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If you’re a first-time homebuyer, you may qualify for special mortgage rates and incentives not available to other homebuyers. For Midwestern buyers, we’ve rounded up all of the information you need to understand which programs you may qualify for in your region.

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

Popular Midwest First Time Home Buyer Programs

Ohio

The real estate market has been buzzing in the Buckeye State over the last year, with the number of homes sold up 5% as of February 2024. Home prices in Ohio were up 9% compared to last year, hitting a $227,800 median price, according to Redfin. Sales prices had the most substantial jump in Maple Heights, Kettering, and Springfield, where increases all topped 30%.

Things can look a bit intimidating for first-time homebuyers seeking a home mortgage loan in Ohio in 2024. Don’t fret, though, as qualifying for a mortgage and affording a home may be more within your means than you think.

The Ohio Housing Finance Agency (OHFA) offers a variety of programs for low- and moderate-income first-time and repeat homebuyers meant to help them achieve homeownership.

💡 Learn about Ohio first-time homebuyer programs

Michigan

With Detroit’s revitalization, the popularity of resort towns on the shores of the Great Lakes, and the proximity to wilderness in the Upper Peninsula, Michigan real estate is bustling. The good news for first-time homebuyers: The Wolverine State is still relatively affordable.

Sales in Michigan are up about 1% year over year as of January 2024 and home prices are up 9.2% this past year. But despite that last stat, there’s good news for first-time homebuyers: The median sales price is $228,000, according to Redfin, which is far below the national median existing-home sales price of $379,100.

First-time homebuyers looking to settle in Michigan may find help through the Michigan State Housing Development Authority .

💡 Learn about Michigan first-time homebuyer programs

Indiana

At $228,552, Indiana’s average home value in early 2024 is up 4.6% year over year, according to Zillow. Even with that increase, typical costs here are lower than the numbers for America as a whole. That doesn’t mean buying a home for the first time is easy, but it certainly places home ownership within reach for more people, especially when state programs offer a helping hand in terms of their down payment, mortgage, and closing costs.

There’s lots of helpful information on the home-buying process available to Hoosier house-hunters, and there are a number of programs that can defray the costs of buying a home. First-time buyers, especially, might want to have a look.

💡 Learn about Indiana first-time homebuyer programs

Wisconsin

Home prices increased 5.5% annually here as of January 2024. And the number of homes sold rose 6.5% as the market began to warm up. The median sale price of a house in the state is $274,400, reports Redfin.

Recommended: Guide to Choosing a Mortgage Term

While the uptick in cost may cause concern for those saving to purchase a property, there are many opportunities to be had for the qualified first-time homebuyer in Wisconsin.

💡 Learn about Wisconsin first-time homebuyer programs

Illinois

High prices, low inventory, and an influx of outside investors and cash buyers make diving into the market as a first-time buyer in Illinois feel daunting.

According to Redfin, the median sale price in Illinois hit $265,900 in January 2024 — an 11.2% year-over-year increase. But in some communities, the numbers have been much higher. In Winnetka, where home prices were up 40.2%, the median purchase price was $1.373 million. Marion saw an 82.3% jump. Fortunately homes there are still relatively affordable, at a median price of $174,250.

Another bit of good news: The state and some counties offer financial assistance. There also are longstanding federal programs that could improve a buyer’s chances of success.

💡 Learn about Illinois first-time homebuyer programs

Minnesota

The Land of 10,000 Lakes has seen a relatively modest 2% year-over-year increase in home values during 2023. Currently, the average Minnesota home value is $316,980, according to Zillow, which is slightly below the national average.

There are several opportunities for the first-time homebuyer in Minnesota through state programs that give assistance with mortgage rates and down payment and closing costs to those who qualify.

💡 Learn about Minnesota first-time homebuyer programs

Iowa

Homes in the heartland of Iowa remain relatively affordable, with an average value of $205,988 vs. the national figure of $342,941, according to Zillow. A number of homebuyer assistance programs also exist that can make the home-buying journey more affordable for Hawkeye State shoppers.

Most of these programs are available through the Iowa Finance Authority (IFA) and can especially be of help to first-time buyers.

💡 Learn about Iowa first-time homebuyer programs

Missouri

The real estate market in Missouri has remained fairly calm, with the state’s average home value of $234,949 nicely below national averages.

The good thing about being a first-time homebuyer with a low to moderate income is that state and local programs offer mortgages and down payment assistance to those who qualify. Even better: You qualify as a first-timer if you have not owned a home in three years.

💡 Learn about Missouri first-time homebuyer programs

North Dakota

Thinking about moving to North Dakota? The state has a lot going for it. In addition to tons of open space, gorgeous landscapes, and a relaxed way of life, the cost of living is lower than the U.S. average and home prices in the state dropped a tiny bit in the year ending February 2024. The average home value in North Dakota is now $248,022, according to Zillow. That means there are plenty of opportunities to find your affordable dream home in North Dakota.

There are several state programs that provide financial assistance and low-interest mortgage loans to the first-time homebuyer in North Dakota. Many of these programs are designed to help low- to moderate-income buyers, and they may have income and purchase price limits, a required credit score, or other criteria you’ll need to meet.

💡 Learn about North Dakota first-time homebuyer programs

South Dakota

The Mount Rushmore State saw a 6.8% increase in home prices from February 2023 to February 2024, however the cost of living remains relatively low here compared to other parts of the country. The median home price in South Dakota is now $311,500, according to Redfin.

If you lack the money for a down payment or aren’t sure how you will afford a mortgage, programs in the state may be able to provide assistance.

💡 Learn about South Dakota first-time homebuyer programs

Nebraska

Considering buying a home in Nebraska? Now is a good time to do so. The median price of a home there is $274,600. That’s up 5.4% year-over-year as of February 2024 but still below the national average.

The first-time homebuyer in Nebraska can also get financial assistance through state programs. Here’s what you need to know as you start your home shopping.

💡 Learn about Nebraska first-time homebuyer programs

Kansas

Though their housing market is generally known for being more affordable than most, first-time homebuyers in Kansas are facing many of the same challenges as buyers across the country. Prices have been rising. Inventory is low. And the competition for available homes can be fierce.

The median price of a home in Kansas was $290,300 in January 2024, a 2.6% increase in 12 months. In some areas, such as Leavenworth, Shawnee, and Leawood, the price increases were greater than 20%.

Fortunately, buyers who are struggling with the costs of purchasing their first home in Kansas may be able to get financial help through programs offered by the state and some cities. There also are longstanding federal programs that may improve a buyer’s chances of success.

💡 Learn about Kansas first-time homebuyer programs

The Takeaway

Qualifying first-time home buyers have many options available to them in the Midwest, including down payment assistance. If you’re looking to buy your first home and aren’t sure how to get started, looking at a list of homebuyer programs in your state is a great place to start. Once you know what kind of assistance you may qualify for, it’s a good idea to estimate just how much house you can really afford using a home affordability calculator.

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.

Photo credit: iStock/Nicholas Smith

*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.

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

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

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

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The housing market has been super-heated in recent years since the pandemic and the popularity of working from home sent ripples across America. After several months of hikes, mortgage rates are expected to fall in 2024, and an increase in home sales may follow.

You may be wondering if this is the year to sell your home, or would it be wise to wait another year or two? That’s not a simple yes/no decision. A variety of factors come into play when making a big lifestyle and financial move like this one.

Here, we’ll provide guidance on how to size up the pros and cons of selling now, including:

•   What is the housing market like in 2024?

•   What are good reasons to sell your house?

•   What are good reasons to wait to sell your house?

•   Should I sell my house now or wait? If so, what are selling tips?

•   Should I buy a house in 2024?

Examining the Housing Market in 2024

The coronavirus pandemic brought an unprecedented demand for housing as more people needed houses that would accommodate the shift to working from home as well as kids shifting to the remote-learning model. The housing market heated up, also fueled by low mortgage interest rates.

Fast forward to today, when many people are heading back to the office, children are back at school, and mortgage rates and the annual percentage yield (APYs) on mortgages have climbed. This has occurred in sync with the Fed raising their rates with an eye to slowing inflation.

What does that mean for the housing market in 2024? It may be softer than at its white-hot peak, but it is still largely a seller’s market, with home prices expected to continue slowly rising in many markets.

So to summarize: Houses were selling like hotcakes throughout the pandemic and demand remains strong in many areas. This could provide a good opportunity to sell your house in some situations. But if you’re selling so you can buy another house, there’s more to dig into local market conditions in order to answer the question, “Should I sell my house now?”


💡 Quick Tip: An online property tracker can help you monitor your home equity over time. That’s important for understanding your net worth and finding sufficient insurance protection.

3 Reasons to Sell Your House

Now could be the smartest time to sell your house, depending on your specific situation. Here are some compelling reasons to sell your house in 2024.

Reason #1: Your House is Worth More Now

Housing prices spiked recently, and now they are dropping. In other words, your home is likely worth more than several years ago and possibly less than it will be in a year or two.

If, due to the spike in value, you discover that how much equity you have in your home is significantly higher, it could be a great time to cash out and buy something else. Or, if you know you want to sell within the next year or two, it might be wise to make a move now since property values may slip lower in the near future.

Recommended: How Much Is My House Worth?

Reason #2: A Few Minor Repairs Could Increase Value

Even if your home is already worth more than in the past, you can get even more value out of it if you make common home repairs like replacing pipes or a water heater.

Also consider revamping your kitchen or bathrooms, since those are big influencers for people looking for a new home. A fresh coat of paint can breathe new life into your home and make it all the more appealing if you put it on the market.

Reason #3: Houses are Selling Fast

Looking to sell quickly? Now could be a good time. In 2024, the median time a home is on the market is 61 days, according to Fred Economic Data. By comparison, homes were typically on the market for 83 days in 2023.

At the start of the year, homes were typically on the market for two weeks longer than a year prior, but that still represents a quicker sale than pre-pandemic norms. So if you do decide to sell your property, be prepared to have to move out quickly and make sure you have a plan for where you’ll live next.

3 Reasons You Should Wait to Sell Your House

While there are some great reasons to sell your home right now, it may not be the right time to sell for everyone. Here’s why you might want to wait.

Reason #1: You Can’t Afford to Buy

Selling in a seller’s market is great…but not so great if you need to buy another house, especially if you’re staying in the same area. Buying a house may be cost-prohibitive for you, especially when you factor in closing costs on top of the inflated pricing.

Also, there’s no avoiding the fact that it has become more expensive to borrow money. As of mid-May 2024, the average mortgage rate for a 15-year fixed-rate mortgage was 6.21% versus 5.89% in January of 2024.

That said, if you live in an expensive area, you could sell your home and move to another more affordable state. Or you might look into different mortgage loan products and options (for instance, buying down your rate by paying points) to make a move less cost-prohibitive.

Recommended: How Much House Can I Afford?

Reason #2: You Owe More Than You Could Sell For

If you are upside-down on your mortgage payments though, selling won’t provide a solution. Perhaps you took out a second mortgage or not have paid enough on your first mortgage to recoup the expense by selling, even at a higher price. That means you would still owe money on a house you no longer live in after selling.

If this is the case, it may be better to build equity over time before selling.

Reason #3: You’re Not Ready to Make Home Repairs

While making home repairs before selling could help you get a higher price for your home, that doesn’t necessarily mean you have $30,000 lying around to make those improvements. If you know that certain repairs would help you get more for your house but you can’t afford to make them right now, it may be better to wait to sell a house until you can afford to invest in those home improvements.

Tips for Selling (and Buying) a Home

Before coming up with your own answer to the question of “Should I sell my house,” consider these points:

•   Figure out how much you can afford to pay to buy another. If you can only afford a house that’s smaller than your current one, or in a neighborhood you don’t want to live in, there’s not much point in selling only to end up worse off.

•   Look at comparables to understand market trends and how much homes are selling for in your neighborhood. Go to open houses to see what sort of updates and features sellers are offering so you have an idea of what to do to get your own house ready for sale.

•   Contemplate being represented by a real estate agent or doing it yourself. There are some great DIY sites that can cut down on the fees you pay to sell, but you will probably have to invest time, effort, and cash into marketing your property.

For instance, if you’re selling your house on your own, invest in professional photos rather than taking your own, and get the house staged (that means more than just removing all the toys and dog beds before a showing!). The better you present your home, the better the price you can command.

•   Remain patient if you’re also buying. It can feel frustrating to be outbid for what seems like the house of your dreams, but it can be a reality right now. Don’t force a decision — the right house will find you.

💡 Quick Tip: Planning a home improvement project? Some upgrades provide more value than others. A midlevel-budget kitchen or bath remodel, for example, can provide a decent return on investment.

The Takeaway

Selling your house this year could be a smart financial decision, but it’s important to make sure you’re looking at the bigger picture with your finances.

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

Photo credit: iStock/AlexSecret

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

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.

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

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

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Recourse loans are secured loans in which the lender can seize a borrower’s collateral and, if necessary, other assets, should the borrower default on the loan. Common types of recourse debt are auto loans, credit cards and, in most states, home mortgages. Recourse loans are low risk to lenders so they tend to have lower interest rates than non-recourse loans.

Non-recourse loans are also secured by collateral but in this case, the lender can only seize the collateral pledged for the loan; they can’t take any other assets. Non-recourse loans are less common than recourse loans and tend to have higher interest rates due to their higher risk.

Read on to learn more about how non-recourse and recourse loans compare.

What Is a Recourse Loan?

A recourse loan is a secured loan for which the lender can seize more than just the collateral if the borrower defaults. The lender is also able to seize other assets the borrower didn’t use as collateral, including income and money in bank accounts.

How Recourse Loans Work

When a borrower defaults on a recourse debt, the lender can seize not only the loan’s collateral, but can also attempt to attach other assets to collect what’s owed. In essence, the lender has additional recourse to recoup their losses.

Between recourse vs. nonrecourse debt, recourse debt favors the lender while nonrecourse debt favors the borrower.

Examples of Recourse Loans

Hard money loans, which are typically based on the value of the collateral rather than just the creditworthiness of the borrower, tend to be recourse loans.

An auto loan is one example of a recourse loan. If an auto loan borrower defaults on the loan, the lender has the right to seize the vehicle and sell it to recoup its losses. If the vehicle has depreciated, however, and the sale doesn’t cover the loan balance, the lender can ask for a deficiency judgment for the difference. In that case, the borrower’s wages could be garnished or the lender could seize other assets.


💡 Quick Tip: A low-interest personal loan from SoFi can help you consolidate your debts, lower your monthly payments, and get you out of debt sooner.

What Is a Non-Recourse Loan?

A nonrecourse loan is a secured loan for which the lender cannot seize assets that weren’t put up as collateral in the original loan agreement.

How Non-Recourse Loans Work

When a borrower pledges collateral on a secured loan, the lender can take that asset — but no others — if the borrower defaults on the loan. The lender will typically sell the asset to recoup their loss on the loan. The lender has no other recourse than seizing the collateralized asset, even if the sale of that asset doesn’t cover the balance of the loan.

Examples of Non-Recourse Loans

Lenders may be cautious about offering non-recourse loans because it limits their ability to recoup losses in the event of a default. Therefore, loans are typically classified as recourse loans.

Mortgages are classified as non-recourse debt as a matter of law in 12 states, meaning the lender cannot pursue a borrower’s other assets if they default and end up in foreclosure. The financial consequences would likely be limited to foreclosures of the home and damage to the borrower’s credit score.

A lender might be willing to offer a non-recourse loan to an applicant with excellent credit and steady, verifiable income if confident in their ability to repay the debt.

Recourse vs Non-Recourse Loans

Both recourse and non-recourse debt can be secured by collateral, which a lender can seize in the event of nonpayment.

The biggest difference between the two is that the lender is prevented from pursuing other assets owned by the borrower to repay what’s owed on a non-recourse debt. Basically, the lender has no other recourse for repayment of the debt other than the collateral that secures the loan.

Pros and Cons of Recourse vs Non-Recourse Debt

Depending on whose perspective the situation is being viewed from, recourse and non-recourse debt each has benefits and drawbacks.

Pros and Cons of Recourse Loans

Recourse debt is more favorable to the lender than the borrower because this type of debt gives the lender more avenues to collect when a debt goes unpaid.

Approval for recourse loans, on the other hand, may be easier since they pose less risk for lenders.

From the borrower’s perspective, here are some pros and cons of recourse loans:

Pros and Cons of Non-Recourse Loans

A non-recourse loan is more favorable to the borrower in the case of default. In that situation, the lender could only seize the asset put up as collateral, but couldn’t lay claim to any of the borrower’s other assets.

Non-recourse financing is usually riskier for the lender since they’re limited to collecting only the collateral when a borrower defaults. As such, lenders may charge higher interest rates for non-recourse loans and/or require borrowers to meet higher credit scores and income requirements to qualify.

From the borrower’s perspective, here are some pros and cons of non-recourse loans:

Managing Recourse vs Non-Recourse Loans

Generally, the only reason for a borrower to be concerned about whether they have recourse vs. non-recourse debt is if they’re in danger of default. As long as they’re keeping up with their payments, whether a debt is recourse or non-recourse shouldn’t be an issue.

But if there is a concern about potentially falling behind in paying a debt, then it helps to do some research before borrowing. For example, if trying to qualify for a home loan, asking upfront whether the loan is treated as recourse or non-recourse debt under a particular state’s laws will help in the decision making.

Making a larger down payment, for example, means less a borrower has to finance. Ultimately, though, a borrower should do what is right for their particular financial situation. It may be better for some borrowers to choose a home loan that allows for a lower down payment so they can keep more cash in the bank to cover financial emergencies down the line.

If you’re planning to apply for a car loan, you might consider buying a vehicle that tends to hold its value longer or making a larger down payment. Those could both help you avoid ending up underwater on the loan if you happen to default for any reason.

Credit cards are revolving debt, not a lump sum being borrowed, so the amount owed can change month to month as purchases are made and paid off. Some ways to manage this type of recourse debt include:

•   Keeping card balances low

•   Paying the balance in full each month, if possible

•   Setting up automatic payments or payment alerts as notification of when a due date is approaching

With any type of debt, recourse, or non-recourse, it’s important that you get in touch with your lender or creditor as soon as you think you’ll have trouble making payments. The lender may be able to offer options to help you manage payments temporarily. Depending on the type of debt, that may include:

•   Credit card hardship programs

•   Student loan forbearance or deferment

•   Mortgage forbearance

•   Skipping or deferring auto loan payments

Reaching out before a payment is missed can help you avoid loss of assets, as well as any negative impact on your credit.


💡 Quick Tip: Swap high-interest debt for a lower-interest loan, and save money on your monthly payments. Find out why SoFi credit card consolidation loans are so popular.

Is a Recourse or a Non-Recourse Loan Best for You?

It’s likely you won’t have much of a choice between a recourse and a Non-Recourse loan when looking at financing options. Lenders are likely to offer only recourse loans because they have more options to recover losses if the borrower defaults on the loan.

If you are presented with both options, choosing a recourse or Non-Recourse loan may depend on your financial situation.

•   A recourse loan may be a good option for those with a limited credit history because in exchange for additional avenues to recoup their losses, if necessary, a lender may offer low interest rates.

•   A non-recourse loan could be a good option for an applicant with good credit and steady income, as the lender may consider them a low-risk borrower and not feel the need to have additional assets to secure the loan.

SoFi Personal Loans Rates

Think twice before turning to high-interest credit cards. Consider a SoFi personal loan instead. SoFi offers competitive fixed rates and same-day funding. Checking your rate takes just a minute.

FAQ

What does recourse mean in lending?

Recourse refers to a lender’s options when recouping losses when a borrower defaults on a loan. With a recourse loan, lenders can recoup defaulted loan balances by seizing both the loan collateral and — when necessary — the borrower’s other assets.

Are you required to pay a non-recourse loan?

Yes, borrowers are required to make payments on both recourse and non-recourse loans.

Are non-recourse loans more expensive?

Non-recourse loans can have higher interest rates than recourse loans because lenders may perceive them as having higher risk.

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.

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

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.

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

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House trading involves selling your home to someone while buying their property. You essentially swap residences. This can spare both parties the irritation of showings and the expense of agent commissions while giving each party their new next home.

Trading homes isn’t done every day, but it can occasionally be an option that works for the parties involved. Learn more here.

What Is House Trading?

House trading means that you sell your home to someone and simultaneously buy their place.

You’re likely familiar with home exchange programs when it comes to vacations. You dash off to a lovely apartment in Paris, and the owners come to the Big Apple to enjoy your apartment. Both parties enjoy a vacation with a much lower price tag.

With house trading, this kind of switch is made permanent. Perhaps you’re outgrowing your compact two-bedroom house as your family grows, and the empty nesters down the street in a four-bedroom are looking to downsize their home. You could proceed with a house trade, selling and buying each other’s places simultaneously.


💡 Quick Tip: SoFi’s award-winning mortgage loan experience means a simple application — we even offer an on-time close guarantee. We’ve made $7.5 billion in home loans so we know a thing or two about what makes homebuyers happy.‡

How Does House Trading Work?

Think of a house swap as a win-win. You want to sell your house. You find a home you like, and the homeowner is interested in buying your home too. It happens.

What comes next? You trade. This means there will be two simultaneous transactions. You sell your home to the Joneses, and they buy yours, typically on the same day. Because you’re selling and buying at the same time, it’s much like a trade. This is not a simple transaction, though. You want the stars aligned on that day.

However, there are some similarities to buying a home the traditional way. Expect the basics of the home-buying process to be the same:

•   Qualifying for a mortgage

•   Getting a home inspection

•   Doing a title search

•   Closing with simultaneous transactions.

You pay off one mortgage, if you have one, and take on a new one if needed. At the same time, the other party will sign their purchase and sale agreement.

As much as doing all this at once may feel overwhelming, the upside is that you won’t have two mortgages on your hands at the same time. If both homes are owned free and clear, then the only money matters are transfer taxes and closing costs.

You’ll probably want a real estate lawyer who knows how these deals work at your side.

Recommended: How to Buy a House When You Already Have a Mortgage?

What If the Homes Are Unequal in Value?

It’s quite probable that the two homes won’t be of equal value. That’s not a deal-breaker, though. What matters is whether each house meets the needs and desires of the other party.

It’s important for both parties to order home appraisals. If one home is more valuable than the other, the buyer of the more expensive home pays the seller the difference at closing.

How Common Is House Trading?

Trading homes is not something that happens every day, but as people continue to search for creative ways to fulfill their dreams and technology helps connect like-minded folks, house trading has its place in the array of home-buying options out there.

Recommended: What Is a Bridge Loan and How Does It Work?

Pros and Cons of Trading Your House

Here’s a look at the upsides and downsides of trading houses.

Pros

There’s something to be said for this unconventional way of buying and selling a home.

•   You may be able to buy a house without a Realtor®. If there is no real estate agent involved in the trade, both buyer and seller keep the money they would have shelled out to their agents.

•   You eliminate some of the hassle of moving day. Because both parties are working in concert, it makes orchestration of the move easier.

•   You skip the whole dog-and-pony show of potential buyers traipsing through your home and the stress of having it look perfect for showings.

•   You also may find that getting financing when trading a home is easier. Some homeowners encounter hurdles qualifying for a mortgage before their home is sold. However, if you have a contract to sell your current house (which you would in a home trade), your lender won’t count your monthly mortgage payments as debt if you apply for a mortgage.

Having this improved debt-to-income ratio can allow you to qualify for better terms on your new mortgage, which just might save you a ton of money as well.

Cons

Trading isn’t without its issues.

•   If you’re in a hurry to move, you may not be able to find someone who wants a house swap as quickly as you want to move.

•   In a big-picture way, house trading may mean you have fewer options, you may not get the neighborhood you have in mind, or you may not find a home with all your dream features.

•   If you owe more on your mortgage than your home is worth, you may have trouble getting financing. The only way a trade would work is if you pay the lender the difference of what you sell your house for and what is still owed on the mortgage.

•   If for some reason the purchase and sale don’t happen at the same time, you could be stuck for a time with two mortgages.

Trading Houses vs Conventional Selling

With trading there’s a good chance you will be able to avoid using a real estate agent if you find your trading partner on your own, be it a relative, colleague, friend of a friend, or from a website. You can also avoid the hassle of staging your home and showing it to prospective buyers.

There are some things that are pretty much the same.

Both parties may need new mortgages, and both may want home inspections. Both will probably want attorneys present.

The Takeaway

Trading homes is a viable option for house hunters who find a trading partner who wants to own their home. While the home exchange approach is decidedly nontraditional, the steps of securing a home loan (if needed) and closing will be familiar.

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.

Photo credit: iStock/AndreyPopov

*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.

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^‡SoFi On-Time Close Guarantee: If all conditions of the Guarantee are met, and your loan does not close on or before the closing date on your purchase contract accepted by SoFi, and the delay is due to SoFi, SoFi will give you a credit toward closing costs or additional expenses caused by the delay in closing of up to $10,000.^ The following terms and conditions apply. This Guarantee is available only for loan applications submitted after 04/01/2024. Please discuss terms of this Guarantee with your loan officer. The mortgage must be a purchase transaction that is approved and funded by SoFi. This Guarantee does not apply to loans to purchase bank-owned properties or short-sale transactions. To qualify for the Guarantee, you must: (1) Sign up for access to SoFi’s online portal and upload all requested documents, (2) Submit documents requested by SoFi within 5 business days of the initial request and all additional doc requests within 2 business days (3) Submit an executed purchase contract on an eligible property with the closing date at least 25 calendar days from the receipt of executed Intent to Proceed and receipt of credit card deposit for an appraisal (30 days for VA loans; 40 days for Jumbo loans), (4) Lock your loan rate and satisfy all loan requirements and conditions at least 5 business days prior to your closing date as confirmed with your loan officer, and (5) Pay for and schedule an appraisal within 48 hours of the appraiser first contacting you by phone or email. This Guarantee will not be paid if any delays to closing are attributable to: a) the borrower(s), a third party, the seller or any other factors outside of SoFi control; b) if the information provided by the borrower(s) on the loan application could not be verified or was inaccurate or insufficient; c) attempting to fulfill federal/state regulatory requirements and/or agency guidelines; d) or the closing date is missed due to acts of God outside the control of SoFi. SoFi may change or terminate this offer at any time without notice to you. *To redeem the Guarantee if conditions met, see documentation provided by loan officer.
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