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Perhaps the idea of home ownership sounds appealing, but the thought of all the maintenance involved — inside and out — doesn’t sound so great. Dealing with snow removal or tending to your lawn might be the last thing you want to add to your already full plate.

If that resonates, buying a home that has a homeowners association, or HOA, might be the right move. Whether you’re shopping for a condo or a 3-bedroom house in a new development, an HOA could be a valuable thing. These organizations, funded by dues, take care of many of those maintenance responsibilities, run shared facilities (like a pool), and create guidelines (and enforce them) for the community of homeowners.

That said, interacting with an HOA and following its guidelines may not be for everyone. Read on to learn:

•   What is an HOA, or homeowners association

•   How do HOAs work

•   How much are HOA dues

•   What are the pros and cons of HOAs

•   How will HOA fees impact your costs as a homeowner

What Is an HOA (Homeowners Association)?

An HOA is typically a non-profit volunteer group that manages aspects of homeownership in certain planned unit developments (PUDs), condos, and other housing communities. The HOA collects fees from each member of the community and uses them to handle maintenance duties and amenities. These may include:

•   Landscaping and maintenance of walkways and the like

•   Pest control

•   Maintenance and utilities of shared spaces, such as lounges and pool areas

•   Garbage pickup

•   Parking

•   Security

Another answer to “What is an HOA?” should mention that these associations typically make enforceable rules about the look and feel of the community. There may be guidelines about, say, the size of pets one may own, or the color schemes permissible for a townhome’s exterior. The existence of an HOA will be an important consideration when you are shopping for a place to live and HOA fees need to be built into a homebuyer’s financial plan, just like home loan payments.

Recommended: Condo vs. Townhouse: 9 Major Differences

How Does an HOA Work?

HOAs can be staffed in different ways. They can be run by people owning property within its boundaries, run by a board of directors, or through a similar arrangement, with board designees elected to oversee and enforce HOA rules.

Many HOAs are incorporated, which makes them subject to the laws of the state and may require them to file annual reports with the corporation commission, in order to remain in good standing.

People who purchase properties within an HOA jurisdiction become members of that organization, and they must abide by the rules contained within that organization’s bylaws and Declaration of Covenants, Conditions, and Restrictions (CC&Rs).

HOA rules, fees and restrictions vary. Some bylaws and CC&Rs are strict, while others are looser, typically focusing on how residents must keep properties maintained according to stated specifications. In a planned unit subdivision of single-family homes, for example, rules may include what types of landscaping are permitted, or exterior colors of paint, what kinds of fencing is allowed, and more.

They can include usage rules for common property, such as a pool, and typically outline penalties for rule violations, ranging from forcing a homeowner to comply to fees and, sometimes, litigation.

How Common Are HOAs?

Here are some recent statistics that will help you get an idea of how common HOAs currently are in the U.S.:

•   Approximately 75.5 million Americans live in HOAs, cooperatives, or condominium units.

•   30% of all U.S. homeowners live in HOA communities.

•   28.2 million housing units in America are part of HOA communities.

As you see, HOAs are quite popular.

What Is an HOA Fee?

Now that you know a bit about what is a homeowners association, let’s look at those fees they charge. People who buy property in an HOA-governed condo or community usually must pay dues — also known as HOA fees — typically due monthly. These fees help to maintain common areas of buildings, such as lobbies and patios, and perhaps community clubhouses. These fees can cover maintenance on elevators or swimming pools, if applicable, or could be used for landscaping expenses, and so forth. Additional special assessments may be charged for major repairs, such as roof repairs.

Some studies suggest that average HOA fees range from $200 to $400 per month, although they can be as low as $50 and as high as $2,500 or more. It depends on the HOA complex, where it is, what amenities the project maintains, and sometimes on how the individual HOA is managed.

What’s most important when shopping for a new home is that you are clear about what fees would be assessed on your individual unit and whether that fits your budget.

When Considering an HOA Property

When considering whether or not to buy a property within a homeowners association, it makes sense to understand what you’d be committing to if you bought this property.

To get an understanding of how the organization operates, you can ask the board of directors if you could read minutes from meetings — if you have a real estate agent, they should be able to help you access records. This may give you a good overview of any challenges the organization is facing, and insights into how solutions are brainstormed and implemented.

Questions to investigate can include:

•   What are the HOA fees each month? What do they cover?

•   If the fees seem low, does it appear as though enough funds are collected to maintain general areas? What about meeting rooms, the gym, pool area, and so forth?

•   If the HOA fees are higher than expected, do they seem excessive for what you’d get in return?

•   Are homeowners also being charged special assessments to cover other costs? If so, how often and what are they?

•   How many units are not paying their HOA fees? What are the consequences for that? Are penalties being imposed?

•   If certain units don’t pay their HOA fees, can these unpaid costs be imposed upon other owners to make up the difference?

•   If desired, will you be allowed to sublet your unit? Over what term and with what restrictions?

•   Are you allowed to have a pet? If so, what restrictions exist? Ask to read a copy of the CC&Rs which is recorded public information.

•   Does pending litigation exist against the HOA? If so, of what type? Does it involve, say, damage to one unit, or does it affect the entire organization?

If you have friends or family members who are part of this HOA, consider asking them what they like about living there, and what they don’t. If you have a friend or family member who owns housing under a different HOA, chat with them as well. Their insights can be valuable in regards to what questions to ask and issues to explore before buying.

You can also review the bylaws, which usually share voting rights of members, budget and assessment rules, meeting requirements, and so forth. Check to see what actions can be taken without a member vote — if they include raising assessments or creating rules, this could have an impact on your buying decision.

Recommended: Mortgage Servicing: Everything You Need to Know

Pros vs Cons of HOAs

There are several benefits of buying a property that’s part of an HOA. Consider these upsides:

•   Guidelines to help maintain the look of the community, settle issues, and create harmony among residents.

•   Enhanced quality of life and property values.

•   Maintenance services so homeowners don’t need to do the work themselves or hire freelance help.

That said, there are also possible drawbacks to being part of an HOA. These can include:

•   The cost of the HOAs fees can be prohibitively expensive, and the possibility of assessments can be financially challenging.

•   Potentially restrictive guidelines that inhibit your freedom over your property (that is, you may not be allowed to have a certain kind of pet or put in solar panels).

•   Those who run the HOA may be volunteers vs. skilled real estate professionals, which could lead to inefficiencies.

Can You Afford to Buy into an HOA?

When shopping for a new home or condo, one key consideration is how much you can afford for a house — with the true cost being more than just principal, interest, and homeowners insurance. If you are considering properties that have HOA charges, it’s vital to factor those in to make sure your budget is manageable.

You’ll need a down payment on the home. There are also property taxes, insurance, closing costs (which can run from 3% to 5% of the home’s cost, paid by the buyer and/or seller according to the contract). And there are expenses other than closing costs such as moving expenses, furniture costs, and more that should be considered as you grapple with how much you can afford.

Plus, you might want to have an emergency fund established for unexpected expenses, whether unanticipated housing repairs, or medical expenses, or something else entirely.

To help you figure out that affordable house payment number, you could check out our mortgage calculator.

Recommended: What Credit Score Is Needed to Buy a House?

What to Know About Mortgages and HOAs

There’s one more wrinkle to the topic of what is a homeowners association and should you buy into one: the impact it may have on securing your mortgage.

When you buy a property that is part of an HOA, you may need additional documentation for your lender. If your bid is accepted, the lender will likely request a homeowners association certification, called an HOA cert for short. This document provides your lender with a snapshot of how the HOA is being run, and may provide information such as:

•   How old the project is

•   Whether a condominium development was converted from an apartment building or specifically built as condo units

•   How many units exist in the project

•   How many units are occupied

•   How many occupied units are owner occupied and how many are rented to someone else

•   How much HOA fees are

•   The amount of insurance on the project

If this information is requested, it will likely be reviewed to confirm that this property meets the lender’s loan eligibility guidelines. Because guidelines can vary from lender to lender and loan program to loan program, it makes sense to check with your lender of choice as soon as possible to determine if this financial institution considers your condo to be eligible for financing.

The HOA cert may also be obtained by the escrow/title company and provided to your lender, along with the relevant CC&Rs. This provides insight into any property restrictions and other aspects that may affect a home’s lendability and marketability.

Recommended: Home Loan vs. Mortgage: What You Should Know

The Takeaway

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

FAQ

Why do HOAs exist?

Homeowners associations exist to manage and maintain common areas, to enforce community rules, and to collect and manage the finances used for community upkeep. Many people who participate in HOAs expect the association to help enhance their property values.

How much are HOA fees?

HOA fees vary widely based on the amenities offered by the development but most people can expect to pay at least $200 to $300 per month.

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.

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Both apartments and condominiums share quite a number of traits but differ in ownership. Apartments are often found in large residential complexes owned by a company. These complexes are often operated by professional property managers. Condos are also usually located in large residential complexes, but each condo unit is typically owned by an individual owner.

If you’re browsing the market for a rental, you’ve likely encountered a dazzling array of condos and apartments, and you might rent either type of property. The question of condo vs. apartment gets more complex if you’re debating whether to buy a condo or rent an apartment.

What Is a Condo?

A condo is a residential unit within a collective living community, where each individual condo is owned by a private owner, but the cost of maintaining communal areas is shared by all owners. While condos are often located in high-rise buildings, they can also take the form of a collection of standalone properties, each designated a “condo unit.”

One benefit to renting a condo is that you can deal directly with your landlord rather than a management office, which may mean more personalized attention for your needs.

For buyers, the purchase price for a condo can be significantly lower than the cost of most single-family homes.


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

What Is an Apartment?

An apartment is a rental unit within a building, complex, or community. Often, an apartment complex is managed by a property management company, which serves as both landlord and leasing agent for all of the units on the premises. In big cities, “apartment” is sometimes used as shorthand for a condo or co-op unit. If you’re choosing between a co-op and a condo to rent or buy, you’ll want to know how they differ, and whether you’re ready to buy an apartment.

Rental apartments may be located in high-rises but can also be found in larger homes that have been subdivided into separate units.

Renting an apartment offers greater mobility than buying a property, which makes it a flexible option if you’re only planning on staying in an area for a couple of years. A full-time management office or private landlord takes care of leasing, rent payments, and repairs.

Where They Differ

Now that we’ve covered the condo vs. apartment basics, let’s dive deeper into some key dimensions in where they differ.

Ownership

Each unit in a condo development is usually owned by a private homeowner. Unless the condo owner retains the services of a property manager, prospective renters can expect to deal with the condo owner directly when it comes to rental applications, monthly rent payments, and any maintenance issues that arise over the course of their lease.

Apartments are often managed by a property management company that may also own the apartment complex. Effectively, this makes the company the landlord for the entire property. Prospective apartment tenants will usually submit their application and rent payments through the apartment leasing office, while full-time maintenance staffers are on call to deal with any repairs. Of course, some apartments are in smaller buildings owned by individuals. In that case, a renter might deal directly with the property owner just as a renter in a condo does.

In either case, landlords may be amenable to your desire to negotiate rent in order to take you on or keep you. Paring the rent is the main goal in such a negotiation, but you can always ask for other benefits in lieu of a rent reduction.

Property Taxes

Renters aren’t responsible for paying property taxes, making them a non-issue in the apartment vs. condo choice. However, if you’re deciding whether to purchase a condo, understand that you’re responsible for paying property taxes for your unit every year. If you decide to rent your condo out, you should also expect to be taxed on any rental income you collect.

Design

Regardless of structure type, condo owners retain the right to make cosmetic adjustments to the interior of their properties. So if you’re interested in renting in a particular condo complex and you don’t like the design choices an owner has made, consider looking at other units that are available for rent — you may find a very different look and feel in another unit. Apartments within a rental complex, in contrast, typically share similar, if not identical, layouts and designs regardless of which unit you choose.

Amenities

The amenities of both apartments and condos vary widely and often depend on when and how they were built. Generally speaking, condos are more likely to offer customized amenities, like state-of-the-art appliances and granite countertops, that reflect the tastes and habits of their owners.

Fees

Apartments and condos of similar quality and in the same area should rent for around the same cost. Both condos and apartments often charge the following fees:

•   Application fee

•   First and last month’s rent

•   Security deposit

•   Credit and background check fee

•   Pet fees and deposit

•   Parking fee

Renters may find that condo owners are more willing to negotiate on things like fees than apartment management teams, as these are private owners trying to keep their units rented out for income purposes.

Buying a condo will mean paying monthly maintenance fees that cover insurance for and upkeep of common areas, water and sewer charges, garbage and recycling collection, condo management services, and contributions to a reserve account.

Community

Condos usually have a greater sense of community than apartment complexes, given that their residents are likely to stay around longer. In many cases, residents consist of the condo owners themselves.

By contrast, renters living in apartments often intend to stay for only a couple of years. While that’s not to say that there aren’t occasional resident get-togethers at some apartment complexes, you’re less likely to encounter the same faces over several months.

If you’re renting a condo, expect to abide by rules set by the homeowners association. These can sometimes be fairly strict. Apartments have their own set of rules that may be less stringent.

Renting and Financing

Renting an apartment involves one monthly rent payment, in addition to any utilities you’re responsible for. Of course, when you leave the apartment, you leave with just your security deposit, assuming all payments have been made and no damage has been done.

Financing a condo and purchasing the property allows you to lock in your monthly mortgage payments at a steady long-term rate and gives you the chance to start building equity. In exchange, you’ll be required to make a down payment and be responsible for any taxes, insurance, and maintenance fees, among other costs.

Deciding whether it’s better to buy a condo or to rent — or to get a house or condo — is a complicated decision that depends on your personal finances and your lifestyle. If you’re thinking about settling down, have a stable job with steady income, and have enough saved up for a down payment with an emergency fund to spare, buying a condo or house may be the right choice for you. However, if you’re still exploring the area or have variable income with limited savings, it may be best to continue renting. For those trying to decide between renting an apartment and financing a condo or house, a mortgage help center can help provide answers.


💡 Quick Tip: Your parents or grandparents probably got mortgages for 30 years. But these days, you can get them for 20, 15, or 10 years — and pay less interest over the life of the loan.

Maintenance

Most apartment complexes have an on-site building supervisor who can address maintenance issues. Given that the owner of a large apartment complex oversees all of the units, they’re incentivized to employ someone full time to attend to the day-to-day affairs. This often means that apartment owners can react faster than condo owners, who sometimes don’t even live on the premises.

By contrast, condo units are usually owned by landlords, and most of them hire a third-party contractor to come in and make repairs as necessary. In some cases, condo owners may be handy and handle the repairs on their own.

If you buy a condo, you’ll have a regular maintenance fee that covers the shared parts of the property, but because condo owners typically own just the interior of their unit, any repairs in the condo unit will be separate. (It’s a good idea to pore over the covenants, conditions, and restrictions to see exactly what is part of your unit or part of the common elements.)

Condominium vs Apartment: A Side-by-Side Comparison

To help sum it all up, here’s a quick guide to the condo and apartment traits discussed above.

Condo vs Apartment: Which One May Be Right for You?

Whether a condo or apartment is right for you depends on your preferred rental experience. If you’re looking for something that feels a little more akin to home and don’t mind dealing directly with your landlord when discussing repairs and rent payments, a condo (or an apartment in a small privately owned apartment building) may be the better option for you.

On the other hand, if you prefer dealing with a full-time staff of property managers, want something more structured, and don’t mind cookie-cutter corporate apartments, an apartment may be the better rental option for you.

Prospective condo buyers will want to keep their finances and monthly budget in mind when deciding if they want to rent or buy. While the idea of building equity is appealing, settling down and committing to a mortgage isn’t for everyone. You’ll want to thoughtfully evaluate your ability to make monthly payments and whether you want to stick around an area.

The Takeaway

In the condo vs. apartment comparison, you’ll pay similar costs when renting properties of similar quality. Things get more complex if you’re debating whether to buy a condo or rent an apartment, as there are myriad added costs for condo owners in exchange for the chance to build equity.

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

FAQ

Why are condos more expensive than apartments?

In general, condos and apartments of comparable quality cost around the same amount to rent. A condo owner, however, will likely face higher monthly costs than an apartment renter, thanks to the added costs that come with owning a property, including mortgage payments, taxes, insurance, and maintenance fees. Over time, the added expense may be offset by the equity built through mortgage payments.

Which retains more value, condos or apartments?

Over the long run, both a condo and an apartment in a co-op building can lose or gain value. Whether your specific property appreciates will depend on local market factors and on upkeep of your unit as well as of the larger complex.

Can I get a loan to buy a condo or co-op apartment?

A qualified buyer can finance a condo with a government-backed or conventional mortgage loan. Getting a loan for buying into a housing cooperative can be more difficult. The buyer is purchasing shares that give them the right to live in the unit — personal property, not real property. That’s one reason that some lenders do not offer financing for co-ops.

Photo credit: iStock/Michael Vi

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

SoFi 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.

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If you’re a first-time homebuyer, you may qualify for special mortgage rates and incentives not available to other homebuyers. For Midwestern buyers, we’ve rounded up all of the information you need to understand which programs you may qualify for in your region.

Recommended: What is the Average Down Payment on a House?

Popular Midwest First Time Home Buyer Programs

Ohio

The real estate market has been buzzing in the Buckeye State over the last year, with the number of homes sold up 5% as of February 2024. Home prices in Ohio were up 9% compared to last year, hitting a $227,800 median price, according to Redfin. Sales prices had the most substantial jump in Maple Heights, Kettering, and Springfield, where increases all topped 30%.

Things can look a bit intimidating for first-time homebuyers seeking a home mortgage loan in Ohio in 2024. Don’t fret, though, as qualifying for a mortgage and affording a home may be more within your means than you think.

The Ohio Housing Finance Agency (OHFA) offers a variety of programs for low- and moderate-income first-time and repeat homebuyers meant to help them achieve homeownership.

💡 Learn about Ohio first-time homebuyer programs

Michigan

With Detroit’s revitalization, the popularity of resort towns on the shores of the Great Lakes, and the proximity to wilderness in the Upper Peninsula, Michigan real estate is bustling. The good news for first-time homebuyers: The Wolverine State is still relatively affordable.

Sales in Michigan are up about 1% year over year as of January 2024 and home prices are up 9.2% this past year. But despite that last stat, there’s good news for first-time homebuyers: The median sales price is $228,000, according to Redfin, which is far below the national median existing-home sales price of $379,100.

First-time homebuyers looking to settle in Michigan may find help through the Michigan State Housing Development Authority .

💡 Learn about Michigan first-time homebuyer programs

Indiana

At $228,552, Indiana’s average home value in early 2024 is up 4.6% year over year, according to Zillow. Even with that increase, typical costs here are lower than the numbers for America as a whole. That doesn’t mean buying a home for the first time is easy, but it certainly places home ownership within reach for more people, especially when state programs offer a helping hand in terms of their down payment, mortgage, and closing costs.

There’s lots of helpful information on the home-buying process available to Hoosier house-hunters, and there are a number of programs that can defray the costs of buying a home. First-time buyers, especially, might want to have a look.

💡 Learn about Indiana first-time homebuyer programs

Wisconsin

Home prices increased 5.5% annually here as of January 2024. And the number of homes sold rose 6.5% as the market began to warm up. The median sale price of a house in the state is $274,400, reports Redfin.

Recommended: Guide to Choosing a Mortgage Term

While the uptick in cost may cause concern for those saving to purchase a property, there are many opportunities to be had for the qualified first-time homebuyer in Wisconsin.

💡 Learn about Wisconsin first-time homebuyer programs

Illinois

High prices, low inventory, and an influx of outside investors and cash buyers make diving into the market as a first-time buyer in Illinois feel daunting.

According to Redfin, the median sale price in Illinois hit $265,900 in January 2024 — an 11.2% year-over-year increase. But in some communities, the numbers have been much higher. In Winnetka, where home prices were up 40.2%, the median purchase price was $1.373 million. Marion saw an 82.3% jump. Fortunately homes there are still relatively affordable, at a median price of $174,250.

Another bit of good news: The state and some counties offer financial assistance. There also are longstanding federal programs that could improve a buyer’s chances of success.

💡 Learn about Illinois first-time homebuyer programs

Minnesota

The Land of 10,000 Lakes has seen a relatively modest 2% year-over-year increase in home values during 2023. Currently, the average Minnesota home value is $316,980, according to Zillow, which is slightly below the national average.

There are several opportunities for the first-time homebuyer in Minnesota through state programs that give assistance with mortgage rates and down payment and closing costs to those who qualify.

💡 Learn about Minnesota first-time homebuyer programs

Iowa

Homes in the heartland of Iowa remain relatively affordable, with an average value of $205,988 vs. the national figure of $342,941, according to Zillow. A number of homebuyer assistance programs also exist that can make the home-buying journey more affordable for Hawkeye State shoppers.

Most of these programs are available through the Iowa Finance Authority (IFA) and can especially be of help to first-time buyers.

💡 Learn about Iowa first-time homebuyer programs

Missouri

The real estate market in Missouri has remained fairly calm, with the state’s average home value of $234,949 nicely below national averages.

The good thing about being a first-time homebuyer with a low to moderate income is that state and local programs offer mortgages and down payment assistance to those who qualify. Even better: You qualify as a first-timer if you have not owned a home in three years.

💡 Learn about Missouri first-time homebuyer programs

North Dakota

Thinking about moving to North Dakota? The state has a lot going for it. In addition to tons of open space, gorgeous landscapes, and a relaxed way of life, the cost of living is lower than the U.S. average and home prices in the state dropped a tiny bit in the year ending February 2024. The average home value in North Dakota is now $248,022, according to Zillow. That means there are plenty of opportunities to find your affordable dream home in North Dakota.

There are several state programs that provide financial assistance and low-interest mortgage loans to the first-time homebuyer in North Dakota. Many of these programs are designed to help low- to moderate-income buyers, and they may have income and purchase price limits, a required credit score, or other criteria you’ll need to meet.

💡 Learn about North Dakota first-time homebuyer programs

South Dakota

The Mount Rushmore State saw a 6.8% increase in home prices from February 2023 to February 2024, however the cost of living remains relatively low here compared to other parts of the country. The median home price in South Dakota is now $311,500, according to Redfin.

If you lack the money for a down payment or aren’t sure how you will afford a mortgage, programs in the state may be able to provide assistance.

💡 Learn about South Dakota first-time homebuyer programs

Nebraska

Considering buying a home in Nebraska? Now is a good time to do so. The median price of a home there is $274,600. That’s up 5.4% year-over-year as of February 2024 but still below the national average.

The first-time homebuyer in Nebraska can also get financial assistance through state programs. Here’s what you need to know as you start your home shopping.

💡 Learn about Nebraska first-time homebuyer programs

Kansas

Though their housing market is generally known for being more affordable than most, first-time homebuyers in Kansas are facing many of the same challenges as buyers across the country. Prices have been rising. Inventory is low. And the competition for available homes can be fierce.

The median price of a home in Kansas was $290,300 in January 2024, a 2.6% increase in 12 months. In some areas, such as Leavenworth, Shawnee, and Leawood, the price increases were greater than 20%.

Fortunately, buyers who are struggling with the costs of purchasing their first home in Kansas may be able to get financial help through programs offered by the state and some cities. There also are longstanding federal programs that may improve a buyer’s chances of success.

💡 Learn about Kansas first-time homebuyer programs

The Takeaway

Qualifying first-time home buyers have many options available to them in the Midwest, including down payment assistance. If you’re looking to buy your first home and aren’t sure how to get started, looking at a list of homebuyer programs in your state is a great place to start. Once you know what kind of assistance you may qualify for, it’s a good idea to estimate just how much house you can really afford using a home affordability calculator.

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.

Photo credit: iStock/Nicholas Smith

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

SoFi 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.

It is possible to get a home loan while on maternity leave. The process may involve your lender verifying your “temporary leave income,” if any; your regular income; and your agreed-upon date of return. Anyone on a standard temporary leave is considered employed, whether the absence is paid or unpaid.

Read on to learn more about buying a home while pregnant and how this will impact your ability to get a mortgage.

Buying a House While Pregnant

Hey, why not take on two of the biggest life stressors at once? Sometimes it just happens this way, with parents preparing for a baby and a new home and mortgage.

First, consider if you can wait a bit to buy a home. It may lead to less stress overall during the pregnancy. Plus, the added pressure of a deadline may lead to hasty decision-making that buyers could regret.

And unless an employer is covering moving expenses, add that sizable cost to all the rest.

But if the move can’t be avoided because of a job relocation or other circumstances, it may be important to find a home before the baby arrives. Which does have a silver lining: Saving for a down payment could interfere with goals like saving for a child’s college tuition.

Another possible benefit to buying a house while pregnant is that the relocation could lead to a better school district or area to raise a child.

Ultimately, the decision to buy a house while pregnant is personal.


💡 Quick Tip: Want the comforts of home and to feel comfortable with your home loan? SoFi has a simple online application and a team dedicated to closing your loan on time. No surprise SoFi has been named a Top Online Lender in 2024 by LendingTree/Newsweek.

What Is the FMLA?

The Family and Medical Leave Act, or FMLA, gives eligible employees job protection and up to 12 weeks of unpaid leave a year in the event of:

•   Childbirth

•   Adoption or foster child care

•   Care for a spouse, child, or parent with a serious health condition

•   A personal serious health condition

•   Qualifying exigencies arising from covered active duty or “call to covered active duty status”

The FMLA guarantees that the employee can return to their job or an equivalent one and that they’ll receive health care benefits during their leave.

Employees are eligible if they work for a company that has 50 or more staffers and have completed at least 1,250 hours of work in the previous year.

In addition to the FMLA’s 12 unpaid weeks off, more and more states are enacting paid family leave laws. Currently, 13 states plus the District of Columbia have made this mandatory. And your employer may cover your pregnancy, childbirth, and recovery thanks to short-term disability insurance. Your benefit would be a percentage of your normal earnings.

Recommended: How Much Does it Cost to Adopt a Child?

How Maternity Leave Impacts a Mortgage

Before diving into the nuances of maternity leave and its impact on qualifying for a mortgage, here’s a quick refresher course on the home-buying process.

Mortgage approval from a lender primarily hinges on two factors:

•   Creditworthiness. How likely is the borrower to pay back the loan, based on their credit history?

•   Ability to pay. Does the borrower generate enough income, and have a certain debt-to-income ratio, to make the monthly mortgage payments?

The lender may contact an employer to verify a borrower’s employment status and income.

Why could getting loans for pregnant women prove a challenge? Income. Consider these points:

•   As long as the lender can verify that the borrower is employed — and remember, someone on temporary leave is considered employed — and generates enough income to cover the mortgage, that could be enough.

•   Expectant borrowers aren’t legally required to disclose their pregnancy to a lender. However, the employer can tell the lender about impending maternity leave when they call to verify employment status.

•   If a borrower is going on unpaid leave, they may need to disclose it to the lender. That’s because the period without pay may qualify as a financial hardship, which a borrower is required to inform a lender of.

•   The lender can’t assume the mother-to-be won’t return to work after maternity leave. Lenders consider that the mother will return to work after maternity leave and continue bringing home paychecks.

•   Before approval, the lender will ask the borrower for written notice of her intent to return to work, and may ask for an expected return date.

•   The mortgage lender may request a tax slip from the last calendar year if the borrower is a salaried employee.

•   A lender may approve the mortgage if your employer verifies in writing that you will return to your previous position or a similar one after your maternity leave. The lender will also consider the timing of the first payment.

•   If the borrower will have returned to work when the first mortgage payment is due, the lender can consider regular income in qualifying for the mortgage.

•   If the borrower will return to work after the first mortgage payment due date, the lender must use the borrower’s temporary leave income (if any) or regular employment income, whichever is less, and then may add available liquid financial reserves.

•   VA loans don’t count temporary leave income towards qualifying for a mortgage, however.

💡 Quick Tip: Want the comforts of home and to feel comfortable with your home loan? SoFi has a simple online application and a team dedicated to closing your loan on time. No surprise SoFi has been named a Top Online Lender in 2024 by LendingTree/Newsweek.

Should I Buy a Home While on Maternity Leave?

For those who qualify for a mortgage while on maternity leave, the question may be, “Should I buy a house while on maternity leave?” not “Can I buy a house while on maternity leave?”

As mentioned, moving can be an incredibly stressful process, pregnancy or no pregnancy. And even if you made a budget for a baby, life has a way of throwing in surprises.

Homeownership can also come with financial surprises. The majority of homeowners reported paying for an unexpected repair within the first year.

Having a child and buying a home both require saving some significant cash. By budgeting, doing the two simultaneously is possible. So it’s your call. Not taking the double plunge could give you time to review what you need to buy a house.

Recommended: First-Time Homebuyers Guide

Home Loans With SoFi

Pregnancy is not a legal limiting factor in a mortgage lender’s eyes, but getting a home loan while on maternity leave will depend on your income, savings, work return date, and credit history.

Whether you’re on a temporary leave or not, it can be worthwhile to take a look at your home loan options.

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

FAQ

Does being on maternity leave affect getting a mortgage?

It can, but only in the sense that maternity leave can affect a homebuyer’s reported income. If buyers anticipate an unpaid maternity leave, they may need a sizable savings account.

Should you buy a home on maternity leave?

Buying a home while on maternity leave depends on your family’s needs and finances. But moving can be stressful, and adding infant care can be a lot to handle.

Who does FMLA cover?

The Family and Medical Leave Act provides 12 weeks of unpaid, job-protected leave per year for eligible employees in the case of the birth or adoption of a child or placement of a foster child, and for other reasons.

Photo credit: iStock/FatCamera

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

SoFi 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.

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A mortgage preapproval letter is usually good for 30 to 90 days, and some lenders will lock the rate for that time.

Having a letter of preapproval from a financial institution can help ensure that you’re ready to snap up a home you love.

What Is Mortgage Preapproval?

Mortgage preapproval has become an essential part of the home-buying process. Real estate agents often want to see a preapproval letter before showing houses.

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

A letter shows sellers that you are serious about buying their home — even if you’re a first-time homebuyer — and that a mortgage lender is likely to give you a home loan of a specific amount quickly.

The lender will review your credit history, credit score, income, debts, and assets to determine the amount you tentatively qualify for.

Preapproval will help you focus on homes that are in your price range. Knowing how much of a mortgage you can afford is important when you don’t want to waste time reviewing homes outside your range.

Mortgage Preapproval Process

The mortgage process starts informally for many would-be homebuyers.

Some buy into the 28% rule — spend no more than 28% of gross monthly income on a mortgage payment — and play with calculators like this home mortgage calculator with taxes and insurance or the one later in this article.

Seeking mortgage preapproval means you’re getting serious. First, you’ll need to understand the different types of mortgage loans — fixed rate, adjustable rate, conventional, government insured (FHA, VA, USDA), jumbo — and what you can qualify for.

Then you’ll need to apply for a loan from one to several lenders and provide a good deal of documentation. Each lender will perform a hard credit inquiry, and you’ll receive a loan estimate within three business days.

If you’re shopping for a home loan, allowing multiple mortgage companies to check your credit within 14 or 45 days, depending on the credit scoring model being used, will minimize the hit to your credit scores.

How Long Does It Take to Get Preapproved?

It usually takes seven to 10 business days to receive a preapproval letter after submitting all the requested information.

Mortgage Preapproval Letter

Other than stating the specific amount you’re preapproved for, a mortgage preapproval letter may outline stipulations to gain the loan, such as maintaining your employment or not taking on any additional debt.

How Long Does Mortgage Preapproval Last?

Some lenders will make a commitment of 60 or 90 days. That time frame tends to work, since homebuyers typically shop for a home for 10 weeks, according to the National Association of Realtors®.

Other lenders will issue preapproval for only 30 or 45 days.

Recommended: How Mortgage APR Works

Mortgage Prequalification vs. Mortgage Preapproval

Since they sound similar, it’s worth mapping out the difference between prequalification and preapproval.
Prequalification is a key first step, when borrowers tell lenders about their income, assets, and debts. Lenders use that unverified information, and usually a soft credit inquiry, to give a ballpark estimate of how much they might be willing to lend.

The response is quick: You can often get prequalified immediately or within a day or two. Just realize that prequalification does not mean that a lender is guaranteeing a loan.

The mortgage preapproval process is a deeper dive and requires documentation.

To gauge whether you qualify for a mortgage, lenders will scrutinize:

•   Income: Employees will need to provide pay stubs, W-2s, and tax returns from the past two years, as well as documentation of any additional income, such as work bonuses. Self-employed workers often need two years’ worth of records and a year-to-date profit and loss statement, although many lenders and loan programs are flexible.

•   Assets and liabilities: You’ll need to provide proof of savings, investment accounts, and any properties. Lenders view assets as proof that you can afford your down payment and closing costs and still have cash reserves.

Lenders also look at monthly debt obligations to calculate your debt-to-income ratio.

•   Credit score: Your credit score is a three-digit representation of your credit history.

Recommended: What Is Considered a Bad Credit Score?

Once your lender has reviewed the information, it may offer a preapproval letter. Importantly, receiving preapproval from a lender does not obligate you to use them.

Estimate Your Mortgage Payment

Before you seek prequalification or preapproval, you might want to get an idea of how much your monthly mortgage payment could be. Use the mortgage calculator below to quickly see the difference in mortgage payments based on down payment, interest rate, and a 15- or 30-year term.

What Should I Do If My Mortgage Preapproval Expires?

Lenders put an expiration date on preapproval letters because they need to have your most up-to-date financial information on hand. The credit, income, debt, and asset items they reviewed for your preapproval typically need to be updated after the letter expires, and your credit may be checked again.

You can minimize the effect of “hard pulls” on your credit score by avoiding seeking a renewal when you’re not actively shopping for a home.

If your finances have mostly stayed the same, your lender is likely to renew your preapproval.

Finalizing Your Mortgage

If you find a house while your mortgage preapproval is still valid, you can choose a lender and move on to finalizing your mortgage application. At this point, in many cases, the lender will check again to see if there have been any changes in your financial situation.

The mortgage underwriter will review all the information, order an appraisal of the chosen property and a title report, and consider your down payment. Then comes the verdict: approved, suspended (more documentation is needed), or denied.

Your mortgage is officially approved when you receive a final commitment letter. A closing date can be scheduled. It generally takes 43 days to close on a house, but it could happen in as little as 20 days.

Buyers may want to minimize changes, like applying for other loans or credit, when a home loan is in underwriting.

The Takeaway

How long is mortgage preapproval good for? Often 30 to 90 days. Getting prequalified is a smart precursor to getting preapproved for a mortgage. Preapproval can give you a competitive edge in a tight home market, and helps you more clearly understand how your home mortgage loan will affect your monthly budget.

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

FAQ

How does mortgage preapproval affect my credit score?

The preapproval process involves a hard credit inquiry, which may cause a dip in your credit score. Each hard pull may lower your credit score but typically by less than five points. Multiple hard inquiries are usually counted as one inquiry as long as they are made within the same 14 to 45 days.

What’s the difference between mortgage prequalification and preapproval process?

Prequalification usually takes just minutes and requires you to provide only the most basic financial information in the application process. It also results in only a soft inquiry on your credit score. Preapproval will require more in-depth information, such as pay stubs and tax returns, and involves a hard credit inquiry. Getting preapproved may take a week or 10 days.

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.

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