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If you’re seeking home affordability, you may be looking at the cost to build a manufactured home. A new double-wide sold for an average of $159,400 in late 2022, whereas a new single-family home went for an average of $543,600 around the same time.

With such a gap, it’s easy to see the allure of manufactured homes. Yet the price of a manufactured home doesn’t tell the whole story. The land, site prep, any exterior additions, and financing all add to the cost to build a manufactured home.

If you want to take a serious look at what a manufactured home is really going to cost you, here’s what you should know.

What Is a Manufactured Home?

A manufactured home is built entirely in a factory and attached to a permanent chassis. Once construction is complete, it is moved to a lot of the owner’s choosing. The wheels are removed and the chassis is placed on a foundation; pier and beam is most common.

Assembly is completed by attaching the different sections, connecting utilities, adding any exterior elements, touching up the interior, and installing tie-downs.

Manufactured homes were called mobile homes before June 15, 1976, when Department of Housing and Urban Development (HUD) building standards began. The HUD code regulates home design and construction, strength, durability, fire resistance, and energy efficiency.

Standard dimensions make them easier to mass-produce in factories, resulting in quick construction timelines and lower costs.

Are these modular homes? No. Modular homes are also built in factories, but a modular home must meet the same building codes as a site-built home and has a permanent, standard foundation.

The Cost of Manufactured Homes by Size

Manufactured homes typically come in three sizes: single-wide, double-wide, and triple-wide. Each section is designed to fit down a highway, with the maximum width set at 16 feet, except in Texas, which adds 2 feet. A single-wide runs 66 to 80 feet long.

Here’s what you can expect to pay for a new manufactured home as of September 2022, according to the U.S. Census Bureau and HUD’s Manufactured Housing Survey:

•   Single-wide. New single-wide homes usually range from 400 to 1,200 square feet and have an average price of $95,800.

•   Double-wide. Double-wide manufactured homes typically range from 1,000 to 2,000 square feet and average $159,400.

•   Triple-wide. With 2,000 to 3,000 square feet, these homes start at $200,000.

Anything smaller than 400 square feet may be considered a tiny house or a park model. Both are often classified as recreational vehicles, not meant for full-time living.

Additional Costs to Consider When Building a Manufactured Home

How much a manufactured home costs may look deceptively low. There may be costs beyond the sticker price, especially if you want to place the home on raw land and need a land loan.

In addition to the home, you might have to pay for utility connections, exterior additions, taxes, delivery, and setup.

You’ll also want to pay attention to rates and terms of loans you qualify for. Owning the land, or a plan to do so, almost always opens the door to more attractive financing options.

Related: How Do Construction Loans Work?

Land Expenses

With a manufactured home, you have the option of renting or purchasing the lot.

•   Rent the lot: Expect a monthly rate of $100 to $1,000. This doesn’t include additional fees from the homeowners association.

•   Buy the lot: $0 to $1,000,000. Land costs depend on size and location; if you inherit land, you may have no cost at all. You might buy a small lot in a resident-owned park, but if it’s a co-op, you’re buying a share in the community.

If you’re buying unimproved land, you may also pay for site clearing and prep, a driveway, drainage, and porch, garage, deck, or other exterior additions. These can add quite a bit to the cost to build a manufactured home.

Utility Connections

If you’re thinking of buying or building a house on raw land, you’ll need a way to connect to utilities. Common costs:

•   Water or well: $3,750 to $15,300.

•   Electric: $0 to $10,000. Some power companies can hook you up for free, while in other areas the cost can be $10,000 or more.

•   Septic: $4,500 to $9,000. Manufactured homes in rural areas will need a septic system if there’s no sewer connection.

Delivery and Setup

Most manufactured home dealers include the cost of delivery and setup when you purchase a home. Some, though, leave delivery and installation for the customer to arrange and pay for.

At a minimum, setup for a manufactured home may involve:

•   Hooking up utilities

•   Testing connections

•   Touching up interior elements, such as where two sections meet

•   Adding skirting

Exterior Additions

If you want a garage, porch, deck, or other exterior structure, you’ll need to add these costs as well. Prices are national averages, as per online cost guide service provider Fixr.com.

•   Porch: $15,000 to $35,000, but can be as low as $5,000 or as high as $50,000.

•   Garage: $23,000 to $45,000

•   Deck: $9,000 to $20,000

•   Landscaping: $8,000 to $15,000

•   Driveway: $3,460 to $6,910

Taxes

You may need to pay sales tax on a manufactured home purchased from a dealer.

That is in addition to property tax you will need to pay each year if you own the land your manufactured home sits on.

Should You Build a Manufactured Home?

Proponents of manufactured homes tout their affordability, quality, and quick construction. It’s possible to build a manufactured home that is much less expensive than buying new construction of a traditional home.

The Consumer Financial Protection Bureau points out that whether the homeowner owns the underlying land affects many aspects of the financing “and can have major implications for the homeowner in terms of cost and security of tenure.”

If you plan to lease the land but feel comfortable absorbing any lot rent increases, then a new manufactured home could be a suitable choice. Some communities are downright upscale, offering pools, tennis, pickleball, golf, fitness centers, clubs for every interest, security, and camaraderie.

Do manufactured homes depreciate? Homes that are not high quality or affixed to a permanent foundation often lose value. A depreciating value also means homeowners may not be able to refinance.

But some data shows that well-maintained manufactured homes in attractive locations actually appreciate in value.

You might want to compare the expected total costs of different types of houses — including a townhouse, condo, and detached single-family home — with a used or brand-new manufactured home.

Financing Costs

When financing a manufactured home, you’ll likely run into several options offered at the sales center. Just be aware that mobile home financing may be different from lending for other kinds of homes.

For one, manufactured homes typically have a repayment period of 25 years or less instead of the 30-year loan that you can obtain for a traditional home. This translates into higher monthly payments.

A new manufactured home attached to a foundation on land you own will be treated like a traditional home as far as financing is concerned. Lenders take into consideration how the manufactured home is titled and deeded. If it’s considered personal property, you may need a large personal loan.

A chattel mortgage is another option for personal property.

An FHA Title I loan could be another possibility. These loans are used to purchase a manufactured home, the lot the home will reside on, or both. There are loan limits.

See also: Mortgage Calculator

Dream Home Quiz

The Takeaway

How much does it cost to build a manufactured home? Much less than a traditional home, but be sure you’re looking at all the costs involved. A lot of the total expense of owning a manufactured home will depend on whether or not you own the land.

3 Home Loan Tips

1.    Traditionally, mortgage lenders like to see a 20% down payment. But some lenders, such as SoFi, allow mortgages with as little as 3% down for qualifying first-time homebuyers.

2.    Generally, the lower your debt-to-income ratio, the better loan terms you’ll be offered. One way to improve your ratio is to increase your income (hello, side hustle!). Another way is to consolidate your debt and lower your monthly debt payments.

3.    When building a house or buying a non-traditional home (such as a houseboat), you likely won’t be able to get a mortgage. One financing option to consider is a personal loan, which can be faster and easier to secure than a construction loan.

SoFi Mortgages: simple, smart, and so affordable.

FAQ

How do you cut down on costs for a manufactured home?

Buyers can cut costs by choosing a standard floor plan, requesting less customization, or opting for a manufactured home that is already built.

How do you pay for a manufactured home?

Manufactured homes can be paid for with a personal loan, a chattel mortgage, a conventional mortgage, or a government-backed loan, depending on the homebuyer’s situation.

What are the best customizations for a manufactured home?

Popular custom finishes include coffered ceilings, fireplaces, built-ins, kitchen islands, upgraded appliances and fixtures, rain showerheads, freestanding tubs, and upgraded lighting.

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Photo credit: iStock/Marje

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

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

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It’s not your imagination: Buying a home has gotten more expensive over the last couple of years. In the fall of 2021, the Case-Shiller U.S. National Home Price index rose a stunning 18.6% in a single year. Adding to the high cost of homeownership is the fact that home loan rates also soared. In the fall of 2022, the average interest rate on 30-year mortgages was 6.12%, while a year earlier, it was a super low 3.03%. In other words, you’re going to pay a lot more for both a house and the money you borrow to fund the purchase.

These economic fluctuations are among the reasons that many people are contemplating buying a fixer-upper. They hope to find a lower-priced house that they can rehab (or pay someone else to renovate) in order to own a piece of the American Dream for less.

However, though buying a fixer-upper home may seem like an enticingly affordable option, the cost of remodeling it could wind up being more than you’d planned.

Just how much does it cost to fix up a house? Let’s break down the most common costs associated with gutting a house and remodeling, so you can make an informed buying decision. Read on to learn:

•   What’s a fixer-upper?

•   What are the pros vs. cons of buying a fixer-upper?

•   How can you plan to renovate a home?

•   How much will a fixer-upper really cost?

•   How can you fund fixing up a home?

What Is a Fixer-Upper?

What exactly is a fixer-upper? It’s a home that’s in need of significant work. In many cases, these are older houses with much deferred maintenance or simply a lot of dated, well-worn features.

A fixer-upper might be a home from 100 years ago with an insufficient electrical and heating system, as well as a roof in need of replacement. Or it could be an apartment with a very old and dated kitchen and bathrooms. These residences might be livable, but they require an infusion of cash and work to make them comfortable by today’s standards.

Pros and Cons of Buying a Fixer-Upper

Buying a fixer-upper home has upsides and downsides. For some people, a fixer-upper can be a terrific way to enter the ranks of homeownership. For others, it could wind up being a frustrating source of bills and stress.

First, let’s consider the pros of buying a fixer-upper:

•   Lower price. This can make it easier to become a homeowner.

•   Lesser competition. Many home-shoppers may shy away from taking on this kind of project.

•   Control. The ability to renovate a home to suit your taste.

•   Profit. The opportunity to flip, or resell, the home and make money by doing so.

In terms of negatives, consider these points:

•   Money required to renovate. Although you may be able to buy a fixer-upper at a bargain price, you’ll have to come up with funds for the renovation.

•   Going over budget. Often, when renovations get underway, you’ll hit unexpected situations that require more money to properly complete the job.

•   Taking longer than expected. Closely related to the point above about going over budget financially is the fact that remodeling may take longer than anticipated, which can create issues.

•   Living in a construction site. If you occupy the home as work is done, it can be an uncomfortable experience.

Recommended: Things to Budget for After Buying a Home

Decide If This Is Your Home or a Flip

Many times, people looking to buy a fixer-upper home are in it for the short game of a flip. This means they are hoping to purchase a home well under market value, make a few renovations, and then quickly sell the home for a profit. And that’s all good—you just need to decide which camp you’re in.

If you are hoping to flip a house and make some money, know what you are getting into. As mentioned above, renovations can run over budget and take longer than scheduled. If all you are planning on doing to a house is refresh the paint and flooring and stage it beautifully, things may work out fine. But if you get started on structural work and discover a bigger issue than anticipated, it could wreck your budget for reselling the property. That’s why it’s vital to get a thorough home inspection before you buy a fixer-upper. It’s also wise to walk through with a contractor (if you plan on hiring one) before purchase to size up costs; you’ll learn more about the potential price tag of renovations in a minute.

If you’re planning on buying a fixer-upper home and making it your forever home, you might have a longer timeline to make upgrades. You could tackle the kitchen one year; then redo the bathrooms the next. This could be easier on your budget, but it might mean living amid construction for a while.

And, of course, you don’t get the potential cash infusion by selling the home at a profit, which is the goal of many people who are searching for a fixer-upper. You do get a lovingly restored home to call your own, quite likely at a good price, which can be an excellent reward.

Recommended: How Much House Can I Afford Based on My Income?

Do Your Homework Before You Buy

It’s crucial to add up all the costs of potential renovations before you buy a fixer-upper house. You don’t want the dream of wanting your own home to cloud your judgment about the work that’s needed. If you don’t do a deep dive on pricing before you buy, you may end up in your own version of “The Money Pit” movie.

Consider the following:

•   Assess the upfront cost of the home and add up all potential material and labor needs — think both big and small, like plumbers, electricians, carpenters, all the way down to any new doorknobs you’ll buy along the way. Then, subtract that from the home’s renovated market value. Would this still be a profitable venture?

•   Keep in mind that inflation is currently running high so prices could get higher than what you believe they will cost during the time you are renovating.

•   It’s important to allow room in your budget and your timeline for overages. It’s not uncommon for home renovations to cost more and take longer than anticipated. It’s wise to have at least 3% to 5% extra in your budget (if not more) to cover additional costs, and wiggle room in your timing, too.

Recommended: How Do Home Improvement Loans Work?

Preparing to Invest in Home Renovations

Each home renovation is unique. If you buy a fixer-upper house, the price of rehabbing it can vary tremendously. One house might need new appliances, the walls painted, and the floors sanded. Another might need a new roof and a cracked foundation fixed…plus an electrical upgrade. The size of the home, its age, its location, and condition will all impact how much you’ll need to spend.

But, to give you a ballpark on costs, here are some statistics from Angi, the home renovation and repair site:

•   Renovating a three-bedroom home can cost between $20,000 and $100,000 on average.

•   Renovation costs are typically between $15 and $60 per square foot overall.

•   Remodeling a kitchen or bathroom can cost $100 to $250 per square foot.

•   A kitchen renovation costs $25,000 on average, and a bathroom remodel runs $10,000, but costs can run significantly higher depending on choice of materials, fixtures, and the like. renovation will be different, Realtor.com provides a general cost breakdown for different remodel hypotheticals.

Keep in mind that pricing may be higher if you live in or near a major city, as well.

Recommended: 6 Tips for Doing Home Addition Projects the Right Way

Common Fixer Upper Project Costs

Kitchen Remodels

According to HomeAdvisor’s 2022 data, the average cost of a kitchen remodel currently sits at $25,000, but costs can range from $5,000 to $65,000 or more.

The three elements that contribute most to cost are the countertops, cabinets, and flooring. The more you lean into custom and luxury options, the higher the price will go.

Bathroom Renovation

The average bathroom renovation ranges from $3,000 for small cosmetic updates to $30,000 for a complete gut do-over, with the average price tag coming in at $11,000. A big expense is moving the plumbing lines. If you can keep the layout as-is, you’ll save up to 50%.

Roof Installation

A roof should typically last two to three decades on a home — or longer if you choose the right material. The average cost for replacing a roof is about $8,000, but that will vary with the size of the home and the material you choose.

For instance, if you opt for a premium product, like slate, you’ll find that the average costs for a 3,000-square-foot roof can be $30,000.

Recommended: How to Buy Homeowners Insurance

How to Handle the Cost of a Fixer Upper

These numbers can seem overwhelming, but remember, you’re bringing out your home’s maximum potential, whether for you to enjoy or to capitalize on via a future sale.

You have a few options for how to finance the renovation of a fixer-upper:

•   You could put less money down and take out a larger mortgage. This would allow you to have some cash on hand to pay for the remodeling.

•   You can buy the house and then take out a home improvement loan, which is a kind of personal loan used to finance your home projects.

•   You could purchase the fixer-upper and then apply for a home equity line of credit, or HELOC. These are revolving lines of credit that may offer attractive terms (low interest, long repayment) but keep in mind you are using your home’s equity as collateral. You typically need 15% to 20% equity in your home to qualify.

•   Another option that’s similar to a HELOC is a home equity loan. The difference is that a home equity loan typically distributes a sum of money, which is repaid in installments over a period of time.

The Takeaway

A fixer-upper can be a good investment for some home shoppers, whether they want to renovate the home and live in it or sell it at a profit. However, it’s important to evaluate your costs up front, before signing a contract, to make sure you don’t wind up with a money pit and can make your renovation dreams come true.

One thing that can help you afford your fix-it-up plans is a SoFi home improvement loan. What’s more, these are unsecured loans, meaning you’re not required to put up collateral against the loan. And with fixed monthly payments, you can better plan for the road ahead. Now, all you need is a hammer and you’re ready to go.

Thinking about renovating a fixer-upper? SoFi personal loans can help you turn your new purchase into a dream home.

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

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

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

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Many first-time house hunters lie awake at night worrying, Will I qualify for a mortgage? With the wide variety of loan programs, down payment requirements, and credit thresholds out there, qualifying for a mortgage can feel like a lame choose-your-own-adventure story: “Didn’t prequalify? Return to page 1.”

Let’s take some of the mystery out of how to qualify for a mortgage.

9 Mortgage Qualification Factors

What goes into qualifying for a home loan can be especially confusing. Here are some things that may come into play when qualifying for a home loan.

1. Down Payment

Down payment requirements vary based on the type of mortgage you’re applying for.

Conventional Loan Down Payment

You may have heard that 20% down is the ideal. But the median down payment across all homebuyers is 13%. And some conventional loans require just 3% down.

The 20% figure comes from buyers trying to avoid the added cost of private mortgage insurance (PMI), which is required if your down payment is less than 20%. But you can also avoid PMI by seeking a “piggyback” mortgage or lender-paid mortgage insurance.

If you’re getting help from loved ones for your down payment, you’ll need to document that with a gift letter.

FHA Loan Down Payments

An FHA loan is a government-backed mortgage insured by the Federal Housing Administration. FHA loans are popular with first-time homebuyers. Over 80% of FHA mortgages are issued to first-time buyers each year.

If your credit score is at least 580, you may qualify for a down payment of 3.5% on an FHA loan. (FHA 203(k) loans for fixer-uppers also ask for 3.5% down.) With a score between 500 and 579, you’ll need at least 10% down.

Upfront and annual mortgage insurance is required for FHA loans, usually for the entire term.

USDA Loan Down Payment

A loan insured by the U.S. Department of Agriculture is aimed at moderate-income households that purchase or build in eligible rural areas. Incredibly, no down payment is required. The USDA also directly issues loans to low- and very-low-income buyers in eligible rural areas and provides payment assistance.

USDA loans require an upfront guarantee fee and an annual premium for the life of the loan, but it’s lower than FHA loan mortgage insurance rates.

VA Loan Down Payment

The great perk of VA loans is that no down payment is usually required, but a sizable one-time funding fee is. (You may be exempt from the funding fee if you’re eligible for VA disability compensation for a service-connected disability or meet other conditions.)

💡 Recommended: First-Time Home Buyer Programs

2. Credit Score

Credit scores attempt to distill an individual’s financial history down to a single number that indicates your worthiness to lenders.

The FICO® Score range of 300 to 850 is categorized like this:

•   Exceptional: 800 to 850

•   Very Good: 740 to 799

•   Good: 670 to 739

•   Fair: 580 to 669

•   Poor: 300 to 579

Borrowers seeking a conventional loan will likely need a credit score of at least 620. For an FHA loan, applicants with a score as low as 500 may be considered. But 580 is the minimum credit score to qualify for the 3.5% down payment advantage.

A USDA loan usually requires a score of 640; a VA loan, a minimum of 580 to 620. In some cases, you don’t have to have a FICO Score to qualify for a home loan. Fannie Mae’s nontraditional credit program and government loan programs allow for a credit profile to be built based on things like rent payments and utility bills.

3. Income

Technically, there’s no minimum income required to apply for a mortgage. But your income can limit the amount you’ll qualify for. Lenders also like to see evidence that your income is stable, and will look at an applicant’s last two years of employment. That means you’ll need to provide pay stubs, W-2s or 1099s, and tax returns.

Many types of income count toward a mortgage application: overtime, commissions, bonuses, dividends, Social Security, alimony, and child support. Lenders may ask for documentation (such as a letter from your employer) that such income is expected to continue for the next several years.

Self-employed homebuyers should keep in mind that lenders look at your income after deductions. Taking too many deductions, however deserved, can lower the size of the loan you’ll qualify for.

For some types of loans, there can be upper income limits. Conventional, FHA, and VA loans have no upper limits. But with USDA loans, your income must not exceed 115% of the median income in your area.

4. Debt-to-Income Ratio

Typically, your income doesn’t matter as much as your debt to income ratio. Your DTI is calculated by dividing your total monthly debt, including your proposed house payment, by your gross monthly income, expressed as a percentage.

For example, say you pay $1,500 a month for a mortgage, $100 a month for a car loan, and $400 a month on a student loan. Your total monthly debt comes to $2,000. If you make $6,000 a month before taxes and deductions, your debt-to-income ratio is 33% ($2000 divided by $6000, multiplied by 100).

“If you have multiple debts, you want to make your minimum payments so you don’t hurt your credit score,” Kendall Meade, a Certified Financial Planner at SoFi said. “If you have cash left over after that, you should develop a strategy for which debts to pay off first,” she suggested.

Depending on your credit score, down payment, and cash reserves, your DTI ratio may weigh heavier or lighter in the qualification process.

•   Conventional Loan DTI: The maximum DTI for a conventional loan is 45%, but exceptions can be made for strong compensating factors.

•   FHA DTI: FHA guidelines allow for a DTI of 43%, but higher ratios are allowed with compensating factors.

•   USDA Loan DTI: The USDA usually allows a maximum DTI of 41% but may make exceptions for those with higher credit scores and stable employment.

•   VA Loan DTI: VA guidelines call for a maximum DTI of 41%, but lenders set their own limits based on an applicant’s financial health.

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

5. Assets

Lenders will want to know about any valuable assets you hold. The idea is that these assets can be converted to cash in the event you face financial hardship down the road. Assets can include cash accounts, retirement accounts, stocks and bonds, cars, boats, RVs, jewelry, artwork, and collectibles. You’ll be asked to provide proof of ownership and value, such as appraisal letters.

6. Documentation

Not having the proper documentation in the mortgage loan process can hold things up. As noted above, lenders usually ask for:

•   Tax returns from the past two years.

•   Two years’ worth of W-2s or year-end pay stubs. If you are self-employed, other evidence of income.

•   Child support or divorce documents.

•   Bank statements.

•   Statements from additional assets.

•   Gift letters.

•   Photo ID.

•   Rental history and contact information.

7. Property Type and Purpose

Up to now, we’ve discussed mortgage qualification factors that are based on the buyer’s financial history. But lenders also consider the purpose of the property you want to buy. A “primary residence,” meaning a home that a buyer purchases with the intention of living in it, will usually qualify for a lower interest rate and better terms than a vacation home or investment property.

The type of home you purchase also makes a difference. Single-family houses secure the best rates. Other types of housing that may incur special fees include condos, co-ops, manufactured houses, log homes, mixed-use developments, and nontraditional architecture. Homes shaped like dinosaurs or flying saucers just make lenders a little nervous.

8. Mortgage Type

The type of mortgage you may want to seek as a primary-home owner will depend on your credit scores, income, the lender’s loan menu, and more. Government-backed mortgages (FHA, VA, and USDA loans) are acquired through approved lenders, and conventional home loans are issued by a bank, credit union, or other private lender.

•   FHA loan: Mortgages backed by the Federal Housing Administration have lower credit requirements than conventional loans but tend to be more expensive for borrowers with good credit and a medium down payment.

•   VA loan: Loans insured by the Department of Veterans Affairs are for active-duty service members, veterans, and some surviving spouses. The VA also has a Native American Direct Loan program, which allows Native Americans to buy, build, or improve a home on federal trust land.

•   USDA loan: Loans backed by the U.S. Department of Agriculture are for moderate-income buyers who choose a home in a designated rural area. The USDA offers direct loans for low-income households.

Most mortgages come with a fixed interest rate, but a variable rate can be an option for some conventional loans, as can a variety of mortgage terms or lengths. The fixed-rate 30-year mortgage dominates the U.S. landscape.

One last wrinkle: There are conforming loans and nonconforming loans. By meeting loan limits, a conventional conforming loan is eligible for purchase by Fannie Mae and Freddie Mac. If it isn’t eligible, it’s a nonconforming mortgage — like the government loans or a jumbo loan.

9. Other Mortgage Qualification Considerations

When browsing for a home, you might consider loan prequalification or preapproval.

Prequalification is a simpler version of preapproval. You’ll provide basic information, which can be by phone or online, and a lender will estimate what size loan you might be approved for. No information is verified at this point.

For preapproval, you’re required to give a lender access to your financial history. After reviewing your credit, income, and assets, the lender will offer a loan up to a specific amount. It doesn’t guarantee that you’ll be approved when you formally apply, though.

Prequalification and preapproval can be great ways to dip your toe into the home-buying waters. Then you may apply with more than one lender. Comparing loan estimates can help you determine which option is best for you financially.

Do I Qualify For a Mortgage?

To help you determine how big a home loan you might qualify for, there are a variety of online mortgage calculators to help get you started:

•   Mortgage Calculator

•   Home Affordability Calculator

Dream Home Quiz

The Takeaway

You know there are many factors that can help or hurt your chances of getting approved for a mortgage loan. Here, we lay them all out in one place: your down payment, credit score, income, debt-to-income ratio, assets, documentation, property type and purpose, mortgage type, and prequalification or preapproval. Some of these factors can compensate for weaknesses in other areas. For instance, a lower income is less of a problem if you have plenty of valuable assets to draw on. And a high down payment can counter a middling credit score.

Home shoppers with stable finances would be smart to look into SoFi home mortgage loans with competitive fixed rates. Qualifying first-time homebuyers can put as little as3% down, and others, 5% down.

Our online application is simple, and our dedicated Mortgage Loan Officers can guide you through the process from start to finish.

FAQ

What are the four things you need to qualify for a mortgage loan?

To qualify for a mortgage loan, you’ll need a stable income, strong credit score, modest debt-to-income ratio, and documentation of your employment and assets. Believe it or not, some loan programs do not require a down payment!

What is the lowest income needed to qualify for a mortgage?

There is no minimum income required to apply for a mortgage. However, your income will determine how large a loan you’ll qualify for. Sometimes, your assets can compensate for a lower income. And there are government-backed programs, especially for low-income borrowers.

At what age do you not qualify for a mortgage?

There is no maximum age limit to qualify for a mortgage loan. In fact, lenders legally cannot deny someone a loan term based on their age. For instance, a 70-year-old can still qualify for a 30-year mortgage term.

What do banks check before giving a mortgage?

Just about everything. Banks check your credit history and score, proof of employment and income (W-2s, 1099s, tax returns), your assets (bank statements), your debts (credit card bills), and anything else that will give them a picture of your overall financial health and future prospects.

Do mortgage lenders look at your spending?

Yes, mortgage lenders may look at your bank and credit card statements for the last two years to see whether your spending habits are consistent and where your money goes.

Is everyone eligible for a mortgage?

Pretty much anyone who can afford to carry a mortgage can qualify for one. However, it’s possible that someone who earns money under the table or holds their assets in offshore accounts wouldn’t be able to document their financial qualifications to satisfy a lender.

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

Non affiliation: SoFi isn’t affiliated with any of the companies highlighted in this article.

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

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Has this happened to you? You’re thinking about getting a personal loan but haven’t yet applied. Then you get a letter in the mail: “You’re preapproved or prequalified for a personal loan!” What does that mean?

Some lenders use “prequalified” interchangeably with “preapproved,” but they are different. Here, we’ll discuss the distinction, and how to know if you’re a good candidate for a personal loan.

What Does Being Prequalified for a Loan Mean?

Prequalification is sometimes considered the first step in the loan approval process. You can think of it as a less comprehensive version of a preapproval. Prequalification simply means that you fit the general description of a customer typically qualified for a loan.

Based on your general profile, the lender can give you an idea of the size of loan you can qualify for. While prequalification can be done fairly quickly, it does not involve a full analysis of your credit report or verification of the financial information you provide. Because of that, there’s no guarantee that your loan will be approved.

Recommended: What Is a Personal Loan?

What Does Loan Preapproval Mean?

Preapproval is a more in-depth stage of the personal loan approval process. A lender will have accessed your financial history to assess you as a potential customer. Being preapproved means that, based on the information accessed, you most likely will be approved for a loan.

Preapproval allows the lender to show you the size of the loan you might qualify for, and the interest rate and loan terms they’re willing to offer. It’s a step closer to final approval of your loan application. However, this doesn’t automatically translate to being fully approved. For example, a hard credit inquiry can pull in information previously unseen by the lender that was not considered at the preapproval stage.

Does Prequalification or Preapproval Affect Your Credit Score?

Lenders typically prequalify you on the basis of financial information that you provide and perhaps a soft inquiry into your credit history. Soft inquiries don’t affect your credit score, so it’s unlikely that prequalification will either.

Because the prequalification process varies by lender, however, it’s impossible to say for sure that prequalification won’t impact your credit. If it does, the impact will be small and temporary.

Preapprovals are more rigorous than prequalifications, and closer to what you’ll experience when you actually apply for a loan. Preapprovals often involve a hard credit inquiry, which does impact your credit. Again, any effect will be minor.

Recommended: Should You Borrow Money During a Recession?

How Do I Know If I’m a Good Candidate for a Personal Loan?

A personal loan application considers your existing debt and your ability to repay the loan. Your current employment will factor into how well-suited you are to repay the loan, as will your credit score. In most cases, this means you need a good credit score to qualify for an unsecured personal loan at a low interest rate.

Lenders will also consider your “DTI” — the ratio of your income to existing debt — and what kind of monthly payments you can afford.

If you can’t otherwise qualify because of a poor credit score, consider asking a close friend or family member to cosign your personal loan. Adding a cosigner with a good credit score to your application can help you get a lower interest rate on your loan.

Will You Prequalify for a SoFi Personal Loan?

Some nontraditional lenders, like SoFi, look at other parts of a financial package when evaluating a candidate’s personal loan application.

SoFi considers additional factors such as your earning potential and cash flow after expenses. This means that even if you have a shorter credit history (because you just graduated college, for example) you may still qualify for a personal loan based on your education and career.

To find out if you qualify for a SoFi personal loan, first go through the online prequalification process. This requires you to create an account, and input your basic personal information, education, and employment history. It takes only a few minutes, after which SoFi will immediately show you which loan options you prequalify for.

After selecting a preliminary personal loan option, you’ll have to finalize your application by uploading documentation to verify your personal information. This may include pay stubs and bank statements. Once you’re approved, the loan is typically disbursed within a week.

If you’re ready to apply for a personal loan, check out SoFi personal loans today.

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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.

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

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One thing you should always look out for — regardless of the type of loan you’re applying for — is loan origination fees. Many lenders charge origination fees for new loans to help cover costs on their end. However, what these fees are called and the amount of these fees can vary quite a bit from lender to lender.

Before you settle on a lender, here are some things you need to know about origination fees, so you can make the best borrowing decision for your financial situation.

What Is a Loan Origination Fee?

An origination fee is a cost the lender charges for a new loan. It’s a one-time fee charged at the time the loan closes. The fee covers the costs the lender incurs for processing and closing the loan.

How Are Origination Fees Determined?

Loan origination fees depend on a number of factors. This includes:

•   Loan type

•   Loan amount

•   Credit score

•   Inclusion of a cosigner

•   Your financial situation, including assets, liabilities, and total income

Do I Have to Pay Origination Fees?

You don’t necessarily have to pay origination fees — while most lenders charge this fee, not all do. Additionally, origination fees may be negotiable. If you ask, a lender could simply lower the fee, or they could offer a credit to offset at least a portion of the origination fee. Or, they might agree to lower the fees if you’ll pay a higher interest rate.

To minimize the sting of loan origination fees, it also pays to research your loan options. Make sure to compare how much you’d pay overall for different loan offers, factoring in the term of the loan, the interest rate, and any fees.

One way to effectively compare and contrast different loan options is to check each loan’s annual percentage rate (APR), an important mortgage basic to understand. A loan’s APR provides a more comprehensive look at the cost you’ll incur over the life of the loan. This is because APR factors in the fees and costs associated with the loan, in addition to the loan’s interest rate.

The Truth in Lending Act requires all lenders to disclose an APR for all types of loans. You’ll also see any fees that a lender may charge listed there, including prepayment penalties.

How Much Are Loan Origination Fees?

How much a lender charges (and what the fee is called) varies based on the type of loan and the lender.

A traditional origination fee is usually calculated based on a percentage of the loan amount — and that percentage depends on the type of loan. For a mortgage, for instance, an origination fee is generally 0.50% to 1%. Origination fees for personal loans, on the other hand, can range from 1% to 8% of the loan amount, depending on a borrower’s credit score as well as the length, amount, and sometimes intended use of the loan.

There are a variety of other origination fees that lenders may charge, and these can be a flat amount rather than a percentage of the loan amount. Other fees that lenders may charge to originate a loan could be called processing, underwriting, administration, or document preparation fees.

Can Loan Origination Fees Affect Your Taxes?

Loan origination fees, categorized by the IRS as points, can be deductible as home mortgage interest. This can be the case even if the seller pays them. Borrowers who can deduct all of the interest on their mortgage may even be able to deduct all of the points, or loan origination fees, paid on their mortgage.

To claim this deduction, borrowers must meet certain conditions laid out by the IRS. They’ll then need to itemize deductions on Schedule A (Form 1040), Itemized Deductions.

The Takeaway

Loan origination fees are important to consider when shopping for a loan during the home-buying process. These fees are charged by lenders to help cover their costs of processing and closing a new loan application. While many lenders do charge origination fees, not all do, and some may be willing to negotiate.

Origination fees are just one reason it’s important to take the time to shop around and compare home loans. With a SoFi Home Loan, for instance, qualified first-time homebuyers can make a down payment as low as 3%.

Ready to get started with the home-buying process? Check out SoFi Mortgages.

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

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

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

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