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If you’re thinking about buying a home in the not-too-distant future, you may be wondering what kind of property to purchase. Would a single-family house be better, or perhaps a condo unit?

Some important factors: Do you prefer being in a city, perhaps in an apartment or townhome, or are you all about a house with a picket fence? Do you like handling your own gardening and picking your own front-door paint colors, or would you like to delegate that? Do you like neighbors close by or prefer privacy? Does your household include furbabies?

These are some of the considerations that may impact whether a house or a condo is right for you. Each option has its pros and cons, and of course, finances will play a role too.

To decide which might suit you best, take this house vs. condo quiz, and then learn more about some key factors.

Next, you might want to take these pros and cons into consideration as well.

Pros and Cons of Buying a House

A top-of-mind question for many people is, “Isn’t a house more expensive than a condo?” Cost is a factor, especially when buying in a hot market, and there can typically be a significant difference between a house and a condo when you are home shopping.

The median sales price of existing single-family homes was $404,400 in the fourth quarter of 2024, according to St. Louis Fed data, compared with a median existing condo price of $359,000 in December 2024, according to the National Association of Realtors®.

Now that you know that price info, look at these pros and cons when buying a house vs. a condo.

Pros of Buying a House

Among the benefits of buying a house are the following:

•   More privacy and space, including storage

•   A yard

•   Ability to customize your home as you see fit

•   Room to garden and create an outdoor space, just as you want it to be

•   Control of your property

•   Pet ownership unlikely to be an issue

•   Sometimes no homeowners association (HOA) or dues

•   Generally considered a better investment

Cons of Buying a House

However, you may have to contend with these downsides:

•   Potentially higher initial and ongoing costs

•   More maintenance inside and out

•   Typically higher utility bills

•   Potentially higher property taxes and homeowners insurance

•   Possibly fewer amenities (such as common areas, a gym, etc.)

If, after taking the quiz and weighing the pros and cons, buying a house feels like the right choice, you can start brainstorming about size, style, location, and price; attending open houses; and looking online.

Learning how to win a bidding war might also come in handy, depending on the temperature of the market.

Pros and Cons of Buying a Condo

A quick look at how condos work before diving in: Condominium owners share an interest in common areas, like the grounds and parking structures, and hold title to their individual units. They are members of an HOA that enforces community rules. Being a member of a community in this way is a key difference between a condo and a house.

Pros of Buying a Condo

Here are some of the upsides of purchasing a condo:

•   More affordable

•   Amenities included (this might include common rooms, a fitness center, and other features)

•   Potentially less expensive homeowners insurance and property taxes

•   Repairs and upkeep of the property typically taken care of

•   Typically lower utility bills

•   Security, if the community is gated or patrolled

•   Access to urban perks

Cons of Buying a Condo

Next, consider the drawbacks of condo living:

•   Less privacy

•   Typically no private yard

•   Rules and restrictions (about noise levels, outside wall colors, pets, and more)

•   Typically less overall space

•   HOA fees

•   Limited parking

•   Slower appreciation in value

Plus, the mortgage interest rate and down payment are often higher on a condo vs. a house of the same value, though that isn’t always the case, especially for a first-time buyer of an owner-occupied condo.

Conventional home loan mortgage lenders sometimes charge more for loans on condo units; they take into consideration the strength of the condo association financials and vacancy rate when weighing risk.

Mortgages backed by the Federal Housing Administration (FHA) are available for condos, even if they are not part of an FHA-approved condominium project, with a process called the Single Unit Approval Program.

An FHA loan is easier to qualify for and requires as little as 3.5% down, but you’ll pay upfront and ongoing mortgage insurance premiums.

What Are the Costs of a House or Condo?

As mentioned above, houses tend to cost more than condos. But here are a few other ways to look at the financials when comparing a condo vs. a house:

•   Condos tend to have lower list prices than houses which may mean a smaller mortgage. However, you also need to factor in monthly maintenance fees and HOAs so you get the full picture.

•   Condos may have assessments from time to time. These are additional charges to fund projects for the unexpected expenses, such as a capital improvement to the entire dwelling.

•   Homeowner fees are growing along with inflation, so when you make your purchase, understand that these charges are not static.

•   Before buying into an HOA community, it’s imperative to vet the board’s finances, including its reserve fund, how often it has raised rates in recent years, whether it has collected any special assessments or plans, and whether it’s facing any lawsuits.

•   If you are buying a house, keep in mind that maintenance and upkeep are your responsibility. This can mean everything from replacing a hot-water heater that’s reaching the end of its lifespan to dealing with roof repairs.

•   Down payments will vary due to several factors. For a condo, a down payment is typically around 10% but can vary considerably from, say, 3% to 20%.

•   With a house, a down payment could be from 3.5% with an FHA loan to the conventional 20% needed to avoid private mortgage insurance, or PMI. Those who qualify for VA loans may be able to buy a house without a down payment.

•   If you are buying a house, make sure to scrutinize property taxes and factor those into your budget. Those are not fixed and can rise over time.

Another smart move: Check out this home affordability calculator to get a better feel for the bottom line.

When Is a Good Time to Buy?

You may know what you’d like to buy (condo vs. a house) and where (in what neighborhood), but do you feel as though now is the right time? If so, fantastic.

You might decide, though, that you want to rent for a while longer under certain circumstances, which can include:

•   Hoping to wait out an overheated market and looking at price-to-rent ratios

•   Wanting to save more money for the down payment and closing costs (the bigger your down payment, the lower your monthlies will likely be)

•   Needing to boost your credit score first

•   Wanting to pay down credit card debt or other debt, which improves your debt-to-income ratio or DTI

•   Needing more time to look at houses and condos before deciding which path to take

The Takeaway

The condo vs. house decision depends on a multitude of factors. Reviewing the pros and cons of buying a condo vs. a house can at least give you a direction to start your search. And so can such givens as knowing that you want to be in a certain location (downtown in a condo instead of in a house on a couple of acres), or that you have lots of dogs and therefore want your own yard, and so forth.

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.

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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.

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

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

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-Q125-045

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Qualifying for a home loan can be especially challenging if you don’t have a regular paycheck.

Even if you have a solid credit score, money in the bank, and low or no debt, you can still expect mortgage lenders to check on your income to be sure you can afford your loan payments. And you may face stricter eligibility requirements if you’re a seasonal employee or a freelance or gig worker.

Having an inconsistent income isn’t an insurmountable hurdle — but there are some basic guidelines homebuyers should be aware of as they prepare to apply for a mortgage.

Here, you’ll learn:

•   Can you get a mortgage without a job?

•   How do you apply for a mortgage if you have seasonal income?

•   What sort of income documentation do you need?

•   How can you improve your chances of mortgage approval?

Is Employment Required to Qualify for a Mortgage?

Usually, you are required to show two years’ worth of employment and income on a mortgage application. Lenders use the information on a loan application to evaluate a borrower’s risk based on a number of factors, including their credit history, their assets, how much debt they can comfortably handle, and the amount and reliability of their income.

If you can prove to your lender that you can make your monthly house payment even though you don’t have a traditional employment situation, you still may be able to qualify for a mortgage. In fact, you may be able to get a mortgage without a job at all if you can prove that you have adequate financial resources.

For example, a retired couple may be eligible for a mortgage based on their Social Security and pension payments alone. And if that isn’t enough for a mortgage, income from other sources may push things ahead. For instance, they may be able to qualify if they have a retirement account they can tap, rental property income, or investments that pay dividends or interest. A divorced individual may be able to use alimony or child support payments to qualify for a home loan. And certain types of long-term disability income also may be accepted.

Applying for a Mortgage with Seasonal Income

If you’re earning an income but some or all of your work is seasonal, you should be prepared to provide extra documentation that proves your income is dependable.

For example, seasonal employees who work for the same company (or in the same field) every year should be ready to furnish two years’ worth of W-2 forms, pay stubs, tax returns, bank statements, and other financial backup. Your employer (or employers) also may have to write a letter stating you can expect to work again the next season.

Remember, the lender wants to be as certain as possible that you can manage your home mortgage loan. If you’ve been working at the seasonal job for less than two years (or if you can’t prove the work will continue), you may not be able to get past the underwriting process. In other words, your mortgage loan would not be approved.

In that case, you may have to wait until you’ve put in more time on the seasonal job, or you could consider applying with a co-borrower or cosigner to improve your chances of getting a loan.

Part-Time Income vs. Seasonal Income

Some points to note about part-time vs. seasonal income:

•   Income documentation requirements are generally less demanding for part-time workers than for seasonal workers.

•   Part-time workers still must provide paperwork that supports the income information on their mortgage application. But if a lender can see that a borrower has year-round employment and a regular paycheck — even if he or she works fewer than 40 hours a week — that consistency can help with qualifying for a mortgage.

•   Even if you work full-time or overtime in a seasonal job (as a store cashier during the holidays, for example, or at a theme park during the summer), you may have a harder time proving that your income is stable.

Recommended: Mortgage Calculator with Taxes and Insurance

Proof of Income Documentation

Proving income stability also can be a challenge for freelancers and gig workers who are trying to qualify for a mortgage.

Instead of pulling out pay stubs and W-2s to prove their income, as employees with more traditional jobs do, self-employed workers have to round up their 1099s and other documentation from their business (bank statements, tax returns, profit and loss statements, etc.). They need to share those as proof of income for a mortgage, along with the required information about their personal finances.

Documentation requirements can vary depending on the lender or the type of loan, but freelance and contract workers typically need to provide proof of at least two years of self-employment income to qualify for a home mortgage loan. And if that income is significantly different from one year to the next, or is going down instead of up, the lender may have questions about the borrower’s ability to keep up with mortgage payments over the long-term.

Something else to keep in mind:

•   Though it may be tempting to take advantage of every tax break for your freelance business, those deductions might affect how a mortgage lender looks at your bottom line.

•   If you have accepted some payments under the table to avoid taxes, you won’t be able to count that money as income on your loan application.

Gathering Your Income Documentation

Not having the proper income documentation can slow down the mortgage loan process, so it can be a good idea to gather up your paperwork well before you actually sit down to apply.

If you’re a first-time homebuyer, or you aren’t clear on what you might need as a seasonal or self-employed worker, a good lender will walk you through the list — but here are a few things you’ll likely need:

•   Tax returns from the past two years. (Personal and business returns if you’re self-employed.)

•   Two years’ worth of W-2s or year-end pay stubs. (If you’re self-employed, you can use your 1099s.)

•   Bank statements. (Personal and business bank statements if you’re self-employed.)

•   Letter verifying your employment. (If you’re a seasonal worker, your employer would state that you’re expected to be hired again. If you’re self-employed, you might provide a letter from a CPA verifying that you’ve been in business for at least two years. You also could include a client list with contact information or your company’s website.)

•   Statements verifying additional assets.

•   Proof of other income sources. (Alimony and child support, disability income, Social Security, etc.)

Improve Your Chances of Mortgage Approval

A stable income can be key to getting a mortgage, but lenders also will consider several other financial factors when evaluating an application. If you want to improve your chances of qualifying for a home loan — and get the lowest interest rate possible — here are a few things to focus on:

Credit Score

Generally, borrowers need a FICO® credit score of at least 620 to qualify for a fixed-rate conventional mortgage. But a higher score (670 to 739 is considered “good”) could make you more appealing to lenders and help you get a lower interest rate. Before you apply for a loan, it’s a good idea to check on your credit score and make sure your credit reports are accurate and up to date.

Down Payment

Coming up with a larger down payment could boost your chances of being approved for a loan. (The tools in SoFi’s Home Loan Help Center can help you figure out the amount you can afford.)

Debt-to-Income Ratio (DTI)

In general, mortgage lenders like to see a DTI ratio of no more than 36%. To figure out your DTI, add up your monthly bills, such as housing costs and any monthly loan or debt payments, and divide that total by your monthly gross (pre-tax) income to get your DTI percentage. If your DTI is running high, lowering or eliminating some debt before applying for a mortgage can make you look like less of a risk.

Cash Reserve

Your lender also may want you to see that you have a backup emergency fund or an asset you can liquidate easily, just in case your income falls short of expectations.

Recommended: Mortgage Preapproval Need to Knows

The Takeaway

If you don’t have a traditional job with a regular paycheck, you may have to jump through a few extra hoops to qualify for a mortgage. But if you can show your lender that you have reliable and consistent income sources, good credit, and can afford your monthly payments, a home loan shouldn’t be out of reach.

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

Can I qualify for a mortgage using seasonal income?

If you can prove you’ve worked in a seasonal job for at least two years, the money you’ve earned, once documented as proof of income for a mortgage, may help you qualify.

Can I include tips as part of my income when qualifying for a mortgage?

If you keep good records and claim the tips you receive from customers on your income tax return, you may be able to include that money as income on your mortgage application. But if you pocket the money and don’t report it on your taxes, you can’t expect your lender to count it.

Are there any exceptions to the two-year employment requirement when applying for a mortgage as a seasonal or freelance worker?

If you change employers but remain in the same line of work from one year to the next, you may be able to get around a lender’s two-year requirement. Let’s say, for example, you’re a swimming coach. If you move from one county to another, but you’re still teaching swimming at a community pool, the fact that you changed employers may not affect your income eligibility.

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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.


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.

Checking Your Rates: To check the rates and terms you may qualify for, SoFi conducts a soft credit pull that will not affect your credit score. However, if you choose a product and continue your application, we will request your full credit report from one or more consumer reporting agencies, which is considered a hard credit pull and may affect your credit.

SOHL-Q125-044

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The Federal Home Loan Mortgage Corporation, or FHLMC, is known as Freddie Mac, the entity created by Congress for the purpose of buying mortgages from lenders to increase liquidity in the market. Freddie Mac was created in 1970 and expressly authorized to create mortgage-backed securities (MBS) to help manage interest-rate risk.

Because the FHLMC buys mortgages, lenders don’t have to keep loans they originate on their books. In turn, these lenders are able to originate more mortgages for new customers. The mortgage market is able to keep capital flowing and offer competitive financing terms to borrowers because of this system. In other words, the market runs more smoothly because of Freddie Mac and its sister company, Fannie Mae, the Federal National Mortgage Association (FNMA).

If you want to know more about how this government-sponsored enterprise works and how it affects your money, read on for details on:

•   What is the FHLMC and what are FHLMC loans?

•   What is the difference between Freddie Mac and Fannie Mae?

•   What are Freddie Mac mortgages?

•   How does the Federal Home Loan Mortgage Corporation work?

Freddie Mac and Fannie Mae

These organizations, with their friendly-sounding nicknames, serve a very important purpose. Freddie Mac and Fannie Mae were created for the purpose of stabilizing the mortgage market and improving housing affordability. These government-sponsored enterprises (GSEs) do this by increasing the liquidity (the free flow of money) in the market by buying mortgages from lenders. Mortgages are then pooled together into a mortgage-backed security (MBS) and sold to investors. The process created the secondary mortgage market, where lenders, homebuyers, and investors are connected in a single system.

In the past, Freddie Mac and Fannie Mae operated as private companies, though they were created by Congress. Fannie Mae came first in 1938, followed by Freddie Mac in 1970. Freddie Mac’s addition in 1970 resulted in the creation of the first mortgage-backed security.

The federal government took over operations at both companies following the financial crisis in 2008. According to the National Association of Realtors®, without government support of Freddie Mac and Fannie Mae, there wouldn’t be very much money available to lend for mortgages.

The Federal Housing Finance Agency (FHFA) has oversight of Freddie Mac and Fannie Mae. On a yearly basis, it assesses the financial soundness and risk management of Fannie Mae and Freddie Mac.

What Is the Purpose of the FHLMC?

As mentioned above, the FHLMC, or Freddie Mac, makes the housing market more affordable, stable, and liquid by buying mortgages on the secondary market. When they buy these loans, the retail lenders they buy them from are able to originate more mortgages to new customers and keep the mortgage market flowing smoothly.

There are many types of mortgage loans; the ones that Freddie Mac buys are known as conventional loans. The mortgage loan must conform to certain standards (such as loan limits) for Freddie Mac to guarantee they will buy these loans.

In general, the process of successfully obtaining a mortgage usually looks something like this once the buyer has made an offer on a house that’s been accepted:

•   The consumer finds a lender, if they haven’t already done so, and will apply for a mortgage.

•   The lender collects documentation required by the loan type and submits it to underwriting.

•   The underwriter approves the loan.

•   The homebuyer closes on the loan, and mortgage servicing begins.

•   The lender sells the loan on the secondary mortgage market to Freddie Mac (or Fannie Mae or Ginnie Mae, depending on what type of loan it is and from what type of lender it originated).

From a homeowner standpoint, they will see the outward mortgage servicing, which is the entity to which they will send their monthly payment and who takes care of the escrow account. The mortgage servicer is the one who forwards the different parts of the mortgage payment to the appropriate parties.

Mortgage servicing can also be sold from servicer to servicer, but this is different from the sale of a mortgage to Fannie Mae or Freddie Mac.

Freddie Mac is also tasked with the responsibility of making housing affordable. There are specific mortgage programs guaranteed by Freddie Mac and offered by lenders.

•   HomeOne®. HomeOne is a mortgage program that offers low down payment options for first-time homebuyers. There are no income or geographic limits.

•   Home Possible®. Home Possible is a program for first-time homebuyers and low- to moderate-income homebuyers. It offers discounted fees and low down payment options.

•   Construction Conversion and Renovation Mortgage. This type of loan combines the costs of purchasing, building, and remodeling into one loan.

•   CHOICEHome® offers financing for real-property factory-built homes that are built to the HUD Code and have the features of a site-built home. This is an option for those buying manufactured homes.

Recommended: What Is the Average Down Payment on a House?

Understanding Mortgage-Backed Securities

After a mortgage is acquired from a lender, Freddie Mac can do one of two things: either keep the mortgage on its books or pool it with other, similar loans and create a mortgage-backed security (MBS). These MBS are then sold to investors on the secondary mortgage market.

What’s attractive about a mortgage-backed security to an investor is how secure it is. Fannie Mae and Freddie Mac guarantee payment of principal and interest. Both Fannie Mae and Freddie Mac issue mortgage-backed securities now.

Does the FHLMC offer Mortgage Loans?

Freddie Mac does not sell mortgages directly to consumers. You won’t see a Freddie Mac mortgage or an FHLMC loan advertised to consumers. Instead, the FHLMC buys mortgages from approved lenders that meet their standards.

Recommended: What Are the Conforming Loan Limits?

The Takeaway

The housing market in the United States arguably benefits from the role of the Federal Home Loan Mortgage Corporation. Lenders can essentially originate mortgages to as many borrowers as can qualify. The free flow of capital created by the FHLMC also means mortgages are less expensive for homebuyers all around. In short, the smooth operation of the housing market owes much of its success to Freddie Mac and Fannie Mae.

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.

FAQs

What does FHLMC stand for?

FHLMC is an abbreviation of Federal Home Loan Mortgage Corporation. It is commonly referred to as Freddie Mac.

What type of loan is FHLMC?

Freddie Mac guarantees conventional loans that adhere to funding criteria, but it does not offer Freddie Mac mortgages directly to consumers.

What is the difference between FNMA and FHLMC?

Fannie Mae and Freddie Mac originated in different decades and initially had different purposes, but for the most part, they serve the same purpose today of helping to improve mortgage liquidity and availability.

Photo credit: iStock/Andrii Yalanskyi

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.

SOHL-Q125-052

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If you, as a mortgage holder, have money in an escrow account, you may see an escrow refund after an escrow analysis at the end of the year. It may not happen often, but an escrow refund check comes if there’s an excess amount in your escrow account. Regulations set by the Consumer Financial Protection Bureau (CFPB) allow the mortgage servicer to retain two months’ worth of your escrow payment as a cushion. Amounts greater than $50 above the cushion should be refunded to you. Escrow balances less than this amount can be retained in the escrow account for the next year or refunded to the borrower.

Escrow refunds generally come when there’s an expense that’s smaller than expected, such as a lower insurance bill or fewer taxes. Your mortgage servicer pays the lower amount and then, when the servicer conducts an escrow analysis, the difference will be refunded to you, typically by check. The funds can also come when an escrow account is closed, such as when the mortgage is paid off or refinanced.

The Escrow Process 101

You might have heard the term “escrow” in a couple of different settings when you’re buying a home. First, an escrow account is like a savings account that is set up for holding earnest money after you make an offer on a house.

And second, a different escrow account is set up by your mortgage servicer after you close on the loan. It can manage your taxes, private mortgage insurance (PMI), and/or homeowner’s insurance. This second type of escrow account is the one most likely to trigger a refund.

In its simplest form, the escrow process looks like this:

1.    The mortgage servicer sets up an escrow account.

2.    The borrower makes monthly payments to the mortgage servicer.

3.    The mortgage servicer deposits the portion of the monthly payment for the homeowners insurance, taxes, and mortgage insurance into an escrow account.

4.    The taxing entity, homeowners insurance provider, and/or mortgage insurance company send the mortgage servicer a bill.

5.    The mortgage servicer pays the bill on the borrower’s behalf.

6.    The mortgage servicer audits accounts every year to determine if there is an overage or a shortage.

7.    If there is an overage above $50, the borrower can be refunded that money. The servicer will alter the monthly payment lower for the next year.

8.    If there is a shortage, the mortgage servicer will modify your monthly payment to account for both the shortage in the last year and the increased cost for the upcoming year.

Recommended: What Is an Escrow Holdback?

What Is an Escrow Refund?

An escrow refund occurs when you, as a mortgage holder, receive a check at the end of the year for the extra money you paid into your escrow account. This is a requirement of mortgage servicing.

When you start making monthly payments to your mortgage servicer, you’ll pay the same amount each month. This amount typically includes your principal, interest, property taxes, homeowners insurance, and PMI (if you have it). The portion designated for taxes, PMI, and homeowner’s insurance will go into your escrow account. This amount is saved until your bill is due. The mortgage servicer pays the bill and deducts the amount from your escrow account.

Every year, the mortgage servicer is required to conduct an escrow analysis. This is a process where the servicer looks at the deposits made by you as well as the bills for insurance and taxes. Adjustments are made, and if you overpaid, you get a refund.

Escrow Refunds at Closing

You also might be wondering, “Do you get escrow money back at closing?” The process for escrow refunds at closing is a little different.

•   Your lender typically uses the money from your existing escrow account to apply toward your down payment or closing costs.

•   Then, for the new escrow account opened by your mortgage servicer, you will contribute what are called “prepaid closing costs” to the account to fund your escrow account. If you end up paying too much, you’ll see an escrow refund check from your servicer after an escrow analysis has been performed.

Mortgage servicers like escrow accounts because it helps protect their investment in your home. When the homeowner’s insurance is paid, the lender can be assured there is protection for the home should anything happen to it. Likewise, when the taxes are paid, the lender doesn’t have to worry about the taxing entity placing a lien on the home.

When Might You Expect An Escrow Refund?

Mortgage servicers are required to complete an escrow analysis at the end of the escrow account computation year, according to Regulation X of the Real Estate Settlement Procedures Act. (The clock starts ticking on the “computational year” when you make your first mortgage payment.) After the yearly escrow analysis, you will receive an escrow account statement. This statement will show you the deposits and expenses for the year, as well as show you a projection of anticipated expenses for the upcoming year.

It will also notify you of changes to your monthly payment that need to be made. These steps help ensure that your mortgage servicer is able to pay your taxes and insurance in full from your monthly payment. It’s common for the amount to change a bit from year to year.

If the escrow analysis uncovers a surplus above the allowable cushion in your escrow account, you can expect a mortgage escrow refund within 30 days.

Here are some common scenarios where you might expect to see a refund from your escrow account.

Mortgage Payoff

When you pay off your mortgage or refinance with a new mortgage loan, your mortgage servicer is no longer required to hold an escrow account for you. You may receive a refund from your escrow account for any unused funds.

Lower Tax Bill

If your tax bill decreases, that means the amount collected from your monthly mortgage payment over the year will be more than what is actually due. The excess amount in your escrow account could be refunded to you after escrow analysis.

Better Insurance Rate

If you change your homeowners insurance to a company that offers a better rate, you may be due a refund. If this happens, you’ll likely pay the higher premium that you had locked into your monthly payment for the year. However, once the escrow analysis is completed, the savings will be apparent and you should receive your refund.

Private Mortgage Insurance No Longer Required

On many conventional mortgages, there may come a time when you don’t need to pay for mortgage insurance. Let’s say you were a first-time homeowner who put less than 10% on your house. When your home equity reaches 20%, you may be able to have the private mortgage insurance premium removed (depending on the type of mortgage you have).

This may happen in the middle of the year before your servicer expects it. Your monthly payment may not be adjusted until an escrow analysis is completed at the end of the year. After an analysis has been completed, you’ll likely receive a refund because you’ve been overpaying for that mortgage insurance you no longer need.

Recommended: What Is a Mortgage Contingency?

Purchase Overpay

If you overpaid for an escrow item when you closed on your home, the surplus can be refunded to you after an escrow analysis.

When You Won’t See an Escrow Refund

The part of your monthly mortgage payment that goes toward your escrow account is set at the beginning of the year. However, tax rates and insurance rates often increase during the year. When your tax or insurance bill is due, your escrow servicer will pay the larger bill even though there isn’t enough money in the escrow account to cover it. This may result in a negative escrow balance.

In the case of a negative escrow balance, the servicer uses their own money to cover the shortfall. To make up for the shortage, the servicer will make adjustments after completing escrow analysis and take steps to collect the shortfall. The adjustment will also account for the new increased amounts due monthly during the upcoming year.

How Soon Can You Expect a Refund?

For ongoing mortgage payments: Your escrow servicer is required to issue a refund within 30 days of discovering a surplus of $50 or more. (This surplus is above a two-month allowable cushion of escrow payments that your mortgage lender may hold.). Borrowers must be current on their mortgage payment, however, to be able to receive this refund.

If you pay off your mortgage: Your escrow servicer may refund the balance of your escrow account within 20 days. Or, if you get a new mortgage with the same servicer, the servicer can apply the balance of the escrow account to a new escrow account with your permission.

The Takeaway

You may see an escrow refund coming your way if you’ve negotiated a better deal for your homeowners insurance, expect to pay less in taxes, or no longer need to pay PMI. It will happen automatically because your mortgage servicer is required to perform yearly escrow analysis. You’ll also receive a refund if you pay off your mortgage and possibly when you refinance. Once that happens, the servicer has 30 days or less to refund the money you’re owed from your escrow account.

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

SoFi Mortgages: simple, smart, and so affordable.

FAQ

How long does it take to get escrow money back?

If you’ve paid off your mortgage in full, the balance in your escrow account should be returned to you within 20 days. If you are still paying into escrow but an escrow analysis (a process conducted every 12 months) has found you’re due money back, you should receive it within 30 days.

Do you get an escrow refund every year?

There is no rule that says you’ll get an escrow refund every year. In fact, in some years you may find that you need to pay more into escrow the following year (or make a lump-sum payment) to make up for a shortfall.

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Photo credit: iStock/MaslovMax

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.

SOHL-Q125-050

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

The financing can vary substantially, as can the fees.

Let’s look at the main differences between these two popular kinds of houses.

What Is a Condo?

First, let’s focus on the first of these two types of houses.

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

A condo is often a good starter home.

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

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

Recommended: Buying a Condo: 8 Things To Do

Pros and Cons of Living in a Condo

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

Pros	Cons
Condos are usually more affordable than single-family homes.	You’ll need to pay HOA fees and follow the community’s rules. Over time, HOA fees can increase, and special assessments can occur.
You can enjoy community amenities with costs shared by all owners; the community may also host social events.	Privacy can be at a premium. Shared spaces can be noisy and you may see more of your neighbors than you’d like. Some of them might entertain frequently, have work hours opposite yours, and so forth.
The outdoor maintenance is handled by the HOA.	Green space is often limited. So, if you enjoy spending time outdoors by your home, this may not work well for you.
Security, from gates to security staff, may be provided.	If another owner in the condo community sells at a lower price or is foreclosed on, this can affect the value of your unit.

What Is a Duplex?

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

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

Pros and Cons of Living in a Duplex

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

Pros	Cons
A duplex tends to be more affordable than a single-family structure.	A duplex isn’t as private as a single-family home and you may hear noise. You’ll also share the driveway and yard.
Buying a duplex allows you to buy a home and get help paying for the mortgage.	You are now a landlord with all of the responsibilities that entails.
Tax write-offs may exist.	If you don’t have a tenant or the tenant falls behind on rent, you still owe your mortgage payment.

What Is the Difference Between a Condo and a Duplex?

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

Financing

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

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

Cost

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

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

Ownership

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

Responsibilities

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

Common Areas

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

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

The Exterior

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

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

Resale Value

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

Duplexes also tend to be easier to resell because of the rent received and the lack of HOA fees — but tenants have rights, and you may need to wait for your rental unit to be vacant before you can sell without legal concerns.

Condo vs Duplex: The Verdict

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

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

The Takeaway

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

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 a condo the same as a duplex?

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

Which is better: a duplex or a condo?

It depends upon your preferences and lifestyle.

Is living in a duplex noisy?

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

Are duplexes cheaper than condos?

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

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Photo credit: iStock/william87

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.

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.

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

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

*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.

SOHL-Q125-024

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