SoFi

We aren’t born with a credit history and, ironically, one of the only ways to build a credit history is to take out credit — which can be hard to do if you don’t have any credit history. Does that mean if you have little to no credit history, you can’t get a personal loan?

Not necessarily. But you may have a harder time qualifying for a loan with favorable interest rates. Read on to learn why a credit score is such an important factor in the loan application process, how to qualify for a personal loan without a substantial credit history, and how no-credit-check personal loans work.

What a Personal Loan Is and How It Works

Personal loans are a type of lending product that allows consumers to borrow money to use for a wide variety of purposes. There are typically few limitations on what you can use a personal loan for, unlike a mortgage or student loan that dictates what the borrower can spend the borrowed funds on.

Personal loans are available through banks, credit unions, and other lending institutions. With this type of loan, you receive the proceeds (or principal) in one lump sum then repay it, plus interest, in fixed monthly installments over the term of the loan.


💡 Quick Tip: Before choosing a personal loan, ask about the lender’s fees: origination, prepayment, late fees, etc. SoFi personal loans come with no-fee options, and no surprises.

What Is a Credit Score?

A credit score is a three-digit number used to predict how likely you are to pay your bills on time. Your credit scores (yes, you have more than one) are calculated using information from your credit reports. Different companies use different credit scoring models, but most take the following factors about a person’s financial history into account:

•   Bill-paying history

•   Current unpaid debt

•   Number and type of loan accounts you currently have

•   How long current loan accounts have been open

•   How much available credit is currently being used

•   New applications for credit

•   Financial events like debt in collections, bankruptcies, or foreclosures

When you apply for a loan, the lender will typically take your credit score into account to determine if they should lend you money, how much money they should lend you, and at what interest rate. The higher someone’s credit score is, generally the easier it is to qualify for lending products with low interest rates.

There are many different types of credit scores and scoring models. Your credit score depends on the credit scoring model used by the lender you’re applying with. Each lender also has its own personal loan credit score requirements.

How Do You Find Your Credit Score?

While you may not be able to track down every potential credit score you have, there are some easy ways to learn your FICO® credit score, which is one of the most widely used credit scoring models. This can give you an idea of what your scores likely look like across the board.

•   Credit card or other loan statements: You can often find your credit score by looking at your monthly credit card or loan statements or by logging into your account online.

•   Nonprofit counselors: If you’re working with a nonprofit credit counselor or HUD-approved housing counselor, those professionals can often provide you with a free copy of your credit report and credit score.

•   Credit score services: You may be able to get your credit score for free from a credit score service as part of a free trial. But be careful about getting locked into a service that charges a monthly fee.

•   Credit reporting agencies: You can buy your score directly from the credit reporting companies.

Recommended: How To Read A Credit Report

What You Can Do if You Don’t Have a Credit Score

If you’re trying to get a personal loan with little to no established credit, you may run into some challenges. Here are some steps that can help.

Establishing Credit

First-time personal loans for no-credit-history borrowers can be hard to get. To get around this hurdle, you’ll want to start establishing credit. One way to do this is to become an authorized user on a trusted friend’s or family member’s existing credit account. Another way is to apply for a secured credit card backed by collateral. With each option, as you make on-time payments, you’ll begin to establish a credit history.

Finding a Cosigner

Another option that can make it easier to qualify for credit products without a strong credit history is to add a cosigner (or co-applicant) to a loan or credit card. When lenders see that someone else (someone with good credit) is willing to make payments on the original borrower’s behalf (if they fail to do so), they have a lot more confidence in lending them money.

Using Collateral

Adding collateral to a personal loan means that the lender has something they can seize and use to recoup their losses if the borrower defaults on their payments. For example, auto loans are secured by the car the loan is financing. Before using collateral, a borrower needs to make sure they can make their loan payments on time each month or they risk the lender taking possession of their collateral.

Personal Loan Options With No Credit History

If a borrower is really struggling to find a personal loan because they don’t have a credit history, they can pursue a loan that doesn’t require a credit check. This type of lending product does exist but often comes with high interest rates and fees to make up for the risk the lender feels they are taking on.

In some cases, loans that don’t require credit checks, like payday loans, can be predatory, so consumers should make sure they know what they’re getting into when taking out this type of personal loan.

Applying for a Personal Loan With No Credit

Some lenders offer personal loans with no credit check. Since they can’t rely on your credit history, they will typically focus on other indicators of your ability to pay back the loan, such as your income, employment history, rental history, and any previous history with the lender. When applying for a personal loan with no credit check, it’s important to read the fine print and carefully weigh the benefits against the costs. Lenders will often charge higher interest rates and impose more fees to lessen their risk.


💡 Quick Tip: With average interest rates lower than credit cards, a personal loan for credit card debt can substantially decrease your monthly bills.

Checking Your Personal Loan Rate

If you’re in the market for a personal loan, it’s a good idea to research different lenders to find one that’s best for your needs. As you compare lenders, take note of their minimum credit requirements, loan amounts, repayment terms, funding time, and whether or not they offer joint, cosigned, or secured loans (which may help you get a lower rate).

Once you’ve identified a few lenders you prefer, it’s time to prequalify – this only involves a soft credit check and gives you a preview of the loan offers you may receive, including your estimated annual percentage rate (APR).

SoFi offers personal loans with competitive fixed rates and same-day funding. Checking your rate takes just a minute.

SoFi’s Personal Loan was named NerdWallet’s 2024 winner for Best Personal Loan overall.

FAQ

Can someone with no credit score get a personal loan?

Some lenders offer personal loans with no credit check. These lenders will look at other indicators of your ability to pay back the loan, such as your income, employment history, rental history, and any previous history with the lender. No credit check loans may come with higher rates and fees, though, so you’ll want to read the fine print.

How hard is it to get a personal loan with no credit score?

It isn’t necessarily hard to get a personal loan without a credit score, as personal loans for no-credit-history borrowers do exist. The bigger challenge is to get approved for a personal loan with a low interest rate and that doesn’t require collateral or a cosigner.

Do no-credit-score, no-cosigner loans exist?

Yes, loans that don’t require a credit check or a cosigner do exist. However, these loans may come with sky high interest rates and less-than-ideal terms.

---

Photo credit: iStock/Yaroslav Olieinikov

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

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

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.

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

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

SOPL0324005

Read more

Returned item charges are bank fees that are assessed when you don’t have enough money in your account to cover a check (or online payment) and the bank doesn’t cover that payment. Instead, they return the check or deny the electronic payment, and hit you with a penalty fee. Returned item fees are also called non-sufficient funds (NSF) fees. While these fees used to be ubiquitous, some banks have chosen to eliminate them.

Read on to learn exactly what NSF/returned item fees are and how you can avoid paying them.

What Is a Non-Sufficient Funds (NSF) Fee?

A non-sufficient fund or NSF fee is the same thing as a returned item fee. These are fees banks charge when someone does not have enough money in their checking account to cover a paper check, e-check, or electronic payment. They are assessed because the bank has to put forth additional work to deal with this situation. They also serve as a way for banks to make money. The average NSF fee is $19.94.

In addition to being hit with an NSF fee from the bank, having bounced checks and rejected electronic payments can cause you to receive returned check fees, late fees, or interest charges from the service provider or company you were attempting to pay.

💡 Quick Tip: Banish bank fees. Open a new bank account with SoFi and you’ll pay no overdraft, minimum balance, or any monthly fees.

How Do Non-Sufficient Fund Fees Work?

Here’s a basic example. Let’s say that someone has $500 in the bank. They withdraw $100 from an ATM and forget to record that transaction. Then, they write a check for $425, believing that those funds are available:

•   Original balance: $500

•   ATM withdrawal: $100

•   New actual balance: $400

•   Check amount: $425

•   Problem: The check is for $25 more than what is currently available.

The financial institution could refuse to honor this check (in other words, the check would “bounce” or be considered a “bad check”) and charge an NSF fee to the account holder. This is not the same thing as an overdraft fee.

An overdraft fee comes into play when you sign up for overdraft protection. Overdraft protection is an agreement with the bank to cover overdrafts on a checking account. This service typically involves a fee (called an overdraft fee) and is generally limited to a preset maximum amount.

Are NSF Fees Legal?

Yes, NSF or returned item fees are legal on bounced checks and returned electronic bill payments. However, they should not be charged on debit card transactions or ATM withdrawals.

If you don’t opt in to overdraft coverage (i.e., agree to pay overdraft fees for certain transactions), then the financial institution cannot legally charge overdraft (or NSF) fees for debit card transactions or ATM withdrawals. Instead, the institution would simply decline the transaction when you try to make it.

No federal law states a maximum NSF fee. But The Truth in Lending Act does require banks to disclose their fees to customers when they open an account.

The Consumer Financial Protection Bureau has been pushing banks to eliminate NSF fees, and their efforts have paid off. Many banks have done away with NSF fees and others have lowered them.

Are NSF Fees Refundable?

You can always ask for a refund. If you’ve been with a financial institution for a while and this is your first NSF fee, you could contact the bank and ask for a refund. The financial institution may see you as a loyal customer that they don’t want to lose, so they may say “yes.” That said, it’s entirely up to them — and, even if they agree the first time, they will probably be less willing if it becomes a pattern. (Or, they may say “no” to the very first request.)

Recommended: Common Bank Fees and How to Avoid Them

Do NSF Fees Affect Your Credit?

Not directly, no. Banking history isn’t reported to the consumer credit bureaus. Indirectly, however, NSF fees could hurt your credit. If a check bounces — say, one to pay your mortgage, car payment, credit card bill, or personal loan — this may cause that payment to be late. If payments are at least 30 days late, loans and credit cards can be reported as delinquent, which can hurt your credit.

And if a payment bounces more than once, a company might send the bill to a collections agency. This information could appear on a credit report and damage your credit. If you don’t pay your NSF fees, the bank may send your debt to a collection agency, which could be reported to the credit bureaus.

Also, keep in mind that any bounced checks or overdrafts could be reported to ChexSystems, a banking reporting agency that works similarly to the credit bureaus. Too many bounced checks or overdrafts could make it hard to open a bank account in the future.

What Happens if You Don’t Pay Your NSF Fees?

If you don’t pay your NSF fees, the bank could suspend or close your account and report your negative banking history to ChexSystems. This could make it difficult for you to open a checking or savings account at another bank or credit union in the future. In addition, the bank may send your debt to a collection agency, which can be reported to the credit bureaus.

How Much Are NSF Fees?

NSF were once as high as $35 per incident but have come down in recent years. The average NSF is now $19.94, which is an historical low.

When Might I Get an NSF Fee?

NSF fees can be charged when there are insufficient funds in your account to cover a check or electronic payment as long as the bank’s policy includes those fees.

Recommended: Negative Bank Balance: What Happens to Your Account?

What’s the Difference Between an NSF and an Overdraft Fee?

An NSF fee can be charged if there aren’t enough funds in your account to cover a transaction and no overdraft protection exists. The check or transaction will not go through, and the fee may be charged.

Some financial institutions, though, do provide overdraft protection. If you opt in to overdraft protection and you have insufficient funds in your account to cover a payment, the bank would cover the amount (which means there is no bounced check or rejected payment), and then the financial institution may charge an overdraft fee. So with overdraft, the transaction you initiated does go through; with an NSF or returned item situation, the transaction does not go through and you need to redo it. Fees may be assessed, however, in both scenarios.

How to Avoid NSF Fees

There are ways to avoid overdraft fees or NSF fees. Here are some strategies to try.

Closely Watch Your Balances

If you know your bank balance, including what’s outstanding in checks, withdrawals, and transfers, then a NSF situation shouldn’t arise. Using your bank’s mobile app or other online access to your accounts can streamline the process of checking your account. Try to get in the habit of looking every few days or at least once a week.

Keep a Cushion Amount

With this strategy, you always keep a certain dollar amount in your account that’s above and beyond what you spend. If it’s significant enough, a minor slip up still shouldn’t trigger an NSF scenario.

💡 Quick Tip: If your checking account doesn’t offer decent rates, why not apply for an online checking account with SoFi to earn 0.50% APY. That’s 7x the national checking account average.

Set Up Automatic Alerts

Many financial institutions allow you to sign up for customized banking alerts, either online or via your banking app. It’s a good idea to set up an alert for whenever your balance dips below a certain threshold. That way, you can transfer funds into the account to prevent getting hit with an NSF fee.

Link to a Backup Account

Your financial institution may allow you to link your savings account to your checking account. If so, should the checking balance go below zero, they’d transfer funds from your savings account to cover the difference.

Use Debit Cards Strategically

If you use your debit card to rent a car or check into a hotel, they may place a hold on a certain dollar amount to ensure payment. It may even be bigger than your actual bill. Depending upon your account balance, this could cause something else to bounce. So be careful in how you use your debit cards.

Look for No-Fee Overdraft Coverage

You can avoid NSF fees by shopping around for a bank that offers no-fee overdraft coverage.

The Takeaway

Returned item fees (also known as NSF fees) can be charged when there are insufficient funds in your account to cover your checks and electronic payments. When you get hit with an NSF fee, you’re essentially getting charged money for not having enough money in your account — a double bummer. To avoid these annoying fees, keep an eye on your balance, know when automatic bill payments go through, and try to find a bank that does not charge NSF fees.

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.

Better banking is here with SoFi, NerdWallet’s 2024 winner for Best Checking Account Overall. Enjoy up to 4.60% APY on SoFi Checking and Savings.

FAQ

What happens when you get an NSF?

If you get charged an non-sufficient funds (or NSF) fee, it means that a financial transaction has bounced because of insufficient funds in your account. You will owe the fee that’s listed in your bank’s policy.

Is an NSF bad?

If a financial transaction doesn’t go through because of insufficient funds, then this can trigger returned item charges (NSF fees). This means you’re paying a fee for not having enough money in your account to cover your payments, a scenario you generally want to avoid.

Does an NSF affect your credit?

An NSF fee does not directly affect your credit, since banking information isn’t reported to the consumer credit agencies. However, if a bounced check or rejected electronic payment leads to a late payment, the company you paid could report the late payment to the credit bureaus, which could impact your credit.

---

Photo credit: iStock/MicroStockHub

SoFi members with direct deposit activity can earn 4.60% annual percentage yield (APY) on savings balances (including Vaults) and 0.50% APY on checking balances. Direct Deposit means a deposit to an account holder’s SoFi Checking or Savings account, including payroll, pension, or government payments (e.g., Social Security), made by the account holder’s employer, payroll or benefits provider or government agency (“Direct Deposit”) via the Automated Clearing House (“ACH”) Network during a 30-day Evaluation Period (as defined below). Deposits that are not from an employer or government agency, including but not limited to check deposits, peer-to-peer transfers (e.g., transfers from PayPal, Venmo, etc.), merchant transactions (e.g., transactions from PayPal, Stripe, Square, etc.), and bank ACH funds transfers and wire transfers from external accounts, do not constitute Direct Deposit activity. There is no minimum Direct Deposit amount required to qualify for the stated interest rate.

SoFi members with Qualifying Deposits can earn 4.60% APY on savings balances (including Vaults) and 0.50% APY on checking balances. Qualifying Deposits means one or more deposits that, in the aggregate, are equal to or greater than $5,000 to an account holder’s SoFi Checking and Savings account (“Qualifying Deposits”) during a 30-day Evaluation Period (as defined below). Qualifying Deposits only include those deposits from the following eligible sources: (i) ACH transfers, (ii) inbound wire transfers, (iii) peer-to-peer transfers (i.e., external transfers from PayPal, Venmo, etc. and internal peer-to-peer transfers from a SoFi account belonging to another account holder), (iv) check deposits, (v) instant funding to your SoFi Bank Debit Card, (vi) push payments to your SoFi Bank Debit Card, and (vii) cash deposits. Qualifying Deposits do not include: (i) transfers between an account holder’s Checking account, Savings account, and/or Vaults; (ii) interest payments; (iii) bonuses issued by SoFi Bank or its affiliates; or (iv) credits, reversals, and refunds from SoFi Bank, N.A. (“SoFi Bank”) or from a merchant.

SoFi Bank shall, in its sole discretion, assess each account holder’s Direct Deposit activity and Qualifying Deposits throughout each 30-Day Evaluation Period to determine the applicability of rates and may request additional documentation for verification of eligibility. The 30-Day Evaluation Period refers to the “Start Date” and “End Date” set forth on the APY Details page of your account, which comprises a period of 30 calendar days (the “30-Day Evaluation Period”). You can access the APY Details page at any time by logging into your SoFi account on the SoFi mobile app or SoFi website and selecting either (i) Banking > Savings > Current APY or (ii) Banking > Checking > Current APY. Upon receiving a Direct Deposit or $5,000 in Qualifying Deposits to your account, you will begin earning 4.60% APY on savings balances (including Vaults) and 0.50% on checking balances on or before the following calendar day. You will continue to earn these APYs for (i) the remainder of the current 30-Day Evaluation Period and through the end of the subsequent 30-Day Evaluation Period and (ii) any following 30-day Evaluation Periods during which SoFi Bank determines you to have Direct Deposit activity or $5,000 in Qualifying Deposits without interruption.

SoFi Bank reserves the right to grant a grace period to account holders following a change in Direct Deposit activity or Qualifying Deposits activity before adjusting rates. If SoFi Bank grants you a grace period, the dates for such grace period will be reflected on the APY Details page of your account. If SoFi Bank determines that you did not have Direct Deposit activity or $5,000 in Qualifying Deposits during the current 30-day Evaluation Period and, if applicable, the grace period, then you will begin earning the rates earned by account holders without either Direct Deposit or Qualifying Deposits until you have Direct Deposit activity or $5,000 in Qualifying Deposits in a subsequent 30-Day Evaluation Period. For the avoidance of doubt, an account holder with both Direct Deposit activity and Qualifying Deposits will earn the rates earned by account holders with Direct Deposit.

Members without either Direct Deposit activity or Qualifying Deposits, as determined by SoFi Bank, during a 30-Day Evaluation Period and, if applicable, the grace period, will earn 1.20% APY on savings balances (including Vaults) and 0.50% APY on checking balances.

Interest rates are variable and subject to change at any time. These rates are current as of 10/24/2023. There is no minimum balance requirement. Additional information can be found at https://www.sofi.com/legal/banking-rate-sheet.

SoFi® Checking and Savings is offered through SoFi Bank, N.A. ©2023 SoFi Bank, N.A. All rights reserved. Member FDIC. Equal Housing Lender.
The SoFi Bank Debit Mastercard® is issued by SoFi Bank, N.A., pursuant to license by Mastercard International Incorporated and can be used everywhere Mastercard is accepted. Mastercard is a registered trademark, and the circles design is a trademark of Mastercard International Incorporated.

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

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

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.

SOBK0124034

Read more

A mortgage servicer is a company that manages a home loan; they may send your statement and collect and process your payment every month, as well as provide customer support.

A mortgage servicer is often different from your lender, or the institution that approved your application and loaned you the funds to buy your property.

To help you understand the finer points of mortgage loan servicing, here’s a handy guide to help.

What Is Mortgage Servicing?

A mortgage servicer is the company that manages your mortgage payments. A mortgage servicer is not necessarily the same as a mortgage lender; nor is the company the holder of your mortgage note.

Because of the way the mortgage market works, a servicer is needed to ensure that all the correct parties are paid on time and that any issues with the borrower or the loan are handled properly.


💡 Quick Tip: SoFi’s Lock and Look ⁺ feature allows you to lock in a low mortgage financing rate for 90 days while you search for the perfect place to call home.

How Does Mortgage Servicing Work?

Mortgage servicing begins after you close on your loan. At this point, a servicer may take over from the lender to manage the day-to-day needs of the loan.

The mortgage note likely will have already been sold on the secondary mortgage market to a government-backed home mortgage company such as Fannie Mae or Freddie Mac. These companies then bundle similar mortgage types and sell them as investments.

On the borrower’s side, here’s how it works: One company gives them a loan, one company holds their mortgage note, and yet another company is responsible for taking care of the administrative tasks of the loan (though some borrowers will have the same lender and servicer).

Most borrowers will only see who the company taking care of these tasks is. That’s the mortgage servicer, which collects your payments, responds to your inquiries, and ensures that the proper entities are paid, including the owner of your mortgage note and all parties that need to be paid from your escrow account.

Recommended: What Is Mortgage Underwriting?

Which Parties Are Involved in Mortgage Servicing?

Mortgage servicing has a few layers.

Servicer

The servicer collects payments and sends money to the mortgage note holder and the entities paid from an escrow account for property tax, homeowners insurance, any mortgage insurance premiums, any HOA (homeowners association) dues, etc.

Lender

When it comes to mortgage servicer vs. mortgage lender, the lender originated your loan. It may be the same entity that services your mortgage loan, but the lender also can transfer or sell the rights to service your mortgage. Even if your loan stays with the same company, the person who originated your loan won’t be who you contact when you need to make a payment.

Investor

Investors buy your mortgage when it is bundled with other mortgages of the same type from one of the government-backed home mortgage companies (such as Fannie Mae or Freddie Mac) and some financial institutions. Holders of deed in lieu of foreclosure.

If a homeowner is unable to continue payments and foreclosure is unavoidable, the servicer initiates the process and maintains the property until it is sold.

Maintain Escrow Accounts

Mortgage servicing companies are also responsible for maintaining escrow accounts.

They will take your mortgage payment, which is usually divided into principal and interest that goes to the holder of your mortgage note, and a payment into an escrow account for taxes, insurance, and any mortgage insurance and HOA dues. By maintaining the escrow account, the mortgage servicer can ensure that all the entities are paid on time.

Not all mortgages require an escrow account. Whether a new home loan will require one is among the mortgage questions to ask your lender.

Keep in Touch With Borrowers

In the event a new servicer is secured, the transfer must be done in a timely manner that enables the new servicer to comply with applicable laws and duties to the consumer. Borrowers should receive a letter at least 15 days before the date of the transfer.


💡 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.

Do I Need to Know Who My Mortgage Servicer Is?

Yes, it’s good to have this information. Your mortgage servicer is your primary point of contact for paying back your mortgage. It is essential that you know who your servicer is and where to send your mortgage payments.

It is possible for the rights of servicing your mortgage to be transferred to another company. In this case, the terms of your mortgage won’t change, just the company that administers your mortgage.

Recommended: 6 Simple Ways to Reduce Your Mortgage Payment

How to Find Out Who Your Mortgage Servicer Is

There are several ways to find out who your mortgage servicer is. Here’s where to look:

Billing Statement

At closing, you provided an address where the servicer should send statements. The name and contact information of your mortgage servicer will be included in the statements sent to you. This is how most new homeowners find their servicer’s information.

Payment Coupon Book

In addition to a mortgage statement you’ll receive every month, you’ll also typically be mailed a coupon book at the beginning of your mortgage servicing.

MERS Servicer Identification System

The MERS® Servicer ID is a free service where you can find the name of your servicer or mortgage note holder. You can call 888-679-6377 or input your information online .

To find your servicer with this system, you’ll need to provide one of these three things:

•   Property address

•   Borrower name and Social Security number

•   The unique mortgage identification number

The Takeaway

A mortgage servicer handles the day-to-day management of a mortgage, sending out statements and collecting payments, for instance. They are an important part of making sure a home loan runs smoothly.

Before mortgage servicing is even a thought, you’ll need to find a mortgage. And that means finding the right lender.

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

Why do I need a mortgage servicing company?

A mortgage servicing company ensures that your payments get to the right parties. Many mortgages are not held by the lending institutions that originated them; instead, they’re sold as investments on the secondary mortgage market.

Can my mortgage servicer change?

Yes. Your mortgage servicer may transfer the mortgage servicing rights for your loan to another company. Your old servicer generally should send a notice at least 15 days before the transfer of the servicing rights.

Is my mortgage servicer different from the lender?

Often, yes. Your mortgage servicer can be the same company as the one that originated your loan, but it’s not unusual for another servicer to take over the management of payments.

---

Photo credit: iStock/LaylaBird

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

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

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

⁺Lock and Look program: Terms and conditions apply. Applies to conventional purchase loans only. Rate will lock for 91 calendar days at the time of preapproval. An executed purchase contract is required within 60 days of your initial rate lock. If current market pricing improves by 0.25 percentage points or more from the original locked rate, you may request your loan officer to review your loan application to determine if you qualify for a one-time float down. SoFi reserves the right to change or terminate this offer at any time with or without notice to you.

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

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

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.

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.

SOHL0124031

Read more

It’s entirely possible to sell a house with a mortgage. In fact, it’s common to sell a property that still has a mortgage, because most people don’t stay in a home long enough to pay off the home loan.

With the help of your lender and real estate agent, you can move ahead and sell a house with a mortgage. Yes, there’s a bit of paperwork involved, but settling your mortgage at the closing table shouldn’t prove too challenging.

Here’s everything you need to know about selling a home with a mortgage.

What Happens to Your Mortgage When You Sell Your Home?

When you sell your home, the amount you contracted with the buyer is put toward your mortgage and settlement costs before any excess funds are wired to you. Here’s how it works for different transaction types.

A Typical Sale

In a typical sale, homeowners will put their current home on the market before buying another one. Assuming the homeowners have more value in their home than what is owed on their mortgage, they can take the proceeds from the sale of the home and apply that money to the purchase of a new home.

A Short Sale

A short sale is one when you cannot sell the home for what you owe on the mortgage and need to ask the lender to cover the difference (or short).

In a short sale transaction, the mortgage lender and servicer must accept the buyer’s offer before an escrow account can be opened for the sale of the property. This type of mortgage relief transaction can be lengthy (up to 120 days) and involves a lot of paperwork. It’s not common in areas where values are falling or at times when the real estate market is dropping.

When You Buy Another House

There are several roads you can take when you buy another house before selling your own. You may have the option of:

•   Holding two mortgages. If your lender approves you for a new mortgage without selling your current home, you may be able to use this option when shopping for a mortgage. However, you won’t be able to use funds from the sale of your current home for the purchase of your next home.

•   Including a home sale contingency in your real estate contract. The home sale contingency states that the purchase of the new home depends upon the sale of the old home. In other words, the contract is not binding unless you find a buyer to purchase the old home. The two transactions are often tied together. When the sale of the old home closes, it can immediately fund the down payment and closing costs of the new home (depending on how much there is, of course). Keep in mind that a home sale contingency can make your offer less competitive in a hot real estate market where sellers are not willing to wait around for a buyer’s home to sell.

•   Getting a bridge loan. A bridge loan is a short-term loan used to fund the costs of obtaining a new home before selling the old home. The interest rates are usually pretty high, but most homebuyers don’t plan to hold the loan for long.

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

Selling a House With a Mortgage: Step by Step

Here are the steps to take to sell a home that still has a mortgage.

Get a Payoff Quote

To determine exactly how much of the mortgage you still owe, you’ll need a payoff quote from your mortgage servicer. This is not the same thing as the balance shown on your last mortgage statement. The payoff amount will include any interest still owed until the day your loan is paid off, as well as any fees you may owe.

The payoff quote will have an expiration date. If the outstanding mortgage balance is paid off before that date, the amount on the payoff quote is valid. If it is paid after, sellers will need to obtain a new payoff quote.

Determine Your Home Equity

Equity is the difference between what your property is worth and what you owe on your mortgage (your payoff quote is most accurate). If your home is worth $400,000 and your payoff amount on the existing mortgage is $250,000, your equity is $150,000.

When you sell your home, you gain access to this equity. Your mortgage, any second mortgage like a home equity loan, and closing costs are settled, and then you are wired the excess amount to use how you like. Many homeowners opt to use part or all of the money as a down payment on their next home.

Secure a Real Estate Agent

A real estate agent can walk you through the process of selling a home with a mortgage and clear up questions on other mortgage basics. Your agent will be particularly valuable if you need to buy a new home before selling your current home.

Set a Price

With your agent, you will look at factors that affect property value, such as comparable sales in your area, to help you set a price. There are different price strategies you can review with your agent to bring in more buyers to bid on your home.

Accept a Bid and Open Escrow

After an open house and showings, you may have an offer (or a handful). Consider what you value in accepting an offer. Do you want a fast close? The highest price? A buyer who is flexible with your moving date? A buyer with mortgage preapproval?

You may also choose to continue negotiating with prospective buyers. Once you’ve selected a buyer and have signed the contract, it’s time to go into escrow.

Review Your Settlement Statement

You’ll be in escrow until the day your transaction closes. An escrow or title agent is the intermediary between you and the buyer until the deal is done. While the loan is being processed, title reports are prepared, inspections are held, and other details to close the deal are being worked out.

Three days before, you’ll see a closing disclosure (if you’re buying a house at the same time) and a settlement statement. The settlement statement outlines fees and charges of the real estate transaction and pinpoints how much money you’ll net by selling your home.


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

Selling a House With a Negative Equity

Negative equity means that the value of an asset (such as a home) is less than the balance due on the loan against it. Say you purchased a property for $400,000 with a $380,000 loan, but then the real estate market took a nosedive. Your property is now worth $350,000, less than the amount of the mortgage.

If you have negative equity in the home and need to sell it, it is possible to sell if you come up with the difference yourself.

In this scenario (an alternative to a short sale), you pay the difference between the amount left on your mortgage note and the purchase offer at closing. So in the example above, if you sold the house for $350,000, at the closing, you would need to pay the loan holder an additional $30,000 to clear the debt.

The Takeaway

Selling a house with a mortgage is common. The buyer pays the sales price, and that money is used to pay off your remaining mortgage, your closing costs, and any second mortgage. The rest is your profit.

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

Who is responsible for the mortgage on the house during the sale?

The homeowner is responsible for continuing to pay the mortgage until paperwork is signed on closing day.

What happens if you sell a house with a HELOC?

When you sell a home that has a home equity line of credit with a balance, a home equity loan, or any other kind of lien against the house, that will need to be paid off before the remaining equity is paid out to you.

What happens to escrow money when you sell your house?

Your mortgage escrow account will be closed, and any money left will be refunded to you.

Can I make a profit on a house I still owe on?

Yes. You can make a profit if the amount you sell your house for is greater than the amount you owe on it, less closing and settlement costs.

Can I have two mortgages at once?

Yes, you can have two mortgages at once if the lender approves it.

---

Photo credit: iStock/Beton studio

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

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

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

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

SOHL0124030

Read more

If you are offered a relatively low mortgage rate, locking it in can secure it and potentially save you a bundle of money over the life of your loan. In other words, it can be a smart move.

That said, when applying for a mortgage, you only have so much control over the mortgage rate, as lenders will consider your credit score, income, and assets to determine your risk as a borrower. What’s more, mortgage rates change daily based on external economic factors like investment activity and inflation.

Read on to learn how a mortgage rate lock works and the benefits and downsides of using this option.

What Is a Mortgage Rate Lock?

A mortgage rate lock is an agreement between a borrower and lender to secure an interest rate on a mortgage for a set period of time. Locking in your mortgage rate safeguards you from market fluctuations while the lender underwrites and processes your loan.

Interest rates can rise and fall significantly between mortgage preapproval and closing on a property.

Remember that in the home-buying process, when you’re pre-approved for a mortgage, you will know exactly how much you most likely can borrow, and then you can shop for a home in that range.

So when can you lock in a mortgage rate? Depending on the lender, you may have the option to lock in the rate any time between preapproval and when underwriting begins.

Before preapproval and locking in, it’s recommended to get multiple offers when shopping for a mortgage to find a competitive rate.


💡 Quick Tip: Want the comforts of home and to feel comfortable with your home loan? SoFi has a simple online application and a team dedicated to closing your loan on time. No surprise SoFi has been named a Top Online Lender in 2024 by LendingTree/Newsweek.

How a Mortgage Rate Lock Works

Mortgage rate locks are more complicated than simply securing a set rate in perpetuity. How the rate lock works in practice will vary among lenders, loan terms, different types of mortgages, and geographic locations.

Once you lock a mortgage rate, there are three possible scenarios: Interest rates will increase, decrease, or stay the same. The ideal outcome is securing a lower rate than the prevailing market interest rate at the time of closing.

Here are some key points to know if you are considering a rate lock:

•   Rate locks are sometimes free but often cost between 0.25% and 0.50% of the loan amount.

•   When you choose to lock in your rate, it’s stabilized for a set period of time — usually for 30 to 60 days, but up to 120 days may be available.

•   If the rate lock expires before closing on the property, the ability to extend is subject to the lender.

•   Time it right. The average mortgage took 44 days to close as of February 2024, according to ICE Mortgage Technology, underscoring the importance of timing a mortgage rate lock with your expected closing date. Otherwise, you could face fees for extending the rate lock or have to settle for a new, potentially higher rate.

•   Whether borrowers are charged for a rate lock depends on the lender. It could be baked into the cost of the offer or tacked on as a flat fee or percentage of the loan amount. The longer the lock period, the higher the fees, generally speaking.

•   Lenders have the discretion to void the rate lock and change your rate based on your personal financial situation. Say you take out a new line of credit to cover an emergency expense during the mortgage underwriting process. This could affect your credit and debt-to-income ratio, causing the lender to reevaluate your eligibility for the offered rate and financing.

•   Lenders also determine the mortgage rate based on the types of houses a borrower is looking at: A primary residence vs. a vacation home or investment property, for example, would influence the interest rate.

Recommended: A Guide to Buying a Duplex

Consequences of Not Locking in Your Mortgage Rate

There are risks to not locking in a mortgage rate before closing.

If you don’t lock in a rate, it can change at any time. An uptick in interest rates would translate to a higher monthly mortgage payment. Granted, a slight bump to your monthly payment may not lead to mortgage relief, but it could cost thousands over time.

Example: The monthly payment on a $300,000 loan at a 30-year fixed rate would go up by $88 if the interest rate increased from 4% to 4.5%. This would add up to an extra $31,611 in interest paid over the life of the loan.

You can use a mortgage calculator tool to see how much a rise in rates could affect your mortgage payment.

Furthermore, a higher monthly payment might potentially disqualify you from financing, depending on the impact on your debt-to-income ratio. After a jump in interest rates, borrowers may need to make a larger down payment or buy mortgage points upfront to obtain financing.

Even if you lock in a mortgage rate early on, you could face these consequences if it expires before closing. Deciding when to lock in a mortgage rate should account for any potential contingencies that could delay the process.
If you’re unsure, ask your lender for guidance on when you should lock in.


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

What to Do if Interest Rates Fall After Your Rate Lock

The main concern with mortgage rate locks is that you could miss out on a lower rate. In most cases, buyers will pay the rate they are locked in at if the prevailing interest rate is less.

A float-down option, however, protects you from rate increases while letting you switch to the lower interest rate at closing.

•   Float-down policies vary by lender but generally cost more than a conventional rate lock for the added flexibility and assurance.

•   It’s also possible that a float-down option won’t be triggered unless a certain threshold is met for the drop in rates.

•   It’s worth noting that borrowers aren’t committed to the mortgage lender until closing, so reapplying elsewhere is an option if rates change considerably.

Pros and Cons of Mortgage Rate Lock

Back to the big question: Should I lock my mortgage rate today? It’s important to weigh the pros and cons to decide when to lock in a mortgage rate.

Pros	Cons
Locking in a rate you can afford can lessen money stress during the closing process	A rate lock might prevent you from getting a better deal if rates fall later on
You could save money on interest if you lock in before rates go up	If a rate lock expires, you may have to pay for an extension or get stuck with a potentially higher rate
Lenders may offer a short-term rate lock for free, providing a window to close the deal if rates spike but an opportunity to wait it out if they drop	Rate locks can involve a fee of 0.25% to 0.50% of the loan amount.

The Takeaway

A favorable interest rate can make a difference in your home-buying budget. If you’re considering a rate lock because you’re concerned that rates will be rising, it’s important to choose a lock period that gives the lender ample time to process the loan to avoid extra fees or a potentially higher rate.

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

How long does a rate lock period last?

Rate locks usually last 30 to 60 days but can be shorter or longer depending on the agreement. It’s not uncommon for lenders to offer a free rate lock for a designated time frame.

Should you use a mortgage rate “float-down”?

If you’re worried about missing out on low interest rates, a mortgage rate float-down option could let you secure the current rate with the option to take a lower one if rates drop. Take note that these agreements usually outline a specified period and minimum amount the rate must drop to activate the float-down.

How much does a rate lock cost?

Lenders don’t always charge for a rate lock. If they do, you can expect costs to range from 0.25% to 0.50% of the loan amount for a lock period (usually 30 to 60 days). A longer lock period or adding a float-down option typically increases the rate lock cost.

What happens if my rate lock expires?

If your rate lock expires before you’ve finalized the deal, you can choose to extend the lock period (usually for a fee) or take the prevailing rate when you close on the loan.

---

Photo credit: iStock/Vertigo3d

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

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

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

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

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

SOHL0124039

Read more