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Before applying for refinancing, listing your house on the market, or buying a house, you’ll need to get a home appraisal. This is an important independent assessment of a property’s value, which matters to all parties involved: you, your buyer (if you’re selling), and a lender.

Here, learn the ins and outs of home appraisals so you understand the process and can manage it successfully. You’ll find out:

•   What is a home appraisal?

•   How long does a home appraisal take?

•   How can you prepare for a home appraisal?

•   What can you do if a home appraisal comes in low?

What Is a Home Appraisal?

A home appraisal is an objective and professional analysis of a home’s value. An appraisal aggregates an array of information including details on the home itself (the floor plan, amenities, and how big it is), a visual inspection, real estate trends in your area, and how much nearby homes in your area sold for.

Generally, an appraisal will be completed when someone is buying, selling, or refinancing a home. It will tell a homeowner whether or not the price they’re putting on the home is fair based on the condition of the home, its amenities, and its location.

Home appraisals will let those buying a home know if a home is a good price. (This can be especially reassuring for first-time homebuyers, who are new to the whole process.)

If you think it’s time to refinance and are getting an appraisal done, it shows the home mortgage lender that you, the borrower, aren’t receiving more money from them than the home is actually worth. The lender wants to know that they are loaning funds to a property that is holding the stated value.

According to a National Association of Realtors® study from June 2024, appraisal issues led to real estate contract delays in 7% of transactions, so it’s important to get the appraisal right the first time around. That’s an important step in selling your home fast.

How Much Does a Home Appraisal Cost?

The home appraisal cost is typically several hundred dollars, and the borrower will most likely be responsible for paying it. Most people can expect to pay between $300 to $610 for a home appraisal, but it could be higher depending on the specific property. Some examples:

•   If the property contains a pond or lake, you can expect the home appraisal cost to be more.

•   If the appraiser is inspecting a larger home and/or a bigger overall property, then the home appraisal cost will go up. The same applies to jumbo loans, which are usually given to borrowers purchasing homes priced in the upper six-figure and $1 million-plus range.

It’s worth noting that there are a few cases in which the seller will cover the cost. These include the following situations:

•   If a homeowner wants to get an appraisal and see what modifications they can then make to increase their home value when they’re ready to sell it, they would pay for it.

•   If a homeowner is going to sell their home to a family member or friend, an appraisal can help ensure that the parties involved are getting a fair price.

The cost of a home appraisal covers things like the appraiser’s training, licensing, insurance, and expertise. It also covers the time it’ll take for the appraiser to assess nearby sales and market trends as well as conduct a visual inspection.

You’re paying for the appraisal report (more on that in a minute), which will show how the appraiser came to their conclusion on the price and information about your home.

At the end of the appraisal, if it comes up lower than the amount for which you want to refinance or sell it, then you may need to work out a new deal with your lender or purchasing party. That topic is explored in more detail below.

What Is the Home Appraisal Process?

The appraisal process may seem complicated, and you may wonder about how long a home appraisal will take and how deeply a home will be scrutinized. Fortunately, trained appraisers will be able to explain and guide you through every step. But it’s worthwhile to keep reading so you can be ready and prepare a bit. Some points to know:

•   Generally, if a home is being sold, the appraisal happens after an offer on a house is accepted and within a week after an inspector has toured the home. Sellers have the option, should they wish to pay for it, to do a pre-listing appraisal so they have more information and are better prepared for negotiations.

•   In most cases, the mortgage lender will seek out a third-party appraisal management company to come up with an objective analysis of the home and the appraisal estimate. The lender will determine the cost of the home appraisal, with the borrower usually being responsible for covering the expense.

Next, how long does a home appraisal take? The actual on-premises inspection appraisal can take between one and three hours, depending on how big and complex the home is. Here’s how it typically goes:

•   The appraiser will usually bring a form to collect information about the home including things like measurements, nearby housing trends, the demographics of the neighborhood, the condition of your home, and how it compares to other properties in your area. (Some of this is research the appraiser will do back at their desk.)

•   The appraiser will also review things like the home’s location, quality of construction, parking situation, exterior condition, its age, its structure, the quality of the siding and gutters, and the square footage.

•   They will also research the appliances and mechanical systems, health and safety factors, the number of bedrooms and bathrooms, and the code compliance throughout.

•   The appraiser will usually take photos of the home as well as make notes. If you are the homeowner, try to avoid getting in the way when the appraiser is taking photos or interrupting them while they’re working.

•   The appraiser may ask questions about what has been done with the home to get a more accurate report. If the homeowner doesn’t want to be there for the appraisal, the real estate agent you’re working with can fill in to answer questions that may come up during the appraisal.

After the appraiser finishes, they’ll put together a report. This involves research into pricing and home values in your area, as well as prevailing market trends. The appraiser may need to check that you had permits to make upgrades, which could delay the process. Typically, however, the finished product is delivered within a week to 10 days.

The report is usually about 10 pages long, but it could be longer if a property is large or complex. It will show details about the home as well as local properties that are similar to it. Here’s how its content could impact your sale:

•   If the appraised value is around the same price as listed, then the sale could close shortly after that.

•   If it’s lower than expected, you have what’s known as an appraisal gap, and it may be necessary to get in touch with the lender to see if a mortgage will be approved. Keep reading for more details on this scenario.

Recommended: Refinance Your Mortgage and Save

What If an Appraisal Comes in Low?

If the appraisal comes in low versus what you think your home’s value is, you likely want to dispute that in some way. One option could be to print out a list of similar homes in the community and show that they were valued at a higher price than your home. You may have the option to appeal the appraisal, but note you’ll likely need to support your argument and the appraiser may not change their appraisal. If you are working with a Realtor, they may be able to provide examples of comparable homes being of higher value.

Each lender may have different criteria for formally disputing an appraisal, so should there be an issue, contact the lender to review their policies. In most cases, only the lender can request a second appraisal.

What if the appraisal is low but you don’t want to dispute it? In this case, if you might negotiate with the buyer, seller, or lender. They may be flexible on the price; all you have to do is ask.

Recommended: Track the value of your home

Home Appraisal Checklist

Before getting a home appraised, there are a few things you can do to help the process go smoothly.

1.    Declutter. While messiness shouldn’t impact the value of your home, if you get rid of clutter (perhaps donate to a local thrift shop), the appraiser can do their job more easily and quickly.

2.    Clean. Thoroughly clean the inside and outside of the home, including the yard. Break out the cleaning supplies or hire a professional cleaning team. It can improve the overall impression of a home’s condition.

3.    Make minor repairs. It’s also a good idea to repair any cracks in the wall, paint over paint that is peeling, and make any other visual repairs that may need attention. Making some common home repairs may cost a little money, but it’s preferable to having a long list of things flagged in the appraiser’s report.

4.    Check fixtures and appliances. Test the lights, faucets, ceiling fans, and security system, as well as confirming that the windows and doors open and close easily. Run appliances like the oven and dishwasher as well to guarantee there are no problems.

5.    Think curb appeal. The exterior of your home is among the factors that affect property value. Consider trimming hedges, getting rid of cobwebs, cleaning the gutters, pulling weeds, and mowing the lawn. Adding plants or flowers could help, too.

   Worth noting: Since the appraiser will be walking outside, avoid watering the grass on the day of the appraisal. This can help avoid mud or dirt being tracked through the house.

6.    Plan for pets. If you have pets, consider putting them in a designated room or taking them to a family member or friend’s home during the appraisal.

7.    Wrangle upgrade info. If possible, make a list of all the upgrades that have been completed on the home and attach permits and receipts detailing how much it all cost.

The Takeaway

Whether you’re buying, selling, or refinancing a home, a home appraisal is a key part of the process. Knowing what to expect can help ensure the process goes as smoothly as possible. It’s also a good idea to understand the factors that go into an appraisal so you can be prepared if the results are not in the range expected.

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 will fail a home appraisal?

Deferred maintenance is one major factor that can cause a home appraisal to fail to come in at the desired value. The longer the list of outdated or broken systems or appliances, the more likely the appraiser is to consider the house of lesser value. Or it could be due to the local market: If home sales are declining in value in your area, that could cause your number to go down as well.

How should I prepare for a home appraisal?

If you’re hoping to buy the house, you simply sit back and let the appraiser do their job. If you are the seller, you can prepare for a home appraisal by cleaning up your property and making whatever repairs are required. These moves can both make the process go more smoothly and possibly enhance the home’s value.

Does messiness affect a home appraisal?

A messy or cluttered house should not impact a home appraisal. Licensed appraisers are trained to look past such issues and focus on the house, not its contents. That said, if your property is untended and in rough condition, with peeling paint or overgrown landscaping, for example, that can take the home’s value down a notch.

About the author

Kylie Ora Lobell

Kylie Ora Lobell is a personal finance writer who covers topics such as credit cards, loans, investing, and budgeting. She has worked for major brands such as Mastercard and Visa, and her work has been featured by MoneyGeek, Slickdeals, TaxAct, and LegalZoom. Read full bio.

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.

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

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

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

•   What is an HOA, or homeowners association

•   How do HOAs work

•   How much are HOA dues

•   What are the pros and cons of HOAs

•   How will HOA fees impact your costs as a homeowner

What Is an HOA (Homeowners Association)?

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

•   Landscaping and maintenance of walkways and the like

•   Pest control

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

•   Garbage pickup

•   Parking

•   Security

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

Recommended: Condo vs. Townhouse: 9 Major Differences

How Does an HOA Work?

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

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

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

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

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

How Common Are HOAs?

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

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

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

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

As you see, HOAs are quite popular.

What Is an HOA Fee?

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

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

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

When Considering an HOA Property

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

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

Questions to investigate can include:

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

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

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

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

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

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

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

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

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

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

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

Recommended: Mortgage Servicing: Everything You Need to Know

Pros vs Cons of HOAs

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

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

•   Enhanced quality of life and property values.

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

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

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

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

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

Can You Afford to Buy into an HOA?

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

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

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

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

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

What to Know About Mortgages and HOAs

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

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

•   How old the project is

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

•   How many units exist in the project

•   How many units are occupied

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

•   How much HOA fees are

•   The amount of insurance on the project

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

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

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

The Takeaway

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

FAQ

Why do HOAs exist?

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

How much are HOA fees?

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

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

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

SOHL-Q324-051

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

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

Popular Midwest First Time Home Buyer Programs

Ohio

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

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

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

💡 Learn about Ohio first-time homebuyer programs

Michigan

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

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

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

💡 Learn about Michigan first-time homebuyer programs

Indiana

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

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

💡 Learn about Indiana first-time homebuyer programs

Wisconsin

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

Recommended: Guide to Choosing a Mortgage Term

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

💡 Learn about Wisconsin first-time homebuyer programs

Illinois

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

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

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

💡 Learn about Illinois first-time homebuyer programs

Minnesota

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

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

💡 Learn about Minnesota first-time homebuyer programs

Iowa

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

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

💡 Learn about Iowa first-time homebuyer programs

Missouri

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

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

💡 Learn about Missouri first-time homebuyer programs

North Dakota

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

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

💡 Learn about North Dakota first-time homebuyer programs

South Dakota

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

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

💡 Learn about South Dakota first-time homebuyer programs

Nebraska

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

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

💡 Learn about Nebraska first-time homebuyer programs

Kansas

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

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

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

💡 Learn about Kansas first-time homebuyer programs

The Takeaway

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

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

Photo credit: iStock/Nicholas Smith

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

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

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

Despite what the name might suggest, a homestead exemption isn’t some kind of dusty old prospector or settler law. Many states have these statutes on the books; they are designed to protect a primary residence from creditors in a bankruptcy filing.

If the Smiths file a Chapter 7 bankruptcy, how much equity they can protect with an exemption will be one of the factors determining whether they will be able to keep their home.

In a Chapter 13 bankruptcy, they won’t lose their home, but they will have to pay creditors an amount equal to the value of the property they can’t protect with an exemption, or their disposable income, whichever is more.
Before declaring bankruptcy, it’s best to consider the alternatives.

This guide will provide an overview of homestead exemptions as applied to bankruptcy, state by state.

What Is Homestead Exemption?

If you’re wondering what a homestead exemption is, it’s a provision in a state’s law that can legally protect a home from creditors in situations such as declaring bankruptcy or enduring the death of a homeowner’s spouse.

In these ways, a homestead exemption can both literally provide you with shelter (a roof over your head) and protection financially, possibly avoiding a situation in which you must lose your residence. That said, this exemption will not prevent foreclosure if a homeowner defaults on their mortgage.

You may be curious about what is the Homestead Act and if it’s the same thing as homestead exemption. They are two different things: The Homestead Act was an 1862 law that granted 160 acres of Western land in the U.S. to anyone who promised to farm it. It was designed to settle the West and drive economic growth.

What States Have a Homestead Exemption?

It’s easier to name the states that don’t have a homestead exemption than those that do since the vast majority of them offer this protection.

Currently, the only states without specific homestead exemptions are New Jersey and Pennsylvania. If you live in one of those states, then you have an idea of where you stand on potential shields with homestead exemptions — although other state and even federal homestead exemption provisions may potentially assist anyone, in any state.

If you live in any of the other 48 states, know that there are many more asterisks to hunt for, depending on your situation and financial plans.

Even if you live in a state that offers homestead exemptions, you may want to find ways to save money on your mortgage. These strategies, such as refinancing a home loan or requesting a new tax assessment, can help you weather financial storms by reducing your monthly payments.

Recommended: Understanding Bankruptcy: Is It Ever the Right Option?

Which State Has the Best Homestead Exemption?

It is true that some states are more favorable than others for seeking the exemption. But no state is literally “best” to homestead in. Many individual factors are worth weighing in your assessment of what — and where — is advantageous.

Before reading the following, an asterisk: Because homestead exemptions are protections for primary residences, you cannot claim an exemption on an investment property or vacation home.

Some states allow bankruptcy filers to use federal bankruptcy exemptions instead of the state exemptions.

The federal homestead exemption amount is calculated every three years. For the period from April 1, 2022, to March 31, 2025, it allows you to protect up to $27,900 of the equity in your home. In cases where you and your spouse file taxes separately, do not live together, maintain separate homesteads, or (according to at least one court) do not have a direct financial connection with each other, each spouse can claim a separate homestead, up to the amount allowed by an individual.

Also, most states allow a “wildcard” exemption, which allows you to protect any kind of property from bankruptcy proceedings. This can be of particular help if one or more of a debtor’s other exemptions falls short of protecting their equity. A wildcard exemption amount can be divided among multiple items.

As of April 1, 2022, the federal wildcard exemption is $1,475, plus up to $13,950 of any part of the federal homestead exemption that has not been used.

Since there’s so much variability in local, regional, and state codes and how they define the homestead exemption, it’s wise to consult local authorities or websites detailing the law’s specifics when you are in a situation that may trigger these laws.

Here’s a rundown of what you might call homestead states that offer some of the strongest protections via exemptions. “Strongest” here is being interpreted as either affordances for high exemptions or greater flexibilities in the law — but other factors, such as cost of living, should also be a consideration:

1. California. California has two systems for the homestead exemption. Under one system, homeowners can exempt up to $600,000 of equity in a house. In the other system, they can exempt up to $31,950 of home equity. Determining what you can access requires research and/or legal counsel.

2. Florida. Under the Florida exemption system “homeowners may exempt an unlimited amount of value in their home or other property covered by the homestead exemption. However, the property cannot be larger than half an acre in a municipality or 160 acres elsewhere.” The exemption can also be claimed by the spouse or children of a deceased owner.

3. Iowa. An unlimited value in one home or a one-unit apartment can be sought in protection. The property must be in a city or town and is limited to one-half acre or 40 acres elsewhere.

4. Kansas. An unlimited amount of value can be sought in protection, but homeowners are limited in the amount of land they can protect. Homeowners can protect up to 1 acre of property if they live within city limits or up to 160 acres of farmland.

5. Minnesota. You can protect up to $450,000 of equity in your home and land or up to $1,125,000 of equity if your land (up to 160 acres) is used for agricultural purposes.

6. Oklahoma. Residents can exempt the entire value of their homes, but the homestead can’t be larger than a half acre if you live in a city, town, or village or up to 160 acres if you live elsewhere. (If you use more than 25% of the total square footage of your property for business, your exemption is limited to $5,000.)

7. Rhode Island. The exemption applies for up to $500,000 of equity.

8. South Dakota. If your home is less than 1 acre in a town or 160 acres in any other type of area, all of your equity is exempt.

9. Texas. For residences on 10 acres or less in a city, town, or village or 100 acres or less in the country, Texas offers an unlimited homestead exemption.

10. Washington. This state’s generous homestead exemption varies depending on the county the homeowner lives in, from $172,900 in Ferry to $729,600 in King County, where Seattle is.

Recommended: Getting Approved for a Personal Loan After Bankruptcy

Homestead Exemptions in Other States

Here’s all the rest of the states and what homestead exemptions they offer:

1. Alabama. The Alabama Department of Revenue indicates that at the state level, homestead exemptions have a maximum value of $16,450. It only applies on land area that is not more than 160 acres.

2. Alaska. Homeowners may exempt up to $72,900 of their home or other property covered by the homestead exemption.

3. Arizona. Homeowners can exempt up to $250,000 for a house and the land it’s on, a cooperative or condominium, a mobile home and the land it’s on, provided the person lives in the dwelling.

4. Arkansas. You can seek an unlimited amount of equity in 80 rural acres or one-quarter of an urban acre.

5. Colorado. Up to $75,000 of equity in a home or other property, such as a mobile home, is protected. The amount increases to $105,000 if the homeowner, spouse, or dependent is disabled or 60 or older.

6. Connecticut. The state of Connecticut protects up to $75,000 of equity in real property, a co-op, or a manufactured home occupied at the time of filing bankruptcy. The exemption rises to $125,000 if a creditor is collecting for hospital costs.

7. Delaware. Exempts up to $125,000 in real property or a manufactured home that was used as a principal residence.

8. Georgia. Homeowners may exempt up to $21,500 of their home or other property covered by the exemption (the amount increases to $43,000 for married filers). They can also apply $10,000 of any unused portion of the exemption to another property they own — a “wildcard” exemption.

9. Hawaii. If you’re the head of a household or over 65, you can exempt up to $30,000 of equity. If you’re not the head of the family, you may protect up to $20,000 of equity in your home.

10. Idaho. A filer can protect up to $175,000 in equity in a home or mobile home.

11. Illinois. Protects up to $15,000 in equity in your home, which includes a farm, mobile home, lot with buildings, condominium, or cooperative.

Recommended: How Often Can You Refinance Your Home?

12. Indiana. A debtor can exempt up to $19,300 in real estate or personal property used as a residence. In addition, if you are married and filing jointly, that figure rises to $38,900.

13. Kentucky. Up to $5,000 of equity can be claimed.

14. Louisiana. Homeowners are allowed to exempt up to $35,000 of home equity, and more if their debts were due to what’s considered a catastrophic or terminal illness or injury.

15. Maine. Up to $80,000 of equity in property used as a residence can be claimed. The amount can be increased to $160,000 in equity if you have a minor dependent residing with you, or if you are 60 or older or disabled.

16. Maryland. Exempts residential property value up to $25,150 (husband and wife may not double).

17. Massachusetts. The state automatically protects up to $125,000 in home equity, and up to $500,000 for those who file and receive the increased exemption (this amount also applies to the elderly or disabled).

18. Michigan. Each homeowner and their dependents can exempt up to $40,475 in a property covered by the homestead exemption. If the homeowner is 65 or older or disabled, the exemption amount increases to $60,725.

19. Mississippi. An exemption of up to $75,000 of equity in the real estate you live in can be claimed, as long as the property is less than 160 acres.

20. Missouri. You can exempt up to $15,000 of equity in the real estate in which you live or will live, and spouses who file a joint bankruptcy can double the exemption.

21. Montana. Up to $350,000 in equity can be protected as applied to up to 320 farm acres, a quarter of a city acre, or one residential acre outside a municipality.

22. Nebraska. Up to $60,000 can be protected on a home, provided the owner is either a head of household, married, or over age 65, and the property does not exceed 160 acres.

Recommended: How Much Does It Cost to Refinance a Mortgage?

23. Nevada. Up to $605,000 in equity in a home can be claimed.

24. New Hampshire. You can protect up to $120,000 in equity.

25. New Mexico. Up to $60,000 of equity in your home can be protected; that increases to $120,000 being available to spouses who co-own property.

26. New York. The homestead exemption amount varies greatly depending on the county. If the property is in the counties of Kings, Queens, New York, Bronx, Richmond, Nassau, Suffolk, Rockland, Westchester, or Putnam, the exemption is $179,950. If the property is in the counties of Dutchess, Albany, Columbia, Orange, Saratoga, or Ulster, the exemption amount is $149,975. For any other county in the state, the exemption amount is $89,975.

27. North Carolina. Homeowners may exempt up to $35,000 of their home or other personal property. Homeowners who are 65 or older whose spouse is deceased may exempt up to $60,000, provided the property was previously owned by the debtor as a tenant by the entirety or as a joint tenant with rights of survivorship.

28. North Dakota. Homeowners can protect up to $100,000 of equity in their home when declaring bankruptcy.

29. Ohio. The state allows for the protection of up to $145,425 of equity as part of the homestead exemption. Spouses who file a joint bankruptcy may double that amount.

30. Oregon. A property owner may be exempt up to $40,000. Married couples, however, may be exempt up to $50,000.

31. South Carolina. The state’s law protects up to $63,250 in equity in a home or real estate used as a residence, with spouses who file a joint bankruptcy being able to double the exemption.

32. Tennessee. Homeowners can exempt up to $5,000 of equity — and that amount goes up to $7,500 for joint owners and $25,000 if there’s at least one minor child who is a dependent. People 62 and older can exempt up to $12,500 of equity in their home—$20,000 if married, and $25,000 if the spouse is also 62 or older.

33. Utah. Homeowners may exempt up to $43,300 to protect their home, provided it is their primary personal residence.

34. Vermont. An exemption up to $125,000 of the equity in a home, condo, or mobile home can be claimed; it can’t be doubled, however, in cases of joint bankruptcy filing.

35. Virginia. This state allows for protection of $5,000 of real estate or personal property as a “wildcard” exemption. That number doubles to $10,000 if the individual is age 65 or older.

36. West Virginia. Homeowners may exempt up to $35,000 of their home or other property. That figure increases to $70,000 if you are married, you and your spouse both own the property, and you file bankruptcy together.

37. Wisconsin. A single person can protect up to $75,000 of equity in a home; spouses can double the amount to $150,000.

38. Wyoming. In this state, up to $20,000 of equity in a home can be shielded from bankruptcy. This can double if you are married, you and your partner own the property together, and you file for bankruptcy jointly.

Still with us? If you don’t see a state listed above, that means it’s one of the two (New Jersey or Pennsylvania) that doesn’t offer any homestead exemptions for use in a bankruptcy filing.

The Takeaway

Homestead exemption rules can help protect your home in instances of a bankruptcy filing and can be very helpful during a difficult time. These guidelines differ greatly by state, but are worth investigating. If you can’t keep your head above financial water, these exemptions may allow you to keep your home.

Refinancing a mortgage may also provide some relief to a struggling homeowner. In addition to offering an array of mortgage loans, SoFi also can help you refinance at competitive rates and with a hassle-free process.

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
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.

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

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

What Is Mortgage Preapproval?

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

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

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

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

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

Mortgage Preapproval Process

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

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

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

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

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

How Long Does It Take to Get Preapproved?

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

Mortgage Preapproval Letter

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

How Long Does Mortgage Preapproval Last?

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

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

Recommended: How Mortgage APR Works

Mortgage Prequalification vs. Mortgage Preapproval

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

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

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

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

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

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

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

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

Recommended: What Is Considered a Bad Credit Score?

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

Estimate Your Mortgage Payment

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

What Should I Do If My Mortgage Preapproval Expires?

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

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

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

Finalizing Your Mortgage

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

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

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

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

The Takeaway

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

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

FAQ

How does mortgage preapproval affect my credit score?

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

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

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

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

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

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