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Attending an open house is a common step as you shop for your dream home. Of course, it lets you see a property (often after it’s been styled and staged to look its best), which can trigger “I love it!,” “hard pass,” and every possible reaction in between.

But an open house also gives you information beyond just the surface appeal of a home. It can give you clues to structural issues, the level of home maintenance it’s received, and how popular it is with potential buyers. That is, if you know what to look for as you walk through, rather than just admiring some great use of subway tile or a charming farmhouse sink.

Here, learn about what to expect at an open house and how to get the most out of attending one.

Benefits of Attending an Open House

At an open house, a property can be viewed by potential buyers. You can eyeball the house, the street, the neighbors’ places. You might even consider it a homebuyer’s guide to what it’s really like to live somewhere.

There are several benefits to attending an open house as you move through the steps of buying a house. These include:

•   You can hone your house-hunting skills by taking detailed notes and comparing them to past and future listings.
•   It’s a face-to-face opportunity to make a good impression on the listing agent and ask as many questions as necessary (without having to wait for a reply).
•   Sometimes listing photos simply don’t do a house justice. The in-person lighting might be brighter, the hardwood floors shinier, or the primary bedroom larger than it seemed online.
•   Similarly, strategically hidden flaws, red flags, and nuances that can only be detected in person are exposed so you (and other potential bidders) can make a truly informed decision.

Recommended: How Long Does It Take to Buy a House?

What to Expect at an Open House

Some open houses are literally open, meaning they’re posted on a real estate listing or a sign out front and members of the public are allowed to stop by.

In other cases, an open house is available only by appointment and arranged by the seller’s broker.

Typically, the sellers won’t be on the scene at an open house. It’s likely their listing agent will handle the event, guiding potential buyers around the dwelling and answering questions.

There could be other house hunters or visitors (nosy neighbors, perhaps?) attending the open house.

Most homebuyers will be provided with a booklet or pamphlet featuring details about the property, which could include the year it was built, heating and cooling information (oil vs. natural gas, etc.), the square footage, how many bedrooms and bathrooms there are, the size of the lot, types of appliances, and exterior features like decks, porches, pools, and sheds.

From there, house hunters will fill out a sign-in document that records their information for follow-up (unless this was already done in advance) and tour the property. This could occur with the listing agent in tow or by themselves, saving questions for the end.

Open House Etiquette

Figuring out what to do at an open house isn’t always intuitive, but a crisp, respectful approach can go a long way:

•   Bringing along food, drinks, pets, or unruly children could be considered disrespectful and distracting.
•   Following the house rules can be crucial, so buyers might be prepared to remove shoes, steer clear of personal property, and ask permission before snapping photos.
•   Being polite and personable to the hosting agent can put potential homebuyers in a more favorable light.
•   Maintaining a poker face can be helpful during the open house process. If homebuyers spill the beans about how much they love the property, it could make negotiations tougher if and when they make an offer.

Recommended: The Mortgage Loan Process, Explained

Things to Look For at an Open House

If you stay focused and zoom in on details, you can learn a lot during an open house. Perhaps there’s an initially inconspicuous flaw on the exterior of the house or there’s no closet in the fourth bedroom.

Things to look for when buying a house and at an open house in particular could include:

•   Visible signs of neglect or damage (more on that soon).
•   Proximity to the neighbors and whether there’s sufficient privacy. A poke around the premises can also reveal what those new neighbors are like. Do they have a half-built skate park? A forever-barking dog? A chicken coop? A forever-barking dog? A chicken coop?
•   Closet and storage space and whether it’s enough to suit your needs.
•   What other potential buyers are up to. If they’re in and out quickly or lingering in one area in particular, perhaps it’s an indication of an issue that might have otherwise gone unnoticed.

Potential Red Flags

Aside from standard considerations like the ones above, some red flags to look for at an open house could include:

•   An abundance of sweet aromas from candles or air fresheners. This could signal hard-to-fix smells (perhaps caused by mildew or another issue) lurking under the surface.
•   Unevenly spaced tiles or crooked electrical outlets, which could signify sloppy DIY renovations that might require costly repairs down the line.
•   Issues with the foundation of the house like large gaps, doors that stick, windows with visible cracks, or uneven floors.
•   Proximity to water. Checking a FEMA flood map can also help potential buyers know whether there’s the risk of flooding and if flood insurance will be required.
•   Signs of lax property maintenance, including faded or chipped paint, leaky faucets, water damage, or overgrown grass and brush. These issues could signify that the owners have neglected other vital home maintenance tasks, which could mean a buyer needs extra funds to cover home repair costs.
•   Signs of mold: small black or gray spots in bathroom closets or cabinets, on the ceiling, or around showers, tubs, and faucets.
•   Exposed pipes with visible rust or leakage.
•   Drafts around windows, doors, and electrical outlets that could be a sign of neglect and a hefty heating bill come winter.
•   Stained or warped baseboards (especially in the basement) that could indicate a prior flood. A sump pump can also indicate that flood damage has occurred in the past.
•   Cosmetic damage like stains from pets that are strategically hidden by area rugs.
•   Condensation or peeling paint around windows, which could signify ventilation problems and moisture issues.

Recommended: How to Winterize a House

Questions to Ask at an Open House

Knowing what to ask is an essential element of attending an open house; it can help you make the most of the experience.

Here are a few key questions homebuyers can ask the selling agent:

•   What year was the house built?
•   Why is it being sold?
•   How long has it been on the market, and were there any asking price fluctuations?
•   Are there any offers?
•   Are there any problems the seller can disclose about the property? These are issues that could come up in an inspection but are made transparent between the seller and buyer, e.g., health and safety hazards, structural defects, mechanical issues, previous water damage, pests, or renovations.
•   Is the property part of a homeowners association? Are there monthly fees associated with it?
•   What is the local school system like? How about the neighborhood?
•   Is the sewer system handled by the town, or does it run on a private septic tank?
•   What fixtures and appliances are part of the purchase: washer/dryer, stove, refrigerator, lighting fixtures, and window treatments?

Next Stop: Buying That Dream Home

After every question has been asked, every surface has been scoured, and every disclosure has been made, it might be time to bid and hopefully snag your new home. Another important step will then be securing a home loan.

With a SoFi Mortgage, you’ll get a competitive rate, flexible terms, and low down-payment options. Plus, our online application process is quick and easy.

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

SOHL0623035

Buying a home is a major responsibility. If you’re unable to continue paying the mortgage on your house, what happens next? You’ve heard of foreclosure, which can result in losing your home and be financially damaging. But there’s another option called a deed in lieu of foreclosure, which may be less stressful than foreclosure, have less of a negative impact on a credit report, and may be faster to complete.

Note: SoFi does not offer a Deed in Lieu at this time.

Here’s what you need to know about a deed in lieu of foreclosure, and when it might be an option to consider.

What Is a Deed in Lieu of Foreclosure?

Where a foreclosure may involve the court and a lengthy process, the alternative, a deed in lieu of foreclosure, is fairly simple.

If your lender agrees, you hand over the deed to them and the lender releases the lien on the property. You may be released from any balance you owed on the mortgage (however, there may be exceptions if you owe more than the home is worth).

And while a deed in lieu will appear on your credit report, it doesn’t have as severe an impact as a foreclosure.

The lender might even offer you financial assistance to spruce up the home to make it more sellable.

Recommended: Tips On Buying a Foreclosed Home

Working With the Lender

Your lender may only consider a deed in lieu of foreclosure in certain situations.

For instance, the lender might require that you first put your home on the market as a short sale or explore a loan modification.

If you’re completely unable to pay, start by contacting your lender and asking if a deed in lieu of foreclosure is an option. If it is, you’ll be given an application and asked for documents proving your inability to pay the mortgage. The documents will show your income and expenses, as well as bank account balances.

This process can take 30 days or more.

If your application is approved, you may want a real estate lawyer to review it to help you understand whether you are fully released from the financial obligations tied to the mortgage. For example, if the lender sells the home for less than the remaining mortgage balance, are you responsible for that deficiency?

Once you are comfortable with the title-transferring agreement, you and the lender will sign it, and it will be notarized and recorded in public records.

At this point, you will be notified how long you have to leave the home.

When to Consider a Deed in Lieu

One instance when a deed in lieu may be a good idea is if you owe more on your home than it is worth, as long as the agreement stipulates that you won’t owe the difference between the value of the home and what you owe.

If you are unable to continue paying your mortgage, it’s important to know that a foreclosure will leave a nasty mark on your credit report for seven years and make it difficult or impossible for you to take out another mortgage for years.

A deed in lieu will appear on your credit report, but it may not have the same lasting effect. Your credit score will drop, but long term, it may not affect your ability to take out a loan.

Benefits of a Deed in Lieu

There are advantages for both the borrower and the lender when it comes to a deed in lieu. For both, the big benefit is not having to go through the long and expensive process of foreclosure.

Because a deed in lieu is an agreement between you and the lender and not an order from a court, you may have a little more flexibility in terms of when you vacate the property.

With foreclosure, you are sometimes forced to vacate within days by local law enforcement. With a deed in lieu, you may even be able to work out an arrangement where you rent the property back for a period. The lender gets a little rent money and you have more time to figure out your next move.

In addition, this option is more private than a foreclosure.

From the lender’s perspective, the benefits of a deed in lieu include avoiding litigation and court time.

Drawbacks of a Deed in Lieu

There are disadvantages as well. A deed in lieu will appear on your credit report, even if it’s not as damaging as a foreclosure. Plus, it may still be difficult to get another mortgage in subsequent years.

It may still be difficult to get another mortgage in subsequent years.

If you owe more than your home is worth, you may still be on the hook for the difference between the appraised property value and what you owe.

You may be denied a deed in lieu if there are other liens or tax judgments on the property, or if the home is in bad condition and requires maintenance to sell.

Recommended: Home Affordability Calculator

Being Smart About Your Mortgage

The best thing to do, if at all possible, is to avoid getting into a situation where you can’t afford to pay your mortgage. If you’re having short-term financial issues, talk to your lender immediately to see if there is the possibility of delaying a few months’ payment or setting up a loan modification so you can work to pay off your outstanding debt.

Typically, the lender will want to help you; it’s easier to work out an agreement now than several months down the road, when you haven’t paid your mortgage at all and are facing foreclosure.

If you do end up in a situation where you are unable to continue paying your mortgage and you aren’t offered options, consider a deed in lieu of foreclosure as a faster and easier solution than a foreclosure.

If you’re just starting to consider buying a home, create a budget and calculate how much in mortgage payments you can afford each month. Don’t forget to calculate insurance and interest as well. Make sure that you won’t be stretched thin financially.

Recommended: Mortgage Calculator

The Takeaway

If you can’t pay your mortgage and you’re unable to get a short sale or loan modification approved, a deed in lieu of foreclosure may be the best option. Rather than go through the foreclosure process, a deed in lieu allows a borrower to sign a property over to the lender.

Your credit will take a significant hit, though not as bad as with a foreclosure.

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.

SOHL0623043

Maybe you’ve considered refinancing your mortgage, but haven’t quite decided. Is now the right time? Will rates go lower?

It can be hard to know when to take the plunge.

Whether you purchased a home recently or bought a home years ago, you probably know the average mortgage rates now are high compared to the near-historic lows in early 2021.

But as with any financial rate or data point, it is hard—if not impossible—to time the market or predict the future.

Homeowners often look to refinance when it could benefit them in some way, like with a lower monthly payment. Refinancing is the process of paying off a mortgage with new financing, ideally at a lower rate or with some other, more favorable, set of terms.

Here are seven signs that locking in a lower mortgage rate could be the right move.

7 Signs It May Be Smart to Refinance Your Mortgage

1. You Can Break Even Fairly Quickly

Refinancing a mortgage costs money—generally 2% to 5% of the principal amount. So if you are refinancing to save money, you’ll likely want to run numbers to be sure the math checks out.

To calculate the break-even point on a mortgage refinance—when savings exceed costs—do this:

1. Determine your monthly savings by subtracting your projected new monthly mortgage payment from your current monthly payment.
2. Find your tax rate (e.g., 22%) and subtract it from 1 for your after-tax rate.
3. Multiply monthly savings by the after-tax rate. This is your after-tax savings.
4. Take the total fees and closing costs of the new mortgage loan and divide that number by your monthly after-tax savings. This yields the number of months it will take to recover the costs of refinancing—or the break-even point.

For example, if you’re refinancing a $300,000, 30-year mortgage that has a fixed 6% rate to a 4% rate, refinancing will reduce your original monthly payment from $1,799 to $1,432 — a monthly savings of $367. Assuming a tax rate of 22%, the after-tax rate would be 0.78, which results in an after-tax savings of $286.26. If you have $12,000 in refinancing costs, it will take nearly 42 months to recoup the costs of refinancing ($12,000 / $286.26 = 41.9).

The length of time you intend to own the home can affect whether refinancing is worth the expense. You’ll want to run the calculations to make sure that you can break even on a timeline that works for you.

The rate and fees usually work in tandem. The lower the rate, the higher the cost. (“Buying down the rate” means paying an extra fee in the form of discount points. One point costs 1% of the mortgage amount.)

If you’re shopping, each mortgage lender you apply with is required to give you a loan estimate within three days of your application so you can compare terms and annual percentage rates. The APR, which includes the interest rate, points, and lender fees, reflects the true cost of borrowing.

2. You Can Reduce the Rate by at Least 0.5%

You may have heard conflicting ideas about when you should consider refinancing. The reason is that there is no one-size-fits-all answer; individual loan scenarios and goals differ.

One commonly espoused rule of thumb is that the home refinance rate should be a minimum of two percentage points lower than an existing mortgage’s rate. What may work for each individual depends on things like loan amount, interest rate, fees, and more.

However, the combination of larger mortgages and lenders offering lower closing cost options has changed that. For a large mortgage, even a change of 0.5% could result in significant savings, especially if the homeowner can avoid or minimize lender fees.

If rates drop low enough, you might even choose to take a higher rate with a no closing cost refi.

3. You Can Afford to Refinance to a 15-Year Mortgage

When you refinance a loan, you are getting an entirely new loan with new terms. Depending on your eligibility, it is possible to adjust aspects of your loan beyond the interest rate, such as the loan’s term or the type of loan (fixed vs. adjustable).

If you’re looking to save major money over the duration of your mortgage loan, you may want to consider a shorter term, such as 15 years. Shortening the term of your mortgage from 30 years to 15 years will likely cost you more monthly, but it could save thousands in interest over the life of the loan.

For example, a 30-year $1 million loan at a 7.5% interest rate would carry a monthly payment of approximately $6,992 and a total cost of around $1,517,172 over the life of the loan.

Refinancing to a 15-year mortgage with a 5.5% rate would result in a higher monthly payment, about $8,171, but the shorter maturity would result in total loan interest of around $470,750—an interest savings over the life of the loan of about $1,046,422 vs. the 30-year term.

One more perk: Lenders often charge a lower interest rate for a 15-year mortgage than for a 30-year home loan.

4. You’re Interested in Securing a Fixed Rate

Borrowers may take out an adjustable-rate mortgage because they may get a lower rate (at least initially) than on a fixed-rate mortgage for the same property. But just as the name states, the rate will adjust with market fluctuations.

Typically, ARMs for second mortgages such as home equity lines of credit are “pegged” to the prime rate, which generally moves in lockstep with the federal funds rate. First mortgage ARM rates are tied more closely to mortgage-backed securities or the 10-year Treasury note.

Even though ARM loans come with yearly and lifetime interest rate caps, if you believe that interest rates will move higher in the future and you plan to keep your loan for a while, you may want to consider a more stable fixed rate.

Refinancing to a fixed mortgage can protect your loan against rate increases in the future and provide the security of knowing how much you’ll be paying on your mortgage each month—no matter what the markets do.

5. You’re Considering an ARM

You may also be considering a move in the other direction—switching from a fixed-rate mortgage to an adjustable-rate mortgage. This could potentially make sense for someone with a 30-year fixed loan but who plans to leave their home much sooner.

For example, you could get a 7/1 ARM with a potential lower interest rate for the first seven years, and then the rate may change once a year, when up for review, as the market changes. If you plan to move on before higher rate changes, you could potentially save money.

It’s best to know exactly when the rate and payment will adjust, and how high. And it’s important to understand the loan’s margin, index, yearly and lifetime rate caps, and payments. For further details, try using an online mortgage calculator

6. You’re Considering a Strategic Cash-Out Refi

In addition to updating the rate and terms of a mortgage loan, it may be possible to do a cash-out refinance, when you take out a new loan at a higher loan amount by tapping into available equity.

The lender will provide you with cash and in exchange will increase your loan amount, which will likely result in a higher monthly payment.

If you go this route, realize that you’re taking on more debt and using the equity you have built up in your home. Market value changes may result in a loss of home value and equity. Also, a mortgage loan is secured by your home, which means that the lender can seize the property if you are unable to make mortgage payments.

A cash-out refi may make sense if you use it as a tool to pay less interest on your overall debt load. Using the cash from the refinance to pay off debts carrying higher rates, like credit cards, could be a good move.

Recommended: How Does Cash Out Refinancing Work?

Depending on loan terms and other factors, a lower rate may allow for overall faster repayment of your other debts.

7. Your Financial Situation Has Improved

When putting together an offer for a mortgage, a lender will often take multiple aspects into consideration. One of those is prevailing interest rates. Another is your financial situation, like your credit history, credit score, income, and debt-to-income ratio.

The better your personal financial situation in the eyes of the lender, the more creditworthy you are—and the better the terms of your loan offer could be.

Therefore, it may be possible to refinance your mortgage loan into better terms if your financial situation has improved since you took out the original loan, especially when paired with relatively low market rates.

Recommended: Guide to Buying, Selling, and Updating Your Home

The Takeaway

Is it time to refinance? It might be if you could get a lower interest rate or better loan term. For instance, locking in a lower rate now may help you achieve your long-term goals by freeing up cash for other stuff, like retirement or a big vacation.

If you decide that refinancing makes sense for you, it’s wise to look for a lender that has competitive rates and flexible terms, like SoFi. Along with a streamlined process, SoFi offers a regular mortgage refinance and a cash-out refinance.

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.

SOHL0623062

You’ve decided to buy a home. Luckily, you’ve found a real estate agent who can help you find homes to look at and assist with negotiations and inspections. But what if that agent also works for the seller? But what if that person also works for the seller? That is called dual agency, and there’s a lot to consider before agreeing to the arrangement.

Here’s what future homebuyers need to know about dual agency to help decide if it’s the right choice for them.

What Is Dual Agency?

A dual agent represents both the buyer and seller in the same real estate deal. Dual agents are also sometimes referred to as transaction brokers.

Dual agency can be controversial and is banned in eight states: Alaska, Colorado, Florida, Kansas, Maryland, Oklahoma, Texas, Vermont, and Wyoming.

Other states do not explicitly make it illegal, but some do warn against using a dual agent.

For example, the New York Department of State issued a memo advising consumers to be extremely cautious when signing on with a dual agent because in doing so they forfeited their right to an agent’s loyalty.

However, in every state where dual agency is legal, the law requires agents to disclose their work with both the buyer and the seller. Both buyer and seller must agree to use a dual agent and sign a consent form indicating they understand what they are agreeing to.

Dual agency may also refer to deal-making of seller’s agents and buyer’s agents at the same real estate company.

For example, Keller Williams, one of the largest real estate firms in the nation, has both seller’s and buyer’s agents. If one of its seller’s agents puts a home on the market, there’s a decent chance that one of its buyer’s agents may have a client for the property.

This is less controversial and poses fewer issues as it is still two separate people overseeing the seller’s and the buyer’s interests.

Recommended: How to Buy a House Without a Realtor

What Are Agents’ Fiduciary Responsibilities?

Real estate agents are legally bound to represent the best interests of their clients. This means agents are to disclose any information they have that may or may not help their clients in the negotiating phase.

The obligation to disclose could pertain to information on home inspection reports, defects with the house, or anything else that affects the property’s value.

While representing a buyer, an agent must also disclose any existing relationship with the seller.

Be sure to ask real estate agents important questions about how they work and what they’ll do for you so you’ll know whether they’re the right agent for your needs.

A seller’s agent must disclose any relationship with potential buyers and all offers made on the property—unless, in general, the seller has instructed his agent in writing to withhold certain kinds of offers.

Real estate agents are also expected to put their clients’ financial best interests above their own. This could mean putting in an offer below asking price, which would reduce their own commission.

With all of that in mind, it becomes clear that issues of loyalty and confidentiality become challenging in a dual agency situation.

Pros of Dual Agency

Smoother communication: Having one agent representing both the buyer and seller could help create a smoother communication path. Because the person represents both parties, they may be able to speed up any negotiations. In this case, the dual agent may also better understand both the seller’s and the buyer’s timelines, their schedules, and any internal deadlines better than two separate parties could. Buyers wouldn’t have to wait for the seller’s agent to call back and sellers wouldn’t have to wait for a buyer’s agent to call back, because with dual agency they are the same person.

Potentially more information on the home: A dual agent may be able to obtain more information on the home than an agent just representing the potential buyer. In turn, they can relay any pertinent information, such as structural issues, inspection reports, and any updates made to the home, to the potential buyer.

Potentially more access to a larger pool of homes: Remember, dual agency also means a buyer’s agent and seller’s agent working for the same agency. That means, if one home doesn’t work out, the two agents could look internally to find more potential homes their agency represents for the would-be buyers. They may even be able to find a few homes that haven’t hit the market yet.

Possibility for a discount on commission: In a typical real estate transaction, the seller’s agent and buyer’s agent split the commission. A dual agent may be willing to negotiate down their commission since they are double-ending the deal.

Dual agents still have to do their job: In the end, even dual agents must present all offers, prepare all paperwork, present all disclosure agreements, and help to complete the deal.

Recommended: 6 First-Time Homebuyer Mistakes to Avoid

Cons of Dual Agency

Buyers (and sellers) won’t get special treatment: Agents only working for one side will likely be willing to go all out for their client to ensure that the client gets the best deal. An agent working for both sides may be more tempted to get the best deal for themselves to maximize the commission (hey, it’s just human nature to look out for No. 1). A buyer (and a seller) usually wants loyalty above all else when looking for a home. Homebuyers may want to seek out someone who knows what’s needed to buy a house and has their back.

Buyers (and sellers) may not get the price they want: Again, a dual agent’s allegiances are split down the middle during the deal-making process. A seller’s agent is meant to promote the home and get the seller the best price for the home with the fewest contingencies.

A buyer’s agent is on a mission to find every tiny thing that needs to be fixed with the home to get the buyer the best deal they can. If a person is representing both sides, how can they do both? It’s important to discern an agent’s allegiances before signing on the dotted line.

No pushback from the other agent: In a two-sided real estate deal, the two agents will typically go back and forth on the home’s price, any reductions the buyer may want in exchange for repairs, the home’s inspection report, and much more. This creates a system of checks and balances for both sides, which can be important when negotiating a fair deal. However, if one person is playing both sides, things may get muddled, hurting both the seller and the buyer.

The Takeaway

Dual agency is rare in the real estate world because most buyers and sellers want to find an agent who is loyal to them and has their best interests at heart. Still, if you find yourself in a dual agent situation, there is much to know.

There’s another important decision most homebuyers must make: getting the right home loan. Different lenders may offer different terms, rates, or perks that may fit a buyer best.

SoFi offers mortgage loans with competitive rates, an online application, and mortgage loan officers who can answer your questions.

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.

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 understanding 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. Here, the eight steps to follow that will help make purchasing a home a smooth process.

8 Steps to Prepare for a Home Purchase

Here, 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 (a.k.a. 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 their 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 3% and 6% 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.

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 the biggest financial goals many people will have in their lifetime. 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 average down payment on a house varies depending on the type of buyer, loan, location, and housing prices. Most recently, the average down payment was 13%.

For first-time homebuyers, 13% or 20% 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 retirement, or receiving assistance from state and local agencies.

For buyers who were 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 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.

5. Getting Preapproved for a Loan

While it might seem like a bit of a nuance, getting prequalified for a loan versus 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 by appealing to the seller as a serious intention of 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.

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 secured, 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.

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