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A duplex or townhouse can be a more affordable alternative to a detached single-family home, yet offer a taste of that homeownership. These medium-density housing choices are sandwiched between suburban and high-density development.

When deciding on a duplex vs. townhouse, consider the amount of space you need, the amount of maintenance you want to do, your budget, and whether the rental component of a duplex — or Aunt Jill, Cousin Joe, or Mom next door — appeals to you.

Let’s take a deep dive into the differences between a duplex and townhouse.

What Is a Duplex?

A duplex is a single structure with two conjoined units on one plot of land. Each unit has its own entrance, kitchen, bedrooms and baths. The two units often share the yard, laundry area, and garage space, but that isn’t always the case.

A duplex shouldn’t be confused with a “twin home,” which is two homes that share a wall, but where each unit and the land it sits on is individually owned. The lot line actually runs through the common wall.

Buying a duplex is often touted as a good investment because owners can rent out one side while living in the other.

Types of Duplexes

There are two common configurations when it comes to duplex living:

•   Side by side. The shared wall is in the middle.

•   Up and down. When the units are in an upstairs and downstairs arrangement, the dividing wall is the floor/ceiling.

What Are the Pros and Cons of Duplex Living?

Duplexes are in demand, often by first-time homebuyers.

Owner-occupants have a big financing advantage: If you buy a multifamily property of four or fewer units and plan to live onsite, you can use an FHA loan with a low down payment or a VA loan, if you’re eligible, with no down payment at all.

There are other upsides, and potential downsides, you may want to consider before deciding on a townhouse vs. duplex.

What Is a Townhouse?

You get the idea about duplexes. Now let’s look at what is a townhouse. A townhouse is an individually owned home with two or more stories and at least one shared wall.

You own the inside and outside of your unit and the land it rests on, whereas a condo owner owns the interior of the condo. A townhouse has a separate entrance but may share communal spaces.

Townhouses are often found where land is in short supply. This is particularly true in areas that transition from dense, urban cities to the suburbs. They make good use of the space with their vertical nature and shared walls.

They are typically lower priced than detached single-family homes. By the way, the U.S. Census Bureau, which tracks residential construction, considers townhouses and duplexes single-family homes. Getting a mortgage on a townhouse is similar to obtaining a home mortgage loan for a freestanding house.

Townhome ownership has been rising, and the National Association of Home Builders (NAHB) says the long-term prospects for townhouse construction remain positive as homebuyers seek medium-density residential neighborhoods such as urban villages.

The NAHB reports that townhouses made up almost 15% of new single-family homes in the second quarter of 2024, and the number of new townhouses being constructed has been on the upswing in recent years.

What Are the Pros and Cons of Townhouse Living?

As the prices of traditional single-family homes have gone through the roof in most markets, townhomes have become popular as starter homes.

And downsizers may be attracted to townhouses, whose cost may be lower than their detached counterparts.

Townhouses make great use of space, but they also have less privacy, and you may need to follow the rules of a homeowners association (HOA), if one exists. (In the condo vs. townhouse comparison, condos come with an HOA, but not all townhouse communities do.)

Financing a townhouse works just like financing any single-family home. Here are pros and cons of buying a townhouse compared with a detached single-family home.

Recommended: Home Loan Help Center

Weighing the Differences Between Duplexes and Townhouse

Taking a look at living in a duplex vs. a townhouse side by side, they have commonalities but also differences. Here are some.

Structure and Design

A townhome typically is in a planned unit development where the homes share walls and community spaces. A duplex is structured to share a yard and a wall with only one neighbor.

Purchase Price

Cost will vary based on square footage, neighborhood, amenities, lot size, and other factors. A duplex will usually cost more than buying a townhouse, but the tradeoff is that you can rent out one side.

Maintenance Cost

A townhouse may have HOA dues, though they might not be ample because owners are responsible for much of their own maintenance. A duplex owner will need to maintain both units and the yard. A comparison will depend on the size and age of the properties and more.

Rental Income

If you plan to rent out a townhouse you buy, it’s a single unit. A duplex has two units, so it may be easier to make the financials work.

Privacy

With a townhome, you’ll be living in a community. Compare that with a duplex, where you’re sharing space with one neighbor.

Then again, having a single neighbor might feel less private than if you had many.

Investment Value

The ability to rent at least one side of a duplex holds more investment value than a townhome. The townhome may also have HOA rules about renting that may not jibe with your idea of how to use your property.

The Takeaway

The difference between a townhouse and a duplex is largely about what type of property fits your lifestyle. A duplex can offer a larger yard and rental potential, but a townhouse may bring that single-family home vibe at a lower price point than either a duplex or a detached single-family house.

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

Are townhomes becoming more popular?

The market share of townhomes is rising. According to the National Association of Home Builders, townhouses composed almost 15% of single-family home starts in Q2 2024 and townhouse starts were at an all-time high in a data series that dates back to 1985.

Which is a better investment: a duplex or a townhouse?

A duplex may be the better investment because you have the potential to rent out both units or live in one and collect rent from the other.

Is it faster to build a duplex or a townhouse?

A lot of factors affect how long it takes to build your new home: size, location, materials, weather, subcontractors, the city or county building department, and the complexity of your building plans. Many townhomes are built at once and may become available more quickly. Construction of a duplex is more like a house.

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Photo credit: iStock/peterspiro

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.

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

SOHL-Q125-020

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If you’re buying a home and have a down payment of less than 20%, you may have to pay for private mortgage insurance (PMI) or a mortgage insurance premium (MIP). This insurance does represent an additional charge you must pay for part or all of the life of the loan, but it can unlock homeownership for you.

Private mortgage insurance may be required for conventional home loans, those not backed by the government. Mortgage insurance premium is always a part of FHA-insured loans, at least for a number of years.

Each is intended to protect lenders against losses if borrowers default. Here’s a guide to how they work, how they differ, how much they cost, and when they can possibly be dropped.

What Is Mortgage Insurance Premium?

Borrowers pay MIP if they’re securing a loan backed by the Federal Housing Administration, no matter the down payment amount or loan term.

MIP runs for the loan’s full term or 11 years. There’s a one-time upfront premium of 1.75% of the base loan amount, which can be rolled into the loan, and an annual premium divided by 12 that is part of the monthly mortgage payment.

A key reason people choose FHA loans is the ability to put down as little as 3.5%.

Additionally, if your heart pounds with excitement when you think about buying a fixer-upper and making it beautiful and functional again, FHA offers the FHA 203(k) home loan for that — something that many lenders won’t do, especially if the home isn’t in good enough shape to be lived in.

With an FHA 203(k) loan, a single source of funding, the interest rate may be slightly higher than other mortgage rates, and the loan can require more coordination. It makes sense to choose contractors to rehab the home who are familiar with the program’s requirements.

Recommended: Different Types of Mortgage Loans, Explained

How Much Is MIP on an FHA Loan?

The ongoing annual MIP of 0.45% to 1.05% is divided by 12 and added to your monthly mortgage payment. What you’ll pay depends on your loan-to-value (LTV) ratio (think: down payment) and length of the loan.

Taking out an FHA loan for the common 30 years, or anything greater than 15 years, will result in the following rates for 2023 (measured in basis points, or bps):

Base Loan Amount	LTV	Annual MIP
≤ $726,200	≤ 95%	50 bps (0.50%)
≤ $726,200	> 95%	55 bps (0.55%)
> $726,200	≤ 95%	70 bps (0.70%)
> $726,200	> 75%	75 bps (0.75%)

Here’s an example: Let’s say you borrow less than or equal to $726,200 and have a down payment of 5% or less. You’ll pay an annual MIP of 0.50%. On a home loan of $300,000, that’s $1,500 per year, or $125 per month. (0.0050 x 300,000 = 1,500, divided by 12.)

Some homeowners can pay off their loans quicker so they choose a shorter term, such as 15 years. As a result, they can take advantage of lower MIP, like this:

Base Loan Amount	LTV	Annual MIP
≤ $726,200	≤ 90%	15 bps (0.15%)
≤ $726,200	> 95%	40 bps (0.40%)
> $726,200	≤ 78%	15 bps (0.15%)
> $726,200	78.01% – 90%	40 bps (0.40%)
> $726,200	> 90%	65 bps (0.65%)

So if you were to borrow less than or equal to $625,500 and put down 10% or less, you’d pay an annual MIP of 0.15%. On a $300,000 home loan, that’s $450 a year, or $37.50 a month.

💡 Quick Tip: SoFi Home Loans are available with flexible term options and down payments as low as 3%.*

Can You Get Rid of MIP?

Maybe.

If you took out an FHA loan before June 3, 2013, you may be able to cancel MIP if you have 22% equity in your home and have made all payments on time. (FHA lenders do not automatically cancel your MIP once you reach that home equity threshold. You’ll need to ask.)

If you purchased or refinanced a home with an FHA loan on or after June 3, 2013, and your down payment was less than 10%, MIP will last for the entire loan term.

If you put down 10% or more, you’ll pay MIP for 11 years.

Here’s a chart that sums it up. For loans with FHA case numbers assigned on or after June 3, 2013, FHA will collect the annual MIP as follows:

Term	LTV	Previous	New
≤ 15 years	≤ 78%	No Annual MIP	11 Years
≤ 15 years	78.01% to 90%	Canceled at 78% LTV	11 Years
≤ 15 years	> 90%	Loan Term	Loan Term
> 15 years	≤ 78%	5 Years	11 Years
> 15 years	78.01% to 90%	Canceled at 78% LTV and 5 Years	11 Years
> 15 years	> 90%	Canceled at 78% LTV and 5 Years	Loan Term

One way to get rid of MIP is to refinance the FHA loan into a conventional loan with a private lender. Many FHA homeowners have enough equity to refi into a conventional loan and give mortgage insurance the heave-ho.

What Is Private Mortgage Insurance?

PMI is typically required when you’re putting less than 20% down on a conventional conforming loan. Most conventional mortgages are “conforming,” which means they meet the requirements to be sold to Fannie Mae or Freddie Mac.

One kind of nonconforming loan, the jumbo loan, which starts at over half a million for a single-family home, does not always require PMI.

Usually, homeowners choose to pay PMI monthly, rather than annually, and it is included in monthly mortgage payments. A few may opt for lender-paid mortgage insurance, but for that convenience a homebuyer will usually pay a slightly higher interest rate.

Although PMI adds costs, it can allow you to qualify for a loan that you otherwise might not. And it can help you to buy a house without putting 20% down.

How Much Does PMI Cost?

PMI varies but often is 0.5% to 2% of the total loan amount annually. The premium amount depends on the type of mortgage you get, LTV, your credit score, and more. It also depends on the amount of PMI that your loan program or lender requires.

According to an Urban Institute report, PMI may be more economical than FHA loans for borrowers with a FICO score of 720 or above and who put 3.5% down.

When Can You Stop Paying PMI?

Buying a home may require you to pay a PMI premium, but there are four methods available to stop paying it.

First, there is a legal end to PMI. Under the Homeowners Protection Act, also known as the PMI Cancellation Act, your lender is required to cancel PMI automatically once your mortgage balance is at 78% of the home’s original value. “Original value” generally means either the contract sales price or the appraised value of your home at the time you purchased it, whichever is lower (or, if you have refinanced, the appraised value at the time you refinanced). Which figure is used for the original value can vary by state.

Second, you can reappraise your home, which will likely result in a new value. Thus, you can ask your servicer to cancel PMI based on your built equity and the current value. Owners of homes that appreciated, either over time or thanks to home improvements, may benefit from this. You may need to be proactive with your lender and meet specific eligibility requirements to help make that happen.

Third, you may be able to refinance your mortgage. If you have at least 20% equity, you can possibly qualify for a conventional loan without the need for PMI.

Finally, the Consumer Financial Protection Bureau notes another way in which PMI can be canceled: If you’re current on your payments and you’ve reached the halfway point of the loan’s schedule, even if your mortgage balance hasn’t yet reached 78% of the home’s original value.

💡 Quick Tip: A major home purchase may mean a jumbo loan, but it doesn’t have to mean a jumbo down payment. Apply for a jumbo mortgage with SoFi, and you could put as little as 10% down.

What About Refinancing?

If you have a mortgage that includes PMI or MIP and your property value has increased significantly, one option to consider is refinancing.

Some borrowers may find that they are now able to qualify for a conventional home loan without mortgage insurance.

Refinancing holds appeal because of the possibility of locking in a better rate and reducing your monthly payment. Equity-rich homeowners sometimes like a cash-out refinance.

But as with your original mortgage, you’ll face closing costs if you refinance.

What about a “no cost refinance” you might see advertised? You’ll either add the closing costs to the principal or get an increased interest rate.

The Takeaway

Glass half-full: Private mortgage insurance and mortgage insurance premium open the door to homeownership to many who otherwise could not buy a property. Glass half-empty: PMI and MIP can really add up.

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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About the author

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

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

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

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

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


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.


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.

SOHL0623077

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A mortgage commitment letter is a step beyond prequalification and preapproval and could give a homebuyer an edge in a competitive market. It lays out the loan details and indicates that a buyer has an agreement for a mortgage.

But who should obtain a mortgage commitment letter and when? Let’s take a look at those answers and more.

What Is a Mortgage Commitment Letter?

A mortgage commitment letter — conditional or final — is a step closer to finalizing a mortgage but short of “cleared to close.” The letter signals to the seller that the buyer and a chosen financial institution have forged an agreement.

Buyers may seek a conditional mortgage commitment letter when they’re house hunting, and a final commitment letter when they’re ready to make an offer on a specific home.

In both types of loan commitments, the lender outlines the terms of the mortgage.

Recommended: Buying in a Seller’s Market With a Low Down Payment

Types of Mortgage Loan Approvals

In the mortgage loan process, buyers will hear “approval” thrown around a lot. But not all approvals are built equally, and each type signifies a different part of the process.

Prequalification

Getting prequalified is often an early step for buyers in the home search. It’s quick, can be done online, and doesn’t require a hard credit inquiry.

To get prequalified, buyers provide financial details, including income, debt, and assets, but no documentation, so this step serves as an estimate of how much home they can afford.

Prequalification can help buyers create a realistic budget, but the amount, interest rate, and loan program might change as the lender gets more information.

Preapproval

Preapproval is slightly more complicated, requiring a hard credit inquiry and documentation from the buyer. Lenders may ask for the following:

•   Identification

•   Recent pay stubs

•   W-2 statements

•   Tax returns

•   Activity from checking, savings, and investment accounts

•   Residential history

Armed with this information, a lender will give buyers a specific amount they’ll likely qualify for.

Preapproval also shows sellers that a buyer is serious about a home, as it means a lender is willing to approve them for a mortgage.

Conditional vs Final Commitment

Prequalification and preapproval can be important steps during the home search. But especially in a seller’s market and in certain cities, the mortgage commitment letter can become an important tool.

While a mortgage loan commitment letter can show a seller that the buyer is serious, not all letters are the same.

A conditional mortgage approval letter, the most common type, means that the lender will approve buyers as long as they meet certain conditions.

Conditions could include:

•   No change to the buyer’s finances before the closing date

•   Proof of funds to cover the down payment and closing costs

•   Passing of a home inspection

•   An appraisal

•   Proof of homeowners insurance

•   No liens or other problems with the property title

A final commitment letter means the lender has unconditionally approved the buyer for a loan to purchase a home. However, this doesn’t mean the buyer is guaranteed a loan; it just means the lender is ready to approve the mortgage.

Having a mortgage commitment letter in hand is a good way to ensure that nothing will go wrong during underwriting.

Recommended: See Local Housing Market Trends by City

How to Know If You Need a Mortgage Commitment Letter

Buyers don’t need to provide a mortgage commitment letter to a seller. Still, that extra step beyond preapproval indicates how serious they are about a property.

Since it may require a little extra work, it shows sellers that a buyer is less likely to back out, especially due to financing issues.

A mortgage commitment letter could convince a seller to take a buyer more seriously in a seller’s market. And it could calm the nerves of buyers who face home-buying angst, including the challenge of covering a down payment and closing costs (even if they plan to roll closing costs into the loan).

How to Get a Mortgage Commitment Letter

Getting a mortgage commitment letter might sound like a hassle during an already stressful home-buying process, but doing so could save buyers time and provide a sense of relief as they creep closer to closing.

First off, buyers will need to be preapproved. If they have chosen a home, once under contract, their lender or underwriter will want more information, which may include:

•   A gift letter if another party is helping with the down payment

•   Employment verification

•   Explanation of any late payments

•   Proof of debts paid and settled

From there, it could be a back-and-forth between the lender and buyer, with the lender asking for clarification or additional documentation. Common issues that arise include:

•   Tax returns with errors or inconsistencies

•   Unexplained deposits into buyer bank accounts

•   Multiple late payments or collections on a credit report

•   Unclear pay stubs

At this point, the lender may grant a conditional commitment letter, with the caveat of additional information and an appraisal. If the buyer has an appraisal and meets lender expectations with documentation, they’re likely to get a final commitment.

Contents of a Commitment Letter

A commitment letter will vary from lender to lender but generally include the following details:

•   Loan amount

•   Loan number

•   What the loan is for

•   Mortgage loan term

•   Type of loan

•   Lender information

•   Expiration date of the commitment letter

What happens after the commitment letter? The lender and underwriter will continue to iron out the mortgage details, aiming for cleared-to-close status before the closing date on the property.

The Takeaway

A mortgage commitment letter is like a short engagement before the wedding: It signals an agreement before the real deal. Buyers in an active seller’s market might find a mortgage commitment letter advantageous.

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 a mortgage commitment letter?

It typically takes 20 to 45 days to get a mortgage commitment letter. The average closing process takes 50 days.

Does a mortgage commitment letter expire?

Yes.

How long is a mortgage commitment letter valid?

Timing can vary by lender, but the length of commitment is typically 30 days.

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Photo credit: iStock/MartinPrescott

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

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

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

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


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

SOHL-Q224-1917095-V1

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After finding that big, beautiful house, you now have to find a big, beautiful mortgage. If the amount you need to borrow is over the Federal Housing Finance Agency (FHFA) conforming loan limit of $726,200 for most geographic areas, you’ll need to get a jumbo loan.

A jumbo loan is a little different than a conventional, conforming mortgage and has its own benefits and drawbacks. You can expect increased scrutiny from potential lenders, and possibly some increased costs.

Jumbo Loans: The Basics

Luxury homes, vacation homes, unique properties, and homes in high-cost-of-living areas may need a jumbo loan. A jumbo loan is different from a conventional loan in that it isn’t guaranteed by Fannie Mae or Freddie Mac. This means the lender takes on more risk to issue a mortgage to the borrower. With the additional risk exposure, lenders have higher qualifications. This may include:

•   A higher credit score

•   A larger down payment

•   Strong cash reserves — sometimes up to a year’s worth of mortgage payments

•   A higher income

•   A low debt-to-income ratio

•   More stringent loan-to-value requirements

While the qualifications and loan amounts may be different, they may offer an interest rate similar to what you would find for a conventional loan below the conforming loan limits.

Keep in mind the more stringent requirements shouldn’t dissuade you from looking into jumbo loans. On the contrary, let’s take a closer look at jumbo loan pros and cons to help you decide if you want to go this direction or not.

Recommended: Local Housing Market Trends

Benefits of Jumbo Loans

A jumbo loan may allow you to buy property you otherwise wouldn’t be able to. Some of the main benefits of a jumbo loan include:

•   Higher loan amount. A jumbo loan allows you to purchase property at a higher price point. If you’re looking for high-end property, a vacation property, or your dream home, a jumbo loan may be able to help you access the financing you need. Depending on where the property is located, the conforming loan limits are either $726,200 or up to $1,089,300.

•   Comparable Interest rates. You may be surprised to learn that interest rates on jumbo loans may be comparable to those of conforming conventional loans. Sometimes, they’re even lower!

•   Avoid PMI. There are some lenders that allow you to forgo private mortgage insurance with a jumbo loan, especially if you put down at least 10% on a property. This can save you money every month.

💡 Quick Tip: A major home purchase may mean a jumbo loan, but it doesn’t have to mean a jumbo down payment. Apply for a jumbo mortgage with SoFi, and you could put as little as 10% down.

Drawbacks of Jumbo Loans

While jumbo loans can afford you the loan you need for a higher-priced property, they do have some drawbacks you should be aware of.

•   More stringent qualifications. Jumbo loans are tougher to get. You need a higher income, a high credit score, and a big down payment. Lenders also want to see a debt-to-income (DTI) ratio lower than 43%, and the loan-to-value (LTV) ratio may max out at 80% of a property’s value.

•   Potentially higher rates. Jumbo loans are not guaranteed by Fannie Mae or Freddie Mac, so a jumbo loan can reduce a lender’s liquidity and expose them to more risk. In the past, jumbo loans have been offered at higher interest rates, though recently, many lenders are offering jumbo loans at a lower interest rate than a conventional mortgage.

•   Need to show cash reserves. For some of the best terms for jumbo loans, you may need to show anywhere from three to 24 months’ worth of cash reserves. Furthermore, jumbo loan lenders have different standards when it comes to what is considered a cash reserve. Some lenders may be able to count your 401(k) as part of your cash reserves, while others require money to be held in a more liquid account.

•   Fewer lenders offer jumbo loans. This doesn’t mean jumbo loans are uncommon by any means, but you do have to find a lender in your area that offers jumbo loans.

•   Higher costs. Because jumbo loans are so large, you have higher costs all around. Closing costs are based on a percentage of the transaction. With a higher loan amount, you’ll pay more for these services. You’ll also pay more for fixed-cost services, such as an appraisal or a home inspection, if your home is larger and has more to evaluate.

How Hard Is It to Qualify for a Jumbo Loan?

It’s true — fewer borrowers will be able to qualify for a jumbo loan. But if you know what lenders are looking for, your odds are good. Jumbo loan requirements may include:

•   Credit score of 700 or higher

•   Down payment of 20%, although some lenders allow as little as 10% down

•   LTV ratio around 80% or lower

•   DTI ratio of 43% or lower

•   Cash reserves equal to 6 to 12 months of the monthly mortgage payment

•   Higher income amount

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

Jumbo Loan vs Conventional Loan

Technically, jumbo loans are conventional loans. A conventional loan is a mortgage that isn’t a government-backed mortgage. What’s different about a jumbo loan is that it is not a conforming conventional loan.

A conforming conventional loan is one where the loan amount is less than the conforming loan limit of $726,200 for most areas and $1,089,300 for high-cost areas. This distinction is important, but it’s also common to call a conforming conventional loan simply a conventional loan.

Aside from the loan amount, other major differences between a jumbo loan and a conventional conforming loan include the down payment amount, credit score requirement, LTV ratio, DTI ratio, income requirement, and cash reserve requirement. These key differences are outlined in the chart below:

	Jumbo Loan	Conventional Conforming Loan
Loan amount	Loan higher than $726,200 in most areas or $1,089,300 in high-cost areas.	Loan lower than $726,200 in most areas or $1,089,300 in high-cost areas.
Down payment	Down payment as low as 10%	Down payment as low as 3%
Credit score	700+	As low as 620
LTV	Around 80%	As high as 97%
DTI	43% or lower, 36% for some lenders	Up to 50%
Income	Higher	Lower
Cash reserves	As much as 12 months	Not required

The Takeaway

If you have your eye on a property that exceeds the conforming home loan limits for your area, a jumbo loan can make it happen for you. Prepare yourself for the more stringent salary, credit score, and cash reserves requirements and you’ll be able to call that home yours.

When you’re ready to take the next step, consider what SoFi Home Loans have to offer. Jumbo loans are offered with competitive interest rates, no private mortgage insurance, and down payments as low as 10%.

SoFi Mortgage Loans: We make the home loan process smart and simple.

FAQ

Who qualifies for a jumbo loan?

Borrowers with a high income, an excellent credit score, substantial funds on hand for a down payment (plus large cash reserves), and a low debt-to-income ratio may qualify for a jumbo loan. Check with lenders to learn their specific requirements.

How do you apply for a jumbo loan?

You can apply for a jumbo loan through any lender that offers a jumbo mortgage product.

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Photo credit: iStock/FOTOGRAFIA INC.

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Creating a beautifully landscaped home can improve your day-to-day life and also increase the resale value of your home, making it well worth the investment. The question is, how much will it cost?

Landscaping costs range widely depending on the size, design, and scope of the project, and whether you plan to do it yourself or hire a professional. On average, however, a landscaping project can run between $1,268 and $6,003, according to Angi (formerly Angi’s List).

Whether you’re thinking about sprucing up your front yard, back yard, or both, here’s a look at what’s involved, how much it can cost, plus tips for how to budget for and finance a landscaping project.

What Are Some Benefits of Landscaping?

If you’re like many homeowners, you may prioritize interior upgrades over outdoor improvements. But improving your landscaping can actually be the gift that keeps on giving — it can beautify your space, increase your home value, and even decrease your heating and cooling expenses.

According to a recent report from the National Association of REALTORS®, an overall landscape upgrade (and even smaller projects like keeping up with yard maintenance), can pay for itself when you sell your home.

Investing in landscaping can also make your home more efficient. Planting leafy trees strategically around your property, for example, can keep your home cooler during the summer and warmer during the winter, reducing your energy bills.

Landscaping can also have environmental benefits beyond your property. The trees, bushes and flowers that make up your landscaping are natural air purifiers — they remove air pollutants from the atmosphere and store carbon dioxide, improving air quality, according to the U.S. Environmental Protection Agency (EPA). Landscaping can also improve local water quality by absorbing and filtering rainwater.

💡 Quick Tip: Home improvement loans typically offer lower interest rates than credit cards. Consider a loan to fund your next renovation.

What Are Some Current Landscaping Trends?

Some of the top landscaping trends for 2023 and 2024 include:

•  Climate-conscious landscaping Many homeowners are seeking out sustainable landscaping revamps, such as replacing lawns with alternative species (like clover) or re-wilding their yards with native species that require far less maintenance, water, and fertilizer.

•  Colorful gardens After years of soft greens, pastels, and neutrals, landscape designers are favoring brighter, more joyful designs. Plants that provide color and as support local pollinators (like birds, butterflies, and bees) are particularly popular. Examples include native sunflowers, coneflowers, garden phylox, and asters.

•  Organic layouts Lanscape design is getting less fussy. Many homeowners are mixing and matching different kinds of plants, including wildflowers, and adding romantic touches like arbors and winding garden paths.

•  Incorporating metals From wrought iron gates to metal planter boxes and sculptures, many homeowners are adding metal accents to their outdoor spaces.

Recommended: The Top Home Improvements to Increase Your Home’s Value

How to Budget for Landscaping

A good first step for coming up with your landscaping budget is to actually ignore numbers and give yourself permission to dream — what does your ideal landscaping look like? What does it feel like?

Next, walk around your property and create a list of both needs and wants. In your “needs” column, list repairs that must be done for safety’s sake, ranging from drainage challenges, broken fences, toxic plants that need to be removed, tree removal, and so forth.

Also imagine what the property could look like with the stunning new landscaping you’re envisioning. Perhaps some of the ideas listed above have inspired you in an unexpected direction. Have fun and add these ideas to your “wants” column.

Now, prioritize your list and be clear about which items are optional (perhaps a special trellis for climbing roses) and which are not (trip hazards where you plan to add outdoor seating).

Next, determine how much you can realistically spend on landscaping, keeping in mind how quality landscaping can add significant value to your home. Then, it might make sense to talk to several professional landscapers to get estimates.

Professionals will also be able to let you know if your plans are realistic for your property. Even if you intend to do some of the work yourself, these professionals will likely share information you have not yet considered. (Hiring them in the off-season might save you money, too.)

Once you determine the scope and cost of your project, it’s a good idea to add a cushion of 10% to 20% for the unexpected. When you have a final number to work with, you’ll need to determine if you can fund the project out of savings, or if you’ll need to finance any part of your landscaping plan (more on that below).

Recommended: Four Ways to Upgrade Your Home

How Much Does Landscaping Cost?

The average landscaping project in the U.S. costs $3,494, but ranges between $1,268 and $6,003. Of course, you can spend a lot less than the average if you’re just sprucing up your front garden beds. You can also spend considerably more if your plan is to build a backyard oasis with a pool and outdoor kitchen.

How much your landscaping revamp will ultimately cost will depend on your yard size, the type of landscaping you want to do, and the landscaper’s labor costs.

Generally speaking, backyard landscaping projects cost more than front yard projects. The cost of the average front-yard spruce-up runs between $1,500 to $5,000, whereas a full backyard renovation can range between $15,000 to $50,000.

If you plan to use a designer for your project, it can run $50 to $150 per hour for a professional landscape designer to come up with an artistic direction for your space, choose the plants, and manage the project. The average cost to hire a landscape designer is $4,600. If you’re planning to do a major structural renovation, you may want to hire a landscape architect, which can run $70 to $150 per hour.

Recommended: Home Renovation Cost Calculator

What Is Landscaping Cost Per Square Foot?

Landscaping costs are influenced by a variety of factors, including geography, type of project, and the materials used. Figuring out the dimensions of the project area, however, can help you come up with ballpark cost estimates.

According to Angi, the cost of landscaping runs between $4.50 and $12 per square foot for basic services and intermediate projects, such as aerating, flower planting, and installing garden beds. However, if you’re planning a major tear-out and remodel, you can expect to spend as much as $40 per square foot.

How Much Does New Landscaping Installation Cost?

Starting from scratch can be challenging, but having a blank slate also opens up possibilities for curating your outdoor spaces.

To fully landscape a new home, you’ll want to budget around 10% of your property value. So if you purchased the home for $350,000, you can anticipate spending around $35,000 to both hardscape (add hard surfaces like brick, concrete, and stone) and softscape (add living things) across your front and backyards.

Recommended: 5 Driveway Improvement Ideas

What Will It Cost to Maintain Landscaping?

In addition to the initial outlay, you’ll also need to set aside an annual budget to help with upkeep. The amount of maintenance you’ll need will depend on landscape design, local climate, and how much of a DIY approach you’re comfortable with.

Lawn-mowing can run anywhere from $50 to $250 per service, while getting your trees trimmed averages $1,800 per job. For all-around yard maintenance, like weeding and mulching, you might find a landscaper who charges an hourly rate (often $50 to $100 per hour) or charges a flat rate per job.

Keep in mind that mowing, trimming back shrubs, weeding, and mulching are also jobs you can likely do yourself, which will cut down on your landscape maintenance costs.

What Are Some Options to Finance a Landscaping Project?

If you want to invest in your home through landscaping but the price point is above what you have in savings, you may want to look into financing. Here are two common types of loans for landscaping.

Financing a Landscaping Project With a Home Equity Loan

A home equity loan gives you access to cash by tapping into the equity you have in your home. Your home equity is the difference between your home’s current market value and what you owe on your mortgage. Depending on the lender and your credit profile, you may be able to borrow up to 75% to 85% of your home’s current equity.

You can use a home equity loan for various purposes, including home upgrades like new landscaping. Because your home serves as collateral for the loan, you may qualify for a lower interest rate than on some other financial products, like personal loans and credit cards. If you have trouble repaying the loan, however, your lender could foreclose on your home. You’ll also pay closing costs with a home equity loan.

Financing a Landscaping Project With a Personal Loan

You can also use a personal loan to fund any type of home improvement project, including upgrading the outside of your home.

Personal loans for home improvement generally have fixed interest rates and a fixed repayment timeline. You’ll receive all the funds upfront, generally soon after you’re approved, and your monthly payments will be fixed for the duration of your loan.

Personal loans are typically unsecured, making them less risky than home equity loans, and don’t come with closing costs. They also tend to be faster to fund than home equity loans, which means you can get your landscape project going sooner. However, because personal loans are unsecured (which poses more risk to the lender), rates are typically higher than rates for home equity loans.

💡 Quick Tip: Generally, the larger the personal loan, the bigger the risk for the lender — and the higher the interest rate. So one way to lower your interest rate is to try downsizing your loan amount.

The Takeaway

Landscaping projects can add curb appeal and value to your home, and can be well worth the time, effort, and money you invest.

The average cost of a landscaping project nationwide is $3,494. Of course you could spend a lot less if you are looking at a small project, like swapping out plants in your front garden. Or, you could spend significantly. Installing a swimming pool, for example, can run $40,000-plus.

If you don’t have enough cash in the bank to cover your landscaping project, you may want to consider getting a loan, such as a home equity loan or a personal loan.

Ready to get started on your landscaping project? Consider a SoFi Personal Loan. SoFi offers competitive fixed rates and same-day funding. Checking your rate takes just a minute.

SoFi’s Personal Loan was named NerdWallet’s 2024 winner for Best Personal Loan overall.

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

Third-Party Brand Mentions: No brands, products, or companies mentioned are affiliated with SoFi, nor do they endorse or sponsor this article. Third-party trademarks referenced herein are property of their respective owners.

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