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Signing on a knowledgeable mortgage lender is one of the first steps you’ll take on your journey to homeownership. A good lender could help you make a sound decision about a major commitment.

If you want to know what questions to ask a mortgage lender, these can help you feel more confident choosing a lender to navigate the complex homebuying process with you.

1. How Much Can You Borrow?

How much you can borrow is the question most buyers have on their minds when they start dreaming about real estate listings online. You may have come across a mortgage calculator tool that estimates how much a mortgage is going to cost.

But that’s just a starting point. A mortgage lender will evaluate the entire spectrum of a homebuyer’s financial situation and find the true amount they’ll be able to borrow. The lender may also make recommendations for programs or loans for each buyer’s unique situation.

When you get a loan, you’ll receive a mortgage note, a legal contract between the lender and you that provides all the details about the loan, including the amount you were approved to borrow.

2. How Much of a Down Payment Do You Need?

Another key question your lender can help answer for you is how much are down payments? You’ve probably heard about the ideal 20% down, but a lender may be able to help homebuyers get into a home with a much lower down payment, such as 3% or 5%. The lowest down payment option is often available only to first-time homebuyers. But anyone who hasn’t owned a primary residence in the last three years is often considered a first-timer.

A 20% down payment will enable you to forgo mortgage insurance on a conventional loan (one not insured by the federal government), but lower down payment amounts can help homebuyers obtain housing sooner. There are plenty of options to explore with your lender.

3. What Is the Interest Rate and APR?

Your mortgage lender may explain the difference between the interest rate and annual percentage rate.

•   Interest rate. The interest rate is the cost to borrow money each year. It does not include any fees or mortgage insurance premiums.

•   APR. The APR is a more comprehensive reflection of what you’ll pay for the mortgage, which will include the interest rate, points paid, mortgage lender fees, and other fees needed to acquire the mortgage. It’s usually higher than the interest rate.

The interest rate and APR must be disclosed to you in a loan estimate with the other terms and conditions the lender is offering. Pay particular attention to how the APR changes from loan to loan. When you’re looking at APR vs. interest rates for an FHA loan and a conventional mortgage, for instance, you’ll notice the numbers come out very different. (This is just a recent example.)

In this case, the interest rate on a 30-year FHA loan is lower than on a conventional loan; however, when accounting an upfront mortgage premium for the FHA loan and other fees, the APR is higher on the FHA loan than on the conventional loan.

4. What Are the Differences Between Fixed- and Adjustable-Rate Mortgages?

The main difference between a fixed-rate mortgage and an adjustable-rate mortgage (ARM) is whether or not the monthly payment will change over the life of the loan.

•   Fixed-rate mortgages start with a little higher monthly payment than an ARM, but the rate is secure for the term.

•   An adjustable-rate mortgage will start with a lower interest rate that may increase as the index of interest rates increases. This type of loan may be more appropriate for buyers who know they will not be keeping the mortgage for long.

The key to an ARM is to know how it adjusts. How frequently will your rate adjust? How much could your interest and monthly payments increase with each adjustment? Is there a cap on how high your interest rate could go? A good mortgage lender will help you consider all these variables when selecting a fixed-rate or adjustable-rate mortgage.

5. How Many Points Does the Rate Include?

What are points on a mortgage? Mortgage points are fees paid to a lender for a lower interest rate. Asking your lender how many points are included in the rate can help you compare loan products accurately.

6. When Can the Interest Rate Be Locked In?

Rate lock policies differ from lender to lender. Check at the top of the first page of your loan estimate to see if your rate is locked, and for how long.

You’ll want to ensure that any rate lock agreement gives you enough time to close on your loan. Many lenders have fees for extending a rate lock.

7. How Much Are Estimated Closing Costs?

One of the most important documents you’ll receive from your lender is called a loan estimate. The loan estimate gives a detailed breakdown of the interest rate, monthly payment, fees, and closing costs on the loan you’re applying for. When you ask about closing costs, your lender can provide this document to you.

Common closing costs include:

•   Appraisal fee

•   Loan origination fee

•   Title insurance

•   Prepaid expenses such as homeowners insurance, property taxes, and interest until your first payment is due

Expect to see 2% to 5% of the purchase price in closing costs.

8. Are There Any Other Fees?

Lenders are required to disclose all costs in the loan estimate. They’re also required to use the same standard form so you can compare costs and fees among different lenders accurately. Be sure to ask lenders about other fees and watch for them on your loan estimate.

9. When Will the Closing Happen?

The time to close on a house will depend on your individual circumstances, but the national average is 43 days.

An experienced lender with a digitized process may be able to close a loan more quickly. The time it takes a lender to approve and process the loan are also factors to consider.

10. What Could Delay the Closing?

In the August 2024 National Association of Realtors® Confidence Index survey, 14% of real estate transactions had a delayed settlement. Previous surveys have shown that the main reasons for a delay included appraisal issues, financing issues, home inspection or environmental issues, deed or title issues, or contingencies stated in the contract.
An experienced lender may know how to bring a home to the closing table despite the challenges with financing and appraisals. Be sure to ask upfront how these challenges would be addressed.

11. What Will Fees and Payments Be?

The neat part about obtaining a mortgage since 2015 is that the information is included in a standard form, the loan estimate. The form is used by all lenders and allows borrowers the opportunity to compare costs among lenders quickly and accurately. All fees and payments are required to be clearly outlined in this form.

Recommended: Guide to Mortgage Statements

12. How Good Does Your Credit Need to Be?

You’ll typically need a FICO^® credit score of at least 620 to get a conventional mortgage, but lenders consider a credit score just one slice of the qualification pie.

With a lower credit score, a lender may steer you in the direction of an FHA loan, which requires a score of 580 or higher to qualify for a 3.5% down payment. Credit scores lower than 580 require a 10% down payment for an FHA loan.

Borrowers with credit scores above 740 may qualify for the best rates and terms a lender can offer.

13. Do You Need an Escrow Account?

Your lender can set up an escrow account to pay for expenses related to the property you’re purchasing. These may include homeowners insurance and taxes. An escrow account can take monthly deposits from the borrower, hold them, and then disburse them to the proper entities when yearly payments are due. In some locations and with certain lenders, escrow accounts are required.

14. Do You Offer Preapproval or Prequalification?

Lenders have different processes for qualifying mortgage applicants so it’s important to understand prequalification vs. preapproval. Preapproval is a much more in-depth analysis of a buyer’s finances than prequalification.

A preapproval letter provided by the lender specifies how much financing the lender is willing to extend to you, and helps to show sellers you’re a qualified buyer. Getting preapproved early in the homebuying process can also help you spot and remedy any potential problems in your credit report.

15. Is There a Prepayment Penalty?

A prepayment penalty is a fee for paying off all or part of your mortgage early. Avoiding prepayment penalties is easy if you choose a mortgage that doesn’t have any. Ask lenders if your desired loan carries a prepayment penalty. It will also be noted in the loan estimate.

16. When Is the First Payment Due?

A lender will be able to help you get your first payment in, which is typically on the first day of the month after a 30-day period after you close. For example, if you closed on Aug. 15, the first mortgage payment would be due on the 1st of the next month following a 30-day period (Oct. 1).

Each mortgage statement sent every billing cycle includes current information about the loan, including the payment breakdown, payment amount due, and principal balance.

17. Do You Need Mortgage Insurance?

Your mortgage lender will guide you through the process of acquiring private mortgage insurance, commonly called PMI, if you need it. Mortgage insurance is required for most conventional mortgages made with a down payment of less than 20%, as well as for FHA and USDA loans.

It’s not insurance for the buyer; instead, it protects the lender from risk. A good mortgage lender can also help advise borrowers on dropping PMI as soon as possible. A home loan help center can help you learn more about PMI or any mortgage question.

Recommended: What is PMI & How to Avoid It?

18. How Much Is the Lender Making Off of You?

Lenders are required to be clear and accurate when it comes to the costs of the loan. These should be fully disclosed on your loan estimate and closing documents. If you want to know how much the lender is charging for its services, you’ll find it under “origination fee.”

The Takeaway

If you’re shopping for a home loan or thinking about it, you might have mortgage questions — about down payments, APR, points, PMI, and more. Don’t worry about asking a lender too many, because many buyers need a guide throughout the homebuying journey. Asking questions is a great way to get to the lender and loan terms that make the most sense for your financial situation.

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

What should you not say to a mortgage lender?

The most important thing to remember when communicating with a prospective lender is that you should be truthful — about everything, but especially your finances.

What questions can a mortgage lender not ask?

Generally speaking, most of the topics that are off limits in a job interview are also off limits in a mortgage negotiation. A lender should not ask you about race, ethnicity, religion, or sexual orientation, for example. You also shouldn’t be asked your age (unless you are applying for an age-based loan), or about your family status (married vs. divorced, whether you are planning to have kids, etc.), or about your health.

Photo credit: iStock/Ridofranz

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

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

As home repairs go, plumbing leaks can range widely. A typical small leak can cost $250 to $500 on average in 2024, not counting cleanup. But hidden pipe failures that take longer to discover and more major issues that send H2O spraying everywhere can easily lead to thousands of dollars in water damage.

The best way to minimize plumbing repair costs is to stay vigilant to potential problems and to fix even little trickles quickly. Here, you’ll learn more about the different levels of plumbing leaks and the typical cost of cleanup and repairs.

Common Types of Plumbing Problems

Water leaks can happen anywhere in the home — not just the bathroom or kitchen. That’s because plumbing systems can be as complex as a spider’s web. Plumbing leaks can cause damage ranging from the trivial to the catastrophic, with repair costs to match. Supply chain issues and inflation can drive the cost up even further.

Smaller Plumbing Leaks

Leaking sinks and toilets are the most obvious and least damaging kind of plumbing issue. If you’re lucky, a trickling noise will alert you before the flood waters rise. While there’s no exact plumbing repair cost calculator, the leak itself typically can be fixed for $125 to $350.

However, hidden leaks can spread quickly and easily erode your cabinetry. Leaks that occur around the base of your faucet can also damage your countertop. Surface or cabinet repairs can cost a few hundred dollars — not including the price of new materials.

Garbage disposals can spring a leak in a number of places. Depending on the scale of the issue, it might be possible to DIY the repair. But if the garbage disposal needs to be replaced, you’ll pay about $225 including parts and labor.

Larger Plumbing Leaks

Leaks behind the walls can go undetected for some time. Contrary to what homeowners like to believe, many leaks don’t cause any change in water pressure or visible wall stains. (Plumbing issues are just one reason why the cost of a home inspection is worth it.)

Leaks stemming from water-using fixtures can also travel through walls to any room in the house. Eventual signs may include a lingering musty smell, mold, and dampness of the surrounding flooring or drywall.

The real doozy with repairing this kind of leak is that you usually have to cut into your wall to fix it, with wall incision and repair amounting to most of the cost. While the actual leak repair will often run to several hundred dollars, when you add in the diagnosis (made after carving into your wall) and wall repair, it can all add up to $1,000 or considerably more.

Water heater leaks can damage the foundation of a house and ruin any property kept in the lowest level of your home. Beyond the damage that the leak itself may cause, the problem triggering the leak can also prove costly. If your water heater is damaged, often through sediment buildup in the tank, it may need to be replaced. A new water heater can cost around $1,300 for a tank-based unit and labor.

Disaster Plumbing Leaks

Some plumbing leaks can be a lot worse than others, and slab leaks can be among the very worst. This type of leak occurs when the pipes under the foundation start to leak. Repairs for a slab leak can be costly if you have to remove flooring and jack-hammer through the foundation.

Homeowners should keep an eye out for a decrease in water pressure, warped hardwood floors, warm flooring, and moist patches. Slab leaks can be pricey to diagnose and pricier to fix, costing an average of $2,200 according to Angi.com.

Washer leaks are another common yet costly water problem. The water leading to your washing machine is constantly running, so any leaks will continually push water into your walls and flooring and flood your home fast.

To appreciate the total cost of a major basement flood, another significant issue, you’ll want to consider water removal, cleanup, ventilation, and decontamination, as well as any building and structural repairs. There may also be costs associated with the replacement or cleaning of personal property and mechanical equipment. Final price tags vary greatly but can be as much as $16,000.

Repair Costs by Type of Leak

Another way to look at the cost of plumbing leak repairs is by the type of leak. Here are some numbers for first-time homebuyers and homeowners to consider.

Water Line Leak

Water line leaks can have a wide range of price tags, from $500 to $5,000, depending on the degree and location of the problem.

Waste Line Leak

The cost of this kind of repair can depend on the length of the pipe needing repair, as well as how much damage the sewage leak caused. That said, the average price is currently around $4,000, though small repairs might be only about $650.

Heating Line Leak

Not all systems can experience this kind of plumbing leak. You will usually find this issue with boilers vs. furnaces. If your home does have a boiler and a pipe fails, you could pay anywhere from $150 for the repair of a small, accessible leak to a few thousand or more for a difficult-to-access or major leak.

Recommended: What Is a Credit Card Consolidation Loan?

Fixing the Leak

While minor leaks in accessible areas can be fixed by a competent homeowner, it can pay to call in the pros for an assessment and for assistance with larger problems. When it comes to how to find a contractor, consider the following:

•   Ask trusted friends or neighbors for references. Good word-of-mouth can be important.

•   Read online reviews. There are trusted sites with robust listings of local professionals.

•   Make sure that any plumbers you are considering are licensed (plumbing is a highly regulated field of work) and carry adequate liability insurance.

•   Get a few quotes, compare them, and check references.

While there are no guarantees, homeowners can help avert plumbing disasters by staying on top of regular maintenance, being alert to the signs of hidden leaks, and responding rapidly if they suspect a problem. As mentioned above, a gradual decrease in water pressure can indicate a leak or buildup in the pipes. Another red flag is a sudden increase in your water bill.

Not letting minor problems progress can help you avoid a major plumbing repair bill (and as a general policy, can help you avoid other common home repair costs, too).

Financing a Plumbing Leak

Homeowners dread plumbing problems due to the widespread damage they can inflict. Caught early, a simple under-the-sink leak can set you back just a couple of hundred dollars. But major leaks and floods can end up costing tens of thousands of dollars in professional water removal, cleanup, decontamination and mold remediation, wall and floor restoration, and property replacement. That can leave a person scrambling to pay for emergency home repairs.

If you do wind up with a big-ticket plumbing repair, consider these sources of funding:

•   Emergency fund: If you’ve followed the advice about setting aside three to six months’ worth of living expenses in an emergency fund, then this could be the time to dip in and finance a repair.

•   Personal loan: A personal loan can provide a source of cash for almost any purpose, from a plumbing repair to a vacation. This kind of unsecured loan can often be quickly obtained and at interest rates below that of credit cards.

•   Home equity: Tapping into a home equity loan or line of credit could unlock funds for a major plumbing repair. With these options, you are using your home as collateral (meaning the lender could seize it if you default) and may be able to access money at a competitive rate. However, the process can take a few or several weeks, as it requires a home appraisal.

•   Credit card: Charging a plumbing repair can be a quick and simple solution, but keep in mind that credit cards typically charge high rates of interest that can lead to credit card debt.

•   Friend or family loans: Borrowing from a friend or relative could be how to pay for plumbing repairs. Just be sure you can repay your debt to avoid causing issues with the relationship while getting your emergency plumbing assistance.

Recommended: Personal Loan Calculator

The Takeaway

Plumbing repairs can cost from a couple of hundred dollars to tens of thousands, depending on how big and complex the leak is and what kind of damage it has done to a home. To pay for a major plumbing repair, you might access your emergency fund, a personal loan, or home equity options, among other sources. Tackling small repairs (before they grow in scope) can be a smart way to avoid major plumbing problems.

Thinking a personal loan might be a good option for a home repair? See what SoFi offers.

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

FAQ

What is the most common plumbing leak?

Bathroom plumbing fixtures, perhaps because they are used so often, tend to be the most common source of residential plumbing leaks. Toilets and their tanks in particular can frequently require the help of a plumber to repair a leak.

How much does the average plumbing leak repair cost?

The average pipe leak repair can cost between $250 to $500, although major leaks, with resulting damage, can cost considerably more.

How much do most plumbers charge an hour?

Depending on your location and other factors, a plumber can charge on average $45 to $150 per hour. There may be a minimum charge for a plumber to visit and assess a leak. This is often a flat fee between $50 and $200.

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

SOPL-Q324-059

Many homeowners are flush with equity, and tapping it can be tempting. Some lenders will let you borrow as much as 100% of your home equity — the home’s current value minus the mortgage balance — for any purpose. Your house, though, will be on the line.

Here are things to know before applying for a home equity loan, a home equity line of credit (HELOC), or a cash-out refinance.

What’s the Most You Can Borrow With a Home Equity Loan?

To determine how much you can borrow with a home equity loan, lenders will calculate the combined loan-to-value ratio: your mortgage balance plus the amount you’d like to borrow compared with the appraised value of your home.

Most lenders will require your combined loan-to-value ratio (CLTV) to be 90% or less for a home equity loan or HELOC (although some will allow you to borrow 100% of your home’s value).

combined loan balance ÷ appraised home value = CLTV

Let’s say you have a mortgage balance of $150,000 and you want to borrow $50,000 of home equity. Your combined loan balance would be $200,000. Your home appraises for $300,000. (An appraiser from the lending institution determines your property value.) The math would look like this:

$200,000 ÷ $300,000 = 0.666

Your CLTV is 67%.

If a lender allowed you to borrow 90% of CLTV in this scenario, you would have a loan of $120,000:

($150,000 + $120,000) ÷ $300,000 = 0.900

But just because you might qualify for a loan or line of credit of this amount doesn’t mean it’s a good idea for your personal situation. Consider what the payments, which include interest, would look like and whether your financial situation is secure enough for you to afford them if you suffer a setback.

Three Ways to Tap Home Equity

You paid off a chunk of your mortgage or all of it, or your home value soared along with the market, but now a wedding, college, remodel, or something else has you wanting to put that home equity to use. Here are three ways to do that.

Remember that converting home equity to cash means you’ll be using your home as collateral.

Home Equity Loan

Home equity loans come in a lump sum. They are often useful for big one-time expenses like a new car or swimming pool and for borrowers who know how much they need and who want fixed payments.

Some lenders waive or reduce closing costs of 2% to 5%, but if you pay off and close the loan within a certain period of time — often three years — you may have to repay some of those costs.

HELOC

A HELOC may be helpful for long-term needs such as home renovations, college tuition, or medical bills.

Borrowers who want flexibility when dealing with, say, a home addition may favor a revolving line of credit over a lump-sum loan.

Again, some lenders waive the closing costs for a HELOC if you keep it open for a predetermined period.

Recommended: How Do Home Equity Lines of Credit Work?

Cash-Out Refinance

A cash-out refinance might be a good choice if you want to borrow more than you’d qualify for with a home equity loan or HELOC. A cash-out refi replaces your existing mortgage with a new mortgage for more than the previous balance. You receive the difference in cash.

Homeowners will often need to have 20% equity left in the home after refinancing. Some lenders will let them dip below that minimum but pay for private mortgage insurance on the new loan.

Some HELOC borrowers refinance before the draw period ends. In that case, the cash can be used to pay off the HELOC.

You can change the mortgage term and aim for a reduced interest rate with a cash-out refi. Closing costs will be required; it’s a new loan.

Recommended: Cash-Out Refinance vs HELOC

What’s the Difference Between a Home Equity Loan and a HELOC?

A home equity loan, also known as a second mortgage, comes in a lump sum with a repayment term of 10 to 30 years. It typically has a fixed interest rate.

A HELOC is a revolving line of credit that lets a homeowner borrow money as needed, up to the approved credit limit. The credit line has two periods:

•   The draw period, when you can use the line of credit. It’s often 10 years. Minimum monthly payments usually will be interest only on the amount withdrawn.

•   The repayment period, often 20 years, when principal and interest payments are due.

Most HELOCs have a variable interest rate but cap how much the rate can rise at one time and over the loan term. (Some lenders, though, offer fixed-rate HELOCs or allow the borrower to fix the rate on a balance partway through the loan.)

Some HELOCs require you to draw a minimum amount upfront. Some have a balloon payment at the end of the draw period, when the loan principal and interest are due. Ensure that you understand your HELOC’s terms, and when the draw period ends and the credit line is closed.

How Is a HELOC Calculated?

Qualified borrowers are often able to access as much as 90% of their equity with a HELOC.

Some HELOC lenders require that the homeowner retain at least 20% equity in the home, but a few are more generous.

Is Taking Out Home Equity Right for You?

If you’re aware of the risk, you’ve read all the fine print, and you forecast no job or income loss, tapping home equity can be extremely useful.

HELOCs usually have lower interest rates than home equity loans, but some people prefer the fixed rate and payments of the latter. HELOC rates tend to be a tad higher than mortgage rates, but you only have to pay interest on what you borrow during the draw period.

Most cash-out refinances result in a new 30-year fixed-rate mortgage.

Approval for a home equity product and the rate you’re offered will depend on your credit score, debt-to-income ratio, home equity, and home value.

Shopping around can yield the best offer.

Recommended: Home Improvement Cost Calculator

The Takeaway

How much equity can you borrow from your home? Homeowners who meet credit and income requirements are often able to tap up to 90% of equity and sometimes more with a home equity loan or HELOC. A cash-out refi is another way to make use of home equity.

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

FAQ

How can I increase my home equity?

Paying off your mortgage faster, refinancing to a shorter loan term, and making home improvements are some of the ways to boost home equity. In a competitive market, your home value may just naturally rise.

How quickly can I get cash from my home equity?

It depends on the product, but closing can take place in as little as two to four weeks.

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

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

SOHL-Q324-045

Buying a home with a significant other is a big investment and commitment, but having two incomes can more easily open the door to homeownership.

If you’re buying a house with a lover (or with a friend, parent, or sibling), here are a few things to know.

What You Should Know When Buying a House Unmarried

Before sharing a mortgage and house, a few heart-to-hearts about your purchase partner’s financial health and yours are in order. Being frank about debts, income, and projected job security is important. It’s a good idea to explore what-ifs as well.

Here’s a list of suggested questions to answer before sharing a deed or a home mortgage loan:

•   Is the down payment to be evenly divided?

•   Will mortgage payments, insurance, property taxes, any mortgage insurance and homeowners association dues, repairs, and utilities be split evenly? If not, how will they be divided up?

•   What will happen if one person is unable to make their portion of the mortgage payments for a while?

•   What will happen if one homeowner dies?

•   If one person leaves and the mortgage is refinanced to remove one of the signers, who pays for the refinancing?

Most lenders underwrite each individual on the home loan. The weaker link will most likely determine the rate at which you can borrow money as a duo — or whether you can get a loan at all. When lenders pull credit scores from the three main credit reporting agencies, they usually focus on the middle score. Let’s say your middle score is 720, and your co-borrower’s is 650. Lenders will use the lower of the two for the application. Even a small change in interest rate can result in significantly more money paid over time. (See for yourself with this online mortgage calculator.)

Loans underwritten by Fannie Mae do have one exception to this rule. To determine whether an unmarried couple is eligible for a loan underwritten by Fannie Mae, a lender will look at the average of their credit scores. As long as the average tops 620, the loan will be considered even if one borrower’s credit score is below 620 (in the past, if either borrower had a score below 620 they would not have been considered for the loan).

Buying a Home Married vs Unmarried

Married couples often merge their finances and operate as a single unit. If spouses are pulling from the same pool of money, they don’t generally mind shortages from a partner when the mortgage payment is due.

Unmarried co-borrowers going in on a house together may need each party to pull its weight each and every month.

Then there’s this: What if a co-owner dies?

For the most part, a spouse has the legal right to inherit property from their partner whether or not the deceased spouse had a will. Domestic couples may have no automatic right to inheritance if a co-owner dies without a will in place (this is known as dying intestate).

Additionally, depending on the state and the way the married couple holds title, the surviving spouse will receive a partial or full step-up in basis upon the first title owner’s death, meaning the property’s cost basis will be reset to fair market value when one spouse dies. If the inheriting spouse decides to sell the property, the stepped-up basis will greatly minimize capital gains taxes owed or translate to none owed at all.

The step-up in basis is one way that some families harness generational wealth through homeownership. Unmarried co-owners should be clear about how they hold title and what that means in case one partner dies.

How to Handle the Title

Two or more unmarried people can take title to a house. The main two forms are:

Tenancy in common. This arrangement allows equal or unequal ownership; that is, one person may own 60% of the property and the other person, 40%. If one owner dies, their share of the property passes to their heirs. It does not pass automatically to the surviving co-owner.

Tenancy in common allows one owner to transfer their interest to another buyer or use their share as collateral for financial transactions. And creditors may place liens on that person’s share of the property.

Joint tenancy with right of survivorship. Each person owns 50% of the house. Upon the death of one of the joint tenants, the property passes automatically to the surviving owner.

If you want to sell your share, you don’t have to ask for permission to do so. Any financing involving the property must be approved by both parties. Creditors trying to collect a debt from one of the homeowners may petition the court to force a sale in order to collect.

A third option is sole ownership, when only one person is on the title. The person left off the title risks walking away with nothing if the relationship sours.

Preparing for the Mortgage Application

The mortgage process is mostly the same whether applying solo or with a co-borrower.

It begins by getting a feel for how much house both of you can afford. Getting prequalified and using a home affordability calculator are quick ways to estimate your maximum budget. Then talk about these questions:

Are you aware of each other’s credit scores, incomes, and debt burdens?

Is each of your debt-to-income ratios around 36%, max? If so, good, because this is a team effort.

Have you agreed on the type of loan that fits your needs? If not, a mortgage broker or direct lender can guide you.

Do you want the standard 30-year mortgage term, or is it in the budget to seek a shorter term, which will mean higher monthly payments but less interest paid?

Combining forces can make homeownership possible, especially for first-time homebuyers and anyone in a hot market. That’s exciting.

How to Make the Property Purchase 50/50

When each co-owner has a 50% share of the property, the status is joint tenants with right of survivorship.

Your real estate agent or attorney will need to be careful about the wording in the deed. It should reflect the desire to create joint tenancy, not tenancy in common.

What Happens If You Part Ways?

It’s a good idea to go into the deal with a written buyout agreement, just in case.

But if a pact is not in place, here are steps you could take to acquire the co-borrower’s share:

1.    Hire an independent appraiser to determine the property value.

2.    Find the difference between the mortgage balance and appraised value. That’s the equity in the house. If you each have a 50% share in the house, divide equity by two.

3.    Negotiate the buyout price. If you can’t come up with cash, take any refinancing costs into consideration and …

4.    Apply for a cash-out refinance. You’ll need to qualify on your own.

5.    Have a real estate agent create a detailed purchase agreement. You are the buyer, and the co-owner is the seller.

6.    If your refinance is approved, you will sign a deed transferring the seller’s interest in the property to you. The cash-out refi loan will pay off the original loan and, with luck, will provide the cash you need to pay your former co-borrower.

7.    The former co-owner signs a certificate of title, deed of sale, loan payoff, and statement of closing costs to make you the sole owner.

If that route is not viable, you may need to get the co-borrower to agree to sell the house. If yours is an assumable mortgage, good. They’re in demand.

The Takeaway

Buying a house with someone you are not married to works similarly to purchasing a property when married, but there are some important conversations to have about how ownership is structured and what might happen if one of you dies or wants to sell. The more solid each buyer is financially, the better the chances of a good mortgage rate.

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

What happens if one of us is not on the mortgage?

If two people’s names are on the deed but just one is on the mortgage, both are owners of the home but only one is liable for repaying the mortgage loan.

What needs to change if I get married?

If co-borrowers marry, the deed will need to be updated.

To add a spouse’s name to the deed, you must file a quitclaim deed. You can transfer the ownership rights from yourself to yourself as well as other people. Once a couple marries, they may want to hold title with rights of survivorship if they do not already.

Can I add my partner’s name to the mortgage after buying the house?

No. You’ll need to refinance your mortgage.

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.

SOHL-Q324-055

A blanket mortgage is a special type of real estate financing that can be helpful when someone wants to buy multiple properties at once. Developers, investors, and house flippers may find blanket loans beneficial.

Note: SoFi does not offer blanket mortgages at this time.

Here’s more about how they work and their pros and cons.

What Is a Blanket Mortgage?

A blanket loan is a single mortgage loan that uses more than one piece of residential or commercial real estate as collateral.

The borrower can sell one of the properties while keeping the rest under the loan. Then the mortgagor can sell a second property, a third one, and so forth while still keeping the financing intact for the loan’s entire term.

You may be able to negotiate a blanket mortgage that lets you buy, sell, or substitute properties with minimal angst.

Recommended: Investment Property Guide

How Does a Blanket Mortgage Work?

A developer, for example, may find a large lot to subdivide into smaller ones, creating a new housing subdivision, under a blanket loan financing structure.

As general contractors or families buy the individual lot or lots they want to build on, those lots could be released from the developer’s blanket mortgage, with unsold lots remaining under the blanket loan.

As another example, someone who buys fixer-uppers, renovates them, and sells them for a profit may buy several properties of interest and finance them with a blanket mortgage. Each property that is refurbished and sold can be released from the blanket mortgage loan.

If a blanket mortgage comes with a release clause, the proceeds from a property the borrower sells can be used to buy another property.

Lenders can create their own terms, so it’s important to be clear about a loan’s parameters. They will want to know about each of the properties involved, their intended use, where they’re located, and their condition. If a housing development is being planned, the lender will want proof of the borrower’s experience.

Recommended: How to Buy a Multifamily Property With No Money Down

Pros and Cons of a Blanket Mortgage

Each of the different types of mortgages comes with pros and cons. That’s true of a blanket mortgage, too.

Recommended: Home Loan Help Center

Should You Consider a Blanket Mortgage?

Possibly. If you’re qualified and you want to buy multiple properties with one mortgage, selling them and releasing them from the loan as they are individually sold, then a blanket loan may make sense.

Blanket mortgages can be elusive. If a blanket loan seems like a good choice, you can inquire about one with banks that offer commercial loans or talk to a mortgage broker.

Any lender or broker you contact should be able to answer your mortgage questions.

The Takeaway

Blanket mortgages are a specialty type of loan used by developers, real estate investors, and house flippers when they want to put multiple properties under a single loan. Blanket loans have pros and cons. Qualifying for one isn’t for the faint of heart.

FAQ

What is an example of a blanket mortgage?

If someone wants to buy fixer-upper homes to rehab and resell, they may use a blanket loan to purchase several of them at once. As a home gets refurbished and sold, that property is released from the blanket loan while the other properties are still funded.

Is it hard to get a blanket mortgage?

Lenders will typically want a borrower to have sizable assets and excellent credit, and the down payment can range from 25% to 50%. So blanket loans are limited to more established borrowers with solid financials.

Who would most likely obtain a blanket mortgage?

Businesses may apply for a blanket loan to buy commercial property. Landlords, both commercial and residential, may also utilize this type of loan. So can construction companies and people who flip homes.

Is a blanket loan a good idea?

Under certain circumstances, a blanket loan can be a useful form of financing. When purchasing multiple properties with one loan, just one approval is needed. Closing costs may be lower. Interest rates and payments may be more attractive, too. That said, requirements to qualify for this type of loan can be significant, with down payments ranging from 25% to 50%.

Photo credit: iStock/oatawa

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.