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The average credit score for a 22-year-old is currently 680, which is in the good range and can qualify you for various types of credit. Your credit score depends on a variety of factors, including your history of paying your bills on time and your length of credit history. The average 22-year-old may not have had much time to build a credit history yet, but on average, people this age are managing credit responsibly.

Understanding what a credit score is and what this number means is an important part of accessing credit and taking control of your personal finances. Read on to learn more.

Average Credit Score for a 22-Year-Old

The average credit score for individuals aged 18 to 25 is 680 as of January 2025. In general, this is considered to be a good score, one that you’ll need to access credit such as a home loan, for example.
As a point of comparison, the average credit score for all Americans is currently 717 as of mid-2024. As you see, the typical score for a young adult is somewhat lower, which may reflect the fact that they likely haven’t been using credit products as long as older people have.

It’s worth noting that credit scores, which usually run from 300 to 850, don’t start at 300. A starting credit score is often between 500 and 700.

Recommended: What Is the Average Salary in the U.S.?

What Is a Credit Score?

Your credit score is a three-digit number ranging from 300 to 850, as noted above, that represents your credit history. It basically provides a snapshot of how well you manage credit. Lenders and others may use it to determine your credit risk. In general, the lower your score, the more lenders will worry you’ll have trouble paying back your debt. The higher your score, the less risk you represent.

What Is the Average Credit Score?

The average credit score in the U.S. is 717 according to FICO® Score, the most commonly used credit scoring system.

There are other credit scoring companies such as VantageScore vs. FICO that may have a different scoring system. The average VantageScore in the U.S. is 705 as of mid-2024.

The average VantageScore for 22-year-olds isn’t broken out by specific age, but those in their 20s were recently found to have an average score of 662, which is a bit lower than a FICO Score of 680 but still in the good range.

Average Credit Score by Age

The average credit score varies and rises steadily by age. Compare average scores across generations to see how you stack up against other age cohorts.

What’s a Good Credit Score for Your Age?

Credit scores are categorized in a range from poor to exceptional. For FICO scores, the most widely used score in the U.S., here is how the scores shape up:

•  300-579: Poor

•  580-669: Fair

•  670-739: Good

•  740-799: Very good

•  800-850: Exceptional or excellent

As mentioned above, the average score of 22-year-olds is 680, which is considered good. On average, those aged 58 and older crack into the very good range.

How to Build Your Credit Score

Building your credit score can potentially give you greater access to borrowing and at more favorable rates and terms. Follow these tips:

•   The biggest step you can typically take to maintain or build your score is always pay your bills on time.

•   The next most important step you can take is to avoid using too much of your available credit. A common rule of thumb suggests using no more than 30% of available credit at any given moment.

•   Having a mix of different types of credit (such as credit cards, home loans, and personal loans) may also build your score. For this reason, you may want to avoid closing old lines of credit, even if they are something you don’t use regularly or at all.

•   Similarly, having a longer credit history can positively impact your credit score. So if you are thinking of closing an account (such as a credit card you rarely use), keep in mind that doing so could lower your score. You might therefore decide to keep it open and use it occasionally.

•   Another wise move can be to avoid applying for too much credit in a short period of time. Otherwise, it could contribute to a lower score. If you are, say, looking for a single home loan from multiple lenders, that kind of rate shopping should not be an issue. But if you apply for a mortgage, car loan, and two new credit cards within a couple of months, that may well lower your score.

How Does My Age Affect My Credit Score?

Your age is not a factor that is included in your credit score. It may have an indirect impact on your score however. It can take time to build credit. If you’re younger, you may not have had much time to build a credit history, which may mean your score is lower than average. But as you age and build your credit through on-time payments, a longer history, and a broader mix of debt, your score may be positively impacted.

At What Age Does Credit Score Improve the Most?

It is perhaps unsurprising that the oldest Americans who have spent years building a credit history tend to have the highest scores, as noted above. This doesn’t mean, however, that you cannot achieve a high score when you are younger if you are responsible with your debt.

How to Build Credit

If you’ve never had credit before, there are several ways you can begin to build credit. Beyond the tips above about managing credit responsibly once you have it, you could open a secured credit card, which requires that you put up an amount of money as collateral for your debt. (Another way to think about this: Your deposit acts as your credit limit. As you pay your bill monthly, your activity is reported to the credit bureaus.) It is often easier to qualify for than other credit cards.

You could also become an authorized user on another person’s credit card account. This is typically something you might request of an older family member. Provided the account is used responsibly, it could help build your score.

If you’re looking to take out a loan, you could have a friend or family member with good credit cosign the loan. By doing so, they agree to make payments if you fail to do so. But be aware that loan activity will show up on both of your credit scores. Failure to make payments could bring your cosigner’s score down.

Credit Score Tips

In addition to keeping an eye on the factors that go into calculating your three digits (noted above), it’s also wise to monitor your credit score carefully to be sure that your credit history is accurate, as incorrect data could be dragging down your score.

You can check your credit score without paying, by requesting a free credit report every week from each of the three major credit reporting bureaus: Equifax, Experian, and TransUnion.

In general, the reporting bureaus will make credit score updates whenever any action has taken place related to your credit.

Check your credit report for errors. If you spot any, be sure to dispute the information with the credit reporting bureau immediately.

Developing healthy financial habits can help you manage your debts. Consider using spending apps and money tracker apps to help you understand your spending, where you may be taking on unnecessary debt, and where you could be saving toward financial goals, including debt repayment.

The Takeaway

The average 22-year-old’s credit score is currently 680, which falls in the good range. Credit scores tend to rise with age, and responsible usage over time can help build a score into the very good or excellent range. To positively impact your score, be sure to pay bills on time and make sure not to take on more debt than you can manage. It’s good practice to monitor your credit score regularly for errors and to see if there are any steps you need to take to build your score and qualify for more favorable rates and terms when accessing credit.

Take control of your finances with SoFi. With our financial insights and credit score monitoring tools, you can view all of your accounts in one convenient dashboard. From there, you can see your various balances, spending breakdowns, and credit score. Plus you can easily set up budgets and discover valuable financial insights — all at no cost.

FAQ

What is a good credit score for a 22 year old?

The average 22-year-old has a credit score of 680, which is in the good range.

Is a 750 credit score at 22 good?

A score of 750 is considered to be very good and is between the good and excellent ranges on credit-scoring scale.

How rare is an 800 credit score?

Just over 20% of Americans have a credit score of 800, making it relatively common.

What is the average credit limit for a 22 year old?

The average credit limit for 22-year-olds is currently almost $13,000.

Can a 20 year old have a 700 credit score?

While someone who is 20 years old probably has a relatively short credit history, it is possible to have a score of 700. The average credit score for people in their 20s is 680, which is fairly close to that number.

How much debt is normal for a 22 year old?

The amount of debt you carry will depend on your own financial circumstances. On average, Americans 18–23 years old carry more than $9,500 in debt.

Photo credit: iStock/insta_photos

SoFi Relay offers users the ability to connect both SoFi accounts and external accounts using Plaid, Inc.’s service. When you use the service to connect an account, you authorize SoFi to obtain account information from any external accounts as set forth in SoFi’s Terms of Use. Based on your consent SoFi will also automatically provide some financial data received from the credit bureau for your visibility, without the need of you connecting additional accounts. SoFi assumes no responsibility for the timeliness, accuracy, deletion, non-delivery or failure to store any user data, loss of user data, communications, or personalization settings. You shall confirm the accuracy of Plaid data through sources independent of SoFi. The credit score is a VantageScore® based on TransUnion® (the “Processing Agent”) data.

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

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.

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.

Third Party Trademarks: Certified Financial Planner Board of Standards Inc. (CFP Board) owns the certification marks CFP®, CERTIFIED FINANCIAL PLANNER®, CFP® (with plaque design), and CFP® (with flame design) in the U.S., which it awards to individuals who successfully complete CFP Board's initial and ongoing certification requirements.

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Both apartments and condominiums share quite a number of traits but differ in ownership. Apartments are often found in large residential complexes owned by a company. These complexes are often operated by professional property managers. Condos are also usually located in large residential complexes, but each condo unit is typically owned by an individual owner.

If you’re browsing the market for a rental, you’ve likely encountered a dazzling array of condos and apartments, and you might rent either type of property. The question of condo vs. apartment gets more complex if you’re debating whether to buy a condo or rent an apartment.

What Is a Condo?

A condo is a residential unit within a collective living community, where each individual condo is owned by a private owner, but the cost of maintaining communal areas is shared by all owners. While condos are often located in high-rise buildings, they can also take the form of a collection of standalone properties, each designated a “condo unit.”

One benefit to renting a condo is that you can deal directly with your landlord rather than a management office, which may mean more personalized attention for your needs.

For buyers, the purchase price for a condo can be significantly lower than the cost of most single-family homes.


💡 Quick Tip: When house hunting, don’t forget to lock in your home mortgage loan rate so there are no surprises if your offer is accepted.

What Is an Apartment?

An apartment is a rental unit within a building, complex, or community. Often, an apartment complex is managed by a property management company, which serves as both landlord and leasing agent for all of the units on the premises. In big cities, “apartment” is sometimes used as shorthand for a condo or co-op unit. If you’re choosing between a co-op and a condo to rent or buy, you’ll want to know how they differ, and whether you’re ready to buy an apartment.

Rental apartments may be located in high-rises but can also be found in larger homes that have been subdivided into separate units.

Renting an apartment offers greater mobility than buying a property, which makes it a flexible option if you’re only planning on staying in an area for a couple of years. A full-time management office or private landlord takes care of leasing, rent payments, and repairs.

Where They Differ

Now that we’ve covered the condo vs. apartment basics, let’s dive deeper into some key dimensions in where they differ.

Ownership

Each unit in a condo development is usually owned by a private homeowner. Unless the condo owner retains the services of a property manager, prospective renters can expect to deal with the condo owner directly when it comes to rental applications, monthly rent payments, and any maintenance issues that arise over the course of their lease.

Apartments are often managed by a property management company that may also own the apartment complex. Effectively, this makes the company the landlord for the entire property. Prospective apartment tenants will usually submit their application and rent payments through the apartment leasing office, while full-time maintenance staffers are on call to deal with any repairs. Of course, some apartments are in smaller buildings owned by individuals. In that case, a renter might deal directly with the property owner just as a renter in a condo does.

In either case, landlords may be amenable to your desire to negotiate rent in order to take you on or keep you. Paring the rent is the main goal in such a negotiation, but you can always ask for other benefits in lieu of a rent reduction.

Property Taxes

Renters aren’t responsible for paying property taxes, making them a non-issue in the apartment vs. condo choice. However, if you’re deciding whether to purchase a condo, understand that you’re responsible for paying property taxes for your unit every year. If you decide to rent your condo out, you should also expect to be taxed on any rental income you collect.

Design

Regardless of structure type, condo owners retain the right to make cosmetic adjustments to the interior of their properties. So if you’re interested in renting in a particular condo complex and you don’t like the design choices an owner has made, consider looking at other units that are available for rent — you may find a very different look and feel in another unit. Apartments within a rental complex, in contrast, typically share similar, if not identical, layouts and designs regardless of which unit you choose.

Amenities

The amenities of both apartments and condos vary widely and often depend on when and how they were built. Generally speaking, condos are more likely to offer customized amenities, like state-of-the-art appliances and granite countertops, that reflect the tastes and habits of their owners.

Fees

Apartments and condos of similar quality and in the same area should rent for around the same cost. Both condos and apartments often charge the following fees:

•   Application fee

•   First and last month’s rent

•   Security deposit

•   Credit and background check fee

•   Pet fees and deposit

•   Parking fee

Renters may find that condo owners are more willing to negotiate on things like fees than apartment management teams, as these are private owners trying to keep their units rented out for income purposes.

Buying a condo will mean paying monthly maintenance fees that cover insurance for and upkeep of common areas, water and sewer charges, garbage and recycling collection, condo management services, and contributions to a reserve account.

Community

Condos usually have a greater sense of community than apartment complexes, given that their residents are likely to stay around longer. In many cases, residents consist of the condo owners themselves.

By contrast, renters living in apartments often intend to stay for only a couple of years. While that’s not to say that there aren’t occasional resident get-togethers at some apartment complexes, you’re less likely to encounter the same faces over several months.

If you’re renting a condo, expect to abide by rules set by the homeowners association. These can sometimes be fairly strict. Apartments have their own set of rules that may be less stringent.

Renting and Financing

Renting an apartment involves one monthly rent payment, in addition to any utilities you’re responsible for. Of course, when you leave the apartment, you leave with just your security deposit, assuming all payments have been made and no damage has been done.

Financing a condo and purchasing the property allows you to lock in your monthly mortgage payments at a steady long-term rate and gives you the chance to start building equity. In exchange, you’ll be required to make a down payment and be responsible for any taxes, insurance, and maintenance fees, among other costs.

Deciding whether it’s better to buy a condo or to rent — or to get a house or condo — is a complicated decision that depends on your personal finances and your lifestyle. If you’re thinking about settling down, have a stable job with steady income, and have enough saved up for a down payment with an emergency fund to spare, buying a condo or house may be the right choice for you. However, if you’re still exploring the area or have variable income with limited savings, it may be best to continue renting. For those trying to decide between renting an apartment and financing a condo or house, a mortgage help center can help provide answers.


💡 Quick Tip: Your parents or grandparents probably got mortgages for 30 years. But these days, you can get them for 20, 15, or 10 years — and pay less interest over the life of the loan.

Maintenance

Most apartment complexes have an on-site building supervisor who can address maintenance issues. Given that the owner of a large apartment complex oversees all of the units, they’re incentivized to employ someone full time to attend to the day-to-day affairs. This often means that apartment owners can react faster than condo owners, who sometimes don’t even live on the premises.

By contrast, condo units are usually owned by landlords, and most of them hire a third-party contractor to come in and make repairs as necessary. In some cases, condo owners may be handy and handle the repairs on their own.

If you buy a condo, you’ll have a regular maintenance fee that covers the shared parts of the property, but because condo owners typically own just the interior of their unit, any repairs in the condo unit will be separate. (It’s a good idea to pore over the covenants, conditions, and restrictions to see exactly what is part of your unit or part of the common elements.)

Condominium vs Apartment: A Side-by-Side Comparison

To help sum it all up, here’s a quick guide to the condo and apartment traits discussed above.

Condo vs Apartment: Which One May Be Right for You?

Whether a condo or apartment is right for you depends on your preferred rental experience. If you’re looking for something that feels a little more akin to home and don’t mind dealing directly with your landlord when discussing repairs and rent payments, a condo (or an apartment in a small privately owned apartment building) may be the better option for you.

On the other hand, if you prefer dealing with a full-time staff of property managers, want something more structured, and don’t mind cookie-cutter corporate apartments, an apartment may be the better rental option for you.

Prospective condo buyers will want to keep their finances and monthly budget in mind when deciding if they want to rent or buy. While the idea of building equity is appealing, settling down and committing to a mortgage isn’t for everyone. You’ll want to thoughtfully evaluate your ability to make monthly payments and whether you want to stick around an area.

The Takeaway

In the condo vs. apartment comparison, you’ll pay similar costs when renting properties of similar quality. Things get more complex if you’re debating whether to buy a condo or rent an apartment, as there are myriad added costs for condo owners in exchange for the chance to build equity.

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

FAQ

Why are condos more expensive than apartments?

In general, condos and apartments of comparable quality cost around the same amount to rent. A condo owner, however, will likely face higher monthly costs than an apartment renter, thanks to the added costs that come with owning a property, including mortgage payments, taxes, insurance, and maintenance fees. Over time, the added expense may be offset by the equity built through mortgage payments.

Which retains more value, condos or apartments?

Over the long run, both a condo and an apartment in a co-op building can lose or gain value. Whether your specific property appreciates will depend on local market factors and on upkeep of your unit as well as of the larger complex.

Can I get a loan to buy a condo or co-op apartment?

A qualified buyer can finance a condo with a government-backed or conventional mortgage loan. Getting a loan for buying into a housing cooperative can be more difficult. The buyer is purchasing shares that give them the right to live in the unit — personal property, not real property. That’s one reason that some lenders do not offer financing for co-ops.

Photo credit: iStock/Michael Vi

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

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

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

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.

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.

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If you’re in the market to buy, the choice could boil down to a condo or a duplex. Someone who would enjoy condo living — communal, with amenities — wouldn’t necessarily savor duplex living, and vice versa.

The financing can be different. Fees differ.

Let’s look at the main differences between these different types of houses.

What Is a Condo?

First, let’s focus on what a condo is. Short for condominium, a condo is a single, privately owned unit that’s part of a community of these units. They can be combined in a building or built as detached structures.

A condo is often a good starter home.

It also can be a good choice for a first-time homebuyer, who technically is someone who hasn’t owned a primary home in three years.

Overseen by a homeowners association (HOA), condo owners have an interest in common areas, from lobbies and hallways to gyms and pools. A purchaser of a unit owns the condo’s interior.

Recommended: Buying a Condo: 8 Things To Do

Pros and Cons of Living in a Condo

When considering a condo, here are pros and cons to ponder.

What Is a Duplex?

A duplex is a multifamily home with two units, each with its own entrance. Sometimes a duplex has two units that are side by side, Sometimes one unit is downstairs and the other upstairs. In that case, outside stairs can lead to the second-story unit.

You may decide to buy a duplex, live in half, and rent out the other half for income — or rent both halves.

Pros and Cons of Living in a Duplex

When considering a duplex, here are pros and cons to consider.

What Is the Difference Between a Condo and a Duplex?

If you found a sweet condo and a duplex with potential, it might pose a dilemma. Here’s more info to inform a decision.

Financing

Homes with up to four units are considered residential, so if you plan to occupy one of the units of a duplex, you’re looking at the same types of mortgage loans you would with a single-family home.

A condo buyer will enjoy the same kind of financing that is available to buyers of single-family homes but will face extra steps and slightly higher interest rates. Financing a condo vs. townhouse, for example, involves a lender review of the condo community or inclusion on a list of approved condominium communities.

Cost

A condo may cost less than a duplex, but it will come with HOA fees. Prices can vary considerably based on the location, size, and condition of a property.

Insurance rates can be higher for a duplex because the entire structure needs to be covered. Rates can be more affordable for a condo owner, who is responsible for the interior of their unit only.

Ownership

With a condo, you’d own the interior of your unit, with common areas owned by the HOA. With a duplex, you’d own the entire structure, which includes the lot it’s built on.

Responsibilities

Duplex owners take on all of the typical homeowner responsibilities.The HOA handles maintenance and repairs for condo owners.

Common Areas

Condo owners can use common areas and amenities, which can include a clubhouse, pool, park, and gym.

If you buy a duplex, people living in both units share the yard, with the owner responsible for its maintenance.

The Exterior

As the owner of a duplex, you’re responsible for the entire property.

At a condo complex, the HOA takes care of common areas, including the building exteriors.

Resale Value

Condos tend to appreciate in value, although not as quickly as single-family homes do.

Duplexes also tend to because of the rent received and the lack of HOA fees.

Condo vs Duplex: The Verdict

If you like the idea of less maintenance and think that HOA fees are worth what you get in return, you would enjoy the community’s amenities, and you’re fine with less green space, then a condo may make sense for you.

If you don’t want to pay HOA fees (and may not use amenities anyway) and believe that having a yard and more control over what you do with your property is a real plus, a duplex may be a better choice.

The Takeaway

When house hunting, two options may include a condo and a duplex. Each has benefits as well as challenges, which should be explored before you make a financial investment in a property.

3 Home Loan Tips

1. To see a house in person, particularly in a tight or expensive market, you may need to show proof of pre-qualification to the real estate agent. With SoFi’s online application, it can take just minutes to get pre-qualified.
2. Not to be confused with pre-qualification, pre-approval involves a longer application, documentation, and hard credit pulls. Ideally, you want to keep your applications for pre-approval 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.
3. Thinking of using a mortgage broker? That person will try to help you save money by finding the best loan offers you are eligible for. But if you deal directly with a mortgage lender, you won’t have to pay a mortgage broker’s commission, which is usually based on the mortgage amount.

FAQ

Is a condo the same as a duplex?

No. A duplex is a detached home that’s divided in half (side by side or up and down) for two sets of residents, while a condo is a single unit within a condominium community.

Which is better: a duplex or a condo?

It depends upon your preferences and lifestyle.

Is living in a duplex noisy?

It could be! You’ll either have a shared wall or a shared ceiling/floor with someone else. So if the residents in the other half have a rambunctious lifestyle, it could get noisy.

Are duplexes cheaper than condos?

In general, a condo may be cheaper than a duplex, but location, size, and condition affect the values.

Photo credit: iStock/william87
SoFi Mortgages
Terms, conditions, and state restrictions apply. Not all products are available in all states. See SoFi.com/eligibility-criteria for more information.

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

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.

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For about 80% of homebuyers, purchasing a home means taking out a mortgage — and a conventional 30-year fixed-rate mortgage is the most popular kind of financing.

Conventional mortgages are those that are not insured or guaranteed by the government.

But the fact that conventional mortgages are so popular doesn’t mean that a conventional home loan is right for everyone. Here, learn more about conventional mortgages and how they compare to other options, including:

•   How do conventional mortgages work?

•   What are the different types of conventional loans?

•   How do conventional loans compare to other mortgages?

•   What are the pros and cons of conventional mortgages?

•   How do you qualify for a conventional loan?

How Conventional Mortgages Work

Conventional mortgages are home loans that are not backed by a government agency. Provided by private lenders, they are the most common type of home loan. A few points to note:

•   Conventional loans are offered by banks, credit unions, and mortgage companies, as well as by two government-sponsored enterprises, known as Fannie Mae and Freddie Mac. (Note: Government-sponsored and government-backed loans are two different things.)

•   Conventional mortgages tend to have a higher bar to entry than government-guaranteed home loans. You might need a better credit score and pay more in interest, for example. Government-backed FHA loans, VA loans, and USDA loans, on the other hand, are designed for certain kinds of homebuyers or homes and are often easier to qualify for. You’ll learn more about them below.

•   Among conventional loans, you’ll find substantial variety. You’ll have a choice of term length (how long you have to pay off the loan with installments), and you’ll probably have a choice between fixed-rate and adjustable-rate products. Keep reading for more detail on these options.

•   Because the government isn’t offering any assurances to the lender that you will pay back that loan, you’ll need to prove you are a good risk. That’s why lenders look at things like your credit score and down payment amount when deciding whether to offer you a conventional mortgage and at what rate.

Conventional vs Conforming Loans

As you pursue a home loan, you’ll likely hear the phrases “conventional loan” and “conforming loan.” Are they the same thing? Not exactly. Let’s spell out the difference:

•   A conforming loan is one in which the underlying terms and conditions adhere to the funding criteria of Freddie Mac and Fannie Mae. There’s a limit to how big the loan can be, and this figure is determined each year by the Federal Housing Finance Agency, or FHFA. For 2025, that ceiling was set at $806,500 for most of the United States. (It was a higher number for those purchasing in certain high-cost areas; you can see the limit for your specific location on the FHFA web site.)

So all conforming loans are conventional loans. But what is a conventional mortgage may not be conforming. If, for instance, you apply for a jumbo mortgage (meaning one that’s more than $806,500 in 2025), you’d be hoping to be approved for a conventional loan. It would not, however, be a conforming mortgage because the amount is over the limit that Freddie Mac or Fannie Mae would back.

Types of Conventional Loans

When answering, “What is a conventional loan?” you’ll learn that it’s not just one single product. There are many options, such as how long a term (you may look at 15- and 30-year, as well as other options). Perhaps one of the most important decisions is whether you want to opt for a fixed or adjustable rate.

Fixed Rate

A conventional loan with a fixed interest rate is one in which the rate won’t change over the life of the loan. If you have one of these “fully amortized conventional loans,” as they are sometimes called, your monthly principal and interest payment will stay the same each month.

Although fixed-rate loans can provide predictability when it comes to payments, they may initially have higher interest rates than adjustable-rate mortgages.

Fixed-rate conventional loans can be a great option for homebuyers during periods of low rates because they can lock in a rate and it won’t rise, even decades from now.

Adjustable Rate

Adjustable-rate mortgages (also sometimes called variable rate loans) have the same interest rate for a set period of time, and then the rate will adjust for the rest of the loan term.

The major upside to choosing an ARM is that the initial rate is usually set below prevailing interest rates and remains constant for a specific amount of time, from six months to 10 years.

There’s a bit of lingo to learn with these loans. A 7/6 ARM of 30 years will have a fixed rate for the first seven years, and then the rate will adjust once every six months over the remaining 23 years, keeping in sync with prevailing rates. A 5/1 ARM will have a fixed rate for five years, followed by a variable rate that adjusts every year.

An ARM may be a good option if you’re not planning on staying in the home that long. The downside, of course, is that if you do stay put, your interest rate could end up higher than you want it to be.

Most adjustable-rate conventional mortgages have limits on how much the interest rate can increase over time. These caps protect a borrower from facing an unexpectedly steep rate hike.

Also, read the fine print and see if your introductory rate will adjust downward if rates shift lower over the course of the loan. Don’t assume they will.

Recommended: Fixed-Rate vs Adjustable-Rate Mortgages

How Are Conventional Home Loans Different From Other Loans?

Wondering what a conventional home loan is vs. government-backed loans? Learn more here.

Conventional Loans vs. FHA Loans

Not sure if a conventional or FHA loan is better for you? FHA loans are geared toward lower- and middle-income buyers; these mortgages can offer a more affordable way to join the ranks of homeowners. Unlike conventional loans, FHA loans are insured by the Federal Housing Administration, so lenders take on less risk. If a borrower defaults, the FHA will help the lender recoup some of the lost costs.

But are FHA loans right for you, the borrower? Here are some of the key differences between FHA loans and conventional ones:

•   FHA loans are usually easier to qualify for. Conventional loans usually need a credit score of at least 620 and at least 3% down. With an FHA loan, you may get approved with a credit score as low as 500 with 10% down or 580 if you put down 3.5%.

•   Unlike conventional loans, FHA loans are limited to a certain amount of money, depending on the geographic location of the house you’re buying. The lender administering the FHA loan can impose its own requirements as well.

•   An FHA loan can be a good option for a buyer with a lower credit score, but it also will require a more rigorous home appraisal and possibly a longer approval process than a conventional loan.

•   Conventional loans require private mortgage insurance (PMI) if the down payment is less than 20%, but PMI will terminate once you reach 20% equity. FHA loans, however, require mortgage insurance for the life of the loan if you put less than 10% down.

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

Conventional Loans vs VA Loans

Not everyone has the choice between conventional and VA loans, which are backed by the U.S. Department of Veterans Affairs. Conventional loans are available to all who qualify, but VA loans are only accessible to those who are veterans, active-duty military, National Guard or Reserve members, or surviving spouses of those who served.

VA loans offer a number of perks that conventional loans don’t:

•   No down payment is needed.

•   No PMI is required, which is a good thing, because it’s typically anywhere from 0.58% to 1.86% of the original loan amount per year.

There are a couple of potential drawbacks to be aware of:

•   Most VA loans demand that you pay what’s known as a funding fee. This is typically 1.25% to 3.3% of the loan amount.

•   A VA loan must be used for a primary residence; no second homes are eligible.

Conventional Loans vs USDA Loans

Curious if you should apply for a USDA loan vs. a conventional loan? Consider this: No matter where in America your dream house is, you can likely apply for a conventional loan. Loans backed by the U.S. Department of Agriculture, however, are only available for use when buying a property in a qualifying rural area. The goal is to encourage people to move into certain areas and help them along with accessible loans.

Beyond this stipulation, consider these upsides of USDA loans vs. conventional loans:

•   USDA loans can offer a very affordable interest rate versus other loans.

•   USDA loans are available without a down payment.

•   These loans don’t require PMI.

But, to provide full disclosure, there are some downsides, beyond limited geographic availability:

•   USDA loans have income-based eligibility requirements. The loans are designed for lower- and middle-income potential home buyers, but the exact cap on income will depend on your geographic area and how many household members you have.

•   This program requires that the loan holder pay a guarantee fee, which is typically 1% of the loan’s total amount.

Benefits and Drawbacks of Conventional Mortgages

Now that you’ve learned what is a conventional loan and how it compares to some other options, let’s do a quick recap of the pros and cons of conventional loans.

Benefits of Conventional Loans

The upsides are:

•   Competitive rates. Rates may seem high, but they are still far from their high point of 16.63% in 1981. Plus, lenders want your business and you may be able to find attractive offers. You can use a mortgage calculator to see how even a small adjustment in interest rates can impact your monthly payments and interest payments over the life of the loan.

•   The ability to buy with little money down. Some conventional mortgages can be had with just 3% down for first-time homebuyers.

•   PMI isn’t forever. Once you have achieved 20% equity in your property, your PMI can be canceled.

•   Flexibility. There are different conventional mortgages to suit your needs, such as fixed- and variable-rate home loans. Also, these mortgages can be used for primary residences (whether single- or multi-family), second homes, and other variations.

Drawbacks of Conventional Loans

Now, the downsides of conventional loans:

•   PMI. If your mortgage involves a small down payment, you do have to pay that PMI until you reach a target number, such as 20% equity.

•   Tougher qualifications vs. government programs. You’ll usually need a credit score of 620 and, with that number, your rate will likely be higher than it would be if you had a higher score.

•   Stricter debt-to-income (DTI) ratio requirements. It’s likely that lenders will want to see a 45% DTI ratio. (DTI is your total monthly recurring payments divided by your monthly gross income.) Government programs have less rigorous qualifications.

How Do You Qualify for a Conventional Loan?

Conventional mortgage requirements vary by lender, but almost all private lenders will require you to have a cash down payment, a good credit score, and sufficient income to make the monthly payments. Here are more specifics:

•   Down Payment: Many lenders that offer conventional loans require that you have enough cash to make a decent down payment. Even if you can manage it, is 20% down always best? It might be more beneficial to put down less than 20% on your dream house.

•   Credit score and history: You’ll also need to demonstrate a good credit history to buy a house, which means at least 620, as mentioned above. You’ll want to show that you make loan payments on time every month.

Each conventional loan lender sets its own requirements when it comes to credit scores, but generally, the higher your credit score, the easier it will be to secure a conventional mortgage at a competitive interest rate.

•   Income: Most lenders will require you to show that you have a sufficient monthly income to meet the mortgage payments. They will also require information about your employment and bank accounts.

The Takeaway

A conventional home loan — meaning a loan not guaranteed by the government — is a very popular option for homebuyers. These mortgages have their pros and cons, as well as variations. It’s also important to know how they differ from government-backed loans, so you can choose the right product to suit your needs. Buying a home is a major step and a big investment, so you want to get the mortgage that suits you best.

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

FAQ

What is the minimum down payment for a conventional loan?

In most cases, 3% of the purchase price is the lowest amount possible and that minimum is usually reserved for first-time homebuyers — a group that can include people who have not purchased a primary residence in the last three years.

How many conventional loans can you have?

A lot! The Federal National Mortgage Association (FNMA, aka Fannie Mae) allows a person to have up to 10 properties with conventional financing. Just remember, you’ll have to convince a lender that you are a good risk for each and every loan.

Do all conventional loans require PMI?

Most lenders require PMI (private mortgage insurance) if you are putting less than 20% down when purchasing a property. However, you may find some PMI-free loans available. They typically have a higher interest rate, though, so make sure they are worthwhile given your particular situation.

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.

^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.
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.

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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It’s not your imagination: Buying a home has gotten more expensive over the last couple of years. In the fall of 2021, the Case-Shiller U.S. National Home Price index rose a stunning 18.6% in a single year. Adding to the high cost of homeownership is the fact that home loan rates also soared. In the fall of 2022, the average interest rate on 30-year mortgages was 6.12%, while a year earlier, it was a super low 3.03%. In other words, you’re going to pay a lot more for both a house and the money you borrow to fund the purchase.

These economic fluctuations are among the reasons that many people are contemplating buying a fixer-upper. They hope to find a lower-priced house that they can rehab (or pay someone else to renovate) in order to own a piece of the American Dream for less.

However, though buying a fixer-upper home may seem like an enticingly affordable option, the cost of remodeling it could wind up being more than you’d planned.

Just how much does it cost to fix up a house? Let’s break down the most common costs associated with gutting a house and remodeling, so you can make an informed buying decision. Read on to learn:

•   What’s a fixer-upper?

•   What are the pros vs. cons of buying a fixer-upper?

•   How can you plan to renovate a home?

•   How much will a fixer-upper really cost?

•   How can you fund fixing up a home?

What Is a Fixer-Upper?

What exactly is a fixer-upper? It’s a home that’s in need of significant work. In many cases, these are older houses with much deferred maintenance or simply a lot of dated, well-worn features.

A fixer-upper might be a home from 100 years ago with an insufficient electrical and heating system, as well as a roof in need of replacement. Or it could be an apartment with a very old and dated kitchen and bathrooms. These residences might be livable, but they require an infusion of cash and work to make them comfortable by today’s standards.

Pros and Cons of Buying a Fixer-Upper

Buying a fixer-upper home has upsides and downsides. For some people, a fixer-upper can be a terrific way to enter the ranks of homeownership. For others, it could wind up being a frustrating source of bills and stress.

First, let’s consider the pros of buying a fixer-upper:

•   Lower price. This can make it easier to become a homeowner.

•   Lesser competition. Many home-shoppers may shy away from taking on this kind of project.

•   Control. The ability to renovate a home to suit your taste.

•   Profit. The opportunity to flip, or resell, the home and make money by doing so.

In terms of negatives, consider these points:

•   Money required to renovate. Although you may be able to buy a fixer-upper at a bargain price, you’ll have to come up with funds for the renovation.

•   Going over budget. Often, when renovations get underway, you’ll hit unexpected situations that require more money to properly complete the job.

•   Taking longer than expected. Closely related to the point above about going over budget financially is the fact that remodeling may take longer than anticipated, which can create issues.

•   Living in a construction site. If you occupy the home as work is done, it can be an uncomfortable experience.

Recommended: Things to Budget for After Buying a Home

Decide If This Is Your Home or a Flip

Many times, people looking to buy a fixer-upper home are in it for the short game of a flip. This means they are hoping to purchase a home well under market value, make a few renovations, and then quickly sell the home for a profit. And that’s all good—you just need to decide which camp you’re in.

If you are hoping to flip a house and make some money, know what you are getting into. As mentioned above, renovations can run over budget and take longer than scheduled. If all you are planning on doing to a house is refresh the paint and flooring and stage it beautifully, things may work out fine. But if you get started on structural work and discover a bigger issue than anticipated, it could wreck your budget for reselling the property. That’s why it’s vital to get a thorough home inspection before you buy a fixer-upper. It’s also wise to walk through with a contractor (if you plan on hiring one) before purchase to size up costs; you’ll learn more about the potential price tag of renovations in a minute.

If you’re planning on buying a fixer-upper home and making it your forever home, you might have a longer timeline to make upgrades. You could tackle the kitchen one year; then redo the bathrooms the next. This could be easier on your budget, but it might mean living amid construction for a while.

And, of course, you don’t get the potential cash infusion by selling the home at a profit, which is the goal of many people who are searching for a fixer-upper. You do get a lovingly restored home to call your own, quite likely at a good price, which can be an excellent reward.

Recommended: How Much House Can I Afford Based on My Income?

Do Your Homework Before You Buy

It’s crucial to add up all the costs of potential renovations before you buy a fixer-upper house. You don’t want the dream of wanting your own home to cloud your judgment about the work that’s needed. If you don’t do a deep dive on pricing before you buy, you may end up in your own version of “The Money Pit” movie.

Consider the following:

•   Assess the upfront cost of the home and add up all potential material and labor needs — think both big and small, like plumbers, electricians, carpenters, all the way down to any new doorknobs you’ll buy along the way. Then, subtract that from the home’s renovated market value. Would this still be a profitable venture?

•   Keep in mind that inflation is currently running high so prices could get higher than what you believe they will cost during the time you are renovating.

•   It’s important to allow room in your budget and your timeline for overages. It’s not uncommon for home renovations to cost more and take longer than anticipated. It’s wise to have at least 3% to 5% extra in your budget (if not more) to cover additional costs, and wiggle room in your timing, too.

Recommended: How Do Home Improvement Loans Work?

Preparing to Invest in Home Renovations

Each home renovation is unique. If you buy a fixer-upper house, the price of rehabbing it can vary tremendously. One house might need new appliances, the walls painted, and the floors sanded. Another might need a new roof and a cracked foundation fixed…plus an electrical upgrade. The size of the home, its age, its location, and condition will all impact how much you’ll need to spend.

But, to give you a ballpark on costs, here are some statistics from Angi, the home renovation and repair site:

•   Renovating a three-bedroom home can cost between $20,000 and $100,000 on average.

•   Renovation costs are typically between $15 and $60 per square foot overall.

•   Remodeling a kitchen or bathroom can cost $100 to $250 per square foot.

•   A kitchen renovation costs $25,000 on average, and a bathroom remodel runs $10,000, but costs can run significantly higher depending on choice of materials, fixtures, and the like. renovation will be different, Realtor.com provides a general cost breakdown for different remodel hypotheticals.

Keep in mind that pricing may be higher if you live in or near a major city, as well.

Recommended: 6 Tips for Doing Home Addition Projects the Right Way

Common Fixer Upper Project Costs

Kitchen Remodels

According to HomeAdvisor’s 2022 data, the average cost of a kitchen remodel currently sits at $25,000, but costs can range from $5,000 to $65,000 or more.

The three elements that contribute most to cost are the countertops, cabinets, and flooring. The more you lean into custom and luxury options, the higher the price will go.

Bathroom Renovation

The average bathroom renovation ranges from $3,000 for small cosmetic updates to $30,000 for a complete gut do-over, with the average price tag coming in at $11,000. A big expense is moving the plumbing lines. If you can keep the layout as-is, you’ll save up to 50%.

Roof Installation

A roof should typically last two to three decades on a home — or longer if you choose the right material. The average cost for replacing a roof is about $8,000, but that will vary with the size of the home and the material you choose.

For instance, if you opt for a premium product, like slate, you’ll find that the average costs for a 3,000-square-foot roof can be $30,000.

Recommended: How to Buy Homeowners Insurance

How to Handle the Cost of a Fixer Upper

These numbers can seem overwhelming, but remember, you’re bringing out your home’s maximum potential, whether for you to enjoy or to capitalize on via a future sale.

You have a few options for how to finance the renovation of a fixer-upper:

•   You could put less money down and take out a larger mortgage. This would allow you to have some cash on hand to pay for the remodeling.

•   You can buy the house and then take out a home improvement loan, which is a kind of personal loan used to finance your home projects.

•   You could purchase the fixer-upper and then apply for a home equity line of credit, or HELOC. These are revolving lines of credit that may offer attractive terms (low interest, long repayment) but keep in mind you are using your home’s equity as collateral. You typically need 15% to 20% equity in your home to qualify.

•   Another option that’s similar to a HELOC is a home equity loan. The difference is that a home equity loan typically distributes a sum of money, which is repaid in installments over a period of time.

The Takeaway

A fixer-upper can be a good investment for some home shoppers, whether they want to renovate the home and live in it or sell it at a profit. However, it’s important to evaluate your costs up front, before signing a contract, to make sure you don’t wind up with a money pit and can make your renovation dreams come true.

One thing that can help you afford your fix-it-up plans is a SoFi home improvement loan. What’s more, these are unsecured loans, meaning you’re not required to put up collateral against the loan. And with fixed monthly payments, you can better plan for the road ahead. Now, all you need is a hammer and you’re ready to go.

Thinking about renovating a fixer-upper? SoFi personal loans can help you turn your new purchase into a dream home.

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

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

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.

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