099 forms, a profit and loss statement, a client list, or work contracts. Rental property owners may be asked to show lease agreements.

You should be ready to explain any negative information that might show up in a credit check. To avoid surprises, you might want to order free credit reports from A credit report shows all balances, payments, and derogatory information but does not give credit scores.

Knowing your scores is also helpful. There are a few ways to check your credit scores without paying.

Those who have filed for bankruptcy may have to show documentation that it has been discharged.

Calculate Your Potential Mortgage

Use the following mortgage calculator to get an idea of what your monthly mortgage payment would look like.

Do Preapproval and Prequalification Affect Credit Scores?

Once you decide on a mortgage lender or lenders, you can begin the preapproval process.

Only preapproval requires a hard credit inquiry, but the good news for mortgage shoppers is that multiple hard pulls are typically counted as a single inquiry as long as they’re made within the same 14 to 45 days.

Newer versions of FICO® allow a 45-day window for rate shoppers to enjoy the single-inquiry advantage; older versions of FICO and VantageScore 3.0 narrow the time to 14 days.

You might want to ask each lender you apply with which credit scoring model they use.

First-time homebuyers can
prequalify for a SoFi mortgage loan,
with as little as 3% down.

Do I Have to Spend How Much I’m Preapproved for?

No! The preapproval amount is your maximum house-hunting budget. Staying well under that number can’t hurt and might free up money for more than mortgage payments.

Like what? Like a college fund, retirement, and vacations.

And like — groan — emergency home repairs.

Recommended: Guide to First-Time Home Buying

Are Prequalification and Preapproval the Same Thing?

By now you know that they are not one and the same. Here’s a visual on what’s needed for each:



Info about income Recent pay stubs
Basic bank account information Bank account numbers and/or recent bank statements
Down payment amount Down payment amount and desired mortgage amount
No tax information needed Tax returns and W-2s for past two years

Do I Need a Prequalification Letter to Buy a House?

No. Nor do you have to have a preapproval letter when making an offer on a house.

But getting prequalified can allow you to quickly get a ballpark figure on a mortgage amount and an interest rate you qualify for, and preapproval has at least three selling points:

1.    Preapproval lets you know the specific amount you are qualified to borrow from a particular lender.

2.    Going through preapproval before house hunting could take some stress out of the loan process by easing the mortgage underwriting step. Underwriting, the final say on mortgage approval or disapproval, comes after you’ve been preapproved, found a house you love and agreed on a price, and applied for the mortgage.

3.    Being preapproved for a loan helps to show sellers that you’re a vetted buyer.

The Takeaway

Prequalified vs. preapproved: If you’re serious about buying a house, do you know the difference? Getting prequalified and then preapproved may increase the odds that your house hunt will lead to a set of jangling keys.

SoFi offers a range of fixed rate mortgage loans with competitive rates and low down payment options.

Looking at investment properties? SoFi has loans for those, too.

It’s a snap to get prequalified and view your rate.

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

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

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.


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How Much Is Homeowners Insurance? Average Cost in 2022

How Much Is Homeowners Insurance? Average Cost in 2022

According to the latest data, the average cost of homeowners insurance in the United States is $1,393 per year. That said, insurance premiums can vary widely by geography depending on how prone your area is to storms, wildfires, or other natural disasters, as well as factors like the crime rate.

If you’re buying a home, it’s a good idea to buy homeowners insurance coverage to ensure that you and your assets are covered in the event of a worst-case situation. They do happen! Many financial advisors suggest that anywhere from 25% to 40% of your net worth could be tied up in your home, and for some, that proportion can reach as high as 70%.

Let’s pause for a minute and think about what this could mean. Taking an uninsured or underinsured loss on 25% to 70% of your net worth is a hit that few Americans can afford. So protect yourself, and shop for the right homeowners insurance policy. It’s easier than ever with online tools. Here’s a look at how much you can expect to pay in your area, and why.

Recommended: Does Net Worth Include Home Equity

Average Cost of Homeowners Insurance by State

Here’s an alphabetical list of the average cost of home insurance premiums by state, plus the District of Columbia.

It will give you a good ballpark of what you might pay for your annual homeowners insurance premium.


Annual premium

Monthly premium

Alabama $1,668 $139
Alaska $1,171.00 $98
Arizona $1,269.00 $106
Arkansas $2,291.00 $191
California $1,127.00 $94
Colorado $1,899.00 $158
Connecticut $1,208.00 $101
District of Columbia $893.00 $74
Delaware $732.00 $61
Florida $1,637.00 $136
Georgia $1,445.00 $120
Hawaii $383.00 $32
Idaho $934.00 $78
Illinois $1,436.00 $120
Indiana $1,195.00 $100
Iowa $1,371.00 $114
Kansas $3,288.00 $274
Kentucky $2,174.00 $181
Louisiana $1,874.00 $156
Maine $951.00 $79
Maryland $1,191.00 $99
Massachusetts $1,323.00 $110
Michigan $1,288.00 $107
Minnesota $1,877.00 $156
Mississippi $1,860.00 $155
Missouri $1,794.00 $150
Montana $1,957.00 $163
Nebraska $3,234.00 $270
Nevada $852.00 $71
New Hampshire $739.00 $62
New Jersey $793.00 $66
New Mexico $2,134.00 $178
New York $1,068.00 $89
North Carolina $1,409.00 $117
North Dakota $1,898.00 $158
Ohio $1,164.00 $97
Oklahoma $3,482.00 $290
Oregon $756.00 $63
Pennsylvania $758.00 $63
Rhode Island $1,261.00 $105
South Carolina $1,235.00 $103
South Dakota $2,126.00 $177
Tennessee $1,745.00 $145
Texas $1,846.00 $154
Utah $706.00 $59
Vermont $665.00 $55
Virginia $1,057.00 $88
Washington $964.00 $80
West Virginia $1,192.00 $99
Wisconsin $933.00 $78
Wyoming $870.00 $73
United States Average $1,393 $116

You may notice that geography and climate play a role in rates. The states in what is known as Tornado Alley, where storms are more likely, have higher rates. You’ll see that Nebraska, Arkansas, and Kansas, for instance, have higher priced premiums, reflecting the elevated risk of damage to a home there. Those with homes in coastal areas can also expect higher premiums.

Conversely, those who live in states and towns with low risk of punishing storms will enjoy lower rates for their homeowners insurance.

Average Cost of Homeowners Insurance by City

Those who choose to live in the city may find their rates differ from those of their suburban or rural neighbors. Take a look at the average rates for homeowners insurance policies for 20 major U.S. cities. Here’s how the average premiums stack up:


Average annual premium

Average monthly premium

Atlanta $1,546 $129
Boston $1,122 $93
Chicago $1,361 $113
Dallas-Fort Worth $3,505 $292
Denver $2,061 $172
Detroit $1,510 $126
Houston $3,416 $285
Los Angeles $1,335 $111
Miami-Fort Lauderdale $3,471 $289
Minneapolis-St. Paul $1,499 $125
New York $1,110 $93
Philadelphia $956 $80
Phoenix $1,648 $137
Riverside-San Bernardino $1,344 $112
San Diego $1,169 $97
San Francisco $1,149 $96
Seattle $1,089 $91
St. Louis $1,799 $150
Tampa-St. Petersburg $1,869 $156
Washington, D.C. $966 $80

As you see, there is a wide variation in prices, with Washington, D.C., coming in at $966 at the low end, and Dallas at $3,505 at the high end. Various factors, from weather patterns to crime rate, impact these figures.

What Factors Influence Cost of Homeowners Insurance?

The price of a homeowners insurance policy isn’t just a matter of “location, location, location,” as they say in the real estate business. There are a variety of other factors that influence your home insurance costs. These include features of the property and residence itself, and your insurance history and choices when it comes to coverage. We break down the most commonly cited factors below.

Location: Yes, this is one of the biggest influencers on the price of your policy. Actuaries, the insurance company employees who calculate rates, use complex tables that factor in a variety of risks, including crime, fire, and weather records for a given zip code.

Age and condition of home: The age of your property and its construction quality play big roles in determining what it might cost to repair or replace your home in the event of a covered loss.

Roof condition: An insurance company will likely want to be prepared for repair or replacement costs if, say, a tree branch goes flying during a storm and damages your roof. These repairs can get fairly expensive for certain roof types, such as slate or shale. As a result, your insurance company will take special interest in the type, age, and condition of your existing roof when pricing your policy.

Added features: Adding a swimming pool, trampoline, or the like can certainly make a home more fun, but it can also increase the possibility of personal liability claims. Consequently, these “attractive nuisances” as they are known in the legal field may increase the cost of your premiums.

Coverage limits: When buying a policy, you will have choices that impact the policy price. The more you insure the contents of your home for, the more expensive the price is likely to be. Also, you will decide whether to base your coverage on replacement cost or what’s called actual cash value. The former will pay the cost of “making you whole” with a payment for a new and comparable feature that was damaged or lost. It is more expensive. With the actual cash value option, though, the policy will deduct depreciation when calculating cash payouts. If you paid $1,000 for your oven a number of years ago, and it’s destroyed in a kitchen fire that’s a covered claim, actual cash value might only pay you back its current value of, say, $250, leaving you without adequate funding to replace it.

Deductible: Your deductible is the amount you must pay out of pocket before insurance will pay out in the event of a covered claim. The amount you choose determines how much risk you’re willing to share with your insurer. A higher deductible generally means a lower-cost home insurance price.

Claims history: Insurance companies view your claims history as an indicator of your likelihood to file future claims. The more claims you’ve filed in the past, the higher your insurance premium is likely to be.

Intended use: Whether you intend to use your home as a primary residence or as an investment property can impact your homeowners insurance rate. Homeowners who choose to use their homes for a business or rent their property out as a landlord are viewed as higher risk and are charged higher home insurance premiums.

Pets: While we consider pets to be part of our families, the truth is that insurance companies charge higher rates for certain pets, particularly breeds viewed as overly aggressive. Why? The insurance company is typically providing coverage if your animal were to injure someone who was visiting. Some insurance companies may even outright reject insurance coverage for certain dogs and exotic animals. However, a number of states have banned these practices of breed discrimination. What’s more, even if you live in a state where this kind of discrimination isn’t banned, you may find that not all insurers restrict coverage or raise premiums for what are considered more aggressive pets. So it can pay to shop around.

What’s Included in a Home Insurance Policy?

If you’re wondering what exactly you get when you purchase a homeowners insurance policy, allow us to spell it out. Here are the six typical coverages offered under most homeowners insurance policies. While some of these may be optional, dwelling, personal property, and personal liability coverage are usually included under most policies.

Dwelling coverage: This pays for covered damages to your home’s structure and attached structures, such as your roof, an attached garage, or built-in appliances.

Other structures coverage: This pays for covered damages to structures on your property that are not attached to your home, such as sheds, fences, or a detached garage.

Personal liability coverage: This kind of coverage pays for injuries or damages to others’ property that you’re legally liable for, as well as legal fees incurred as a result of a covered incident.

Personal property coverage: This is the aspect of your policy that covers damages, losses, and theft of personal property due to a covered incident. This usually includes most belongings like furniture, electronics, and clothing. Worth noting: Certain items are subject to coverage caps, and additional coverage may be needed to ensure fully cover high value items like jewelry, artwork, or antiques.

Medical payments coverage: This pays for the medical bills of anyone injured on your property, regardless of fault.

Loss of use coverage: What if your home were to have fire damage that forced you to live in a hotel while repairs were made? That’s the kind of situation in which loss of use coverage swoops in. It pays for reasonable living expenses if you’re displaced from your home as a result of a covered claim.

Do You Need Homeowners Insurance?

While you’re not legally required to purchase homeowners insurance, home insurance coverage is typically mandated as part of your contract with your mortgage lender. You will generally have to purchase homeowners insurance in order to close on your home if you’re buying the property using borrowed funds.The lender wants to know that their investment in your home is well protected.

If you do not maintain adequate homeowners insurance while your mortgage remains outstanding, your lender will typically purchase homeowners insurance on your behalf (often at unfavorable rates) and charge you the premiums as part of your monthly mortgage payments. It’s therefore, in your best interest to shop for and maintain your own home insurance policy.

Even if you’re an all cash buyer, having an active homeowners insurance policy is highly recommended. Real estate is where the majority of wealth is concentrated for the vast majority of American households, and it is vital to ensuring that your assets are protected in the event of a disaster. No one wants to imagine it, but bad things do happen every day, from storm damage to home burglaries. It’s important to be prepared.

There are a lot of incentives to buy homeowners insurance, as you see. That’s because it’s a key way to make sure that your home base is well protected, even when worst case situations occur.

Recommended: Should I Sell My House Now or Wait

The Takeaway

The average price of homeowners insurance is $1,249 per year, but your particular cost will vary based on your location, climate patterns, crime rates, the type of home you live in, your deductible, and many other factors. What doesn’t vary is the fact that homeowners insurance is often a requirement. Even if not, it’s an excellent way to protect what is probably your biggest asset and give you peace of mind.

Homeowners Insurance Made Simple

If you’re searching for a home insurance policy that’s reliable, affordable, and easy to buy online, we’ve got you covered. Through our partnership with Experian, we offer you great coverage at a great price. Experian allows you to match your current coverage to new policy offers with little to no data entry. And you can easily bundle your home and auto insurance to save money. All with no fees and no paperwork.

Photo credit: iStock/svetikd

Insurance not available in all states.
Experian is a registered service mark of Experian Personal Insurance Agency, Inc.
Social Finance, Inc. ("SoFi") is compensated by Experian for each customer who purchases a policy through Experian from the site.

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


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Trying to Rent in a Tight Housing Market? 4 Steps to Win the Lease

Trying to Rent in a Tight Housing Market? 4 Steps to Win the Lease

If you’ve been looking for a rental of any kind, you know how tough the hunt can be. Dozens of applicants for each vacancy, stricter credit, income, and referral requirements from landlords, bidding wars. These are, unfortunately, all part of navigating today’s tough rental market.

The culprit is a national housing shortage that has been brewing for more than a decade. Ever since the housing crash of 2008, new construction of homes and rental units has slowed dramatically. Any recent building uptick has been offset by supply chain and other pandemic-related delays. Meanwhile, rising mortgage rates make owning a home less affordable, prompting lots of would-be buyers to stay put in the rental market.

The result? There are many more people who want to rent than the number of rental units out there. That rental market squeeze means higher prices, forcing most people to spend more on rent than the recommended 30% of income.

In the first three months of 2022, apartment occupancy hit an all-time high of 97.6%. During the same time period, asking rents jumped an average of 15.2% throughout the country.

These four steps can help you anticipate what landlords are looking for and help you present yourself as the ideal tenant.

Tips to Get Approved for a Lease

Step 1: Know Your Number

Determine just how much you can afford for housing costs.

The advertised or asking rent is just the beginning. You’ll also need to take any fees, utilities, maintenance, parking, and renters insurance into account. With inflation hitting a 40-year high, you may need to adjust your estimates for these costs upward.

Take into account the bidding war environment. In the heat of the moment, you may outbid the others but also end up with an apartment you can’t comfortably afford. To avoid this scenario, determine your ideal monthly payment and stick to that number, no matter how tired you are of the apartment hunt.

💡 Need help figuring out housing costs? Check out our cost of living by state breakdown.

Step 2: Prepare Your Rental Resume

Apply for a rental the same way you approach applying for a job. You want to make sure you fulfill all of the requirements, and then some.

The first step to getting approved for an apartment is usually filling out an application online. Be sure to do so accurately and thoroughly. When the time comes to see the place, you’ll help make your case if you bring the following:

Copies of Your Credit Reports

Landlords routinely do background and credit checks on applicants they are considering. Offering a copy of a credit report gives them on-the-spot information. If something on your report is confusing, you can attach your own letter of explanation.

Most landlords will look for a good FICO® score (670 to 739) or higher. Find your credit score on a loan or credit card statement or through an online credit score checker. Or get it for free from Experian.

Proof of Employment and Income

Landlords want to know that you can comfortably afford the rent. To prove you can, you could bring copies of your past three to six months of pay stubs, a copy of your most recent tax return, and contact information for your current employer. (This may be more than the landlord is asking for, but it helps build your case.)

Some, but not all, landlords also require employment history information. Having a list of former employers and their contact information on hand can help speed up this process. Even if it’s not required, the list helps paint a more complete picture of why you’re a trustworthy candidate.


Be ready to present credit references, which may include character references and asset documentation. Personal references from your boss, a co-worker, or another nonfamily adult who can vouch for you are a good idea. The landlord or agent may not call these people, but having them on your list is a sign of your professionalism and trustworthiness.

Landlords probably also will want the names, locations, and contact information of any previous landlords. A stellar rental history can help put you ahead of the crowd, so you want to make it easy for the agent or landlord to check on you.

If you’ve had trouble making rental payments, it’s best to be honest and offer an explanation.

Documentation for Service or Assistance Animals

According to the Fair Housing Act, a person with a disability may seek a “reasonable accommodation” from a housing provider so that they may have an equal opportunity as a nondisabled person to use a dwelling, even one that otherwise does not allow animals. The disability can be physical or mental.

Service animals, defined as dogs, are not considered pets, and housing providers cannot charge fees or deposits for them.

So-called emotional support animals have ruffled feathers throughout the country. First, applicants with assistance animals must make a request for reasonable accommodation, and not necessarily in writing. If the disability is not observable, they must provide reliable information — typically a letter from a medical provider or therapist — to the housing provider showing that the animal provides assistance.

Beyond that, the U.S. Department of Housing and Urban Development (HUD) does not allow housing providers to seek personal details of a person’s medical history. Importantly, HUD says that online certificates alone are not sufficient to reliably establish that a person has a nonobservable disability or disability-related need for an assistance animal.

So if you have assistance animals, it’s a good idea to bone up on the laws, which can be complicated, and have professional documentation.

Step 3: Show an Interest

It may sound trite, but landlords and rental agents are reassured when they know that someone really wants to live in the property. At a time when demand is high, this can be even more important as landlords become inundated with calls or online requests.

If you’ve visited the property before, have a friend in the same complex or nearby, love the neighborhood, or even appreciate the architecture or amenities, be sure to say so. Landlords want to know you’ll enjoy living there and, in turn, take good care of your new home.

Step 4: Prepare to Pay

Many leases have been lost when an early and promising applicant is ready to rent but doesn’t have the funds available.

Make sure you bring your checkbook or an electronic payment option so you can pay your security deposit, first month’s rent, and whatever else is required immediately. And, of course, make sure you have the funds available, even if your budget is having to also cover moving expenses.

Move-in money can obviously be a challenge to come up with. If it’s several thousand dollars, a personal loan could help.

Did you snag the apartment or house? Once you move in and exhale, renter-friendly updates can help you make the space your own.

The Takeaway

It’s a challenging time to look for a rental. But preparing thoroughly before you start your hunt and taking steps to show landlords your qualifications and genuine interest can help you stand out in the crowd.

In this rental squeeze, however, some house hunters may find that it makes more sense to build equity in their own home, and generational wealth, than pay rent.

If so, SoFi is here to help.

Consider that SoFi home mortgage loans come with competitive fixed rates and can call for as little as 3% down for qualifying first-time homebuyers.

Photo credit: iStock/cnythzl

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

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

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.


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How Much Does It Cost to Finish an Attic?

How Much Does It Cost to Finish an Attic?

The longer you live in your house, the more obvious it may become that you need more living space — perhaps for a guest bedroom when your family expands or as a home office where you can work remotely in a telecommuting society. Your first thought might be to build an addition, but the sticker shock may cause you to shelve that idea and instead consider an attic conversion.

Fortunately, an attic conversion is an idea that may be more economical than a complete home addition. Read on for a full breakdown of the cost to finish an attic.

Should You Convert Your Attic Space?

There are many benefits of converting an attic into usable space, including:

•   The space already exists in your home, making this choice both cost- and time-effective.

•   You don’t need to pour a foundation, again making it a more viable and economical option.

•   Wiring is likely already in place and can be modified to suit your needs.

An attic conversion also allows you to use the entire envelope of your home, rather than wasting potential living space.

Before you fully commit to your attic remodel, though, it’s crucial to make sure your attic has the potential to become a usable living space. Better Homes & Gardens provides a litmus test to determine whether your attic is worth remodeling .

Recommended: Renovation vs. Remodel

Tips on Converting an Attic, Plus Associated Costs

One of the first things you might do before converting your attic is to see if your roof is being supported by W-shaped trusses in your attic. If so, it’s likely that building an addition is a better choice. If your attic contains A-shaped rafters, though, that’s a plus; if there’s enough open space beneath the rafters, then you can potentially convert your attic into usable space.

Other considerations that Better Homes & Gardens recommend include to:

•   Check your local building codes to make sure your remodel will fit. As just one example, a typical requirement is that the attic space must be at least 7.5 feet high and over 50 percent of the floor area. The thickness of the material will also factor into the final headroom and ceiling height. The quickest way to add significant costs to your attic remodel is to be forced to change course mid-project because of a code violation (though this is an example of personal loan use that could come in handy).

•   Determine how you’ll get into the space. Will you need to add a staircase or expand the current one? Stairs that go straight up will need more floor space than, say, spiral staircases. Or perhaps your only option is a pull-down access point; this will limit what furniture and materials you can fit into your attic conversion and how utilitarian the new living space might be.

•   Consider whether you’ll need to add windows. If you’re creating an additional bedroom, codes may require an egress window in case of fires. But even if they aren’t required, you might consider adding windows or punching skylights that open to brighten the space with natural light.

•   Decide how much flooring needs to be reinforced, along with any electrical or plumbing issues. If you ultimately decide that your attic has what’s needed for a successful conversion, it’s time to think both practically and creatively to shape what may well become the most interesting — and potentially challenging — room in your house.

•   Prioritize what’s most important to you. Maybe it’s crucial that the attic is fully plumbed for a bathroom because you want this space to serve as a guest suite. To make that happen, perhaps you’d be willing to give up your specialty flooring idea if your budget doesn’t accommodate both or if it could make it harder to get your personal loan approved for the project.

•   Consult with a professional unless you’re already an experienced builder. Ask friends, family members, and building associations for recommendations and referrals, then request quotes from at least three contractors to understand both possibilities and associated costs. When you contact contractors, ask them for credentials. Compare bids and, tempting as it may be, don’t automatically choose the lowest one. Make sure the contractor describes what will be provided as well as the estimated time frame.

Want to know how much value your attic conversion will bring to the table? Check out SoFi’s Home Project Value Estimator.

Recommended: How to Find a Contractor for Home Renovations & Remodeling

How Much Does It Cost to Finish an Attic per Square Foot?

On average, you can expect to pay between $4,600 to $16,000 — or $30 to $60 per square foot — to refinish your attic. Most high-end attic conversions can cost as much as $200 per square foot.

Overall, costs vary depending on the overall square footage and the materials you use.

How Much Does It Cost to Finish an Attic per Task?

If you hire individual contractors for each aspect of your attic remodel, then it’s easy to see what each portion of the remodel is costing you. However, if you hire a contractor to manage the entire project, you likely won’t receive the project broken down into great detail.

Here are some estimates you might expect to pay for various components of your attic renovation:

Cost of Walls and Ceilings

New walls and ceilings can effectively transform an unfinished attic into a space that’s both comfortable and livable. Although prices vary by where you live, attic drywall can cost an average of $1,000 to $2,600 to install, with ceilings costing $120 to $25,000.

Other aspects to consider: Will you paint the walls and ceilings? Add wallpaper? Do you need trim and crown molding? All of these features will be additional costs and can quickly cause your project budget to skyrocket.

Cost of Flooring

Flooring is another important consideration, so first think about what’s located directly below the attic space. Do you need soundproofing? If a bedroom is located below the attic space, you’ll likely want some sound control. Insulation provides that to some degree, and carpeting adds even more dampening.

The cost of attic flooring will depend on the current state of the attic and what materials you choose. Replacing floor joists to beef up the strength will cost anywhere between $1,000 and $10,000, while installing subfloor will run between $500 and $800. Installing the flooring itself averages between $200 and $6,400, depending on material and square footage.

Cost of Windows and Skylights

If there currently are no windows in your attic, you may want to add an egress window, which will run you between around $2,500 and $5,300, as a safety precaution. You also might want windows or skylights to brighten the space with natural light. Expect to pay an average of $200 to $10,000 to install an attic window, and $1,000 to $2,400 to add a skylight.

Cost of Heating and Cooling

Your attic conversion might require additional heating and cooling. The price to install an attic fan is around $400 to $900, and a window air conditioner averages $298. A skillful contractor could also potentially tie in your current climate control system.

For heat, baseboard heaters run $780 on average. Electricians charge $75 to $200 per hour in labor, and installing duct plumbing might cost you between $454 and $2,051 on average.

If your attic is difficult to access during the renovation period, contractors may tack on a surcharge. To get an idea of how much your attic renovation will cost, use our Home Improvement Cost Calculator.

How Much Does It Cost to Finish an Attic Yourself?

It’s generally cheaper to go the DIY route than to hire a professional — though you will need some know-how. If you’re making minor improvements to your attic space, you may be looking at an attic remodel cost as low as $300. However, if you’re looking to make a total transformation, your costs for materials could run as high as $50,000.

Though you’ll certainly save on labor costs, make sure to take into account the time involved if you decide to do it yourself as opposed to bringing in a professional.

How Much Does It Cost to Finish an Attic by Type?

How much it costs to finish an attic will also vary depending on the type of attic space you’re creating. Here’s a look at how much an attic remodel costs by attic type.

Cost of Finishing a Walk-Up Attic

The cost of finishing a walk-up attic generally ranges anywhere from $8,100 and $26,000. Large portions of the costs are typically adding a staircase and installing flooring.

Finishing an Attic as a Storage Space

If you’re finishing an attic to serve as a storage space, your costs are generally a little lower as there isn’t as much polishing involved. Generally, the attic remodel cost for a storage space runs from $4,600 for a simpler setup to $18,900 if the space is larger and you opt for more elaborate storage systems.

Cost to Finish an Attic With a Dormer

Installing a dormer — a window that juts out vertically on a sloped roof — can add in some ceiling height and natural sunlight into an attic. However, it will set you back. On average, the cost to add in a dormer ranges anywhere from $2,500-$20,000, plus the additional costs of other attic remodeling work.

Cost to Finish an Attic Above a Garage

The cost to finish an attic above a garage can vary widely depending on what’s involved, such as the installation of heating, insulation, or ventilation. You can typically expect to pay anywhere from $4,600 up to $24,000.

What Factors Influence the Cost of Finishing an Attic?

As you may have guessed from the wide-ranging estimates above, the cost of finishing an attic can vary a lot depending on what’s involved and what materials you use. Here are some major factors that can affect how much it costs to finish an attic:

•   Square footage: How large your attic is will play a big role in the total costs involved in remodeling. The bigger an attic is, the more materials required and the more time it will take to finish it, which translates to additional labor costs.

•   Need for structural changes: You’ll also pay extra if your attic is an odd shape or difficult to access. These challenges could call for structural updates, such as the addition of height, the expansion of space, or the creation of a staircase.

•   Intended use: Your planned purpose for your attic will also influence cost. If you just want to add in some additional storage space, you’ll pay a lot less than if you plan to install a full suite complete with a bedroom, bathroom, and closet.

•   Extra features desired: Perhaps unsurprisingly, the more features you want in your newly remodeled attic, the more it will cost you. Big-ticket items include windows, electricity, plumbing, and heating and cooling.

Of course, another factor that influences your cost is whether you need to get financing for the project and, if so, what terms you’re able to secure. Keep in mind that you can always use our personal loan calculator to see how your current loan stacks up.

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The Takeaway

An attic conversion can be one way to create a unique room through adding more usable space to your home. It’s also a more economical home renovation project than an addition to your house. There are a lot of technical aspects to consider, and before getting started, it’s best to check with your local codes office so you know any building or permit requirements upfront, then come up with a project wishlist before soliciting bids from at least three contractors.

Figuring out how to finance your attic conversion is the last step of the project before getting started. If you’re looking for help with some or even the whole cost of your attic conversion, a home improvement loan is one way to finance virtually any home project. These are essentially one of the types of personal loans used to pay for renovations, additions, or updates to your home or property.

SoFi offers personal loans online for home improvement with a fast approval process, so you can get started sooner than later. Because of SoFi’s low rates and flexible terms, it can be a better choice than paying for your remodel with high-interest credit cards. And because this is an unsecured loan, you aren’t using your home as collateral like you would with a home equity line of credit.

Ready to start renovating your attic? Learn more about how SoFi personal loans can help.

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.

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


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Guide to Student Loan Cash-Out Refinance

Guide to Student Loan Cash-Out Refinance

A cash-out refinance is a type of refinancing that allows you to tap into the equity in your home and also receive cash back at closing. You can work with a lender to get a better interest rate and/or consolidate debt into one monthly payment. You can also integrate your student loans into this process.

A student loan cash-out refinance is not the right choice for everyone. It’s helpful to weigh the pros and cons of cash-out refinance to decide if it makes the most sense for your personal financial situation.

Refinancing to Pay Off Student Loans

Before considering a student loan cash-out refinance, it’s helpful to review what refinancing is. In general, student loan refinancing means that a lender pays off your existing loans with a new one, ideally at a lower interest rate, which can save you money over time.

If you have federal student loans, you can only refinance with a private lender, which means you could lose certain federal student loan benefits and protections, such as income-driven repayment or forgiveness plans.

Calculate paying off your student loan before you decide whether this method makes sense for you.

Recommended: Types of Federal Student Loans

What Is a Student Loan Cash-Out Refinance?

If you own a home and have student loan debt, you can roll your student loan into your mortgage using a student loan cash-out refinance.

Here’s how cash-out refinance works: You get a mortgage loan that allows you to tap into your home’s equity to pay off your student loan debt. You consolidate your mortgage loan and your student debt. You also get a lump sum of money upon closing, which comes out of your home’s equity.

To qualify, you typically must have a credit score (a number that indicates how likely you are to pay back a loan on time) of at least 620 to get a mortgage that isn’t from a government agency. You also generally need to have a debt-to-income ratio (DTI) of under 43%, which refers to your monthly debt payment compared to your monthly gross income. You’ll also need at least 20% of equity in your home in order to take advantage of a cash-out refinance.

Your lender pays off your first mortgage, which results in a new mortgage loan, which probably has different terms than your original loan (a different type of loan and/or a different interest rate).

How Cash-Out Refinance Works for Student Loans

Typically, you can borrow up to 80% of your home’s equity. Equity refers to the difference between the current value of your home and the amount of money you owe on your mortgage.

To get a student loan cash-out refinance, you can prequalify and choose the right mortgage refinancing option for you. Your lender will detail the interest rate and monthly payments that fit your goals.

Once your application has been approved, you’ll sign your paperwork. Your lender will pay off your student loan at closing by sending the cash to your student loan servicer to take care of your student loan debt.

Taking out money for a cash-out refinance means you just move debt from one location to another. Ultimately, you still have to pay off that debt — it just takes a different form.

Recommended: Cash-Out Refinance vs HELOC 

Pros of Cash-Out Refinance for Student Loans

Why might you want to use a cash-out refinance to pay off student loans? Here are some of the reasons why it might be a good choice.

•   You can get a better interest rate. Before you refinance, you want to make sure you’re getting a lower interest rate than your current student loan interest rate and your current mortgage interest rate.

   Calculating the new interest amount will tell you whether you’ll save money. (You’ll also want to figure in any fees.) If you lengthen your loan term along with your cash-out refinance, you may lower your monthly payments but pay more interest over the long run.

•   You may tap into tax deductions. The interest you pay on student loans and your mortgage are both typically tax deductible. However, you’ll have to itemize deductions if you choose a cash-out refinance with your mortgage.

   You can take either the standard deduction or itemize deductions on your taxes. If your allowable itemized deductions are greater than your standard deduction or you cannot use the standard deduction, you can itemize. However, it’s important to note that the new larger standard deduction means you may want to consider whether it makes sense to itemize.

   In tax year 2021, the standard deduction for married couples filing jointly is $25,100. For single taxpayers and married individuals filing separately, the standard deduction is $12,550. For heads of households, the standard deduction is $18,800.

•   You no longer have to make two payments. Instead of making both a mortgage payment and a student loan payment, make one payment, which can help you stay on top of your payments.

Cons of Cash-Out Refinance for Student Loans

It’s important to consider the downsides of cash-out refinancing for student loans as well.

•   You give up certain borrower protections. Rolling a federal student loan into your mortgage forces you to give up certain borrower protections that come with federal loans, such as income-based repayment plans, loan forgiveness, and other options through the Department of Education.

•   You turn unsecured debt into secured debt. Student loans don’t require any collateral. However, your mortgage does, which means that you turn what was once unsecured debt into secured debt. If you stop making your mortgage payments, you could lose your home to foreclosure.

•   You’ll pay closing fees. You’ll pay closing costs to refinance a mortgage, which can include title fees, appraisal fees, settlement fees, recording fees, land surveys, and transfer tax. The amount you’ll pay depends on your mortgage, the terms, and your state. You’ll want to consider whether these fees are worth what you’ll gain by refinancing.

When to Execute a Student Loan Cash-Out Refinance

It can be hard to decide when to refinance your student loans. This option may make sense for you if you:

•   Know you’ll save money in the long run: It’s important to fully understand how a student loan cash-out refinance works. If you’ve calculated your new loan amount and know you’ll save money after streamlining your debt, you could be a good candidate for a student loan cash-out refinance.

   A new repayment term over a longer period may seem like a great deal because you’re lowering your monthly payments, but you’ll pay more in interest over your loan term. You may also pay more in interest due to the higher loan amount which might give you higher potential fees and expenses.

•   Have a plan to tackle your debt after refinancing: It’s important to be sure that you’ll be able to make your mortgage payments every month.

•   Want just one payment: Having just one loan with a longer repayment term means you simplify your debt. This way, you don’t have to keep track of multiple payments every month.

Finally, you may want to go through with a student loan cash-out refinance if you know for sure that you won’t need or be eligible for federal student loan repayment programs, forgiveness options, or other benefits, and have a plan to tackle debt. It’s a good idea to envision your top priorities — whether you want to save money, prefer just one payment, or would like to lower your monthly payments — or prefer all three benefits!

There are other reasons you may consider getting a cash-out refinance to pay off student loans, but this list gives you a jump start.

Refinancing Your Student Loans With SoFi

SoFi offers both cash-out refinancing and student loan refinancing to help you save money when you refinance your student loans. Borrowers won’t ever have to worry about any fees and can apply quickly online today.

Learn more about refinancing student loans with SoFi.


How long does underwriting take for cash-out refinance?

Refinancing a mortgage can take anywhere from 30 to 90 days, depending on how well you provide information to your lender, the complexity of the loan, and your lender or broker. The faster you provide documentation, the quicker your lender can underwrite and process your loan.

How do you get your money from a cash-out refinance?

Upon closing, you get a lump sum from your lender when you get a cash-out refinance. The loan proceeds pay off your existing mortgage(s), including closing costs and any prepaid items. You can do what you want with the remaining funds.

Do you pay closing costs on a cash-out refinance?

Yes, you’ll pay closing costs to refinance a mortgage. The amount you’ll pay depends on a variety of factors. It’s a good idea to consider how long it’ll take you to recoup your closing costs after refinancing.

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

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

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

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

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