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According to the IRS, approximately 90% of tax refunds are issued in under 21 days. However, some tax returns require more attention, which can lengthen the process and push back your tax refund date.

The deadline for filing 2024 taxes is Tuesday, April 15, 2025. If you request an extension, the deadline is Wednesday, October 15, 2025. Keep reading to learn more about deadlines for 2024 tax returns, and how to track the progress of your tax refund.

Tax Refund Process, Explained

The process begins when you submit your return to the IRS. The IRS then breaks down the process into three steps: return received, refund approved, and refund sent.

If you file electronically, you should receive an email confirming that your return was received within 24 hours. Paper return filers will have to wait longer.

After the IRS processes your return and confirms the information, your refund will be approved and a tax refund date will be issued. This takes about 3 weeks for electronic filers. Taxpayers who file a paper return by mail will wait at least four weeks.

The last step is when your tax refund is sent out. For filers who provide direct deposit information, your refund should appear in your account almost immediately. Taxpayers who do not include their bank information will have to wait for a paper check to arrive by mail.

Factors Impacting How Long a Tax Refund Takes

Several factors can affect the timing of your tax refund — including your financial organization skills and the accuracy of the information you provide. If you don’t receive your tax refund within 21 days, your return is likely being manually reviewed due to a mistake or complication.

The following factors can also affect your 2024 tax refund date.

How Early You File

Filing early is essential if you want to get your tax refund early. Ideally, you should be able to compile all your tax documents by the end of January. Forms such as W-2s, 1099-Rs, 1098-Es, and 1098s will provide the income information you need to file.

Filing early means submitting your tax return before the official deadline of Tuesday, April 15, 2025, for your 2024 tax return. Since many taxpayers file their returns on the official deadline, filing early allows you to beat the rush.

Similarly, if you requested an extension, filing “early” means before the October deadline. The deadline for 2024 returns is Wednesday, October 15, 2025. However, taxpayers can file anytime before October. This way, you’ll avoid the bottleneck that inevitably occurs on the deadline itself.

If You Are Claiming Certain Credits

Claiming certain credits on your tax return can push back your 2024 tax refund date. These include:

•   Earned Income Tax Credit

•   Additional Child Tax Credit

•   Injured Spouse Allocation

•   Child Tax Credit, if you claim the wrong amount

E-filed or Sent By Mail

Whether you do your own taxes by hand, use software to assist you, or hire an accountant or tax preparer, it’s best to opt for electronic filing. E-filed taxes are accepted by the IRS within a day or two, while mailed paper returns can take weeks to arrive.

Existing Government Debt

Some taxpayers owe the federal or state government due to unpaid child support, taxes from years past, or student loan payments. Taxpayers facing these issues will receive a reduced refund or none at all, and any refund can take longer than the standard 21-day timeframe after e-filing.

How to Track the Progress of Your Refund

If you’re like most taxpayers, it won’t take long until you start wondering where their tax refund is. Getting hold of a live IRS representative by phone is possible but challenging during tax season.

Fortunately, the IRS’s Refund Status tool provides updates on your 2025 tax refund date just 24 hours after you submit your 2024 taxes electronically.

The tool shows taxpayers one of three statuses: return received, refund approved, or refund sent. After the refund is approved, the IRS will give you a tax refund date. If you mailed your return, you’ll have to wait about four weeks for the tool to provide information on your refund.

What to Do Once Your Refund Arrives

How should I spend my tax refund? It’s a perennial question for taxpayers. Top choices include paying down debt, saving for a vacation, and investing. The important thing is to plan ahead so you don’t spend it all on frivolous or impulsive purchases.

One popular option is to treat your refund like regular income. You can budget the majority of the money for “needs” by setting up an emergency fund or paying down your mortgage. The rest can be set aside for “wants,” such as a year’s worth of dining out.

An online budget planner can help you decide the appropriate percentages for needs and wants. Likewise, a debt pay off planner can show you how much sooner you’ll be debt-free after depositing some or all of your refund.

What Happens If You Can’t File Income Taxes by the Deadline

Each year, taxpayers unable to file their return on time (usually mid-April) can ask the IRS for an extension. The IRS’s Free File tool allows you to electronically submit a request to change your filing deadline to October.

Be aware that taxpayers who want an extension must make an educated guess about the taxes they owe and pay the IRS that amount.

How to File Form 4868 for a Tax Return Extension

Another way to file for an extension is to complete form 4868. You can submit the form electronically or by mail.

The Takeaway

While you cannot predict your exact tax refund date, filing electronically early in the tax season can help you get your refund faster. The IRS sends out most refunds within 21 days of receiving the return. The deadline for filing 2024 taxes is Tuesday, April 15, 2025. If you request an extension, the deadline for filing a 2024 tax return is Wednesday, October 15, 2025.

Take control of your finances with SoFi. With our financial insights and credit score monitoring tools, you can view all of your accounts in one convenient dashboard. From there, you can see your various balances, spending breakdowns, and credit score. Plus you can easily set up budgets and discover valuable financial insights — all at no cost.

SoFi helps you stay on top of your finances.

FAQ

When should I expect my 2025 tax refund?

Typically, you can expect to receive your refund within 21 days of filing your return. However, mistakes and special tax credits can slow down the process.

What days does the IRS deposit refunds in 2025?

The IRS deposits refunds Monday through Friday, except for holidays.

How long does it take the IRS to approve a refund in 2025?

Most refunds are issued in 21 days or less from when the IRS accepts your return. However, if there are issues with the return, it may take longer.

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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.

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.

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.

SORL-Q125-002

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

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

What Is a Townhouse?

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

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

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

Benefits of Buying a Townhouse

There are at least three upsides to purchasing a townhouse.

Owner Rights

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

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

Price

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

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

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

Low Maintenance

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

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

Disadvantages of Buying a Townhouse

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

HOA

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

Lack of Privacy

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

What Is an Apartment?

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

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

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

Benefits of Living in an Apartment

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

Low Maintenance

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

Low Utilities

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

HOA

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

Disadvantages of Living in an Apartment

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

Parking

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

Noisy or Nosy Neighbors

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

Limited Space

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

Differences Between a Townhouse and an Apartment

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

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

The Takeaway

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

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

SoFi Mortgages: simple, smart, and so affordable.

FAQ

Do townhomes appreciate as much as houses?

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

Are townhouses a bad investment?

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

Are fees higher for a townhouse or condo?

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

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Photo credit: iStock/Auseklis

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

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

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

SOHL-Q125-023

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

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

What Is a Renovation Home Loan?

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

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

Types of Home Loans That Can Include Renovations

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

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

1. FHA 203K

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

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

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

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

2. Fannie Mae HomeStyle

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

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

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

3. Freddie Mac CHOICERenovation

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

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

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

4. USDA Purchase with Rehabilitation and Repair Loan

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

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

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

5. VA Alteration and Repair Loan

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

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

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

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

Home Style Quiz

Other Options for Financing Home Renovations

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

Cash-out Refinance

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

Personal Loan

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

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

Home Equity Loan

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

Home Equity Line of Credit (HELOC)

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

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

Recommended: A Personal Line of Credit vs. a HELOC

Private Loan

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

Government or Nonprofit Program

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

Recommended: What Is HUD?

The Takeaway

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

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

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

FAQ

How do renovation mortgages work?

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

Can you include renovation costs in a mortgage?

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

Can you add renovation costs to your mortgage?

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

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Photo credit: iStock/Hispanolistic

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

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

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

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

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

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

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

SOHL-Q125-007

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On a salary of $45,000 per year, you can afford a house priced at around $120,000 with a monthly payment of $1,050 for a conventional home loan — that is, if you have no debt and can make a down payment. This number assumes a 6% interest rate.

These numbers change—sometimes dramatically—depending on a few factors, including:

•   How much debt you have

•   What your down payment is

•   How much you’re paying for taxes, insurance, and homeowners association dues, if anything

•   What interest rate is available to you

•   What type of loan you get

With the median home price in the U.S. topping $400,000, you might be wondering how everyone else affords a home in your neighborhood. We’ll cover every aspect of home affordability for a $45,000 salary to help you work toward getting the home you’ve always wanted.


💡 Quick Tip: A VA loan can make home buying simple for qualified borrowers. Because the VA guarantees a portion of the loan, you could skip a down payment. Plus, you could qualify for lower interest rates, enjoy lower closing costs, and even bypass mortgage insurance.†

What Kind of House Can I Afford With $45K a Year?

The kind of home you can afford depends on more than your $45,000 salary. It’s also based on your debt-to-income (DTI) ratio, interest rate, down payment, type of home loan, and lender.

Understanding Debt-to-income Ratio

Your DTI ratio is a key factor in determining how much home you can afford. The more debt you have, the lower your housing payment needs to be. This directly translates into a lower priced home. So, what exactly is a DTI ratio? It is the proportion of monthly debt you need to repay in relation to your gross monthly income.

For example, if your total debt amounts are $2,000 each month and your income is $6,000 per month, your debt-to-income ratio would be 33%. This falls under the 36% threshold mortgage lenders look for with conventional home mortgage loans.

However, keep in mind that the $2,000 has to include your new mortgage payment. If your debts cost $500 each month, your monthly mortgage payment cannot be more than $1,500.

How to Factor in Your Down Payment

Your down payment also plays a significant factor in home affordability. Generally, the higher down payment you have, the more home you can afford. If you purchase a home far below what you can afford, your monthly payment will be much lower.

If you make a down payment of 20% or more, you’ll also be able to save on mortgage insurance premiums, which are typically required on most loan types for homes purchased with a down payment lower than 20%.

If you play around with a mortgage calculator, you can see how a larger down payment can affect your monthly payment and home price.

Factors That Affect Home Affordability

Beyond your debt, income, and down payment, there are a number of other factors that go into home affordability. These include:

•   Interest rates The interest rate you have on your home dramatically impacts how much home you can afford. When interest rates are high, your monthly payment is higher. When interest rates are down, you pay less interest on your loan, which means you can afford a more costly home. Remember that if rates drop significantly a mortgage refinance is always an option.

•   Credit history and score The interest rate that you’ll qualify for is dependent on your credit score and history. A better credit score will qualify you for the best interest rates, which means your monthly payment will be lower, which can increase your buying power.

•   Taxes and insurance Taxes and insurance factor into your home’s monthly payment. They will be calculated into the home’s PITI (payment, interest, taxes, insurance) and included as part of your monthly debts.

•   Loan type The type of loan you get affects home affordability. This is due to the different interest rates and down payment options available to specific loan types. VA loans from the U.S. Department of Veterans Affairs, for example, come with a lower interest rate and don’t require a down payment.

•   Lender Lenders may have discretion to increase the allowable debt-to-income ratio. Some can go as high as 50%.

•   Location Some areas are more affordable than others. Thinking about moving? Take a look at a list of the best affordable places to live in the U.S.

Recommended: The Cost of Living By State

How to Afford More House With Down Payment Assistance

One of the best tools for increasing home affordability is with down payment assistance programs. These programs provide funds for the down payment (and sometimes closing costs) to help make homes more affordable for buyers.

Some programs offer down payment assistance in the form of a grant that does not need to be repaid, while others finance a second mortgage which may need to be paid when the home is sold (but sometimes is forgiven earlier). In Colorado, for example, there’s the CHFA Colorado Down Payment Assistance Grant. Virginia offers the Virginia HOMEownership Down Payment and Closing Cost Assistance program (DPA)

Search your state, county, and city to see what programs are offered for your area. You may also want to read tips to qualify for a mortgage.

How to Calculate How Much House You Can Afford

Calculating how much house you can afford is smart, especially if you’re a first-time homebuyer and making early plans to buy a home. There are some guidelines lenders use to qualify borrowers for a mortgage, including:

The 28/36 Rule: This guideline states that no more than 28% of your income should go to your monthly housing payment and your debt-to-income ratio should be no more than 36% of your income

When calculating DTI (also known as the back-end ratio), your lender will add all of your debts (including the new mortgage payment) to make sure all debts will fall under 36% of your income amount. If your monthly income is $3,750 ($45,000/12 = $3,750), your debts (including the mortgage payment) should be no more than $1,350 ($3,750*.36).

Lenders will also calculate the front-end ratio, which should be no more than 28% or your income. With a monthly income of $3,750, this number works out to $1,050.

The 35/45 Rule: Some lenders may go by the 35/45 guideline, which allows for a housing payment up to 35% of income and 45% of total DTI ratio. This expanded allowance is up to the lender, but may allow for qualification of higher purchase amount and payment.

With a monthly income of $3,750, the housing allowance (35% of your income) increases to $1,312.50 and the total monthly debts (45% of your income) increases to $1,687.50. An easier way to calculate how much home you can afford is with a home affordability calculator.

Home Affordability Examples

Let’s take a look at two examples of homebuyers with $45,000 incomes in differing scenarios. All assume the same taxes ($2,500), insurance ($1,000), and APR (6%) for a 30-year loan term (just for illustrative purposes).

The $45,000 annual salary is divided by 12 to get a $3,750 monthly income and the maximum DTI ratio works out to be $1,350 ($3,750 * .36).

Example #1: $45,000 income but lots of debt
Monthly credit card debt: $300
Monthly car payment: $350
Student loan payment: $300
Total debt = $950 total debt payments

Down payment = $20,000
Maximum DTI ratio = $3,750 * .36 = $1,350
Maximum mortgage payment = $400 ($1,350 – $950)

Home budget = $38,069

Even with a $20,000 down payment, it could be hard to buy a home in this scenario.

Example #2: $45,000 income with little debt
Monthly credit card debt: $50
Monthly car payment: $0
Student loan payment: $0
Total debt = $50

Down payment: $20,000
Maximum DTI ratio = $3,750 * .36 = $1,350
Maximum mortgage payment = $1,300 ($1,350 – $50)

Home budget = $171,925

💡 Quick Tip: Don’t have a lot of cash on hand for a down payment? The minimum down payment for an FHA mortgage loan is as low as 3.5%.1

How Your Monthly Payment Affects Your Price Range

The monthly payment you qualify for affects the total price you can pay for a home. If monthly debts are too high, for example, you’ll likely qualify for a lower-priced home. The monthly payment is also affected by interest rates. Because interest is amortized over 30 years (on a 30-year mortgage), the amount of interest you pay is significant, even if you manage to score a lower rate.

Recommended: Home Loan Help Center

Types of Home Loans Available to $45K Households

When you’re looking for home loans, you’ll see these different types of mortgage loans available:

•   FHA loans Loans backed by the Federal Housing Administration are geared toward buyers with low down payments, low credit scores, and other situations that require a lender to be more flexible.

•   USDA loans United States Department of Agriculture loans are for those who live in rural areas. They offer zero down payment options and low interest rates.

•   Conventional loans Conventional loans are loans that are not part of a government program, but they are backed by government-sponsored enterprises, Fannie Mae and Freddie Mac. They’re usually less expensive than FHA loans, but your application does need to meet certain guidelines to qualify for conventional financing.

•   VA loans VA loans offer zero down payment options, the lowest interest rates on the market, and flexible credit requirements. If you qualify for a VA loan, you’ll likely want to go with this option.

The Takeaway

There’s no way around it — affording a home in today’s housing market is tough. If your $45,000 salary is all you have access to, you’ll need to save, improve your credit, research down payment assistance programs, enlist a partner, move to a less expensive area, or find other creative ways to afford a home. But don’t give up. It can be done. Your hard work will pay off with a mortgage for a home of your own soon.

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

SoFi Mortgages: simple, smart, and so affordable.

FAQ

Is $45K a good salary for a single person?

A $45,000 salary for a single person is a good start. How good it feels to earn $45,000 will depend on the cost of living where you live and the friends and neighbors you’re surrounded by.

What is a comfortable income for a single person?

A comfortable income for a single person depends on your lifestyle and habits. The median income for a single person is $56,929, according to data from the U.S. Census. A single person in Cobb County, Georgia, would be able to cover their expenses for about $40,000 per year while the same person in New York City would need $53,342.

What is a liveable wage in 2023?

The Massachusetts Institute of Technology’s Living Wage Calculator takes into account your area, working household members, and number of children. For example, a single living in San Francisco has a living wage of $26.63. A household with three children where only one spouse works in St. George, Utah has a living wage of $44.99 per hour.

What salary is considered rich for a single person?

To be in the top 5% of earners, you would need a salary north of $234,342.

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Photo credit: iStock/500

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

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

^¹FHA loans are subject to unique terms and conditions established by FHA and SoFi. Ask your SoFi loan officer for details about eligibility, documentation, and other requirements. FHA loans require an Upfront Mortgage Insurance Premium (UFMIP), which may be financed or paid at closing, in addition to monthly Mortgage Insurance Premiums (MIP). Maximum loan amounts vary by county. The minimum FHA mortgage down payment is 3.5% for those who qualify financially for a primary purchase. SoFi is not affiliated with any government agency.
^†Veterans, Service members, and members of the National Guard or Reserve may be eligible for a loan guaranteed by the U.S. Department of Veterans Affairs. VA loans are subject to unique terms and conditions established by VA and SoFi. Ask your SoFi loan officer for details about eligibility, documentation, and other requirements. VA loans typically require a one-time funding fee except as may be exempted by VA guidelines. The fee may be financed or paid at closing. The amount of the fee depends on the type of loan, the total amount of the loan, and, depending on loan type, prior use of VA eligibility and down payment amount. The VA funding fee is typically non-refundable. SoFi is not affiliated with any government agency.
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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