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Conventional loans — mortgages that are not insured by the federal government — are the most popular type of mortgage and offer affordability to homebuyers.

Private mortgage lenders originate and fund conventional loans, which are then often bought by Fannie Mae and Freddie Mac, publicly traded companies that are run under a congressional charter.

By buying and selling these mortgages, Fannie and Freddie help to ensure a reliable flow of mortgage funding.

Requirements for Conventional Loans

It can be confusing to know how to qualify for a mortgage.

Just realize, for one thing, that a higher credit score is usually required for a conventional home loan than for an FHA loan backed by the Federal Housing Administration, a type popular among first-time homebuyers.

Here are factors a lender will consider when sizing you up for a conventional loan.

Credit Score

You’ll usually need a FICO credit score of at least 620 for a fixed-rate or adjustable-rate mortgage.

The FICO score range of 300 to 850 is carved into these categories:

•   Exceptional: 800 to 850

•   Very Good: 740 to 799

•   Good: 670 to 739

•   Fair: 580 to 669

•   Poor: 300 to 579

In general, the higher your credit score, the better the interest rate you’ll be offered.

Down Payment

Putting 20% down is desirable because it means you can avoid paying for PMI, or private mortgage insurance, which covers the lender in case of loan default.

But many buyers don’t put 20% down. The median down payment on a home for first-time buyers is 10%, according to a recent study by the National Association of Realtors®.

Conventional loans require as little as 3% down for first-time homebuyers, and the down payment can be funded by a gift from a close relative; a spouse, fiancé or domestic partner; a buyer’s employer or church; or a nonprofit or public agency. The gift may require a gift letter for the mortgage.

Just keep in mind that the smaller the down payment, the higher your monthly payments are likely to be, and PMI may come along for the ride until you reach 20% equity.

Debt-to-Income Ratio

Your debt-to-income (DTI) ratio helps a lender understand your ongoing monthly debt obligations relative to your gross monthly income.

To calculate back-end DTI:

1.    Add up your monthly bills (but do not include groceries, utilities, cellphone bill, car insurance, and health insurance).

2.    Divide the total by your pretax monthly income.

3.    Multiply by 100 to convert the number to a percentage.

In general, lenders like to see a DTI ratio of 36% but will accept 43%.

The Fannie Mae HomeReady® loan, for lower-income borrowers, may allow a DTI ratio of up to 50%.

In any case, the lower your DTI ratio, the more likely you are to qualify for a mortgage and possibly better terms.

Loan-to-Value Ratio

The loan-to-value ratio (LTV) is the amount of the mortgage you are applying for compared with the home value. The higher the down payment, the lower the LTV ratio.

Fannie Mae typically sets LTV limits at 97% for a fixed-rate mortgage for a principal residence (think: 3% down) and 85% for a fixed-rate or adjustable-rate loan for a one-unit investment property.

When LTV exceeds 80% on a conforming loan, PMI will likely apply, although some borrowers employ a piggyback loan to avoid mortgage insurance.

Conventional Conforming Loan Limits

Many loans are both conventional and conforming — meaning they meet the guidelines of secondary mortgage market powerhouses Fannie Mae and Freddie Mac, which buy such mortgages and often package them into securities for investors.

Conventional conforming loans fall below limits set by the Federal Housing Finance Agency (FHFA) every year. Staying under a conforming loan limit often equates to a lower-cost mortgage because the loan can be acquired by Fannie and Freddie.

The conforming loan limits for 2026 in many counties in the contiguous states, Washington, D.C., and Puerto Rico rose with market prices:

•   One unit: $832,750

•   Two units: $1,066,250

•   Three units: $1,288,800

•   Four units: $1,601,750

In high-cost areas like Alaska, Hawaii, Guam, and the U.S. Virgin Islands, the 2026 conforming loan limits are:

•   One unit: $1,249,125

•   Two units: $1,599,375

•   Three units: $1,933,200

•   Four units: $2,402,625

If you’re curious about your county’s specific conforming loan limits, you can check out this FHFA guide.

Nonconforming Loans

Word games, anyone? Nonconforming loans are simply mortgages that do not meet Fannie and Freddie standards for purchase. They usually take the form of jumbo loans and government-backed loans.

A homebuyer or refinancer who needs a mortgage beyond the FHFA limits can seek a jumbo mortgage loan. A jumbo loan is still a conventional loan if it’s not backed by a government agency; it’s just considered a “nonconforming” loan.

FHA, VA, and USDA mortgages — those backed by the Federal Housing Administration, Department of Veterans Affairs, and the U.S. Department of Agriculture — are also nonconforming loans.

Nonconforming mortgage rates for jumbo loans may be higher because the loans carry greater risk for lenders, but when the nonconforming loan is backed by the government, its rate might skew lower than conventional conforming rates.

The Takeaway

Conventional loan requirements are good to know when you’re looking at the most popular type of mortgage around. Would-be homebuyers will want to make sure their credit score, debt-to-income ratio, and down payment numbers are lined up as favorably as possible before pursuing their dream property.

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

Are there any drawbacks to a conventional loan?

The main drawback to a conventional loan is that you will need to make some type of down payment on the property. It doesn’t need to be the 20% down payment that was common in decades past. But even a low down payment of, say, 3.5% could add up to tens of thousands of dollars given today’s home prices.

What’s the main reason I might not qualify for a conventional loan?

The most common reason someone might not qualify for a conventional home loan is usually related to credit — perhaps the applicant has a credit score below 620, or maybe there is some other significant warning sign on the credit report, such as a history of delinquencies or bankruptcy.

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*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.
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. Third Party Trademarks: Certified Financial Planner Board of Standards Center for Financial Planning, Inc. owns and licenses the certification marks CFP®, CERTIFIED FINANCIAL PLANNER®
Checking Your Rates: To check the rates and terms you may qualify for, SoFi conducts a soft credit pull that will not affect your credit score. However, if you choose a product and continue your application, we will request your full credit report from one or more consumer reporting agencies, which is considered a hard credit pull and may affect your credit.

SOHL-Q126-022

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There are two basic types of income: earned and unearned. Earned income is the money you make from working, and unearned income is money you receive that isn’t tied to a business or job.

The difference between these two types of income is critical when saving for retirement and paying taxes. Here’s what you need to know about each of them as well as how they affect your finances.

What Is Unearned Income?

Unearned income is a type of passive income. It’s money you make without working or performing some kind of professional service. For example, money you receive from investing, such as dividends, interest, and capital gains, is unearned income.

Other types of unearned income include:

•   Retirement account distributions from a 401(k), pension, or annuity

•   Money you received in unemployment benefits

•   Taxable social security benefits

•   Money received from the cancellation of debt (such as student loans that are forgiven)

•   Distributions of any unearned income from a trust

•   Alimony payments

•   Gambling and lottery winnings

Dividends from investments in the stock market and interest are two of the most common forms of unearned income. Dividends are paid when a company shares a portion of its profits with stockholders. They may be paid monthly, quarterly, semiannually, or annually.

Interest is usually generated from interest-bearing accounts. These include savings, checking, and money market accounts as well as certificates of deposit (CDs).

How Is Earned Income Different From Unearned Income?

Earned income is the money you make from a job. Any money you earn from an employer, including wages, fees, and tips from which income taxes are withheld, counts as earned income.

Those wages still count as earned income if you’re part of the freelance economy and the companies you work for don’t withhold taxes. They could include wages earned for professional or creative services, driving for a rideshare service, or running errands.

Money you make from self-employment — if you own your own business, for example — also counts as earned income, as does money you earn from a side hustle.

Other types of earned income include benefits from a union strike, disability benefits you receive before you reach full retirement age, and nontaxable combat pay. This guide can help you learn about all the different types of income.

You can keep tabs on all the types of income you have by tracking your checking, savings, investment, and retirement accounts in one place with an online money tracker. It allows you to organize your accounts on a single dashboard and monitor your credit score and budget to achieve your financial goals.

How Income Types Affect Taxes

All earned income is taxed at your usual income tax rate. Taxes on unearned income are more complicated and depend on the type of unearned income you have, including the following.

Interest

Interest, which is unearned income from financial instruments such as bank accounts and CDs, is taxed the same as earned income.

Dividends

Dividends from investments fall into two categories: qualified and nonqualified. Generally, qualified dividends are those paid to you by a company in the U.S. or a qualified foreign company and are taxed at a lower rate. Nonqualified dividends don’t meet IRS requirements to qualify for the lower tax rate and are taxed at the same rate as ordinary income.

Capital Gains

Investments that are sold at a profit are subject to capital gains taxes. If you held the investment for less than a year, your earnings are subject to short-term capital gains rates, which are equal to your regular income tax rate. If you kept the investment for a year or more, it’s subject to long-term capital gains rates, which means it will be taxed at 0%, 15%, or 20%, depending on your taxable income and filing status. The higher your taxable income is, the higher your rate will be.

Social Security

If your income is more than $25,000 a year for individuals or $32,000 a year for married couples filing jointly, you will pay federal income tax on a portion of your Social Security benefits. You’ll be taxed on up to 50% of your benefits if your income is between $25,000 and $34,000 for an individual or $32,000 to $44,000 for a married couple, and you’ll be taxed on up to 85% of your benefit if your income is more than that.

Alimony

As a result of the Tax Cuts and Jobs Act of 2017, alimony payments that are part of divorce agreements made after January 1, 2019, are not taxable by the person who is paying the alimony, nor are they taxable for the person receiving the alimony.

Gambling Winnings

Money earned from gambling, including winnings from casinos, lotteries, raffles, and horse races, is fully taxable. This applies to cash and to prizes such as vacations and cars, which are taxed at their fair market value.

Debt Cancellation

If you have a debt canceled or forgiven for less than the amount you were required to pay, the canceled debt is taxable, and you must report it on your tax return. Starting in 2026, this includes the forgiven amount of certain federal student loans. There are exceptions: Public Service Loan Forgiveness, Teacher Loan Forgiveness, and Death and Disability Discharge are still tax-free. Debt payoff planning can help you resolve any outstanding debts you may have.

How Earned vs. Unearned Income Affects Retirement Savings

Retirement accounts, including 401(k)s, IRAs, and the Roth versions of both, provide tax advantages that help boost the amount that you can save.

For example, 401(k) contributions are made with pre-tax dollars, which can then be invested in the account. The investments are allowed to grow tax-deferred until withdrawals are made in retirement, at which point they become subject to income tax. In contrast, your contributions to Roth accounts are made with after-tax dollars. These increase tax-free, and withdrawals made in retirement are not subject to income tax.

Retirement accounts can only be funded with earned income. You can’t use unearned sources of income to make contributions.

There are certain exceptions to this rule. If you’re married and you file a joint return with your spouse and you don’t have taxable compensation, you may be able to contribute to an IRA as long as your spouse did have taxable compensation.

The Takeaway

The difference between earned income and unearned income is an important distinction, especially when it comes to paying your taxes. Unearned income, which is income you make not from a job but through other means, such as investments, can be taxed at different rates, depending on its type. Make sure you understand yours and their tax implications. Doing so can significantly impact how you save for your future.

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

What is the difference between earned and unearned income?

Earned income is cash or in-kind benefits people receive in exchange for work or service, including employment and self-employment. Unearned income is cash or in-kind benefits received without being required to perform work or services.

Why do I need to know the difference between earned and unearned income?

It’s important to understand the difference between earned and unearned income because the two may be taxed differently. Also, in most cases, you must use earned income to fund your retirement accounts.

What is an example of unearned income?

Unearned income is money you receive without working for it. Interest, such as that from a bank account, and dividend payments are two of the most common types of unearned income.

Do I have to pay taxes on unearned income?

The answer is yes. Though it’s not subject to employment taxes (such as Social Security and Medicare, and, in most cases, payroll taxes), unearned income is generally treated as taxable income.

How does being a freelancer affect my taxes?

According to the IRS, a self-employed individual is generally required to file an annual income tax return and pay estimated taxes quarterly. You have to file an income tax return if your net earnings from self-employment were $400 or more. If your net earnings from self-employment were less than $400, you still have to file an income tax return if you meet any other filing requirement.

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*Terms and conditions apply. This offer is only available to new SoFi users without existing SoFi accounts. It is non-transferable. One offer per person. To receive the rewards points offer, you must successfully complete setting up Credit Score Monitoring. Rewards points may only be redeemed towards active SoFi accounts, such as your SoFi Checking or Savings account, subject to program terms that may be found here: SoFi Member Rewards Terms and Conditions. SoFi reserves the right to modify or discontinue this offer at any time without notice.

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.

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

SORL-Q126-001

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With the cost of higher education out of reach for many, more young people are flocking to high-paying trade jobs that don’t require a bachelor’s degree. Many of these jobs pay well, but they are typically in high demand due to unpredictable job markets and economic conditions.

What Is a Trade Job?

A trade job is a profession that doesn’t require a college degree, but rather a specialized skill or skill set obtained through a trade school or on-the-job experience and training. Popular trade jobs include construction managers, technicians, dental hygienists, mechanics, commercial pilots, and real estate brokers.

Pros of a Skilled Trade Job

A skilled trade job can be an attractive career path for a couple of reasons:

Educational Requirements

Unlike careers that require a college degree — which can cost hundreds of thousands of dollars and take four years to complete — trade jobs can often be obtained with less than two years of specialized education and at a fraction of the cost. Some trade jobs do not require any supplemental education at all, allowing trade workers to earn a living without being saddled by student loan debt.

Job Security

Many trade jobs are in high demand due to the specialized knowledge and skilled physical labor needed to perform them. They can also have a lower risk of outsourcing or automation because they require a human to be physically present.

Recommended: Is the Average College Tuition Rising?

Cons of a Skilled Trade Job

On the other hand, there are downsides to some trade jobs, including:

Physical Demands

Trade jobs involving physical labor, such as construction workers and mechanics, can take a toll over the course of a long career.

Potential Dangers

Certain trade jobs have high injury and mortality rates, particularly those involving the operation of heavy machinery or working in hazardous environments.

25 Trade Jobs That Make the Most Money

Despite the conventional wisdom that a bachelor’s or master’s degree is required to earn a good salary, trade jobs can pay very well. In fact, some of the highest-paying jobs in certain states are skilled trades.

Here are 25 of the highest-paying trade jobs in the last several years, according to data from the U.S. Bureau of Labor Statistics:

1. Transportation, Storage, and Distribution Manager

•   2024 Median Annual Salary: $102,010

•   Requirements: High school diploma or equivalent, 5+ years of work experience

•   Job Description: Supervise and coordinate the transportation, storage, testing, and shipping of materials or products in accordance with government regulations.

•   Duties:

◦   Supervising workers involved in receiving or shipping

◦   Inspecting warehouse and equipment safety

◦   Analyzing logistics and collaborating with other departments

2. Elevator/Escalator Installers and Repairer

•   2024 Median Annual Salary: $106,580

•   Requirements: High school diploma or equivalent, apprenticeship, license (most states)

•   Job Description: Assemble, install, maintain, and fix elevators, escalators, chairlifts and other moving walkways and equipment. In addition to understanding the mechanics and components of each system, they are typically involved in the physical repair or replacement of parts, as well as testing equipment to ensure it meets specifications.

•   Duties:

◦   Assembling elevators, escalators, and similar units

◦   Conducting preventative maintenance and inspections

◦   Maintaining service records

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3. Nuclear Power Reactor Operator

•   2023 Median Annual Salary: $120,350

•   Requirements: High school diploma or equivalent, long-term on-the-job training, U.S. Nuclear Regulatory Commission license

•   Job Description: Control and maintain the systems that generate and distribute power to businesses, homes, or factories. This can include monitoring and adjusting control rods to moderate the amount of electricity a plant generates, controlling cooling systems, and implementing safety procedures.

•   Duties:

◦   Monitoring voltage and electricity grids

◦   Adjusting control rods and electricity output

◦   Recording systems data

4. Radiation Therapist

•   2023 Median Annual Salary: $98,300

•   Requirements: Associate degree (preferred) or certificate, state and national license

•   Job Description: Administer radiation therapy to patients with cancer.

•   Duties:

◦   Explaining treatment plans to patients

◦   Calibrating and operating radiation machinery

◦   Monitoring patients and keeping records of treatment

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5. Subway and Streetcar Operator

•   2023 Median Annual Salary: $84,270

•   Requirements: High school diploma or equivalent, moderate on-the-job training, local transit training program (varies by location)

•   Job Description: Operate subways and aboveground street cars, ensuring passengers safely move from one location to another.

•   Duties:

◦   Operating train controls

◦   Making announcements and providing verbal directions to passengers

◦   Ensuring passenger safety

6. Nuclear Medicine Technologist

•   2024 Median Annual Salary: $97,020

•   Requirements: Associate degree from an accredited nuclear medicine technology program, state license, long-term on-the-job training

•   Job Description: Prepare and administer radioactive drugs for imaging or treatment, typically within hospitals, medical labs, and care centers.

•   Duties:

◦   Explaining medical procedures to patients

◦   Preparing and administering drugs

◦   Maintaining and operating imaging equipment

7. Gas Plant Operator

•   2023 Median Annual Salary: $82,560

•   Requirements: High school diploma or equivalent, long-term on-the-job training

•   Job Description: Oversee the day-to-day operations of industrial power plants used by utilities, oil and gas, and manufacturing companies.

•   Duties:

◦   Maintaining equipment and machinery

◦   Ensuring compliance with safety and regulatory standards

◦   Supervising employees and contractors at the plant

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8. Dental Hygienist

•   2024 Median Annual Salary: $94,260

•   Education Requirements: Associate degree, state license

•   Job Description: Examine patients for oral diseases and provide preventative care and education about oral hygiene.

•   Duties:

◦   Taking dental x-rays

◦   Assisting dentists in providing teeth cleaning and plaque removal

◦   Educating patients about oral hygiene techniques

9. Diagnostic Medical Sonographer

•   2024 Median Annual Salary: $89,340

•   Requirements: Associate degree, state license or certification (some states)

•   Job Description: Operate sonographs to produce images of the inside of a body to assess and diagnose medical conditions.

•   Duties:

◦   Prepping and administering sonograph exams

◦   Reviewing images and test results for quality

◦   Analyzing diagnostic information and providing summaries for physicians

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10. Electrical Line Installer and Repairer

•   2024 Median Annual Salary: $92,560

•   Requirements: High school diploma or equivalent, long-term on-the-job training

•   Job Description: Install and repair cables or wires used in electrical power systems and telecommunications systems.

•   Duties:

◦   Installing, inspecting, and testing power lines and equipment

◦   Identifying defective devices, transformers, and switches

◦   Installing power lines between buildings and structures

11. Construction Manager

•   2024 Median Annual Salary: $106,980

•   Requirements: High school diploma or equivalent, 5+ years of experience

•   Job Description: Supervise and coordinate the activities of construction workers.

•   Duties:

◦   Overseeing construction projects

◦   Scheduling and supervising on-site contractors

◦   Preparing and monitoring budgets

12. Aircraft and Avionics Equipment Mechanic and Technician

•   2024 Median Annual Salary: $79,140

•   Requirements: Certificate from a Federal Aviation Administration-approved program

•   Job Description: Repair and perform maintenance on aircraft.

•   Duties:

◦   Diagnosing mechanical and electrical issues

◦   Repairing aircraft components

◦   Testing aircraft parts with diagnostic equipment

13. Boilermaker

•   2024 Median Annual Salary: $73,340

•   Requirements: High school diploma or equivalent, apprenticeship

•   Job Description: Assemble, maintain, and repair boilers, vats, and other containers used to hold liquids and gas.

•   Duties:

◦   Reading blueprints to determine where to position boiler parts

◦   Assembling boiler tankers using welding machines

◦   Cleaning boiling vats and replacing broken valves and pipes

14. Wellhead Pumper

•   2023 Median Annual Salary: $71,830

•   Requirements: High school diploma or equivalent, moderate on-the-job training

•   Job Description: Operate power pumps and equipment used to extract oil or gas from an oil field well.

•   Duties:

◦   Assembling pumps and attaching hoses to wellheads

◦   Operating pumps and monitoring flow

◦   Transferring oil to storage tanks or trucks

15. Electrical and Electronic Engineering Technologist and Technician

•   2024 Median Annual Salary: $77,180

•   Requirements: Associate degree (preferred), certificate from accredited program

•   Job Description: Assist electrical engineers with the design and development of communications equipment, computers, medical devices, and other electrical equipment.

•   Duties:

◦   Designing and assembling electrical systems

◦   Observing onsite systems placement and performance

◦   Performing quality control and identifying issues

16. Real Estate Broker and Sales Agent

•   2024 Median Annual Salary: $58,960

•   Requirements: High school diploma or equivalent, licensing exam

•   Job Description: Help clients buy, sell, or rent their properties.

•   Duties:

◦   Generating lists of properties for sale or rent and showing them to clients

◦   Advising clients on prices, mortgages, and market conditions

◦   Facilitating buyer/seller negotiations and final purchase or rental agreements

17. Respiratory Therapist

•   2024 Median Annual Salary: $80,450

•   Requirements: Associate degree

•   Job Description: Provide care for patients with respiratory issues.

•   Duties:

◦   Examining patients and recording symptoms and conditions

◦   Consulting with physicians on treatment

◦   Performing diagnostic tests

18. Construction and Building Inspector

•   2024 Median Annual Salary: $72,120

•   Requirements: High school diploma or equivalent

•   Job Description: Review building plans to ensure construction meets local and national regulations and ordinances.

•   Duties:

◦   Monitoring construction to ensure compliance

◦   Inspecting electrical and plumbing systems to ensure they are up to code

◦   Issuing violations for noncompliant work

19. Millwright

•   2023 Median Annual Salary: $62,980

•   Requirements: High school diploma or equivalent

•   Job Description: Install, dismantle, repair, reassemble, and move machinery in factories, power plants, and construction sites.

•   Duties:

◦   Repairing and replacing malfunctioning equipment

◦   Cleaning, adjusting, and calibrating new machinery

◦   Moving machinery and equipment

20. Electrician

•   2024 Median Annual Salary: $62,350

•   Requirements: High school diploma or equivalent, apprenticeship, license (most states)

•   Job Description: Install, maintain, and repair electrical power, communications, lighting, and control systems.

•   Duties:

◦   Identifying and repairing electrical problems

◦   Installing wiring and equipment for electrical systems

◦   Ensuring compliance with national and local codes

21. Plumber, Pipefitter, and Steamfitter

•   2024 Median Annual Salary: $62,970

•   Requirements: High school diploma or equivalent, apprenticeship

•   Job Description: Install and repair gas and water piping systems in homes, factories, and businesses.

•   Duties:

◦   Identifying and repairing plumbing problems

◦   Installing pipes and plumbing fixtures

◦   Cleaning drains, removing obstructions, and repairing or replacing broken pipes and fixtures

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22. Mining Roof Bolter

•   2023 Median Annual Salary: $66,660

•   Requirements: High school diploma or equivalent, moderate on-the-job training

•   Job Description: Operate machinery to install roof supporting bolts in underground mines.

•   Duties:

◦   Drilling bolt holes into roofs

◦   Performing safety checks on bolting equipment

◦   Extracting loose rock from bolting supports

23. Broadcast, Sound, and Video Technician

•   2024 Median Annual Salary: $56,600

•   Requirements: High school diploma or equivalent, moderate on-the-job training

•   Job Description: Operate and maintain electrical equipment used for television broadcasts, radio programs, live concerts, and films.

•   Duties:

◦   Setting up and operating equipment

◦   Monitoring and adjusting audio and video quality

◦   Repairing equipment and fixing recording issues

24. Heating, Air Conditioning, and Refrigeration Mechanic and Installer

•   2024 Median Annual Salary: $59,810

•   Requirements: Postsecondary nondegree award, lengthy on-the-job training

•   Job Description: Install and perform maintenance on heating, air conditioning, and refrigeration (HVACR) systems for buildings and private residences.

•   Duties:

◦   Installing, testing, and repairing HVACR systems

◦   Replacing and repairing defective parts

◦   Conducting overall system maintenance and performance improvements

25. Masonry Worker

•   2024 Median Annual Salary: $56,600

•   Requirements: High school diploma or equivalent, apprenticeship or on-the-job training

•   Job Description: Use bricks, concrete, and natural and manmade stones to build structures, walls, and walkways.

•   Duties:

◦   Designing blueprints and calculating materials needed

◦   Breaking and resizing materials into the required shape

◦   Aligning, constructing, and polishing finished structures

The Takeaway

Many trade jobs offer competitive pay and job security, without a significant upfront educational cost. Moreover, they provide an opportunity to make a difference by solving real-world problems. Choosing the right career path is an important step toward achieving your financial goals. It’s just as important to practice smart financial habits, such as setting spending limits, staying on top of your credit score, and establishing long-term goals.

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.

See exactly how your money comes and goes at a glance.

FAQ

What is a trade job?

A trade job does not require a college degree, but it may require other qualifications or on-the-job training.

What are the pros and cons of a trade job?

The benefits of a trade job may include a higher level of job security and not needing to have a college degree. However, trade jobs can be more physically demanding and dangerous than other professions.

What skilled trades are in demand?

According to the Bureau of Labor Statistics, wind turbine service technicians, solar photovoltaic installers, and physical therapist assistants are expected to experience the greatest job growth over the next ten years.

What are some of the best trades to learn that pay well?

Transportation managers, elevator installers, nuclear power reactor operators, and radiation therapists all earn a median salary above $80,000.

What are high-paying trade jobs that require no degree?

HVACR technicians, real estate agents, subway operators, and plumbers all pay above-average salaries and require no formal degree.

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A bear market is defined as a broad market decline of 20% or more from recent highs, which lasts for at least two months. Although bear markets make for dramatic headlines, the truth is that bull markets tend to last much longer. The average bear market typically ends within a year.

While most investors might know the difference between a bull and a bear market, it’s important to know some of the characteristics of bear markets in order to understand how different market conditions may impact your portfolio and your investment choices.

What Is the Definition of a Bear Market?

Investors and market watchers generally define a bear market as a drop of 20% or more from market highs. So, when investors refer to a bear market, it usually means that multiple broad market indexes, such as the S&P 500 Index (S&P 500), Dow Jones Industrial Average (DJIA), and others, fell by 20% or more over at least two months.

Note, though, that 20% is a somewhat arbitrary barometer, but it’s a common enough standard throughout the financial world.

The term bear market can also be used to describe a specific security. For example, when a particular stock drops 20% in a short time, it can be said that the stock has entered a bear market. Bear markets are the opposite of bull markets, the latter of which is when the market is seeing a broad increase in asset values.

Bear markets are often associated with economic recessions, although this isn’t always the case. As economic activity slows, people lose jobs, consumer spending falls, and business earnings decline. As a result, many companies may see their share prices tumble or stagnate as investors pull back.

Why Is It Called a Bear Market?

There are a variety of explanations for why “bear” and “bull” have come to describe specific market conditions. Some say a market slump is like a bear going into hibernation, versus a bull market that keeps charging upward.

The origins of the term bear market may also have come from the so-called bearskin market in the 18th century or earlier. There was a proverb that said it is unwise to sell a bear’s skin before one has caught the bear. Over time the term bearskin, and then bear, became used to describe the selling of assets.

Characteristics of a Bear Market

There are two different types of bear markets:

•   Regular bear market or cyclical bear market: The market declines and takes a few months to a year to recover.

•   Secular bear market: This type of bear market lasts longer and is driven more by long-term market trends than short-term consumer sentiment. A cyclical bear market can happen within a secular bear market.

History of Bear Markets

The most recent U.S. bear market began in June 2022, largely sparked by rising interest rates and inflation. The bear market officially ended on June 8, 2023, lasting about 248 trading days, resulting in a market drop of around 25%.

Including the most recent bear market, the S&P 500 Index posted 13 declines of more than 20% since World War II. The table below shows the S&P 500’s returns from the highest point to the lowest point in a downturn. Bear markets average a decline of 32.4%, and generally last around 355 days.

Bear markets have occurred as close together as two years and as far apart as nearly 12 years. A secular bear market refers to a longer period of lower-than-average returns; this could last 10 years or more. A secular bear market may include minor rallies, but these don’t take hold.

A cyclical bear market is more likely to last a few weeks to a few months and is more a function of market volatility.

Peak (Start)	Trough (End)	Return	Length (in days)
May 29, 1946	May 17, 1947	-28.78%	353
June 15, 1948	June 13, 1949	-20.57%	363
August 2, 1956	October 22, 1957	-21.63%	446
December 12, 1961	June 26, 1962	-27.97%	196
February 9, 1966	October 7, 1966	-22.18%	240
November 29, 1968	May 26, 1970	-36.06%	543
January 11, 1973	October 3, 1974	-48.20%	630
November 28, 1980	August 12, 1982	-27.11%	622
August 25, 1987	December 4, 1987	-33.51%	101
March 27, 2000	Sept. 21, 2001	-36.77%	545
Jan. 4, 2002	Oct. 9, 2002	-33.75%	278
October 9, 2007	Nov. 10, 2008	-51.93%	408
Jan. 6, 2009	March 9, 2009	-27.62%	62
February 19, 2020	March 23, 2020	-34%	33
June 2022	June 8, 2023	-25%	248
Average		-34%	401

Source: Seeking Alpha/Dow Jones Market Data as of January 2026

https://seekingalpha.com/article/4483348-bear-market-history

3 Examples of Bear Markets

Here are a few examples of some of the more notable bear markets in history.

The Great Depression (1929)

The Great Depression started in 1929, and lasted for years. Between 1929 and when the market bottomed-out in 1932, the stock market shed roughly 90% of its value, and didn’t fully recover for decades, until 1954.

The 2008 Financial Crisis

The 2008 financial crisis, which was a part of the Great Recession, actually started in 2007, when the global economy contracted. Its origins are complicated, but in large part trace back to mortgage-related assets and a collapse of the housing market. The resulting bear market lasted for around 17 total months, with the market recovering in March 2009 after the market lost more than half of its value.

The COVID-19 Crash (2020)

Most recently, the COVID-19 pandemic in early 2020 sparked another bear market. The market plummeted starting in late February 2020, and in all, lost 37% of its value over the next month or so. It did rebound fairly fast, though, and the market regained momentum by April.

What Causes a Bear Market?

Usually bear markets are caused by a loss of consumer, investor, and business confidence. Various factors can contribute to the loss of consumer confidence, such as changes to interest rates, global events, falling housing prices, or changes in the economy.

When the market reaches a high, people may feel that certain assets are overvalued. In that instance, people are less likely to buy those assets and more likely to start selling them, which can make prices fall.

When other investors see that prices are falling, they may anticipate that the market has reached a peak and will start declining, so they may also sell off their assets to try and profit on them before the decline. In some cases panic can set in, leading to a mass sell-off and a stock market crash (but this is rare).

Bear Markets vs Recessions: What’s the Difference?

A bear market, as noted, marks a 20% or more decline in the stock market. A recession is a broader issue related to the economy. Specifically, a recession is when the economy shrinks or contracts, and we typically don’t know that it’s happening until well after it’s started contracting (and perhaps even after it’s started growing once again). In short, bear markets have to do with stock markets, while recessions refer to negative growth of the broader economy.

What Is a Bear Market Rally

Things can get tricky if there is a bear market rally. This happens when the market goes back up for a number of days or weeks, but the rise is only temporary. Investors may think that the market decline has ended and start buying, but it may in fact continue to decline after the rally. Sometimes the market does recover and go back into a bull market, but this is hard to predict.

If the bear market continues on long enough then it becomes a recession, which can go on for months or years. That said, it’s not always the case that a bear market means there will be a recession.

Once asset prices have decreased as much as they possibly can, consumer confidence begins to rise again, and people start buying. This reverses the bear market trend into a bull market, and the market starts to recover and grow again.

Bear Market vs Bull Market

A bull market is essentially the opposite of a bear market. As consumer confidence increases, money goes into the markets and they go up.

A bull market is defined as a 20% rise from the low that the market hit in a bear market. However, the parameters of a bull market are not as clearly defined as they are for a bear market. Once the bottom of the bear market has been reached, people generally feel that a bull market has started.

How to Invest and Manage Your Money During a Bear Market

There are a few different bear market investing strategies one can use to both prepare for a bear market and navigate through one.

1. Reassess Your Risk Tolerance

When preparing for a bear market, it’s a good idea to reduce higher-risk holdings such as growth stocks and speculative assets. One can move money into cash, gold, bonds, or other less risky investments to try and reduce the risk of losses if the market goes down.

These safe investments tend to perform better than stocks during a bear market. Types of stocks that tend to weather bear markets well include consumer staples and healthcare companies.

2. Diversify Your Portfolio

Another investing strategy is diversification. Rather than having all of one’s money in stocks, distribute your investments across asset classes, e.g., precious metals, bonds, real estate, or other types of investments.

This way, if one type of asset goes down a lot, the others might not go down as much. Similarly, one asset may increase a lot in value, but it’s hard to predict which one, so diversifying increases the chances that one will be exposed to the upward trend, and you’ll see a gain.

3. Look for Buying Opportunities

In a broad sense, if the market is at a high and assets are clearly overvalued, this may not be the best time to buy. And vice versa, if assets are clearly undervalued it may be a good time to buy and grow one’s portfolio.

A bear market can be a good time to identify assets that might grow in the next bull market and start investing in them.

4. Consider Dollar-Cost Averaging

Dollar-cost averaging is an investment strategy that involves making regular, relatively small investments at certain intervals regardless of what’s happening with the broader market or news cycle. In all, the various prices at which investments are purchased average out over time, so if an investor is buying at a fairly high price one week, they may be buying at a relatively low price another week. Over time, the buying prices average out.

That can help some investors lower their overall risk profile, and take some of the emotion out of investment decisions.

5. Understand Advanced Strategies (Like Short Selling)

Short selling is a very risky strategy that some investors take on in anticipation of a potential bear market. This involves borrowing shares and selling them, then hoping to buy them back at a lower price. It’s risky because there is no guarantee that the price of the shares will fall, and since the shares are borrowed, typically using a margin account, they may end up owing the broker money if their trade doesn’t work out as they hope.

Overall, it’s best to create a long-term investing strategy rather than focusing on short-term trends and making reactive decisions to market changes. It can be scary to watch one’s portfolio go down, especially if it happens fast, but selling off assets because the market is crashing generally doesn’t turn out well for investors.

The Takeaway

Bear markets can be scary times for investors, but even a prolonged drop of 20% or more isn’t likely to last more than a few months, according to historical data. In some cases, bear markets present opportunities to buy stocks at a discount (meaning, when prices are low), in the hope they might rise.

Also there are strategies you can use to reduce losses and prepare for the next bull market, including different types of asset allocation. The point is that whether the markets are considered bearish or bullish, any time can be a good time to invest.

Invest in what matters most to you with SoFi Active Invest. In a self-directed account provided by SoFi Securities, you can trade stocks, exchange-traded funds (ETFs), mutual funds, alternative funds, options, and more — all while paying $0 commission on every trade. Other fees may apply. Whether you want to trade after-hours or manage your portfolio using real-time stock insights and analyst ratings, you can invest your way in SoFi's easy-to-use mobile app.

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FAQ

How long do bear markets last?

Bear markets may last a few months to a year or more, but most bear markets end within a year’s time. If they go on longer than that they typically become recessions. And while a bear market can end in a few months, it can take longer for the market to regain lost ground.

Is a bear market good or bad?

A bear market is probably going to be considered a bad thing by some investors, as it could negatively affect their portfolio value. However, others might consider it an opportunity to utilize strategies to take advantage and potentially, generate returns.

When was the last bear market in the U.S?

The most recent bear market occurred in 2022, and lasted into 2023. During that time, the market lost roughly 25% before recovering.

What are the best assets to hold in a bear market?

Some investors prefer to hold assets that are generally less volatile during bear markets, in the hopes that they’ll hold their value better than more volatile assets. That could include certain types of stocks or funds, bonds, or even commodities such as precious metals.

What was the worst bear market?

The worst bear market in history occurred after the market crash in 1929, and lasted for several years. During that time, the economy entered the Great Depression, and the market lost almost 90% of its value.

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Investment Risk: Diversification can help reduce some investment risk. It cannot guarantee profit, or fully protect in a down market.

S&P 500 Index: The S&P 500 Index is a market-capitalization-weighted index of 500 leading publicly traded companies in the U.S. It is not an investment product, but a measure of U.S. equity performance. Historical performance of the S&P 500 Index does not guarantee similar results in the future. The historical return of the S&P 500 Index shown does not include the reinvestment of dividends or account for investment fees, expenses, or taxes, which would reduce actual returns.
Dollar Cost Averaging (DCA): Dollar cost averaging is an investment strategy that involves regularly investing a fixed amount of money, regardless of market conditions. This approach can help reduce the impact of market volatility and lower the average cost per share over time. However, it does not guarantee a profit or protect against losses in declining markets. Investors should consider their financial goals, risk tolerance, and market conditions when deciding whether to use dollar cost averaging. Past performance is not indicative of future results. You should consult with a financial advisor to determine if this strategy is appropriate for your individual circumstances.

Utilizing a margin loan is generally considered more appropriate for experienced investors as there are additional costs and risks associated. It is possible to lose more than your initial investment when using margin. Please see SoFi.com/wealth/assets/documents/brokerage-margin-disclosure-statement.pdf for detailed disclosure information.

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