How to Invest in Single-Family Rental Homes

Is Investing in Single-Family Homes a Good Idea? A Guide to Investing in Real Estate

Investing in single-family homes is often a good way to build wealth and generate monthly cash flow.

Real estate has proven to be an economic bulwark when stocks and bonds experience downturns. Even in late 2024, with the average sales price of homes in the U.S. slightly down from its 2022 historic high, the average price is almost $100,000 above where it stood at the start of this decade, according to the Federal Reserve Bank of St. Louis, which tracks the data.

Single-family rental homes have lots of upsides for an investor, but there are also a few reasons to look before you leap.

Key Points

•   Single-family homes can provide capital appreciation and immediate cash flow, making them attractive investments.

•   Financing for single-family homes is generally easier, with lower down payments and better loan terms.

•   These investments may be relatively stable, with less market volatility compared to some other investments.

•   Real estate acts as a tangible asset and a hedge against inflation.

•   Market research and understanding local regulations are essential for successful investment in single-family homes.

What Is a Single-Family Home?

The popular image of a single-family home is a stand-alone, one-dwelling structure with its own utilities, entrance, exit, and access to the street. The owners own both the building and land it sits on, so condos do not count.

Some government agencies expand this definition to include properties of up to four units, such as duplexes, as well as townhouses.

First-time homebuyers can
prequalify for a SoFi mortgage loan,
with as little as 3% down.

Questions? Call (888)-541-0398.


Why Invest in Single-Family Homes?

Buying investment property offers two key benefits to long-term investors:

•   the potential for capital appreciation

•   immediate cash flow

Let’s walk through some of the key motivators for investing in single-family homes.

Financing

Single-family homes are typically easier to obtain financing for than multifamily homes of five or more units.

A multifamily property meeting that criterion requires a commercial loan, which usually has a higher interest rate and shorter term than a residential mortgage. (Note: SoFi does not offer commercial loans; it does provide loans for residential investment properties of four or fewer units.)

Lenders often require at least 20% down for an investment property. It could be higher, depending on the borrower’s credit score and savings. Then again, there are creative ways to buy a multifamily property with no money down.

Less Volatility

The market for single-family homes is relatively stable and tends to grow more smoothly over the long run compared with other types of homes.

Unlike commercial real estate and apartments, the demand for single-family homes tends to remain relatively strong at all stages of the economic cycle.

Steady Income

Single-family homes may be rented out for longer terms than apartments and usually sit vacant for less time thanks to the steady demand for single-family housing.

Some contend that single-family rentals feel more like proper homes for tenants and therefore are better cared for than apartments.

You’re also more likely to find more families renting single-family homes than individuals. Families may be more likely to extend the lease if they end up loving the neighborhood and schools, as in a coveted suburb.

Tangible Asset

Many people seek to diversify portfolios with different types of investments. Unlike stocks and bonds, which represent shares of ownership and rights to dividend payments from a company, real estate is a tangible asset.

The tangible factor gives you something physical to hold on to that’s unlikely to disintegrate over the long term. Stocks, bonds, and other intangible investments require the underlying company to remain a going concern.

Inflation Hedge

Inflation is the creeping impact of price increases, and when there are concentrated bouts of it over a short period of time, it can rapidly erode the purchasing power of your assets.

Housing has often been touted as an inflation hedge because it has historically held its real value during inflationary markets. This could be because of the following reasons:

1.    Most homebuyers lock in their purchase price through a mortgage.

2.    Rental agreements typically last one or two years, which allows homeowners to gradually raise rents to keep pace with inflation.

3.    Home values typically appreciate over the long run thanks to the intrinsic value of the house and land.

Return on Investment

Thanks to steady demand, single-family homes can match or even exceed the return on investment (ROI) of bigger multifamily properties, with lower volatility than stocks or bonds.

Potential ROI across different real estate properties can be compared using a capitalization rate (cap rate) calculation: net operating income divided by current market value.

Net operating income is your gross annual income from the property minus operating expenses (like repair costs, groundskeeping, property taxes, insurance, utilities not paid by tenants, and any property management fees). Home mortgage loan payments are not included in the net operating income formula.

Diversification

Single-family homes could be a good addition to a portfolio of stocks and bonds, but why does portfolio diversification matter anyway? Because by diversifying assets, you may offset a certain amount of risk and improve returns. When stocks or bonds fall, real estate prices can take much longer to follow.

Things to Know Before Investing in Single-Family Rentals

Because of the high acquisition cost of single-family homes, you’ll want to conduct proper due diligence on your local housing market and target property before you buy. As with all investments, be cautious when investing a significant portion of your cash in one place.

Your Numbers

While the projected rental income on a property looks attractive at a glance, bear in mind that maintenance costs and surprises should be factored in. Vacancy rates, legal issues with tenants, and unexpected repairs can sap your returns over time.

It’s smart to factor in a cash buffer to ensure that money is available on short notice.

Your Target Rental and Housing Market

While the rental income streams of New York and California offer much higher revenue potential, keep in mind that the costs of owning real estate in those areas is enormous as well.

Income is only one side of the rate of return calculation, so make sure you have a good handle on the expenses as well. You can only do that by thoroughly investigating your target housing market and relying on the home appraisal.

The local job market, its dominant industries, and the dependability and growth of local businesses also will shed light on how stable a given market will be over time. Good schools, safe cities, and proximity to workplaces and attractions matter to many renters.

If you’re looking to use the property as a short-term rental, check out the local ordinances, which may prohibit you from doing so.

The 1% and 50% Rules

The 1% rule is a back-of-the-envelope calculation to estimate whether your rental income strategy will be profitable. If the estimated rental income on the property is at least 1% of its purchase price, you should theoretically be able to generate cash flow. If your purchase price was $300,000, for example, the monthly rent should be at least $3,000, according to the rule.

The 50% rule states that you should expect the expenses on your real estate investment to make up approximately 50% of the gross income generated. That’ll give you a quick and dirty estimate to help you start ballparking your net returns.

Obviously, the exact numbers are more complicated. When you have time, you’ll want to run a full comparison of revenues vs. potential costs of your venture.

Your Strategy

This one’s a little more nuanced, as it depends on your goal amount, the time horizon, and your risk tolerance.

Are you looking to build a rental home empire or are you just looking for a little extra income to supplement your retirement?

Do you intend to tap home equity to buy one or more investment properties? Do you plan to flip or hold the home?

How to Invest in Single-Family Homes

If you’re confident that buying a single-family home is the right choice for you, there are a few ways you can invest:

Buy It Yourself

This is the most capital intensive and least liquid route. Buying a single-family home in the neighborhood of your choice will net you reward as well as the risk that comes with any property.

If you’re handy, you can buy a fixer-upper or a HUD home (bidding opens to investors after owner-occupants are given a chance) and renovate it into turnkey condition.

The expense of any contractors or property managers will need to be factored in.

Invest Through a Crowdfunding Platform

If you don’t have copious amounts of capital, you can still fund real estate investment projects through online crowdfunding platforms like Fundrise. These allow you to diffuse risk while taking part in more aggressive investments than you might have been willing to by yourself.

Keep in mind that you’ll need to share the benefits with all investors who partake in the process. Another shortcoming is that your funds may be tied up for an extended period of time, which varies by project.

Invest in a Real Estate Investment Trust

REITs are corporate entities that specialize in purchasing and financing pools of real estate investments on behalf of their clients. They sell shares that are publicly traded and can specialize in any number of sectors or strategies.

The big benefit of REITs is that they’re one of the most liquid real estate investments out there, as you can buy or sell your shares at almost any time on the open market. However, the market value of each share will fluctuate daily.

In the realm of investment opportunities, REITs often provide better returns than fixed-income assets like bonds, but REITs carry higher risk.

There are REITs that specialize in buying and operating single-family rentals. These REITs pay out a major portion of their cash earnings to shareholders.

The Takeaway

When done right, your single-family home investment can offer growth and income and diversify your portfolio. You can start with lower levels of capital by investing in REITs or crowdfunding platforms, but any gains will be diluted. It may be easier to obtain a mortgage for a one-family home, or a property that is four units or fewer, than for a larger multiunit property.

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

SoFi Mortgages: simple, smart, and so affordable.

FAQ

Is renting out a single-family home worth it?

It can be. Appreciation and rental income have made single-family homes attractive to investors. Multifamily properties provide more rental income streams but also require more property and tenant management.

How do you value a single-family home rental?

There are a few ways. One is to look at recent comparable sales. Another is to calculate the capitalization rate (net operating income divided by property price or value). A third is to use the gross rent multiplier approach (property price divided by gross rental income).

How fast does the value of single-family homes appreciate?

It depends on the market. Lately, appreciation has decelerated. But the median sales price of a house in the last quarter of 2024 was still about $100,000 more than it was five years before.


Photo credit: iStock/Phynart Studio

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


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



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

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


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.


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.

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

SOHL-Q125-022

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What Is a Mortgage Closing Disclosure?

Mortgage Closing Disclosure: All You Need to Know About Using It

Before signing your closing documents and walking away with the keys to your new home, it’s important to reexamine the final details of the mortgage. Your lender is required to provide this information ahead of closing in the form of a mortgage closing disclosure.

Paperwork fatigue aside, the closing disclosure deserves careful review, as it outlines the mortgage terms and conditions you’re agreeing to.

Key Points

•   The mortgage closing disclosure outlines final loan terms, including amount, interest rate, and monthly payments.

•   The disclosure must be provided at least three business days before closing to allow for review.

•   Borrowers should compare the closing disclosure with the initial loan estimate for accuracy.

•   Certain fees, like transfer taxes and lender service fees, cannot change without a valid reason.

•   Errors on the closing disclosure should be reported to the lender or settlement agent immediately to avoid delays.

What Is a Closing Disclosure?

You may have weighed the different mortgage types and then homed in on one that suited you best.

Maybe you got mortgage preapproval before zeroing in on a property you couldn’t live without (for a while, at least). Now the deal is almost buttoned up.

Here comes the closing disclosure, a five-page form from your lender outlining the home mortgage loans terms, including the loan principal, interest rate, and estimated monthly payment. It also lays out how much money is owed for closing costs and the down payment.

Lenders are required by federal law to provide the mortgage closing disclosure at least three business days ahead of the closing date.

First-time homebuyers can
prequalify for a SoFi mortgage loan,
with as little as 3% down.

Questions? Call (888)-541-0398.


Recommended: Understanding Mortgage Basics

Why the Closing Disclosure Is Important

The mortgage closing disclosure contains all the final terms of your home loan, like how much you pay each month and over the life of the loan. You probably had many mortgage questions for your lender, but all the conditions of your loan, such as your ability to refinance or pay off the loan early, are detailed here.

These specifics can have a significant impact on your personal finances. Just one percentage point difference in the interest rate can cost you thousands in the long run.

When you receive the closing disclosure from your lender, this is a final chance to review the fine print and compare everything with the loan estimate, the three-page document with the loan amount, interest rate, and other key information provided by your lender after you applied for a mortgage.

You may have obtained multiple loan estimates when shopping for a mortgage, but you’ll only get a closing disclosure from the lender you chose to finance with.

Recommended: Mortgage Help Center

What’s in the Closing Disclosure?

Visual learners, rejoice: The U.S. government’s Consumer Financial Protection Bureau maintains a sample closing disclosure with an accompanying checklist and tips on how to read a closing disclosure.

Here’s a breakdown of the components in the closing disclosure.

Loan Terms

The terms include the loan amount, interest rate, and the monthly principal and interest you’ll pay. This section notes if the loan has a prepayment penalty for paying off the mortgage early (a rarity these days) or a balloon payment, a one-time fee due at the end of the loan (ditto).

The closing disclosure will note with a “yes” or “no” whether the amount for any of these items can increase after closing.

Projected Payments

This section shows the factors used for the payment calculation, including the principal and interest, any mortgage insurance, and estimated escrow to pay property taxes, homeowners insurance, and any flood insurance. These add up to estimated total monthly payment for the mortgage.

If you don’t use an escrow account, the bottom of this section will show the monthly costs for property taxes, homeowners insurance, and homeowners association (HOA) dues, if applicable.

Checking these numbers against the original loan estimate from your lender is good practice.

Costs at Closing

Top of mind for many borrowers is the amount of cash needed to close. Usually, you can expect closing costs to be 2% to 5% of the home purchase price.

This section identifies the “cash to close,” which represents the closing costs plus the down payment owed by the borrower.

Loan Costs

Flipping to Page 2, this section provides a summary of expenses associated with taking out the loan. The costs consist of the origination fee, application fee, underwriting fee, and mortgage points if you’ve chosen to purchase any.

Additional costs are categorized under “services borrower did not shop for” and “services borrower did shop for.” The former includes services arranged by the lender, like the appraisal fee, while the latter refers to services the borrower had a choice in procuring, such as the title search and pest inspection fee.

Other Costs

There are other costs that may be due at signing, such as taxes and government fees, prepaids, escrow payments, and HOA fees.

Ensure that each amount is accurate and correctly entered as either borrow-paid or seller-paid.

Calculating Cash to Close

The table in this section shows a side-by-side comparison between the loan estimate and final dollar amount needed to close.

The calculation will account for any deposits paid by the borrower and seller credits negotiated as part of the deal.

Summaries of Transactions

This section provides a detailed look at what the borrower and seller are paying at closing. Costs prepaid by the seller, such as property taxes and HOA fees, may be adjusted to show what portion is owed by the borrower.

Loan Disclosures

Your mortgage comes with conditions, which are outlined on Page 4 of the closing disclosure. You’ll see which apply based on the box that’s checked for each.

Loan Calculations

On the final page, there are loan calculations showing the total amount you’ll pay over the life of the loan, as well as the finance charge, amount financed, annual percentage rate, and total interest percentage.

If you’re just looking into home loans, a mortgage calculator can estimate your monthly payments and total interest paid over the loan term.

Other Disclosures

The lender must disclose other characteristics of the mortgage, if applicable. They include the appraisal, contract details, liability after foreclosure, ability to refinance, and tax deductions.

Contact Information

Refer to this section if you need to contact the lender, brokers, or settlement agent involved with your mortgage.

Confirm Receipt

Signing the mortgage closing disclosure indicates that you received the form, not that you agree to the terms and accept the loan.

What Is the Three-Day Waiting Period?

As of 2015, the Consumer Financial Protection Bureau’s “Know Before You Owe” mortgage rule requires lenders to provide the mortgage closing disclosure at least three business days before closing.

This aims to give borrowers plenty of time to review the final loan terms, ask their lender any clarifying questions, and prevent unexpected costs at closing.

There are a few scenarios that could change the closing disclosure timeline. Your lender must provide another closing disclosure, thus granting three more days, if one of the following issues occurs:

•  A change in the loan APR (one-eighth of a percentage point or more for a fixed-rate loan or one-quarter of a percentage point for an adjustable-rate mortgage)

•  Addition of a prepayment penalty

•  A change in the loan product

How to Check Your Closing Disclosure

All five pages of the closing disclosure contain key information for the borrower to review. It may be helpful to go line by line with your loan estimate in hand to compare the final terms against what the lender previously provided.

Here are a few important items to pay attention to:

•  Review your name and the property information.

•  Check that the loan description and amount match the loan estimate.

•  Make sure that the interest rate is unchanged if you locked it.

•  Ensure you understand all the fees and any changes to them.

What Can and Can’t Change on the Closing Disclosure

There are some costs that can’t be changed on the closing disclosure, while others may increase by a certain percentage or by any amount.

Unless there’s a change in circumstances on the loan, changes can’t be made to the following:

•  Transfer taxes

•  Fees paid to the lender for a required service

•  Fees paid for a required service that the borrower wasn’t allowed to shop separately for

Recording fees and costs for required services from a lender’s written list of providers may not increase by more than 10%.

There are other costs that can change by any amount at any time, including:

•  Prepaid interest, property insurance premiums, or initial escrow deposits

•  Fees for required services by the lender that the borrower shopped separately for

•  Fees for optional third-party services

•  Note that your interest rate can fluctuate if it’s not locked or due to changes on your mortgage application.

What to Do if There’s an Error on the Closing Disclosure

It’s important to notify your lender or settlement agent of any errors on the closing disclosure.

Redoing the closing disclosure could delay the closing and affect your interest rate if your mortgage rate lock expires.

The Takeaway

The mortgage closing disclosure gives a detailed overview of your loan terms and closing costs. Review it promptly with your loan estimate at hand. If you’re uncertain of any information, reach out to your lender to go over the closing disclosure as soon as possible.

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

SoFi Mortgages: simple, smart, and so affordable.

FAQ

Does a closing disclosure mean I’m approved?

The loan is approved before you receive the closing disclosure, but a significant change to your credit, income, or debt before closing could affect your approval.

Can you waive the three-day closing disclosure?

You can waive the three-day closing disclosure in the case of a personal financial emergency, such as losing the home if the mortgage doesn’t close in time.

How long after the closing disclosure do you close?

You can close three business days at the earliest after receiving the closing disclosure. Errors on the closing disclosure could delay the process.

Can you be denied after the closing disclosure?

Yes. A dramatic change in your personal finances could cause a lender to reject your mortgage. It’s a good idea to try to avoid changing jobs or taking on new debt near the end zone.


Photo credit: iStock/Khosrork

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


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



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

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


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.


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.

This article is not intended to be legal advice. Please consult an attorney for advice.

SOHL-Q125-025

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What Is a Floating House?

What Is a Floating Home? Should You Consider Owning One?

For those who love living near the water — really near — a floating home may be the perfect fit. These unique dwellings provide rooms with a view, a community vibe, and more.

Isn’t this another name for a houseboat? No. Floating homes almost always stay put.

Read on to find out what a floating home is and what type of person might be the best fit for one.

Key Points

•   Floating homes are permanently docked structures with no engines, unlike houseboats.

•   These homes are often part of a homeowners association, contributing to maintenance and utility costs.

•   Ownership might include the slip where the home is docked.

•   Floating homes can offer a close-knit community experience and unique waterfront living.

•   They may face challenges such as financing difficulties and susceptibility to weather and water damage.

Characteristics of a Floating Home

Floating homes have the following features:

•   Permanently docked. Floating homes sit on the water like houseboats, but they are anchored and permanently connected to land-based utilities. Unlike houseboats, floating homes have no engine.

•   HOA membership. Floating home residents pay homeowners association or moorage fees to maintain the docks and slips and cover common utility bills like water, sewer, and garbage service.

•   Slip might be included. Floating homes are often sold with their slip.

•   What lies beneath. The hull is often made of concrete, although it could be wood, metal, or foam. A houseboat hull is likely made of fiberglass, aluminum, or steel.

First-time homebuyers can
prequalify for a SoFi mortgage loan,
with as little as 3% down.

Questions? Call (888)-541-0398.


Pros and Cons of a Floating House

For water lovers, floating houses offer a unique lifestyle that might fit the bill. But they come with their fair share of drawbacks as well.

Benefits

•   Close community. Floating homes typically are very close to their neighbors. This can mean a tight-knit community.

•   No engine maintenance. Unlike houseboat owners, floating home owners don’t have to worry about the upkeep of an engine.

•   Water, water, everywhere. Forget waterfront homes; floating homes are in the water. For the homebuyer with a love of the outdoors and watersports, the location is unbeatable.

•   Possibly less expensive housing. In certain cities in California, Washington state, and Florida where homes on terra firma might be sky-high, a floating home could cost less. Look into the cost of living by state if you’re thinking about a move.

•   Tend to hold their value. Whereas houseboats tend to depreciate, floating homes may appreciate.

•   Potential for property tax breaks. A floating home might be classified as personal property, not “real property,” so owners may not have to pay property taxes. Instead, they might pay an annual personal-property tax. (Tax laws pertaining to floating homes differ by state, county, and even water body, so it’s important to know the applicable law where the floating home exists.)

Drawbacks

•   Fees. Floating home owners typically pay HOA or moorage fees. They can be sizable and keep rising.

•   Limited locations. Floating homes are pretty rare. That means limited opportunities to purchase one or limited space in moorages to build one.

•   Seasickness or motion sickness. While floating homes aren’t mobile (unless they are, in rare instances, towed), owners will still experience some rocking and rolling, which might not be the best for those with sensitivity toward motion sickness.

•   Weather and water damage. If there’s inclement weather on the body of water, floating home owners may face expenses for repairs. And being on the water all the time can take a toll on wood and metal.

•   Harder to finance. Securing a loan can be a challenge. Some lenders do offer long-term loans (but not FHA or VA loans) for floating houses. They usually require at least 20% down and have a higher rate than traditional mortgage rates. A personal loan might be another option, and a personal loan may streamline the process of closing on your purchase as it could have a shorter timeline.

Recommended: Applying for a Personal Loan with a Co-Borrower

Moorage Rules

The moorage is the community where a floating home stays, usually permanently.

A slip in a moorage may be part of a floating house purchase. Other owners rent a slip. The price of a floating home with slip will be much more but owning your slip likely means less in monthly fees.

Like any neighborhood, moorages will have their own personality based on the residents. As floating homes tend to be close together, the communal spirit may come into play more than in a traditional neighborhood.

Similar to an HOA, moorages have community rules, which could include:

•   Stipulations on renting out floating homes

•   Standards of exterior upkeep of floating homes

•   Quiet hours

•   Share community spaces or equipment

Buyers may want to shop around for a moorage that suits their personality.

Finding a Floating Home to Buy vs. Building One

Because many floating homes are sold along with the slip, buyers don’t have to seek out a new moorage for the property.

Homebuyers in the market for a floating home will have to refine their search to areas where floating homes are popular and communities are established.

The benefit of building a floating home is the technology available today. Modern floating homes typically use different foundations than older floating homes, which could translate to lower maintenance costs down the line.

But a drawback to building a floating home is the stress of finding a moorage that can accommodate it. Float home builders may have to wait for an opening.

Recommended: How to Build a House

Maintaining a Floating House

When it comes to upkeep, floating homes have most of the maintenance of single-family homes, with the added challenge of keeping them afloat.

Floating home owners should keep a close eye on their home’s foundation and reach out to specialists whenever a crack or issue emerges.

Even basic repairs such as plumbing or electrical may require a contractor. Not all plumbers are certified scuba divers, but they may have to be to work on a floating home. That means even basic repairs could cost much more than they would for a land-based home.

Floating houses need ongoing maintenance thanks to exposure to the elements. To keep siding and other exterior parts in good condition may require constant maintenance and more frequent replacement.

Who Should Get a Floating House?

Floating homes can be expensive and fees can add up, so buyers will have to weigh whether this unusual choice among the different types of homes is worth its salt. Floating home buyers may be interested in some or all of the following:

•   A love of water and proximity to nature. With waterfront views around the entire property, floating homes are a great fit for those who love activity on the water and unbeatable sunsets.

•   A sense of community. If a buyer is looking for neighbors nearby and with similar interests, a floating community could be a great fit.

•   Minimalism. When everything has to be hauled from the dock onto a property, it can be exhausting. Floating homes and downsizing may go hand in hand.

•   A go-with-the-flow mentality. This style of living comes with some day-to-day inconveniences. Plumbing and electrical outages are more common in floating homes because of the nature of the hookups. If the moorage is in a remote area, cellphone service and internet access may be limited.

The Takeaway

Floating homes aren’t for everyone, but water lovers may feel the urge to say ahoy to this lifestyle steeped in nature. A floating house has benefits, but inconveniences and fees make this way of living best for a unique type of buyer.
Floating house buyers often need special financing options too, such as a personal loan. Buying at the waterfront but not actually on the water? A conventional home loan is an option if you’re staying on terra firma.

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

SoFi Mortgages: simple, smart, and so affordable.

FAQ

What is a floating house, and what is the difference between a floating house and a houseboat?

A floating home is permanently docked with a floating foundation. Houseboats have an engine and can move to different locations.

What is the cost of maintaining a floating home?

Maintaining a floating home may be similar to the upkeep on a waterfront or beachfront property. Basic repairs, including plumbing and electric, will likely require a specialist with experience in floating homes, which could be more expensive.

Can you get a loan to buy a floating home?

You could use a floating-home loan, personal loan, or home equity line of credit to buy a floating house, but floating homes are not eligible for a traditional mortgage.

Are floating homes safe?

Most are. Most floating home communities have standards in order to maintain property values. And the homes are usually subject to inspection and enforcement of regulations of the moorage and jurisdiction.


Photo credit: iStock/DR pics24

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.


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

¹FHA loans are subject to unique terms and conditions established by FHA and SoFi. Ask your SoFi loan officer for details about eligibility, documentation, and other requirements. FHA loans require an Upfront Mortgage Insurance Premium (UFMIP), which may be financed or paid at closing, in addition to monthly Mortgage Insurance Premiums (MIP). Maximum loan amounts vary by county. The minimum FHA mortgage down payment is 3.5% for those who qualify financially for a primary purchase. SoFi is not affiliated with any government agency.
Veterans, Service members, and members of the National Guard or Reserve may be eligible for a loan guaranteed by the U.S. Department of Veterans Affairs. VA loans are subject to unique terms and conditions established by VA and SoFi. Ask your SoFi loan officer for details about eligibility, documentation, and other requirements. VA loans typically require a one-time funding fee except as may be exempted by VA guidelines. The fee may be financed or paid at closing. The amount of the fee depends on the type of loan, the total amount of the loan, and, depending on loan type, prior use of VA eligibility and down payment amount. The VA funding fee is typically non-refundable. SoFi is not affiliated with any government agency.
²SoFi Bank, N.A. NMLS #696891 (Member FDIC), offers loans directly or we may assist you in obtaining a loan from SpringEQ, a state licensed lender, NMLS #1464945.
All loan terms, fees, and rates may vary based upon your individual financial and personal circumstances and state.
You should consider and discuss with your loan officer whether a Cash Out Refinance, Home Equity Loan or a Home Equity Line of Credit is appropriate. Please note that the SoFi member discount does not apply to Home Equity Loans or Lines of Credit not originated by SoFi Bank. Terms and conditions will apply. Before you apply, please note that not all products are offered in all states, and all loans are subject to eligibility restrictions and limitations, including requirements related to loan applicant’s credit, income, property, and a minimum loan amount. Lowest rates are reserved for the most creditworthy borrowers. Products, rates, benefits, terms, and conditions are subject to change without notice. Learn more at SoFi.com/eligibility-criteria. Information current as of 06/27/24.
In the event SoFi serves as broker to Spring EQ for your loan, SoFi will be paid a fee.


This content is provided for informational and educational purposes only and should not be construed as financial advice.

SOHL-Q125-017

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What Is a Hard Money Loan?

What Is a Hard Money Loan?

A hard money loan is a nontraditional, secured loan provided by an investor to a buyer of a “hard asset,” usually real estate, whose creditworthiness is less important than the value of the asset.

Hard money loans are more common for real estate investments — purchasing a rental property or flipping a house, for instance — and can get you money quickly.

Individual investors or investment firms offer these loans. They typically have high interest rates and short repayment terms and can be risky.

Note: SoFi does not offer hard money loans at this time.

Key Points

•   Hard money loans provide quick funding for real estate investments.

•   Interest rates for these loans typically range from 9.00% to 15.00%.

•   Down payments required for hard money loans are usually 20% to 35%.

•   Repayment terms are often short, lasting six months to three years.

•   Hard money loans are suitable for investors with fair credit or those needing fast financing.

Common Reasons to Get a Hard Money Loan

People typically look for hard money loans when they are interested in investing in real estate that needs repairs.

Amateur real estate investors who may not have another way of securing financing — or who may just need money fast and don’t have time for a lengthy mortgage process — rely on hard money loans for:

•   Purchasing real estate to fix up and rent out

•   Buying a home to upgrade and flip for a profit

Business owners sometimes take out hard money loans to purchase commercial real estate as they expand their business.

Finally, some homeowners who have poor credit but who possess equity in a home may apply for a hard money loan to avoid foreclosure.

Recommended: How to Buy a Foreclosed Home

How to Get a Hard Money Loan

Unlike lenders of personal loans or traditional mortgage loans, hard money lenders aren’t all that interested in your credit scores. Instead, they care about the value of the investment — if you default on the loan, they’ll have made money on the interest and have legal claim to the investment.

That makes getting a hard money loan easier than a traditional loan. But how do you find hard money lenders if they’re not traditional direct lenders? Finding them could be as simple as asking a real estate agent or an industry friend (like another local landlord or house flipper) for a recommendation.

Hard money lenders are also online and accessed through mortgage brokers. It’s always a good idea to find trusted reviews of a lender before signing.

Hard Money Loan Requirements

Hard money lenders are less concerned about your credit scores than traditional lenders are, though they may check your credit and verify your income. Instead, there are three basic hard money requirements:

A Valuable Asset

The investment firms and financing companies that grant hard money loans are mainly interested in the value of the investment itself. A hard money loan is based on the after-repair value of a property.

Experience

Hard money lenders may want to know that you’re capable of completing the renovations you’re envisioning for your rental property or house flip. Being able to provide a portfolio of previous work may help your cause.

A Large Down Payment

Typically, hard money lenders require a down payment of 20% to 35%.

Hard Money Loan Rates and Terms

Hard money loans come with higher interest rates and shorter terms than traditional mortgage loans. This can make them a higher risk for some borrowers.

•   Rates: Interest rates can range from 9.00% to 15.00%. This is higher than the typical 30-year fixed-rate mortgage.

•   Terms: In general, hard money loans come with short repayment periods. While most homebuyers choose a mortgage term of 30 years, hard money loans are often for six months to three years.

Recommended: How Inflation Affects Mortgage Interest Rates

Pros and Cons of Hard Money Loans

So what are the advantages and disadvantages of hard money loans? Let’s break it down in easy terms:

Pros

Cons

Fast funding High interest rates
Fair credit usually OK Short repayment terms
Less stringent underwriting process Large down payment
Easy way to start investing Can’t work with traditional lenders

Hard Money Loan Alternatives

Hard money loans aren’t your only option if you want to start investing in real estate, though the condition of the property will be a factor, as will the size: Any multifamily property of five or more units requires commercial financing.

It’s important to consider every avenue and understand how it will affect your finances and the likelihood of getting an offer approved.

Traditional Mortgage

Properties that need significant repairs usually do not qualify for a conventional loan, but otherwise it could be possible to use a residential conventional loan for a property with up to four units if one unit will be owner occupied for at least a year.

The same is true for qualified borrowers of an FHA loan or VA loan.

Banks, credit unions, and mortgage companies also may offer commercial real estate loans to qualified borrowers.

Home Equity Loan or Cash-Out Refi

If you have significant equity in your home, you may be able to purchase an investment property by tapping your home equity with a home equity loan, home equity line of credit (HELOC), or cash-out refinance. Interest rates are typically lower than those for a personal loan, but your home serves as the collateral on the loan.

Personal Loan

Depending on the cost of the investment property, you may be able to cover the price with an unsecured personal loan — or a personal loan and cash reserves you may have.

Borrowers, depending on their credit score, may be able to secure financing for a lower rate than they’d get with a hard money loan.

A home improvement loan could also come in handy if you qualify.

The Takeaway

Hard money loans offer fast funding and don’t require a strong credit score, making them tempting for investment properties. But these loans — which are not available through traditional lenders — typically have high interest rates and short terms.

FAQ

What is a hard money loan example?

Borrowers often seek out hard money loans for real estate investments. They may be interested in renovating a property to rent out or they may want to do a quick upgrade or more extensive rehab, then flip the home for a profit.

What are typical terms for a hard money loan?

Hard money loans typically require a down payment of 20% to 35%, come with an interest rate of 9.00% to 15.00%, and must be paid off within six months to a few years. This makes them high risk for some borrowers, but the fast funding and de-emphasis on credit history can be appealing.

Do hard money lenders run your credit?

Some hard money lenders may check your credit and verify your income, but in general, they are not as concerned with your credit scores as a traditional lender is. Instead, they want to see a large down payment, a history with rental properties, and an asset worth investing in, which serves as collateral for the loan.


Photo credit: iStock/Prostock-Studio

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


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



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

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

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.
²SoFi Bank, N.A. NMLS #696891 (Member FDIC), offers loans directly or we may assist you in obtaining a loan from SpringEQ, a state licensed lender, NMLS #1464945.
All loan terms, fees, and rates may vary based upon your individual financial and personal circumstances and state.
You should consider and discuss with your loan officer whether a Cash Out Refinance, Home Equity Loan or a Home Equity Line of Credit is appropriate. Please note that the SoFi member discount does not apply to Home Equity Loans or Lines of Credit not originated by SoFi Bank. Terms and conditions will apply. Before you apply, please note that not all products are offered in all states, and all loans are subject to eligibility restrictions and limitations, including requirements related to loan applicant’s credit, income, property, and a minimum loan amount. Lowest rates are reserved for the most creditworthy borrowers. Products, rates, benefits, terms, and conditions are subject to change without notice. Learn more at SoFi.com/eligibility-criteria. Information current as of 06/27/24.
In the event SoFi serves as broker to Spring EQ for your loan, SoFi will be paid a fee.

SOHL-Q125-028

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What Does a Mortgage Loan Officer Do?

What Does a Mortgage Loan Officer Do?

A mortgage loan officer, also called a mortgage loan originator, helps borrowers determine if they qualify for a home loan, and, if so, aids homebuyers in finding the right type of mortgage and best interest rate and terms for them.

Throughout the home-buying process, your mortgage loan officer will review your information, collect necessary documentation, and track important milestones leading up to closing.

Mortgage loan officers typically work for a specific bank, credit union, or mortgage company.

In this piece, we’ll discuss what a mortgage loan officer is and does, how to find a mortgage loan originator, the differences between a mortgage broker and a loan officer, and the qualifications of a mortgage loan officer.

Key Points

•   Mortgage loan officers assist homebuyers with loan qualification and the application process.

•   Officers review applications, set loan terms, and ensure all deadlines are met.

•   If working for a specific lender, officers offer a limited range of loan options.

•   Brokers, for a fee, help find the best deals from various lenders.

•   Qualifications including education, licensing, and registration, may depend on where the officer is working.

What Is a Mortgage Loan Officer?

The mortgage loan process can be nerve-wracking, even if it’s not your first go-around.

A mortgage loan officer serves as a guide to home loans. This individual, sometimes licensed and certified, helps potential homebuyers determine if they qualify for a loan and, if so, which type of home loan is right for them.

A mortgage loan officer is a type of mortgage loan originator (MLO), a regulatory term. An MLO may also refer to a company that does mortgage originations, like a mortgage broker.

What Does a Mortgage Loan Officer Do?

A mortgage loan officer has two main responsibilities:

1.    Accept and review mortgage loan applications from prospective homebuyers

2.    Work with borrowers to determine loan terms, including interest rates

Of course, mortgage loan officers’ day-to-day duties include much more than these two tasks. In a given week, they might meet with potential borrowers to review their options and explain basic loan definitions, work with underwriters to process loan applications, coordinate with home appraisers to ensure a house is worth what a borrower is offering, and monitor important deadlines for various clients to ensure everything is moving along correctly ahead of closing.

Mortgage loan originators charge a fee for their services. Homebuyers can typically expect to pay this fee as part of their closing costs.

Recommended: How Inflation Affects Mortgage Interest Rates

How to Find a Mortgage Loan Originator

Do you need a mortgage loan officer for a home purchase or refinance? Here are some tips for finding a mortgage lender and loan officer, whether you’re an experienced or first-time homebuyer.

Reading Reviews

Reading about other borrowers’ experiences with particular loan officers and lenders can help weed out the ones you should avoid. Sites like the Better Business Bureau are good resources for customer reviews.

Asking Family and Friends

Online reviews aren’t your only source for feedback. You can talk with friends and family who have recently purchased a home to see if they would recommend their loan officer. If you belong to special groups on social media, like a neighborhood group, you can survey a larger group for recommendations for a mortgage loan originator near you.

Talking with Your Real Estate Agent

Real estate agents work closely with a wide range of loan officers. Your agent may be able to recommend a mortgage loan officer with a good reputation.

Shopping Around

Whether you’re interested in a local bank or an online lender, you have multiple options available. Researching multiple lenders online can help give you an idea of the right mortgage loan originator for you.

Interviewing Multiple Mortgage Loan Officers

When you have narrowed down your list, it’s a good idea to interview a few mortgage loan officers. If you let them know that you’re considering multiple options, they may even feel incentivized to offer you a better deal.

Checking Their License

In some cases, mortgage loan officers must receive formal education, register with the government, pass a licensing test, and take continuing education classes to maintain their license.

You can check a license number through the Nationwide Multistate Licensing System & Registry (NMLS) consumer access site.

Mortgage loan officers at covered financial institutions (those that are highly regulated) are not required to be licensed; they only need to be registered.

Mortgage Broker vs. Direct Lender

If you’re thinking about mortgage shopping, you’ll want to understand the difference between a mortgage broker vs. a direct lender.

A loan officer typically works for a specific bank or lender and can thus only offer you loan options from that institution. At bigger banks, you may only be able to access their loan options through their own mortgage loan officers. Working directly with a loan officer may yield discounts on closing costs or access to better rates.

A mortgage broker, on the other hand, does not directly lend you money. Instead, for a fee, brokers shop around to find you the best deal given your financial situation (credit score, down payment, income, etc.).

Because brokers aren’t tied to a specific lender, they might be able to find you a better deal. But brokers do not have access to every lender, so you still might be missing out on the best deal available.

The fees charged by mortgage brokers may be higher than those charged by direct lenders. If you’re deciding whether to work with a broker or direct lender, ask about all the fees associated with loan generation.

Recommended: Can You Roll Closing Costs Into Home Loans?

What Are the Qualifications to Become a Mortgage Loan Originator?

MLOs may follow multiple career paths, each of which may require different levels of education and licensure.

Education

At a minimum, MLOs need to be at least 18 years old with a GED. Many officers at least obtain a bachelor’s degree, often in business, finance, or mathematics.

License vs. Registration

If you wish to work independently, for a broker, or for a nonbank, you must obtain licensure. A license is also a value proposition to potential homebuyers: It tells them that you have passed a difficult test and commit to continuing education.

If you work for a “covered financial institution,” you will not be required to obtain a license. You’ll simply need to register every year. The financial institution that employs you will likely coordinate this.

To earn your MLO license, you will need to:

•   Complete 20 hours of courses, as required by the NMLS.

•   Take and pass a state license test.

•   Pass the SAFE MLO test. (SAFE stands for the Secure and Fair Enforcement Act, which established guidelines for MLOs after the subprime mortgage debacle, which contributed to the global financial crisis in 2008.)

•   Keep up with NMLS requirements, including registration and continuing education.

Characteristics

Beyond the registration or license, a good mortgage loan officer will typically need the following qualities:

•   Good with numbers

•   Interpersonal skills

•   Strong decision-making and organization

•   An eye for detail

The Takeaway

A mortgage loan officer helps potential homebuyers find a fitting mortgage, apply for the loan, and meet deadlines. You can interview several mortgage loan originators to see what they offer.

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

SoFi Mortgages: simple, smart, and so affordable.

FAQ

What are the job responsibilities of a mortgage loan officer?

A mortgage loan officer reviews mortgage loan applications and determines which loans and rates to offer potential homebuyers. The officer works with underwriting on loan approval, then helps the homebuyer through the process until closing.

What is the difference between a loan officer and mortgage broker?

A loan officer, aka mortgage loan originator, typically works for a lender and has access to the best deals of that particular lender. A mortgage broker helps homebuyers shop for the best deal, though they don’t have access to every possible loan.

How do you find a mortgage lender?

To find a mortgage lender, it’s a good idea to read online reviews, ask friends and family for recommendations, talk to your real estate agent about a referral, and shop around online.


Photo credit: iStock/Paperkites

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


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



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

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


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.

SOHL-Q125-026

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