Apr
28
2025
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What Is A Fellowship?

By | Student Loans, student_loan | Comments Off on What Is A Fellowship?

If you’re planning to pursue additional studies after you get your undergraduate degree, a fellowship could allow you to achieve your career goals while also helping you pay for school.

What is a fellowship? And how does it work? Read on to find out about fellowship programs and how they might help bring your total educational costs down.

Key Points

•   Fellowships provide funding for advanced education, often requiring work or research in return.

•   These programs may cover tuition and living expenses, helping to reduce student debt.

•   Fellowships are highly competitive and demand high academic performance.

•   Fellowships offer valuable hands-on experience and specialized skills, enhancing career prospects.

•   Fellowships are available in different fields of study and may last just a few months or as long as several years.

What Exactly Is A Fellowship?

A fellowship is a program that allows students — usually graduate students — to continue their education while earning money at the same time, most often in exchange for doing work in their field of study. It can help cover at least some of the cost of college.

A fellowship might be as short as a few months or as long as several years; it might be funded for a few thousand dollars or cover the entire cost of your graduate education, including living expenses.

The work involved could be field research, local community work, or teaching undergraduates in your discipline while you pursue higher studies. There’s a lot of variety out there depending on the program.

Fellowships are competitive prizes, and successfully securing one often requires a history of high academic merit and also writing a killer application essay (or several). The idea is that students who are awarded fellowships show potential in their field and have the capacity to become successful professionals later on.

While fellowship monies don’t need to be repaid after you graduate from the program (so long as you adhere to the parameters set out by the organization offering the fellowship), you may be doing some work or service in exchange for the funding.

Recommended: How to Pay for Grad School

Types Of Fellowship Programs

Although there are a large variety of individual fellowships programs, there are three common types you’re apt to run into.

1. Graduate Fellowships

Graduate fellowships help graduate students pursue their education by subsidizing some or all of the costs in exchange for work on-campus.

For instance, a graduate fellowship for a master’s degree in creative writing might come with a tuition waiver as well as a monthly stipend to cover living expenses, an option to purchase affordable healthcare through the school, monies to cover certain educational related travels, and so on. In exchange, the student is generally expected to teach a certain number of beginner-level courses in their field to undergraduate students.

2. Postdoctoral Fellowships

For students who’ve already earned their doctorate degrees, postdoctoral fellowships can open the door to even more education, which can help these scholars become specialized in a very specific aspect of their field.

What is the fellowship definition in this instance, and how does the fellowship work? A postdoctoral fellow might be expected to complete a certain amount of research or, again, teach courses while they continue their studies. In exchange, they might receive funding for their coursework and extracurricular activities like relevant travel.

3. Medical Fellowships

If you’re pursuing a career in the medical field, you may be wondering, what is a fellowship in medicine? For physicians and dentists who’ve already completed medical school and their residency, a medical fellowship can help them continue their training and gain more competency in a specific area of medicine.

Medical fellowships generally come after a doctor has already completed their residency. While fellowships provide an excellent learning experience and often better pay than a residency does, they still pay less than a third of the average full-fledged physician’s salary. To put it in perspective: Primary care medical fellowships pay approximately $75,943 a year on average, while a family medicine physician averages about $273,000 annually.

That means careful budgeting on a medical fellowship is likely to be required — and the same is true with any kind of academic or research fellowship.

What Is A Fellowship Like?

As mentioned above, fellowships don’t generally provide a lot of money for living expenses — your room and board may or may not be included, or you may be offered a flat stipend with which to cover your own cost of living.

Graduate students may be expected to do a lot of work for what feels like a minimal paycheck. But having one’s tuition waived is a big deal that can lead to substantial savings. This is especially true in the long term, when you consider the interest on graduate school loans.

Not only that, graduate students may already have undergraduate loans to worry about as well. And, since one of the basics of student loans is repaying them, that is likely to be top of mind. A fellowship may be a great step toward pursuing the career of your dreams without the additional burden of even more student debt.

One option for grad students to look into regarding their undergraduate loans is deferring them until after school. However, even with deferment, you might want to put some money toward student loans while still in school, to help reduce your payments later on.

Another possible alternative to consider is refinancing student loans, particularly if you could qualify for lower rates or better terms that might help reduce your monthly payments. (Be aware that you may pay more interest over the life of the loan if you lower your payment by extending your loan term.) Refinancing federal loans does mean giving up access to federal programs and protections. But if you don’t need those benefits, refinancing might be an option for you.

There are different options for refinancing student loans, including some specifically for grad students training for specialized careers, such as medical resident refinance. However, refinancing federal loans does mean giving up access to federal programs and protections. If you don’t need those benefits, refinancing might be an option for you.

Recommended: Private Student Loans Guide

Is Applying For A Fellowship Worth It?

Given the amount of work involved and the relatively small amount of money you may earn, is applying for a fellowship worth it in the first place? In the end, only you can make that decision for your own educational and financial future — but here are some pros and cons to consider.

Pros:

•   Fellowships offer you the opportunity to gain hands-on experience in your field, which can help you hone your skills and also learn more about whether or not you like the work in the first place.

•   Fellowships can help keep you from racking up more student debt, which is particularly attractive if you already have loans to repay.

•   Fellowships last only for a short amount of time, but the experience you get by taking one on may help you create a long-lasting and stable career.

Cons:

•   While completing a fellowship, you’re likely to work very hard for what feels like not very much of a paycheck.

•   The application process requires dedication and work. And fellowships are very competitive: Even with great credentials, you may not get the fellowship.

•   Fellowships may have very specific requirements, such as GPA or work hour minimums, and your fellowship may be revoked if you don’t complete the project or adhere to the guidelines.

The Takeaway

A fellowship can provide graduate students with an advanced education and highly specialized skills in their field. A fellowship offers funding in exchange for work to help pay for this schooling, which means that grad students may avoid accumulating more student loan debt. Fellowships are very competitive, however, so it’s wise for those considering one to weigh the pros and cons to make sure it’s the right choice for their situation.

Looking to lower your monthly student loan payment? Refinancing may be one way to do it — by extending your loan term, getting a lower interest rate than what you currently have, or both. (Please note that refinancing federal loans makes them ineligible for federal forgiveness and protections. Also, lengthening your loan term may mean paying more in interest over the life of the loan.) SoFi student loan refinancing offers flexible terms that fit your budget.


With SoFi, refinancing is fast, easy, and all online. We offer competitive fixed and variable rates.

FAQ

What does it mean when you get a fellowship?

A fellowship is a funded opportunity for the advanced study of a subject. Fellowships are typically for graduate students who want to pursue advanced academics and learn highly specialized skills in their field, while earning money, or getting a stipend, to help pay for their studies.

Is a fellowship a paid job?

It depends on the type of fellowship. In general, a fellowship allows graduate students to pursue an advanced education while earning money — or receiving a cost of living stipend — to pay for their schooling, typically in exchange for doing work related to their field of study. The work might consist of doing research or teaching, for instance.

How hard is it to get a fellowship?

Fellowships are merit-based and extremely competitive. In order to secure a fellowship, an individual typically needs to have a history of high academic achievement. Students who are awarded fellowships generally must show great potential in their field with the capacity to become successful professionals in the future.

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SOSLR-Q225-014

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Apr
28
2025

Can You Buy a Second Home Without a Down Payment?

By | Financial Independence, Home Ownership, mortgage | Comments Off on Can You Buy a Second Home Without a Down Payment?

While it is possible to buy a second home without a down payment, the scenarios in which you can do so are quite rare.

Traditional zero-down payment programs may not be available to you because you’re no longer a first-time homebuyer. Lenders are also generally hesitant to offer second home mortgages with low down payments. The down payment requirements for a second home are usually 10% or more.

But you may be in luck: Sometimes you can figure out how to buy a second home with no down payment. Read on to learn:

•   What does buying a second home involve?

•   What are the usual down payment requirements for a second home?

•   How can you buy a second home with no down payment?

Note: SoFi mortgage loans require a down payment.

Key Points

•   Purchasing a second home typically requires a down payment, but exceptions exist.

•   VA loans, for military and veterans, offer zero-down options for eligible borrowers.

•   Seller financing may allow you to forgo a down payment; however, it typically requires a higher amount down.

•   Home equity from an existing property may serve as a down payment, through a home equity loan or home equity line of credit (HELOC).

•   Strong financial credentials are necessary for lender approval on a second home.

What to Know About Buying a Second Home

Buying a second home comes with a different set of guidelines and rules than purchasing your first home. You’re no longer considered a first-time homebuyer, which disqualifies you from many down payment assistance programs. However, your situation will be treated differently depending on how you want to use the property. Consider the following possibilities:

Moving into the Second Home

If your plan is to keep your first home as a rental property and move into the second home, you may have some options. A mortgage loan may be available in one of two ways.

•   USDA loans in approved areas have zero-down payment options. You’re allowed to get a second home with a zero-down USDA loan if you meet certain requirements involving citizenship, income, and other factors. You must live in the property as your principal residence, and you cannot have a USDA loan on your first property. In addition, you must financially qualify for both homes. To count rental income for the first home, USDA requires 24 months of rental income history.

Note: SoFi does not offer USDA loans at this time. However, SoFi does offer FHA, VA, and conventional loan options.

Other qualifiers for this kind of loan include:

•   The current home no longer meets your needs for certain reasons (for example, if your family is growing and you live in a two-bedroom home, you’re relocating for a new job, or you’re getting divorced).

•   You don’t have another way to obtain the property without the USDA loan.

•   You can only keep one other house besides the new second home.

If, say, you’re moving from to a new region for a job opportunity, and USDA loans are available in the area you’re moving to, it’s possible to keep your first home and buy a second if you meet the above conditions.

Worth noting: An obstacle for borrowers can be that lenders need a way to verify rental income. A signed lease and bank statements may not be enough. Your lender may want to see the rental income reported on your taxes for two years.

•   VA Loans may also offer zero down payment options. Available to qualifying veterans, service members, and surviving spouses, these government-backed loans can only be used to purchase property that will be a primary residence. So, if you’re moving from one place to another and qualify, you can use a VA loan to purchase the next property with no money down.

Buying the Second Home as a Vacation Home or Rental

Is there a way to buy a second home with no down payment if you plan to use it as a vacation home or rental? Options are few and far between if you’re not planning to use the property as your principal residence. When you’re looking at non-owner-occupied financing, lenders usually want a bigger down payment, not a smaller one.

That said, here are a couple of options that could answer the question of how to buy a second home with no down payment:

•   Private loans: If you finance through a relative or other private source, it’s possible to obtain a no-money-down mortgage. Terms are agreed upon by both parties.

•   Seller financing: Much like a private loan, the conditions of seller financing (aka owner financing) a loan are whatever the two parties agree on. If the seller is willing to let you buy the property with no money down, you might be able to make this work. However, seller financing usually comes with a bigger down payment, not a smaller one.


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Do You Need a Down Payment on a Second Home?

Down payment requirements for a second home are usually higher. Lenders also look for a higher credit score. The loftier down payment requirement and credit score reflect the fact that the lender is taking on elevated risk since borrowers are more likely to default on a second home than a first home. A lender may expect your down payment to be right around the average down payment on a house, which is currently 13%.

Yet, your mortgage lender is also looking for a loan that accommodates your unique situation to help you to buy a second home. Though no down payment options are rare, your lender may have access to financial products that allow for a smaller down payment.

Can You Buy Another Home When You Have a Current Mortgage?

If you financially qualify, buying another house when you have a mortgage is possible. Generally speaking, lenders look for a strong credit history and enough income to cover your debts (including the cost of the new mortgage) to determine if you qualify for an additional mortgage.

Recommended: What Is a Second Mortgage?

Using Home Equity as a Down Payment Source

If you don’t have enough cash for a down payment on a second home, you may be able to tap your home equity. A home equity loan or a home equity line of credit (HELOC) can help you access money to use for a down payment on a second home.

Though not all lenders will permit this, using home equity may be possible if you want to keep your first home and have no other way of obtaining enough money for a down payment on your second.

It may be advisable to get a home equity loan or HELOC while you are still living in your first house. This allows you to qualify for owner-occupant rates, which are typically much lower than non-owner-occupied rates.

Recommended: HELOC vs. Home Equity Loan: How They Compare

The Takeaway

While there aren’t many options for financing a second home with no down payment, you may be in luck. There are some no down payment loans available to qualified buyers, and these loans can help you preserve cash for renovations, improvements, and other expenses. Even if you can’t find a no down payment mortgage for a second home, you will likely have a number of financing options you can tap into that may allow you to snag another property.

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

Unlock your home’s value with a home equity line of credit from SoFi, brokered through Spring EQ.

FAQ

What is the minimum down payment for a second home?

For a second home that is not going to be your primary residence, most lenders look for at least a 10% down payment.

How do I buy a second home without 20% down?

With a higher credit score and other financial qualifications, you may be able to find a lender or a program with a required down payment less than 20%.

Can I buy another house if I already have a mortgage?

If you’re a qualified buyer with good debt and income levels with a strong credit history, a lender may be able to approve you for a second mortgage.

Can I use my equity to buy another house?

It may be possible to use home equity to buy another home. Contact a lender to go over your unique situation.

Photo credit: iStock/Nuttawan Jayawan

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HomeStory will issue the reward using the payment option you select and will be sent to the client enrolled in the program within 45 days of HomeStory Real Estate Services receipt of settlement statements and any other documentation reasonably required to calculate the applicable reward amount. Real estate agent fees and commissions still apply. Short sale transactions do not qualify for the reward. Depending on state regulations highlighted above, reward amount is based on sale price of the home purchased and/or sold and cannot exceed $9,500 per buy or sell transaction. Employer-sponsored relocations may preclude participation in the reward program offering. SoFi is not responsible for the reward.

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SOHL-Q225-002

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Apr
28
2025
Doctor at desk with laptop

Budgeting on a Fellowship Doctor Salary

By | Budgeting & Goals, Building Your Career, Life & Career, money, student_loan | No Comments

A medical fellowship after residency can provide the training you need for a successful career in your preferred specialty. But it also probably means you’ll make far less for a period of one to three years.

Do you get paid during a fellowship? Yes, you do. Primary care medical fellows earn an average salary of $75,943 per year. While that’s above the national annual median salary of $59,228, it doesn’t compare to the salary of a full-time family medicine physician of $273,000.

You may need to set and stick to a budget during your fellowship training period. Read on for some strategies that can help.

Key Points

•   A medical fellowship typically offers a salary of around $75,943, which is lower than that of fully licensed physicians, necessitating careful budgeting.

•   Budgeting effectively involves categorizing expenses into fixed and variable types, ensuring that monthly expenses do not exceed income.

•   Housing is often the largest monthly expense; finding affordable housing or considering shared living arrangements can significantly reduce costs.

•   Utilizing income-based repayment plans, deferment, or forbearance options can help manage student loan payments while in a medical fellowship.

•   Seeking passive income opportunities, using credit card points, and practicing smart grocery shopping can further alleviate financial pressures during fellowship years.

The Difference Between Residency and Fellowship

Residency usually takes place right after medical school and is designed to give doctors the experience needed to serve patients. A fellowship follows residency and is designed to train fellows in a narrower specialty.

While some fellows may earn more than residents (residents earn an average of $67,400 per year), their salary is still significantly lower than that for most working physicians. Usually, medical fellows have to pay for the majority of their living expenses, including housing and at least some meals.

Additionally, most fellows face a high student loan burden as well, with 73% of medical school graduates having some form of education debt. The average student loan debt of medical school graduates, including undergraduate loans, is $264,519.

With a relatively low salary and a high debt burden, being smart with money during fellowship years can be a big part of creating a strong financial foundation.

Fellows may feel like they have too much on their plate to devote time to thinking about personal finance. But just a few savvy budgeting strategies can help fellows spend wisely and potentially avoid getting deeper into debt.

10 Budgeting Tips for Living on Your Fellowship Doctor Salary

1. Finding a Budget that Works for You

The first step to smart budgeting is actually making a budget. Start by creating a list of monthly expenses in two categories: fixed expenses (those that stay roughly the same every month, such as rent, utilities, and insurance) and variable expenses (those that fluctuate, such as eating out and entertainment).

Next, note how much money is earned each month from fellowship or any other income sources. Use take-home pay after taxes and deductions.

Ideally, expenses should be less than income. If they’re not, work out where costs can be trimmed. With a reasonable budget in place, the next step can be to track spending each month.

2. Living Within Your Means

Expenses should not exceed the money you bring in. During a medical fellowship, you might be tempted to extend yourself financially with the expectation that your salary will soon increase dramatically. But going into debt isn’t a savvy way to start off your career.

Credit cards generally have the highest interest rates, so even a small balance can balloon into substantial debt down the line. Failing to make payments or using too much available credit could impact an individual’s credit score, which could make a difference when looking for a mortgage or car loan.

3. Choosing Housing Carefully

For most people, housing is the single largest monthly expense. That’s why it’s worth putting in the effort to find an affordable option that meets your needs. In a particularly expensive market, it may be worth getting roommates. Another factor to consider — the closer you are to your workplace, the more that can potentially be saved in commuting costs.

4. Delaying the Purchase of a New Car

For those living in an urban area, think about whether public transit or carpooling may be options for getting to work. If a vehicle is nonnegotiable, consider a used car rather than a new one. Cars lose much of their value when they’re driven off the lot for the first time, so it may be worth seeking out used cars that are in great shape at a great price.

5. Saving on Food

As a variable expense, food is an area with plenty of opportunities to save. If you have any meals provided for you as part of your fellowship, take advantage of the free food. Eating out can be tempting with a busy schedule, but it may be wiser to limit how often you go to restaurants and how much you spend there.

Since you won’t always have time to cook, preparing meals in batches to eat throughout the week could help you resist the temptation of going out.

To save money on food when you grocery shop, purchase what’s on sale, learn what produce is in season, and consider purchasing generic brands. Look for nonperishable items in bulk at discount stores. If you’re feeling extra thrifty, using coupons could save you some change, too.

6. Traveling with Rewards Points

During your fellowship, you’ll probably want to go on vacation and take a well-deserved break. But your trip doesn’t have to break the bank. Fellows with a decent enough credit score may qualify for credit cards that offer significant point bonuses, which can be redeemed for travel costs like flights, hotels, or rental cars. Some cards may require cardholders to spend a certain amount upfront to qualify for a bonus, so double check you’re not taking on unnecessary expenses or carrying a balance if you don’t need to.

7. Taking Advantage of Income-Based Repayment Plans, Deferment, or Forbearance

Those with eligible federal loans who cannot afford to make payments may be able to pause their payments through deferment or forbearance options if they meet certain qualifications.

Income-driven repayment (IDR) plans allow borrowers to tie their monthly payment to what they make over 20 to 25 years. After that, the balance is forgiven on one of the IDR plans, the Income-Based Repayment (IBR) Plan. Eligibility for these programs largely depends on the types of student loans that the borrower holds and when they were borrowed.

Those who are in a qualified graduate fellowship may be able to request a student loan deferment while in a medical fellowship. If successful, they likely won’t have to make payments during the fellowship. In some cases, borrowers may not be required to pay accrued interest, for example, if they hold subsidized federal student loans.

Borrowers who don’t qualify for deferment but are still struggling financially may be able to apply for forbearance, but would likely be responsible for paying the interest that accrues.

Fellows who are interested in pursuing a career in public health may also consider the Public Service Loan Forgiveness program. In that program, borrowers who work for a qualifying government or non-profit organization may be able to get their loans forgiven after 10 years of qualifying payments.

8. Trying to Save

Living on a fellow’s salary may not leave much room for saving, but if at all possible, setting small savings goals could be helpful.

For example, if you don’t already have an emergency fund, you could try to put away some money every month until you have about three to six months of living expenses saved.

Once you have a cushion for emergencies, consider contributing to a retirement account, such as a traditional or Roth IRA. The power of compound returns means investing early can translate into gains over time. The longer money is invested, the more time it potentially has to grow and withstand any volatility.

9. Considering Passive Income

As a fellow, you probably don’t have extra time to take on a side hustle. If you’re looking for ways to potentially boost your pay, consider looking into low-effort sources of passive income, which can allow you to earn money without investing much time or energy.

Examples include renting out a room or your car. It may require some effort up front, but if you can increase your cash flow without working too much, it could be worth it.

10. Refinancing Your Student Loans

Dealing with student loans can be challenging when you’re living on a medical fellowship salary.

Refinancing your medical student loans is one way to help make your debt more manageable and potentially free up some extra cash.

When you refinance your loans with a private lender, you get a new loan, ideally with a lower interest rate and/or more favorable term.

Depending on your situation, student loan refinancing can lower your monthly payment. Note: You may pay more interest over the life of the loan if you refinance with an extended term.

Keep in mind that when refinancing with a private lender, you do give up the federal benefits that come with most federal student loans, such as deferment, forbearance, income-based repayment programs, and student loan forgiveness. If you plan on using those programs at any point in time, it is not recommended to refinance your federal student loans.

The Takeaway

Fellowships can be an excellent opportunity to hone in on your medical specialty of choice, but the relatively low salary may require some creative budgeting in order to keep expenses in line with income.

Some ideas to consider include creating a passive income stream, shopping smarter at the grocery store, establishing a realistic budget, and finding an affordable living situation.

Looking to lower your monthly student loan payment? Refinancing may be one way to do it — by extending your loan term, getting a lower interest rate than what you currently have, or both. (Please note that refinancing federal loans makes them ineligible for federal forgiveness and protections. Also, lengthening your loan term may mean paying more in interest over the life of the loan.) SoFi student loan refinancing offers flexible terms that fit your budget.


With SoFi, refinancing is fast, easy, and all online. We offer competitive fixed and variable rates.

FAQ

Is a medical fellowship worth it?

Whether a medical fellowship is worth it depends on an individual’s situation and goals. Medical fellowships provide advanced learning and training as well as practical work experience in very specific specialties. Medical fellows tend to be highly respected, and a fellowship can be a solid foundation for a successful career.

However, medical fellowship programs are extremely competitive to get into, fellowships require a significant time commitment, and the salary is substantially lower than the salary of a full-time physician.

Does a medical fellowship pay more than a residency?

A medical fellowship generally does pay more than a medical residency. The average salary for a primary care medical fellow is $75,943 per year, while the average salary for a medical resident is $67,400 per year.

How long is a medical fellowship?

A medical fellowship is typically one to three years, but the exact length of time depends on the area of specialization. For example, family practice physicians generally have a three-year fellowship, while general surgeons have a five-year fellowship.

SoFi Student Loan Refinance
Terms and conditions apply. SoFi Refinance Student Loans are private loans. When you refinance federal loans with a SoFi loan, YOU FORFEIT YOUR ELIGIBILITY FOR ALL FEDERAL LOAN BENEFITS, including all flexible federal repayment and forgiveness options that are or may become available to federal student loan borrowers including, but not limited to: Public Service Loan Forgiveness (PSLF), Income-Based Repayment, Income-Contingent Repayment, extended repayment plans, PAYE or SAVE. Lowest rates reserved for the most creditworthy borrowers. Learn more at SoFi.com/eligibility. SoFi Refinance Student Loans are originated by SoFi Bank, N.A. Member FDIC. NMLS #696891 (www.nmlsconsumeraccess.org).

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.


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.

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

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

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.

SOSLR-Q225-013

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Apr
25
2025
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Preparing to Buy a House in 8 Simple Steps

By | Budgeting & Goals, Financial Independence, Home Ownership, mortgage | Comments Off on Preparing to Buy a House in 8 Simple Steps

Buying a home is probably one of the biggest financial commitments many people make in their life, and so it stands to reason that the process can be complex and lengthy. From figuring out how much you can afford to learning how mortgages work to getting preapproved to determining where exactly to live…it’s a lot!

But by learning about the usual flow before you begin hitting the open houses, you can be well-prepared to dive into homeownership. Below, the eight steps to follow that will help make purchasing a home a smooth process.

Key Points

•   Check your credit score and strengthen it to help secure a mortgage with favorable terms.

•   Save for a down payment to influence monthly mortgage payments and attract sellers in a competitive market.

•   Decide on a budget to understand how much you can afford, covering down payment, closing costs, and ongoing expenses.

•   Shop for a mortgage lender and compare interest rates, terms, and closing costs.

•   Find a real estate agent to assist in the house-hunting process and provide expertise in the local market.

8 Steps to Prepare for a Home Purchase

Here are the moves that will help you get ready to buy your dream property:

1. Determining Credit Score

A homebuyer’s credit score can impact their ability to secure a mortgage loan with a desirable rate. It can also affect how much they’ll be required to pay as a down payment when it’s time to close.

Credit score can be influenced by a variety of factors, from payment history to amount of debt (aka credit utilization ratio) to age of credit accounts, mix of credit accounts, and new credit inquiries.

Payment history is the main factor that affects a person’s credit score, accounting for 35% of an overall FICO® score. Missing a payment on any credit account — from unpaid student loans to credit cards, auto loans, and mortgages — can negatively impact a person’s credit score.

On the other hand, positive habits can include making on-time payments, limiting the number of new inquiries on their credit file, and working to pay down outstanding balances.

Is There a Credit Score “Sweet Spot?”

Many buyers wonder whether there’s a desired credit score range or “sweet spot” to obtain a mortgage. Typically, a credit score of 740 or higher will get the best deals (meaning lowest rates).

Credit scores can also affect the amount of the down payment itself. Some mortgage lenders require at least 20% of the house’s sale price be put down, but might offer more flexibility if the buyer’s credit score is in the higher range. A lower credit score, on the other hand, could call for a larger down payment.

Whether homebuyers have debt or not, checking credit reports is still a recommended first step to applying for a mortgage. Understanding the information on credit reports can be invaluable in knowing where you stand when qualifying for a mortgage loan rate.

2. Deciding How Much to Spend

Deciding how much to pay for a new home can be based on a variety of factors including expected and unexpected housing costs, upfront payments and closing costs, and how it all fits into the buyer’s overall budget.

Calculating Housing Costs

There are several housing costs for home purchasers to consider that might affect how much they can afford to offer for the house itself. The costs of ongoing fees like property taxes, homeowner’s insurance, and interest — if the loan isn’t a fixed-rate mortgage — can all lead to an increase in the monthly mortgage payment.

Closing costs are fees associated with the final real estate transaction that go above and beyond the price of the property itself. These costs might include an origination fee paid to the bank or lender for its services in creating the loan, real estate attorney fees, escrow fees, title insurance fees, home inspection and appraisal fees and recording fees, to name a few.

Typically, closing costs are between 2% and 5% of the loan’s amount. To get an idea on how this can impact your budget, use this home affordability calculator to estimate total purchase cost.

In addition to closing costs, expenses that potential homebuyers might want to consider are repairs and updates they might want to make to a home, new furniture, moving costs, or even commuting costs. If you are considering buying in a community with a homeowners association, factor those costs in as well.

Finally, unforeseen costs of a major life event like a layoff or the birth of a new child might not be the first expenses that come to mind. However, some buyers could find themselves making a potential home-buying mistake by not getting their finances in order to prepare for the unexpected.

Making a list of these estimated expenses can help homebuyers calculate how much they can feasibly afford. It can also help them create a budget that could help them avoid being overextended on housing costs, especially if they might be paying other debt or saving for other financial goals.

3. Saving for a Down Payment

Saving money for a house is one of life’s biggest financial goals. And how much they’re able to offer as a down payment can significantly impact the amount of their monthly mortgage payment.

A larger down payment can also be convincing to sellers who see it as evidence of solid finances, sometimes beating out other offers in a competitive housing market.

The typical down payment on a house varies depending on the type of buyer, loan, location, and housing prices. Most recently, the median down payment was 18%, although it was 9% for first-time buyers.

For first-time homebuyers, 18% or even 9% of the price of the home can seem like a daunting figure. Many buyers find that cutting spending on luxury or non-essential items and entertainment can help them save up the funds.

Other tactics could include getting gifts and loans from family members, applying for low down-payment mortgages, withdrawing funds from a retirement account, or receiving assistance from state and local agencies.

For buyers who are also sellers, proceeds from another property could also fund the down payment.

4. Shopping for a Mortgage Lender

There are many mortgage lenders competing for the business of homebuyers who finance their home purchases. These lenders offer a variety of mortgages to apply for, with a few of the most common being conventional/fixed rate, adjustable rate, FHA loans, and VA loans.

Buyers might not realize they can — and should — shop around for a lender before selecting one to work with. Different lenders offer different variations in interest rates, terms, and closing costs, so it can be helpful to conduct adequate research before landing on a particular lender.

Mortgage lenders must provide a home mortgage loan estimate within three business days of receiving a mortgage application. The form is standard — all lenders are required to use the same form, which makes it easier for the applicant to compare information from different lenders and make sure they are getting the best loan for their financial situation.

When comparing loan offers, don’t just look at the interest rate. Examine the annual percentage rate (APR), which factors in costs.

5. Getting Preapproved for a Loan

While it might seem like a bit of a nuance, getting prequalified for a loan vs. preapproved for a loan are two different things.

When a buyer is prequalified for a loan, their mortgage lender estimates the loan amount they are qualified for, based on financial information they provided.

When a buyer is preapproved, the lender conducts a thorough investigation into their finances that includes income verification, assets, and credit rating. Preapproval is not a guarantee but tells a buyer that a lender is likely to approve them for a certain amount, as long as they clear the underwriting process.

Having a preapproval letter in hand can help some buyers get ahead in a competitive home market. It shows the would-be owner’s intent to purchase and a lender’s guarantee to back that purchase up.

6. Finding the Right Real Estate Agent

While the internet and popular real estate search websites have made it easier for homebuyers to hunt for a house online, most buyers still solicit the help of a real estate agent to find the right home and negotiate the price and purchase.

Also, many realtors are experts in their particular housing market, so for buyers who are searching in a specific location, a real estate agent may be able to offer valuable insights that might not be revealed online.

7. Exploring Different Neighborhoods

By researching neighborhoods where they might want to purchase a property (both in-person and online), homebuyers can get a better sense of what living in their future community could look like.

Many real estate websites provide comparable listings to help determine a reasonable offer amount in a given neighborhood.

Check out housing market
trends, hot neighborhoods,
and demographics by city.

They may also highlight nearby school ratings, price and tax history, commute times, and neighborhood stats like home value fluctuations or predictions, and walkability ratings.

All of this information can help paint a picture of life in the area a homebuyer chooses to settle in. Doing a deep dive into a desired neighborhood can help inform a more realistic decision on where to buy a house.

8. Kicking off the House Hunt

Once the neighborhoods are whittled down, the loan is preapproved, the real estate agent has been signed, and the savings are set aside, the official house hunt can begin.

With the help of a trusted real estate agent and a housing market with adequate inventory, most homebuyers can begin to book showings, attend open houses, and formally put down an offer on a house they like.

In particularly “hot” markets, houses could receive several offers, so homebuyers might want to be prepared to go through the bidding process with a few properties before they get to that glorious final sale.

Are You Ready to Buy a Home Quiz

The Takeaway

A home may well be the biggest purchase you make and the biggest asset you ever own, so it makes sense to spend some time on the home-buying process. From checking out different mortgage options to getting preapproved for a loan to attending open houses, the process is a valuable one that brings you closer to your dream home.

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

What is the 20% rule when buying a house?

The 20% rule typically refers to the idea that a homebuyer should make a 20% down payment. This percentage allows the buyer to avoid paying for private mortgage insurance (PMI) as part of their monthly mortgage payment. It’s hard to come up with that much cash upfront, especially for first-time buyers, and it’s not unusual to see buyers put down less. In fact, eligible first-time homebuyers can purchase with as little as 3% down with some lenders. And some government-backed loans require no down payment at all.

How large a down payment do I need for a $350,000 house?

If you want to put down 20% and avoid paying for private mortgage insurance, you will need to come up with a down payment of $70,000. This may be difficult for some buyers, and it is certainly possible to put down less. Eligible buyers may be able to put down just 3.5%, which on a $350,000 house would be $12,250. And if you buy with a government loan, you may be able to avoid a down payment altogether.

What do I do now if I want to buy a house next year?

Preparing to buy a house one year from now is primarily about strengthening your financial situation. Check your credit score and practice good credit hygiene: Pay your bills on time and clear up any blemishes on your credit report. Try to pay down debt and also to save some money for a down payment and the expenses that come with a home purchase. If you have a particular neighborhood or city in mind, begin to follow listings and local news in the area.

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


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



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

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

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

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

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25
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5 Tips For Getting the Lowest Rate When Refinancing Student Loans

By | Fresh Out of School, Student Loans, student_loan | No Comments

One main reason for refinancing student loans with a private lender is to combine your loans into one new loan with a lower interest rate. If you get a lower interest rate, your monthly student loan payment will go down. You’ll also pay less interest over the life of the loan.

Here, learn more about steps to take to help get a lower interest rate on student loans.

Key Points

•   A student loan refinance may help borrowers get a lower interest rate if they qualify and reduce monthly loan payments.

•   A strong credit history and a low debt-to-income ratio can help refinancing applicants get a better rate.

•   Reducing living expenses and paying down other debt like credit card debt could be beneficial when applying for student loan refinance.

•   Providing lenders with a comprehensive employment history and proof of salary increases can be useful.

•   Those without a strong credit history may want to consider refinancing with a cosigner for better rates.

Reduce Your Interest on Student Loans

Consolidating multiple student loan balances into one new refinance loan with a low interest rate can be ideal for those looking to reduce the amount they owe in interest and also lower their monthly loan payment. It’s important to note, though, that if you refinance federal student loans, you lose access to federal benefits such as income-driven repayment plans.

Getting approved for student loan refinancing isn’t just a matter of submitting an application. You need a game plan — one that will help you become a strong loan candidate, who’ll qualify for a lower student loan interest rate. Here are five strategies that may help.

5-Point Plan for Getting a Low Interest Rate

1. Check your credit.

If you want to reduce your student loan interest rate through refinancing, the first thing you should do is check your credit score. The stronger your credit profile, the less risky you appear to lenders. If your credit profile is solid — meaning you have a good credit score and a low debt-to-income ratio — lenders should offer you better rates.

If, however, your credit profile isn’t quite where you want it to be, that’s OK. Take a few months to build your credit and reapply for student loan refinancing down the line to see if you qualify for a better rate.

Recommended: Why Your Debt to Income Ratio Matters

2. Take a hard look at your cost of living.

Some cities are more expensive to live in than others. Someone renting an apartment in a small Midwestern town, for example, has lower living expenses than someone who owns a row home in San Francisco. Cost of living ties directly into your debt-to-income ratio, and therefore it matters when you want to get a lower interest rate on student loans.

To some extent, this is out of your hands; your zip code helps lenders determine your cost of living. But anything you can do to pay down debt, especially high-interest credit card debt, and make choices that free up more money — such as renting a smaller place, taking on a roommate, or leasing a cheaper car — can help your case.

3. Give lenders a complete history.

Some student loan refinancing lenders consider things like where you went to school and your position at work when they weigh your application. Provide as much information as you can when it comes to your undergraduate and graduate degrees.

Be sure to also include all relevant work experience. Again, if you can show lenders that you have a solid work history and your income has steadily increased, you will appear less risky. The less riskier you are to lenders, the better your student loan interest rate is likely to be.

If there’s a job offer on the horizon, be sure to submit your offer letter with your application. And if you get a promotion while your application is under review, notify the lender immediately. Finally, if you’re in line for a promotion that will positively affect your paycheck, wait until it happens before you apply.

4. Show all your income.

When lenders ask for income information, they mean all of your income, not just job earnings. List dividends, interest earned, bonuses, and the extra money you make from your side hustle or Airbnb rental property. As long as you can prove these income sources, it will all count toward your debt-to-income ratio and help to lower it. And again, the lower this ratio, the better chances you have at qualifying for a lower student loan refinance rate.

Also, make sure your driver’s license is current and that your student loan statements are all correct. If you’re self-employed, you may want to wait until you’ve filed your taxes to apply for refinancing — it’s one of the easiest ways to prove the previous year’s income.

5. Be flexible.

If you have a number of student loans and you’re not offered the best rate when you apply for refinancing, consider refinancing only a couple of them. You may get a lower interest rate with a smaller refinance balance. You can always apply for the full balance down the road after you’ve received a raise or moved to a less expensive location.

Being flexible also means you might want to think about asking a friend or relative for help if your application isn’t as strong as you’d like. When you refinance your student loans with a cosigner who has a good credit profile and low debt-to-income ratio, you may be able to get a lower rate than if you refinanced on your own.

Refinance Student Loans With SoFi

The stronger you are as a student loan refinancing candidate, the better your chances are of getting a lower student loan refinance rate. To get the lowest rate when refinancing, check your credit, take a close look at your living expenses and debt-to-income ratio, give lenders a complete history of your education and employment, make sure to include all of your income sources in the application, and finally, be flexible, even if that means applying with a cosigner.

Keep in mind, though, that if you choose to refinance your federal student loans with a private lender, you lose access to federal benefits, such as student loan forgiveness and income-driven repayment plans. Make sure you don’t plan on using these benefits now or at any point in the future before deciding to refinance.

If you do think a student loan refinance may be right for you, consider SoFi. SoFi offers competitive rates and does not charge origination fees. It takes just a few minutes to see your rates, and your credit score will not be affected when you prequalify.

With SoFi, refinancing is fast, easy, and all online. We offer competitive fixed and variable rates.

FAQ

Can you negotiate your student loan interest rate?

Not necessarily. Interest rates are determined by both the market and your credit profile, leaving little room for negotiation. You could, however, present your lowest offer to another lender to see if they will match that.

How can I get a lower interest rate when refinancing my student loans?

Strategies to potentially get a lower interest rate when refinancing student loans include building your credit profile, having a reliable source of income, and making sure your debt-to-income ratio is low.

Is it possible to get lower rates when refinancing student loans?

Yes, it is possible to get a lower interest rate when refinancing student loans. Your student loan interest rate will generally depend on current market rates, your credit profile, and your debt-to-income ratio. A strong credit history and a lower debt-to-income ratio may help you get a lower rate.

SoFi Student Loan Refinance
Terms and conditions apply. SoFi Refinance Student Loans are private loans. When you refinance federal loans with a SoFi loan, YOU FORFEIT YOUR ELIGIBILITY FOR ALL FEDERAL LOAN BENEFITS, including all flexible federal repayment and forgiveness options that are or may become available to federal student loan borrowers including, but not limited to: Public Service Loan Forgiveness (PSLF), Income-Based Repayment, Income-Contingent Repayment, extended repayment plans, PAYE or SAVE. Lowest rates reserved for the most creditworthy borrowers. Learn more at SoFi.com/eligibility. SoFi Refinance Student Loans are originated by SoFi Bank, N.A. Member FDIC. NMLS #696891 (www.nmlsconsumeraccess.org).

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.


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.

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

Disclaimer: Many factors affect your credit scores and the interest rates you may receive. SoFi is not a Credit Repair Organization as defined under federal or state law, including the Credit Repair Organizations Act. SoFi does not provide “credit repair” services or advice or assistance regarding “rebuilding” or “improving” your credit record, credit history, or credit rating. For details, see the FTC’s website .

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.

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.

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Terms and conditions apply. SOFI RESERVES THE RIGHT TO MODIFY OR DISCONTINUE PRODUCTS AND BENEFITS AT ANY TIME WITHOUT NOTICE. To qualify, a borrower must be a U.S. citizen or other eligible status, be residing in the U.S., and meet SoFi's underwriting requirements. Not all borrowers receive the lowest rate. Lowest rates reserved for the most creditworthy borrowers. If approved, your actual rate will be within the range of rates at the time of application and will depend on a variety of factors, including term of loan, evaluation of your creditworthiness, income, and other factors. If SoFi is unable to offer you a loan but matches you for a loan with a participating bank, then your rate may be outside the range of rates listed above. Rates and Terms are subject to change at any time without notice. SoFi Personal Loans can be used for any lawful personal, family, or household purposes and may not be used for post-secondary education expenses. Minimum loan amount is $5,000. The average of SoFi Personal Loans funded in 2023 was around $33K. Information current as of 2/26/24. SoFi Personal Loans originated by SoFi Bank, N.A. Member FDIC. NMLS #696891 (www.nmlsconsumeraccess.org). See SoFi.com/legal for state-specific license details. See SoFi.com/eligibility for details and state restrictions.

✝ 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.

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