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Filing taxes as a beginner can be intimidating, but once you’ve done it a couple of times, it can get easier. You’ll know the process and just which documents and numbers you’ll need to complete your forms. That applies whether you file on your own or work with a tax preparer.

So, here’s a great starting point for learning how to file taxes when you aren’t so familiar with the procedure.

What Do You Need to File Your Taxes?

If this is your first time filing, it’s a good idea to gather everything you need before you sit down at a computer or with an accountant. Here’s what you’ll need:

•   Social Security number: If you aren’t sure, ask your parents or legal guardians. Once you start filing taxes, it’s a good idea for you to keep your Social Security card and other important documents, like your birth certificate, instead of leaving them at your parents’ house.

•   Wage and income information: For most first-time filers, this will simply be a W-2 form from your employer.

◦   If you did any freelance or contacted work, you should receive 1099 forms from each entity that paid you.

◦   If you have a bank account or investments that earned interest, and you will have received forms for those, typically a 1099-INT or 1099-DIV.

•   Documentation for tax credits and deductions: When doing your taxes at a young age, it is unlikely that you will qualify for many tax credits and deductions, if any at all. And because the standard deduction has increased significantly over the years, you will likely take the standard deduction (instead of itemized), for which you won’t need any documentation.

◦   If you’re a student, also look for the form 1098-T from your school, which details tuition payments you have made and funds received (such as grants), to help you identify whether you are eligible for any deductions. In addition, be aware that some college scholarships or grants may be considered taxable income.

•   Bank account info: If you expect to receive a refund and want the money electronically deposited into your bank account, you need to have your account number and routing number at the ready. If you owe money, you can pay from your bank account, a credit or debit card, or a paper check or money order.

The IRS also advises checking with parents before filing to see if they are claiming you as a dependent.

Where Can You Fill Out Your Taxes?

When learning how to do taxes for the first time, one big question is exactly where to get this done. The IRS allows you to fill out your taxes in several ways, either on paper or electronically.

Filing Online

You can file online directly through the IRS website with a tool called IRS Free File. And if your adjusted gross income (AGI) is $84,000 or less, the IRS currently offers free guided tax preparation software. Even if you brought in more than $84,000, the IRS makes its tax forms available for e-file free of charge. Check the IRS website for updates regarding this program for each calendar year.

However, navigating tax forms can be overwhelming. Purchased tax software comes with educational resources and interactive platforms that prompt you for the correct information. Using tax software could help filers avoid math errors and find deductions and tax credits they may not have otherwise known about.

As a filer, it’s up to you to research popular tax software solutions (such as TurboTax, H&R Block, TaxSlayer, and TaxAct) and find the option that suits you best. Prices can range from about $40 to $125 or more and up.

Filing Manually

The old method of filing by hand with pen and paper is still possible, though these returns may take longer to process.

Because pen and paper can potentially lead to errors, it is a good idea for first-time and veteran filers to utilize free or purchased online software or even a tax professional.

Recommended: How Long Does It Take for the IRS to Mail Tax Refund Checks?

Filing With a Professional

Tax professionals can file manually and online, but the IRS encourages all accountants to utilize the online option. For a speedy return and fewer errors, most tax professionals will likely file electronically for you.

As a first-time filer, your tax situation will not likely be complex enough to warrant a tax professional. But as your finances become more complicated — with investments, real estate, small business ownership, and more — a tax accountant may make sense.

Another benefit of working with an accountant can be their training and knowledge. A professional may be able to help you find (legal) ways to pay less taxes.

How Do You Pay Your Taxes?

When filing taxes for the first time, there’s a good chance you will not owe anything. In the event that you do owe the government money, however, you have multiple options for paying your taxes:

•   IRS Direct Pay: The amount owed will be debited from a checking or savings account.

•   Credit or debit card: You can pay your outstanding tax balance with a debit or credit card online. This is a nice option if you have cash back rewards, but you will typically be paying a high interest rate if you carry a balance.

•   Check or money order: The IRS still accepts checks in the mail, as well as money orders.

•   Installment agreement: If you cannot afford your tax bill all at once, you can use the IRS Online Payment Agreement tool to apply for an installment plan.

Filing Tips for First-Timers

Feeling nervous about doing taxes for the first time? Here are some tips for making the experience easier; consider them steps for how beginners can file taxes.

1. Watch Your Income

To determine if you need to file, you can watch your income throughout the year. Once you pass a certain threshold, you will be required to file. This filing threshold can vary depending on your situation, so you’ll need to check out the IRS filing requirements .

If you know that you will make enough money to pay taxes, it’s a good idea to ensure your employer is withholding the proper amount of money from each paycheck for federal, state, city, and even school district taxes. If you believe your employer is not withholding enough (or is withholding too much), the IRS recommends filling out a Form W-4 to change your withholding.

Recommended: What Tax Bracket Am I In?

2. Gather All Necessary Documents

Tax documents will start arriving in the mail or digitally early in the new year, typically near the end of January or in early February. As these documents come in, it’s wise to store them in a safe place, like a manila folder in a fire safe or an encrypted folder on your computer. When it’s time to file, you’ll be able to access all your tax forms quickly and easily, rather than hunting all over for them. Being organized this way can also help you be aware of any missing tax documents.

If your tax situation is more complex — for instance, if you are self-employed, receive student loans, or make charitable donations — it’s a good idea to hold on to relevant forms throughout the year. Self-employed individuals, for example, may want to save receipts for business expenses incurred throughout the year. These can help you claim tax deductions for freelancers.

3. Learn About Potential Credits

When filing taxes for the first time, you may not be eligible for many tax credits. Tax preparation software, a tax professional, or even the IRS’s guided filing tool may be able to help you find out which credits you qualify for.

Before filing on your own, it could be wise to review the IRS list of tax credits for individuals to see if any apply to you.

4. Understand Potential Deductions

Similarly, most first-time filers will want to take the standard deduction instead of itemizing because it may offer the larger discount. However, the IRS does offer itemized deductions for student loan interest and for work expenses, if you are self-employed.

You can familiarize yourself with IRS deductions, including tax deductions for college students (if that applies) before filing to determine if itemizing deductions is right for you.

5. Hit Your Deadlines

Tax Day in the United States is traditionally April 15, but if that date falls on a Saturday, Sunday, or legal holiday, the tax deadline moves out to the next business day.

If you owe estimated taxes each quarter (say, if you are self-employed), you will need to pay taxes four times a year. Working with a tax accountant may be in your best interest. Members of the Armed Forces may have special rules governing the due date of their taxes.

Individuals can also apply for a tax extension; this extends the due date of filing, but not the due date of payment. That means you might get a six-month extension to file the paperwork, but if you have not paid what you owe by April 15, you could be subject to late penalties.

Do You Need to File Taxes Every Year?

Not everyone is required to file tax returns every year. It all comes down to your unique tax situation and how much you earned. However, if you earn income throughout the year, there is a good chance you will need to file. It’s a good idea to review the IRS filing requirements or speak with an accountant if you are not sure.

Tax Filing Mistakes to Avoid

Working with tax preparation software or an accountant can help avoid some common mistakes when filing taxes, but familiarizing yourself with some of the most common errors can be helpful, no matter how you’re filing:

•   Forgetting about state and city. We often think about federal income taxes, but your city and state (and maybe even school district) could also have their own taxes that you are required to pay.

•   Not filing. Income thresholds can change each year. It’s always a good idea to check whether you are required to file taxes for a given year even if you didn’t have to for the previous year.

•   Not checking with parents. If you are filing taxes for the first time, your parents are likely used to claiming you as a dependent. Talking with them about dependent status before filing could be a smart move.

•   Filing without all your forms. Getting taxes over with early can relieve a lot of stress (and means you can get your tax refund early), but if you have any tax form stragglers, like a 1099, that appear in the mail after you’ve completed your taxes, you might land in trouble with the IRS.

•   Entering in the wrong info. Tax preparation is not something to speed through. Even though e-filing helps avoid simple pen-and-paper mistakes, it’s still possible to incorrectly enter things like your birth date or Social Security number. Slow and steady — with lots of double- and triple-checking — wins the race.

The Takeaway

Filing taxes as a beginner can be intimidating, but if you put some time and organizational effort into the process, it can go smoothly. You’ll also be better prepared for next year’s Tax Day once you’ve filed. Whether you do your own taxes or work with a tax professional, it’s wise to gather the necessary paperwork, understand your potential credits and deductions, and file on time and precisely.

The fastest way to get a tax refund, if you’re due one, is a direct deposit into your bank account. If you’re a first-time filer, it’s wise to have an account ready to receive any funds heading your way.

Interested in opening an online bank account? When you sign up for a SoFi Checking and Savings account with direct deposit, you’ll get a competitive annual percentage yield (APY), pay zero account fees, and enjoy an array of rewards, such as access to the Allpoint Network of 55,000+ fee-free ATMs globally. Qualifying accounts can even access their paycheck up to two days early.

FAQ

What happens if you make an error on your taxes?

As soon as you realize you have made a mistake on your taxes, you can amend it with Form 1040-X or by calling the IRS at 800-829-1040. In general, the IRS does not consider mistakes to be tax fraud, though you may end up paying late penalties. If you have intentionally made errors and the IRS catches you, you could be charged with a tax crime.

How much income do I need to make in order to pay taxes?

The amount of income that you need to make to pay taxes can fluctuate each year and depends on your filing status (single; head of household; married, filing jointly; married, filing separately; qualifying widow/widower). For the 2025 tax year, a single filer under 65 needed to make $15,750 or more to file.

What is the deadline for filing taxes?

In general, the tax deadline in the U.S. is April 15. If this date falls on a weekend or legal holiday, the deadline shifts to the next business day. Members of the military may have special rules affecting their deadline, and self-employed individuals typically must pay quarterly estimated taxes throughout the year.

How can I avoid tax scams?

The best way to avoid tax scams is to educate yourself on what they look like. The most common tax scams are email phishing scams and phone scams. Remember that the IRS will never email you requesting personal or financial information nor will the IRS call you and threaten legal action or leave pre-recorded, urgent messages.

Photo credit: iStock/PeopleImages

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SOBNK-Q425-021

Altcoin season is a term used to describe a period in the cryptocurrency markets during which altcoins, or a significant percentage of them, rally and see their prices increase.

Altcoin itself is a sort of catch-all term that refers to cryptocurrencies aside from Bitcoin; they’re “alternate” coins, in other words. Since Bitcoin is the biggest and most popular crypto on the market, almost all other cryptos are seemingly in a classification of their own: Altcoins.

What Is Altcoin Season?

Altcoin season is a stretch in which altcoin appreciation outperforms Bitcoin, or a significant number of altcoins simultaneously see their prices increase. Or, put another way, altcoin season happens when there’s steady outperformance of tokens and coins that aren’t Bitcoin. They could last weeks, or even months.

How Altcoin Season Differs from Bitcoin Cycles

Cryptocurrencies tend to experience market cycles, similar to those seen in the broader economy and even in the stock market. That means that prices, productivity, or other metrics experience periods of expansion (value growth) or contraction (value decline). The same happens in the crypto markets.

Altcoin season, then, can happen when Bitcoin reaches the bottom of one of those cycles, effectively paving the way for altcoins to experience a period of expansion or growth.

However, there’s no guarantee that every runup in Bitcoin will turn into a downturn later, or that altcoins will start outperforming the original crypto. In fact, it’s not uncommon for all cryptos to rise together, as excitement about the sector grows. As such, there can be pros and cons to owning crypto.

The Role of Bitcoin Dominance in Market Trends

Bitcoin is the oldest and largest cryptocurrency. So, it tends to set the tone for the markets, and can move the currents and momentum within them, so to speak. When there is a big movement or change with Bitcoin, that is generally reflected in the markets, and that filters down to altcoins, which include different types of cryptocurrencies.

So, following a Bitcoin rally, it’s possible altcoins could also rally (though not guaranteed). They could both then see a staggered cooling period.

Why Do Altcoins Often Follow Bitcoin’s Price Movements?

There are a few different theories for why altcoin season happens, and why altcoins tend to follow Bitcoin’s price movements. Here are some of the most common.

Expectations of Future Growth

After a large runup of Bitcoin, crypto-holder’s projected growth in the price of other crypto assets might change.

The Altcoin Season Index: Your #1 Indicator

Remember this: You can’t determine altcoin season just by looking at the price of altcoins, Bitcoin, or any other cryptocurrency in isolation. Perhaps the best gauge is the Altcoin Season Index.

How This Key Indicator Works

The Altcoin Season Index is a crypto market indicator, similar to many other market-focused metrics out there, that helps market participants get a sense of whether or not altcoins are outperforming or seeing more appreciation than Bitcoin at any given time. It is, in other words, a tool to measure the prevailing winds of the crypto market.

The Index itself looks at the top altcoins on the market (with the exception of crypto’s stablecoins), measures their collective performance over a period of the previous 90 days, and produces an index score that reports the percentage of altcoins (altcoins tracked by the Index) that are or have performed better than Bitcoin during the tracking period.

How to Read the Index’s Signals

As noted, the Index produces a percentage that helps market participants gauge whether they’re witnessing an “altcoin season” play out. Depending on the percentage, or the signal, produced, the crypto market could be said to be either in a “Bitcoin season,” neutral, or in an “altcoin season.”

Specifically, here’s how those percentages break down:

•  0-25%: This means that less than a quarter of tracked altcoins are outperforming Bitcoin, putting the market in a “Bitcoin season.”

•  26-74%: A solid amount of altcoins are outperforming Bitcoin, but not an overwhelming amount. This is a “neutral” market.

•  75-100%: This indicates that the vast majority of altcoins are outperforming Bitcoin; the market is experiencing an “altcoin season.”

Where to Find the Live Index Data

Data related to the Altcoin Season Index can be found on a number of websites. A simple internet search should bring up plenty of places to access the live data.

3 Other Key Signs an Altcoin Season Might Be Starting

The Altcoin Season Index is a powerful tool to help crypto market participants gauge whether the market is, in fact, experiencing an Altcoin Season. But there are a few other key signs you can use to try and discern what’s happening.

Sign 1: Bitcoin’s Price Stabilizes After a Major Rally

One sign that may indicate an Altcoin Season is nigh is that Bitcoin starts to see a period of price stabilization, particularly after it rallies a bit. In the wake of the rally, Bitcoin prices may appreciate more slowly, or even fall or remain relatively stagnant. Altcoins, following the rally, could see a rally of their own, marking the beginning of an altcoin season.

Sign 2: New Narratives and Hype Cycles Emerge (e.g., DeFi, AI, GameFi)

Certain altcoins may see a period of appreciation that outperforms Bitcoin, too, if the market and news cycle is suddenly saturated with new, emerging narratives or hype cycles. These can take many forms, but may center around expanding or emerging AI or DeFI projects, among other things. Many of those projects may have their own related altcoins, which see value appreciation as a part of the hype cycle.

That enthusiasm may also spill over into other altcoins, sparking a rally.

Sign 3: Retail Interest and Social Media Buzz Explode

Similarly, there may be times when altcoin interest or hype takes flight among the general market or on social media. That can create hype cycles, and market participants may want to get in on the action as altcoins see price appreciation. Hype cycles can happen at any time, and seemingly for any reason, or sometimes no reason at all. And it can be difficult to tell if these will be brief hype bursts, or sustained, broad altcoin seasons.

What Happened in Past Altcoin Seasons?

There are examples of previous altcoin seasons, such as those that occurred during 2017, and again in 2021. Here’s a brief rundown of what happened.

2017

During 2017, there was a rapid and broad altcoin rally that was largely driven by speculative market participants, a slew of project launches, and piles of money entering the crypto markets.^[1]

Specifically, regulatory changes in Japan helped fuel the frenzy, and Ethereum took off as what looked like the next Bitcoin, becoming the second-largest crypto on the market. There were also many ICOs, or initial coin offerings that year, and Bitcoin’s price also reached a high point (which it would eclipse in later years).

Ethereum, Ripple, Litecoin, and Bitcoin Cash were some of the top-performing altcoins that year, too.

2021

Similarly, 2021^[2] saw another altcoin season and huge swell in interest in the crypto markets. There were several things happening, including a boom in NFTs and meme coins, much of which redirected capital and resources away from Bitcoin and into altcoins or other crypto-related projects.

This was all occurring during the pandemic, as well, which drove lots of speculative buying and selling all while the crypto ecosystem itself was becoming more sophisticated and entering the mainstream.

Some top performing altcoins in 2021 included Shiba Inu, Dogecoin, Solana, and Polygon.^[3]

Lessons Learned from Historical Rallies

What sorts of takeaways are to be had from previous altcoin seasons? There can be a lot to digest, and the history of Bitcoin prices — which in of themselves have been volatile — play a role. But perhaps the overriding lessons are that the crypto markets can be and often are driven by hype and intense speculation. There can be outside events that also play a factor (such as global health emergencies and softening government stances toward crypto), but by and large, the markets can be difficult to predict and make sense of.

With all of this in mind, it can be good to keep risk in mind. Over short time periods, assets, be they crypto holdings, stocks, or precious metals, can lose value. The market is volatile, and things are always changing.

How to Approach Altcoin Season

With all of this in mind, how can crypto market participants best approach altcoin seasons, assuming they feel that one is waiting in the wings? Here are a few things to help keep you grounded.

Avoiding the FOMO (Fear of Missing Out) Trap

While altcoins may be used as a tool for transactions, or as a store of value, or even as a means of generating passive crypto income, it’s dangerous to get lured into the assumption that they could continue to appreciate. That can lead to making poor decisions due to FOMO, or the fear of missing out. Cryptocurrencies prices are historically highly volatile, and that should be taken into account during altcoin seasons, as well.

Perhaps the best thing to do in these cases is to keep your head on your shoulders, remember that you have a financial plan (or may want to create one), and that any altcoins you may be considering holding are merely one element of that.

Separating Market Hype From a Project’s Real Utility

Similarly, you may be hearing or seeing a lot of crypto hype about altcoin seasons or related to a specific crypto project. It may be helpful to try and understand where it’s coming from. You may want to ask whether there’s really a “there” there, and do some research before deciding to buy, sell, or hold altcoins whose potential promise could be unfounded or that could even turn out to be a crypto scam or rug-pull.

Volatility

The crypto market is volatile, and that volatility can occur during any “season,” not just “altcoin season.” It can be a good idea to try and keep that in mind when navigating the crypto space.

The Takeaway

Altcoin season describes a time period when altcoins steadily outperform Bitcoin. There are a few ways to try to determine altcoin season, but it remains impossible to predict. Basically, you’ll usually know it when you’re in it. And when an altcoin season does occur, it’s important to navigate it carefully. Always researching options carefully can help ensure they align with your financial goals and risk tolerance.

Soon, SoFi members will be able to buy, sell, and hold cryptocurrencies, such as Bitcoin, Ethereum, and more, and manage them all seamlessly alongside their other finances. This, however, is just the first of an expanding list of crypto services SoFi aims to provide, giving members more control and more ways to manage their money.

FAQ

How can you tell if altcoin season has started?

There may not be a good or surefire way to determine if an altcoin season has started, at least not until some time has passed and there’s data to digest to help determine that. However, you can look for certain signs, such as a cooling Bitcoin rally, as a precursor or indicator that the altcoin market could rally.

How long do altcoin seasons usually last?

There’s really no telling for sure how long an altcoin season will last, but historically, they’ve lasted for one or two months, and perhaps a little longer.

Are all altcoins likely to rise during an altseason?

Depending on several factors, some altcoins are probably more likely to see value appreciation during an altcoin season than others.

What role does institutional investment play in altcoin seasons?

If institutional investors plow a project with a bunch of capital or make a huge investment in a particular altcoin, that could spark an altcoin season as interest rises in that altcoin, and also related ones. But there’s no guarantee that would necessarily happen.

Which indicators signal the end of an altcoin season?

One indicator that an altcoin season is near or at its end is a rally in Bitcoin prices, signalling Bitcoin may be returning to its dominant position.

Photo credit: iStock/Prostock-Studio

SOCRYP-Q325-088

Crypto and stocks may seem similar at first, but they are fundamentally different types of assets. There are key differences in terms of how they’re structured (one is digital, one has real-world value), how volatile they are (crypto’s swings can be more dramatic), how they’re stored, and more.

Crypto and stocks both have their pros and cons, and certain risks to consider. Here’s what you need to know.

Understanding What You Own

Before getting too granular in the differences between crypto and stocks, you may to solidify your understanding of what, exactly, each is.

Stocks

In the simplest terms, a stock is a share of ownership in a publicly-traded company. As a stockholder, you own part of the company.

So, when thinking about the difference between crypto and stocks, the first point to remember is that a share of stock may represent a percentage of ownership in a tangible business.

While stocks and whole sectors go in and out of fashion with investors, the stock itself still corresponds to a portion of a functioning company, with a price that’s tied to the underlying, fundamental value of that company. By contrast, cryptocurrencies are wholly digital, and that impacts their value, their real-world viability, and how they are traded.

Cryptocurrency

Cryptocurrencies are a speculative asset class that are created and stored digitally, using decentralized blockchain technology.

The main difference between crypto vs. stocks is that stocks are a share of ownership, while cryptocurrencies don’t have any intrinsic value – their value is largely determined by market sentiment, and supply and demand, which is one reason cryptocurrencies can be highly volatile.

It’s also important to know that most cryptocurrencies are not valued the way fiat currencies are. Fiat currency, like the U.S. dollar, is money that’s issued and backed by a central bank or government. Cryptocurrencies are wholly digital, and are not issued or overseen by a government, bank, or any other central authority.

And because they’re volatile, most types of cryptocurrencies aren’t currencies in the traditional sense. Their real-world value as a means of purchasing goods and services is often limited, although this is expanding as payment systems and retailers begin to accept certain cryptocurrencies, such as Bitcoin.

The value of a cryptocurrency reflects a variety of factors, including, as mentioned above, current supply and demand for that currency. In some cases, it also reflects a faith in the underlying technology that powers the currency, or a particular innovation that a certain crypto stands for.

7 Key Differences Between Crypto and Stocks

Knowing that both crypto and stocks are two different things, there are some further, more detailed differences that are important to parse out.

Regulation

In terms of regulation, the key difference between stocks and crypto is that stocks have an established oversight apparatus, while crypto regulation is still emerging and formulating.

For stocks, there are national agencies in the United States, such as the Securities and Exchanges Commission (SEC), which oversee stocks and stock markets, and the Financial Industry Regulatory Authority (FINRA), which regulates broker-dealers. The regulation provided by these groups helps create a certain level of transparency into publicly traded companies.

By contrast, cryptocurrencies have only begun being regulated by the federal government. Though there have been some regulatory frameworks introduced recently (The GENIUS Act, for example), the regulatory apparatus isn’t as robust as it is for stocks or other securities.

In the current U.S. market, cryptocurrency regulation is a collection of rules from multiple federal agencies and state-level laws, impacting buying, selling, and holding of the crypto assets, depending on the nature and use of the crypto asset. Current regulations may not apply directly to an individual’s personal use of their self-custody wallet, but they heavily govern the exchanges, platforms, and services an individual uses to buy, sell, or custody their assets in the U.S. financial system.

Volatility and Market Risk

Both crypto and stocks are or can be volatile and are subject to market risk. But stocks are, traditionally, subject to more moderate volatility, often driven by fundamental or economic factors, whereas crypto can experience extreme swings and volatility, driven by shifts in market sentiment perhaps more than anything.

Make no mistake: There is volatility and risk involved in buying both crypto and stocks. Both assets can go up or down in value, and it’s nearly impossible to time the market to know exactly the best time to buy or sell.

While the stock market has a well-earned reputation for volatility, the broader market has tended to go up over the course of decades. Since past performance is no guarantee of future returns, and public stocks must publicly report on their finances, investors have access to several sources of information to make decisions about purchasing those securities.

On the other hand, cryptocurrency is, or traditionally has been, more likely to undergo sudden, drastic changes in value, sometimes without warning.

Those swings can lead to potentially big wins for crypto users, but it can also create large losses, including total loss, in a very short period of time. While it is possible for public companies to go bankrupt and their shares to become worthless, they’re far less likely to lose all of their value than most cryptocurrencies are.

Trading Hours and Market Access

The stock markets are usually only open during business hours in their home country, Monday through Friday, and closed on holidays on weekends. By contrast, the crypto market runs around the clock, every day of the year.

The 24/7 availability of the crypto markets may be one reason why crypto is so volatile. As decades of research on the stock market has shown, some investors often succumb to emotional impulses that can drive their behavior. Time off may help restore a sense of control and order, giving participants a chance to cool down.

What Drives Their Value

Crypto and stock values may be driven by different factors, too. Stock values may increase after a strong earnings report, for instance, while crypto values may increase due to scarcity, speculation, or adoption trends, along with other variables.

There can also be associated costs to contend with, which may also hurt demand for one or the other.

For example, every time an investor buys or sells stocks, they may need to pay transaction fees, such as commissions, that eat into their returns. Even investors who purchase assets like low-fee index mutual funds, which are essentially baskets of stocks, have to pay fees that cover the costs of running the fund.

The costs of actively managed funds, and for trading through a brokerage account, may be higher.

Note that crypto exchanges also charge fees. And there are “gas fees,” which are the costs extracted by a network for various transactions on the blockchain. These fees vary widely from one form of crypto to another.

While costs are not the end-all-be-all that affect demand, it is something that’s in the mix, and that should be taken into account when considering any stock or crypto transaction.

Market Age and History

As noted, the concept of stocks and stock-trading has a long, established history going back centuries. The rules are solidified, oversight and regulation is in place, and investors or traders generally have a good idea of how the markets work.

Crypto markets, on the other hand, are very young, having been around for only around a decade-and-a-half. Until recently, they were largely unregulated, too, and the whole crypto space has had a “wild west” feel to it. That’s quickly changing, but its short history could also mean that there’s more risk involved, which some may not be comfortable with or have the capacity to take.

Liquidity (How Easily They Are Bought and Sold)

Stocks are liquid, meaning they’re fairly easy to buy and sell. Crypto, depending on the specific crypto at hand, can have variable levels of liquidity.

For more background: Smaller markets also affect the ability to trade in and out of your investments, whether they’re stocks or cryptocurrencies. That ability to trade an asset at will without substantially affecting its price is called liquidity. Investors typically consider stocks highly liquid, since there are so many active traders in the stock market.

With cryptocurrency, on the other hand, liquidity varies quite a bit from one form of crypto to another. Bitcoin is a more liquid asset than most cryptocurrency. That means there are more buyers and sellers who want to trade if you want to get in or out of that particular cryptocurrency.

Custody: Who Holds Your Assets?

The concept of custody is also important, and differs between cryptocurrencies and stocks.

In effect, brokerages hold stocks or other types of securities, acting as a custodian for investors. Additionally, to purchase and own stock, you typically need a brokerage account to handle the transaction. That account is verified by information like your address, Social Security number, signature, and more. This offers some protection in the event of identity theft or fraud.

That is not always the case with crypto, where crypto users themselves may be the custodians, and need to handle and store their assets accordingly. Some crypto users also keep their cryptocurrencies in their own personal (non-custodial) crypto wallets vs. a crypto exchange, which can be fully virtual or exist offline on a USB drive. That may create unique risks, such as forgetting your password and losing access to your account. Or you could misplace your USB drive, and lose all your crypto.

But there are instances in which exchanges may act as custodians, similar to brokerages. Crypto exchanges and certain other financial crypto platforms are subject to certain laws, meaning they must verify customers’ identities, as required by Know Your Customer (KYC) laws designed to help prevent illegal activities.

It’s also important to know that cryptocurrencies are not insured in the event of a financial institution’s failure as traditional brokerage assets are by the Securities Investor Protection Corporation (SPIC) and traditional bank deposits are by the Federal Deposit Insurance Corporation (FDIC).

The Takeaway

Stocks and cryptocurrency seem similar, but have some stark differences. Stocks offer investors a tangible piece of ownership in a company (even if it’s a tiny fraction of that company), whereas crypto assets don’t have intrinsic value. That said, both can offer different things for holders.

Soon, SoFi members will be able to buy, sell, and hold cryptocurrencies, such as Bitcoin, Ethereum, and more, and manage them all seamlessly alongside their other finances. This, however, is just the first of an expanding list of crypto services SoFi aims to provide, giving members more control and more ways to manage their money.

FAQ

Is crypto harder than stocks?

In some sense, crypto may be a bit more difficult to comprehend than stocks. Cryptocurrencies are bought and sold on crypto exchanges; the fees are unpredictable; and many types of crypto are so new they don’t have a track record, and it’s hard to establish their value. Exchange-traded stocks are well established and highly regulated securities that can be bought and sold via a traditional brokerage or app, in a variety of forms — including index funds and exchange-traded funds, and more.

Is crypto taxed more than stocks?

Crypto is treated as property by the IRS, the same as stocks, so the two are more or less taxed in the same way. Further, crypto could be taxed as ordinary income if it’s acquired through staking, mining, or received as payment.

What are the main differences in regulation between crypto and stocks?

Stocks are regulated under a well-established federal framework overseen by agencies like the SEC, and have been for a long time. Crypto regulation, conversely, is new and evolving, and until recently, almost non-existent in the U.S.

Can buying and selling crypto impact the stock market?

There isn’t a huge sample size at this time, but it seems that what happens in the crypto markets is at least somewhat correlated with what happens in the stock markets. Meaning, investors in each market seem to be behaving similarly.

Photo credit: iStock/ljubaphoto

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The housing market is rising in some areas of America and falling in others. If you find yourself in a hot seller’s market, it can be challenging to buy a house, but doing so, even with a low down payment, is possible.

Lenders are willing to approve mortgages with lower down payment requirements if you qualify and are comfortable with paying mortgage insurance.

Read on for advice on navigating the real estate market if you have a small down payment but a fair amount of competition from other prospective buyers.

What Is Considered a Low Down Payment?

While many people believe you need at least a 20% down payment to buy a house, the average down payment by a first time homebuyer at the end of 2025 was 10%. And low-down-payment mortgage loans — even home loans with zero down payment — do exist.

Given the wide range above, what’s actually considered a low down payment? Popular mortgage programs out there may require as little as 3% down, and a couple of more specific home loan programs allow 0% down.

The reason why that 20% down payment figure keeps popping up is that any amount less than that will likely entail some form of mortgage insurance, an ongoing fee charged by most lenders.

💡 Quick Tip: You deserve a more zen mortgage. Look for a mortgage lender who’s dedicated to closing your loan on time.

Challenges of Buying in a Seller’s Market With a Small Down Payment

If you’re wondering how to buy a house with a low down payment, it’s important to acknowledge a painful truth in today’s housing market: There’s truth to the saying “cash is king,” and that continues to be evident in a seller’s market, where real estate investors who pay all cash frequently outbid prospective first-time homebuyers. All-cash sales have risen to a historic high of 26% in 2025, according to the National Association of Realtors. Be ready for these potential challenges if you intend to buy a house with a small down payment.

Longer Closing Time

Closing on a home with a mortgage-contingent offer to buy takes longer than closing with a cash offer. There’s often more paperwork, and underwriters will require time to ensure that your financials are in order before green-lighting your mortgage.

Lenders May Disagree With Mortgage Minimums

Just because a mortgage loan program allows for low-down-payment mortgage loans for qualified buyers doesn’t mean a lender will accept a down payment of 3%. Lenders have wide latitude to dictate their own terms, and it’s fairly common for them to set their own minimum down payment requirement somewhere above what the stated minimum for the program is.

Home Sellers May Be Nervous About Your Ability to Close

While it’s true that all funds from your down payment and mortgage transfer to the seller at closing, many sellers still buy into the old “bird in hand” adage when it comes to accepting offers. A higher down payment signals a buyer’s financial capacity and is, therefore, more attractive in the eyes of the homeowner.

If sellers accept a bid with a low down payment, they may run an increased risk of the buyer being rejected at the last minute by the mortgage lender.

In a deal involving a mortgage backed by the Federal Housing Administration (FHA), if the home is appraised for less than the agreed-upon price, the sellers must match the appraised price or the deal will fall through. FHA guidelines require home appraisers to look for certain defects. If any are found, the sellers may have to repair them before the sale.

Struggles With Competitive Offers and Bidding Wars

When your down payment is limited, you may find it difficult to compete in a bidding war. To help your case, if you are obtaining a conventional loan, seek out mortgage preapproval before beginning your home search in earnest. And consider writing a “love note” to the seller in your offer letter. Compliment something you especially like about the house and try to find some common ground with the seller that will appeal to their emotions. Thank the seller for considering your offer.

Recommended: Private Mortgage Insurance (PMI) vs. Mortgage Insurance Premium (MIP)

Types of Low-Down-Payment Mortgages

If you’re trying to score a home with a small down payment, there are some ways you can approach it to increase your odds. Some of the most popular low-down-payment mortgage programs are:

FHA Loans

FHA loans backed by the Federal Housing Administration, allow for a down payment as low as 3% to 5%. The government guarantee makes these loans more palatable for mortgage lenders and easier for a homebuyer to afford.

Fannie Mae HomeReady

Buyers who are within 80% of area median income for the census tract where a home is located can put down just 3% with this program. You don’t need to be a first-time buyer to take advantage of this program, however if all buyers are first-timers, you may be required to take a homebuyer education class.

Conventional 97 Loan

This loan allows first-time homebuyers of any income level to put only 3% down and finance the other 97% of their purchase with a fixed-rate mortgage with a term of up to 30 years. A credit score of 620 is required, although it will take a score of 680 to take full advantage of the features of this loan. At least one buyer must be a first-timer, and if all buyers are first-time homebuyers, a homeowner education course is usually required.

Conventional Mortgage

If you don’t qualify as a first-time homebuyer you can still obtain a low-down-payment home loan with a down payment as low as 5%. Conventional mortgage loans can be either fixed or adjustable rate, and you could take anywhere from 10 to 30 years to repay what you owe, depending on the mortgage term you choose. You’ll need a credit score of 620, and the higher your score, the better the interest rate you will likely be offered. If you put down less than 20%, you’ll need to pay for private mortgage insurance (PMI) with your monthly payment until you have 20% equity in your home.

Recommended: Home Affordability Calculator

Types of No-Down-Payment Mortgages

It is also possible to buy a house with no money down at all. Here are two common no-down-payment mortgages you may want to explore:

VA Loan

A VA loan backed by the U.S. Department of Veterans Affairs, allows eligible active-duty military members, veterans, reserve members, National Guard members, and certain surviving spouses to purchase a home with a zero-down-payment mortgage. If you think you might be eligible for a VA loan, your first step is to obtain a Certificate of Eligibility from the VA. Then you’ll obtain the loan from a lender (most will require a 620 credit score or better). While there is no mortgage insurance required, there is usually a VA funding fee.

USDA Loan

USDA loans are for low- and moderate-income buyers living in rural areas. The fixed-rate loan allows for the purchase of a new home but also allows borrowers to wrap some renovation costs into a home purchase. The loan can be used for modular or manufactured housing. There is no down payment or minimum credit score required for this loan.

💡 Quick Tip: Not to be confused with prequalification, preapproval involves a longer application, documentation, and hard credit pulls. Ideally, you want to keep your applications for preapproval to within the same 14- to 45-day period, since many hard credit pulls outside the given time period can adversely affect your credit score, which in turn affects the mortgage terms you’ll be offered.

Pros and Cons of Zero-Down-Payment Mortgage Loans

There are both benefits and disadvantages to going into homeownership with no down payment. Here are a few points to think about.

Recommended: Home-Buying Process Checklist

How Down Payment Assistance Can Help

If you’re struggling to come up with a down payment and a zero-down-payment loan isn’t an option, you may be able to get help. Consider exploring both of these options:

Down Payment Assistance (DPA) Programs

Many governments and nonprofits offer down payment assistance programs for first-time homebuyers — those who have not owned a principal residence in the past three years. The funds may come in the form of a loan or a grant. Some lenders can even assist you in qualifying for these programs to help offset the upfront costs of homebuying.

Cash Gift for Down Payment

Finally, you can also ask a family member, or sometimes a domestic partner, close friend, or employer, to help with the down payment by contributing gift money. The money can’t come with any strings attached, and a gift letter will likely be required by the lender. This is a popular option for parents and in-laws who want to help their children buy a first home.

Low- or No-Down-Payment Considerations

Mortgage Insurance

Buyers who put down less than 20% on a home purchased with a conventional mortgage can expect to have to pay for private mortgage insurance until they reach 20% equity in their home. Those who finance their home with an FHA loan will need to pay an upfront and annual mortgage insurance premium for the life of the loan. Some other government-backed loans also have similar fees.

Higher Cost Overall

Home loans cost money, in the form of interest. And because more of the home’s price must be financed when you put down a low down payment (or none at all), the total cost of the home will be greater than if some or all of the home purchase was covered by cash.

Less Equity Initially

The larger the down payment on a home, the more equity the buyer has on move-in day. Of course, you will build equity with your monthly mortgage payments, but in a process called mortgage amortization, a greater proportion of your monthly payment goes toward interest in the early years of a home loan, with less going to pay down the principal. The balance shifts gradually over the years of your loan, but you build equity slowly at the outset of a home loan.

The Takeaway

Buying a home with a small down payment is possible, even in a seller’s market. With preparation and the right mortgage lender, you may be able to land a place to call your own even with a low down payment — or no down payment at all.

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 mortgage has the lowest down payment?

Homebuyers who qualify can get a VA mortgage (backed by the U.S. Department of Veterans Affairs) or a USDA loan (from the U.S. Department of Agriculture) with no down payment at all. For other loan types, the lowest down payment amount is 3%.

Are zero-down mortgages a good idea?

Zero-down-payment home loans can help you get settled into a home sooner, but there are a few things to consider: You will not have any equity in your home at the outset, and equity builds slowly in the earliest years of a home loan. Your zero-down-payment loan will also be larger than the loan you would have if you made a down payment, so over the long haul, you will pay more for the home. However, if buying with no down payment allows you to take advantage of low interest rates, it might be worthwhile.

Is it harder to get your offer accepted with a small down payment?

If a seller is considering similar offers, the buyer with the larger down payment might have an edge. Being preapproved for a home loan can give you an advantage, however. If you can’t make a large down payment, consider obtaining preapproval.

Can a low down payment affect your mortgage rate?

Lenders may perceive buyers with lower down payments to be a greater risk, so a low down payment can sometimes result in a higher interest rate.

Are there programs to help first-time buyers compete in a seller’s market?

There are both national and local programs to help first-time homebuyers, including first-time homebuyer loan programs and down payment assistance programs. While these programs are not designed specifically to help buyers in a seller’s market, they certainly can’t hurt.

Should I wait for a buyer’s market if I only have a small down payment?

Whether or not to wait for a buyer’s market will depend on how soon you wish to buy a home and which local market you’re searching in. If waiting will allow you to build money for a larger down payment or improve your credit score, it might be worthwhile. The same is true if you foresee any reason the market might cool in the future. But if you need to settle down now, consider exploring nearby housing markets that might be a little less heated. And line up your mortgage preapproval to position yourself for success.

Photo credit: iStock/sturti

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-Q425-198

Before most house hunters can close the deal, they need to qualify for a mortgage. Learning how to apply for a mortgage in advance — and breaking the process down into digestible steps — can help applicants feel better prepared and avoid any unpleasant surprises during the process. (Good news: The mortgage application process is one of those things that is more complicated to explain than to experience!)

Ready to learn how to apply for a home loan? Here are the seven steps in the mortgage process, including moves you can make that may expedite your approval.

Table of Contents

1. Submit Your Mortgage Application

You’ve found the ideal property, made an offer on the house, and put your down payment into escrow. If you didn’t already get preapproved for a mortgage online, it’s time to apply for a mortgage. There are many different mortgage types, and choosing one will depend on your income, down payment, location, financial approach, and lifestyle. Some choices you’ll need to make at this stage of the mortgage process are:

•   A conventional home loan or a government-insured loan, such as an FHA loan backed by the Federal Housing Administration or a VA loan backed by the U.S. Department of Veterans Affairs)

•   A fixed-rate or an adjustable-rate mortgage

•   Your repayment term: typically 15, 20, or 30 years

A good lender will walk you through your options, whether you’re looking at a home requiring an FHA mortgage or a high-priced home with a jumbo loan.

Your lender will have the required forms for your mortgage loan application, and you can often submit everything online, but you’ll want to have the following at hand:

•   Proof of identity.

•   Documentation of income: W-2s or 1099s, your most recent income tax filing, profit-and-loss statements if self-employed, pay stubs, Social Security and retirement account info, information on alimony and child support, etc.

•   Documentation of assets: bank accounts, real estate, investment accounts, etc. If you received help from a family member to fund your down payment, a gift letter will be necessary.

•   Documentation of debts: any current mortgage you might have, car loans, credit cards, student loans, etc.

•   Information on property: street address, sale price, property size, property taxes, etc.

•   Employment documentation: current employer information, salary information, position/title, length of time at employer, etc. In general, lenders like to see two years of employment on a loan application. Self-employed individuals will generally submit two years of tax returns.

2. Schedule Your Home Inspection and Appraisal

It can take a little time to get your inspection and appraisal on the calendar, and then you can expect to wait at least a few days to get the reports. So now’s the time to make sure these two important aspects of the home-buying process are moving along.

A home inspection may not be required, but it’s a good idea to hire an inspector (your real estate agent may have recommendations, but you can shop around) to thoroughly check the property inside and out for undisclosed problems. If the inspector uncovers expensive issues, you may negotiate for a price reduction, which could affect your mortgage principal amount. If the problem is a dealbreaker, the inspector’s report could help you back out of the deal without penalty.

Review this home inspection checklist to make sure your inspector will cover all the bases. In some cases, a general home inspector may find an issue that requires a more specific expert to take a look (and yes, that’ll cost more money — but it may be worth the cost).

Don’t let the infatuation with a seemingly perfect property blind you. If there are serious issues that come up during the inspection and the sellers won’t budge on price (or agree to fix them before closing), seriously consider walking away. You won’t recoup the money you paid for the inspection — a home inspection costs between $300 and $500 — but if it keeps you from investing in a money pit, it’s money well spent.

An appraisal will be necessary as part of the mortgage underwriting process. It’s an independent evaluation of a home’s value. It will describe the property and what makes it valuable. Factors that affect the appraisal value include the location, condition, amenities and features, and market conditions in the area.

A lender requires a home appraisal to ensure that it isn’t lending more than the property is worth. If the appraisal comes in too low, the lender won’t lend extra money to cover the gap. Buyers will need to cover the difference with their own money or renegotiate the price with the seller to match the appraisal.

Recommended: Local Housing Market Trends

3. Secure Homeowners Insurance

You’ll need to buy homeowners insurance before you can close on your new home, so now’s the time to scout around for a policy that provides the coverage you need at the price you feel is right. Thanks to the appraisal, you can feel confident in the value of the home, which will help in the insurance process.

Before you commit, get quotes from a few different companies. Taking the time to do so at this step of the mortgage process will ensure your coverage is shipshape when you reach your closing. Your prospective lender will want to know the home is covered and many homeowners make their insurance premium payments as part of their monthly mortgage bill.

4. Undergo Loan Processing and Review

While you are taking care of your insurance coverage, the lender will be processing and reviewing your loan application to make sure you meet all the mortgage loan requirements. A major part of the mortgage loan process is the underwriting phase. The underwriting process begins after you complete your mortgage application, ends after all the documentation has been completed, and includes the appraisal.

During the process, the underwriter examines the borrower’s financials, as well as the appraisal, title search, and proof of homeowners insurance. The lender will perform a hard credit inquiry. In general, the better your credit score, the better the mortgage rate you’ll be approved for. If your score is above 740, you’ll qualify for the best rates. But in general, you’ll need a minimum 620 credit score to buy a house. Lenders are required to do a second credit check before final mortgage loan approval and may likely ask for further documentation.

The average time between submitting a mortgage application and closing is about 50 days, so if you’re wondering how long does the underwriting process take for a mortgage, you can expect things to take a little under two months, start to finish. During this period, it’s wise to observe a self-imposed “credit freeze.” That is, don’t run up your credit cards beyond what you usually spend each month. Put off major purchases. Don’t apply for new credit cards, take out auto loans, or take on any other new debt. And, of course, make sure to pay all your bills on time. If there’s any significant change in your credit history, your closing may be delayed or even derailed. Should something major come up (like an expensive medical emergency), call your lender to let it know.

Responding quickly to any questions or requests from your lender can help keep your application on track.

Recommended: What’s the Difference Between a Hard and Soft Credit Inquiry?

5. Receive Your Approval and Closing Disclosure

It can be tough feeling like your life is on hold while you’re waiting for the mortgage underwriting process to be completed. Try to be patient and let things play out. Now is a good time to reach out to friends and family who have been through the mortgage loan process before and commiserate. Consider this your orientation into the homeownership club.

Once the appraisal is complete and all documentation has been reviewed and verified, the underwriter will complete the mortgage underwriting process and recommend approval, denial, or pending. A pending decision is given when information is incomplete. You may still be able to get the loan by providing the documentation asked for.

It’s a happy day when your lender officially notifies you that you have been approved for your home loan. After underwriting approval with a “clear to close,” you’re set to close on your loan. The mortgage closing disclosure you receive from the lender is a required document. This five-page form from your lender will outline the home mortgage loan terms, including the loan principal, interest rate, and estimated monthly payment. It also lays out how much money is owed for closing costs and the down payment.

Lenders are required by federal law to provide the mortgage closing disclosure at least three business days ahead of the closing date. Make sure you read it immediately and thoroughly.

6. Do A Final Walk-Through of the Home

Before arriving at closing, you’ll want to do a final walk-through of the property you’re purchasing. During this walk-through, confirm that the sellers have made any repairs that were agreed to — and that they haven’t removed anything, such as an appliance or light fixture, that was meant to be left, per the purchase agreement.

7. Attend the Closing Meeting

Closing day comes after the mortgage loan approval process is completed. All parties will sign the final documents and ownership is legally transferred from the sellers. In the days prior to your close, the lender should provide a final list of closing costs. Closing costs are typically 2% to 5% of the mortgage principal and may include items like:

•   Lender fees

•   Appraisal and survey fees

•   Title search/title insurance fees

•   Recording fees

•   First year of private mortgage insurance (PMI) premiums, if required

You can pay closing costs by wire transfer a day or two before, or by cashier’s check or certified check the day of closing.

In the past, buyers and sellers, their agents, and lawyers would gather in the same room to sign the paperwork at closing. In recent years, remote online closings have become more common. The closing may be virtual, but the feelings of relief and happiness that typically result are very real.

The Takeaway

Applying for and securing a home mortgage loan follows a simple process that can seem complicated the first time you do it. But if you reply to questions promptly and are organized with your documents, it’s actually pretty simple — even if it does involve a little waiting time.

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 long is a mortgage loan in processing?

It takes a little under two months from the date you submit your mortgage application to closing on the house — the average timeline is about 50 days. In some scenarios, you may be able to close in as little as 30 days.

How do you know when your mortgage loan is approved?

Your mortgage loan officer will contact you when your loan is approved. They may call you to give you the good news, but you’ll want to see it in writing so watch for an email as well.

What should I avoid after applying for a mortgage?

You want to keep your financial situation as stable as possible during the mortgage application process. That means don’t open new credit accounts, and keep your credit utilization down (no extra swipes on those credit cards). Don’t fall behind on any bill, either

What looks bad on a mortgage application?

Key red flags on a mortgage application include a high level of debt relative to your income, a low credit score, or a history of late or missed debt payments. A lender might also be concerned about any large, unexplained influx of cash into your bank account in the months leading up to your application. A history of gambling or repeated use of payday loans might also be cause for concern from a lender’s perspective.

Photo credit: iStock/MicroStockHub

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-Q425-196