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Are you sick of pouring money into summer rentals or booking vacation houses online, sight unseen? If you’re managing to make the mortgage payments on your primary residence without straining your budget, you could be ready to invest in a second home. Here are some ideas on how to get an additional mortgage loan to potentially purchase another home.

Consider All the Costs

If you already own a house, you understand that the costs of home ownership go beyond mortgage payments. Remember that you’ll now have a second set of costs, including property taxes, insurance, maintenance, utilities, and the cost of travel to the second location.

You may also face some expenses with a vacation property that you wouldn’t face with a primary residence. For example, a house on the beach might need flood insurance to protect it against hurricanes.

All of these costs factor in on top of a second mortgage payment. Before you dive into owning a second home, consider whether or not you can afford them.

💡 Quick Tip: You deserve a more zen mortgage. Look for a mortgage lender who’s dedicated to closing your loan on time.

Determine if You Want a Vacation Home or a Rental Property

Before beginning to shop for a mortgage, you’ll need to decide whether you want to potentially earn rental income on the property. The answer to this question will determine the type of mortgage you qualify for.

However, if you require rental income in order to qualify for the additional home purchase, you may need to document existing rental income derived from the property (if the seller will share that information) or the lender may require a rental appraisal from a local property manager or real estate agent specifying the likely rental income. Keep in mind that the lender may only use a certain percentage (likely 75%) of the lease amount as a credit toward your qualifying income.

To qualify for a loan on a rental property, you will likely need a higher down payment, typically at least 20% or more. Non-owner occupied loans allow you to use the home when it’s not rented. Investment property mortgage rates may be higher than those for a primary residence. Another factor to consider is that a rental property may affect your income tax deductions differently than a vacation home.

Factors to Qualify for a Mortgage

If you’re ready to buy a home, and you’ve decided whether you’re looking for a vacation home or a rental property, you’ll want to consider many of the same factors needed to secure a first mortgage. Utilizing a home affordability calculator can be important when understanding how much home you can afford.

Credit report and FICO® score: Your credit report is essentially a report card that shows lenders how responsible you are about managing your debt, including your existing mortgage. It shows whether you make payments on time and whether you’ve missed payments or defaulted on debt in the past.

Your FICO score is a number that reflects your consumer credit risk. Make sure that you keep your credit score healthy by making on-time payments. Also check your credit report to be sure everything has been reported correctly. Mistakes can drag your score down, so it’s important to alert the credit reporting bureaus immediately if you find incorrect information.

Debt-to-income ratio: Your debt-to-income (DTI) ratio is a measure of how much debt you carry each month compared to your monthly income. If you have $2,000 a month in debt payments and make $6,000 a month in income, your DTI is $2,000/$6,000, or 33%. If your DTI is too high, lenders are less likely to give you a mortgage, or you may not be able to secure a mortgage with favorable terms. The DTI required by your lender can vary based on factors such as your credit score, type of home, and the size of your down payment but most lenders like to see a DTI of no more than 43% for a second home purchase.

One way to get your DTI low is by paying off old debts and avoiding taking on new ones. “It’s important to cut spending as much as you can while you’re tackling your debts,” said Kendall Meade, a Certified Financial Planner at SoFi. You may also consider refinancing loans you already have, including the mortgage on your first house, if you can take advantage of potentially lower interest rates. A lower interest rate could mean paying less over the life of the loan, which could help you lower your DTI sooner than you thought.

If you are purchasing a rental property, and you can show an existing tenant’s fully executed lease agreement and other supporting documentation the lender may require, it is likely that the lender will calculate 75% of the monthly lease amount toward your qualifying income.

Down payment: Required down payments on second homes are typically higher than on primary residences. For a second home purchase, lenders may require a down payment of at least 10% or more. If you put less than 20% down, you may be required to have private mortgage insurance (PMI), which protects the lender if you stop making payments.

The more you can pay upfront with a down payment, the more favorable your mortgage terms are likely to be. Your interest rate and monthly payments may be lower, and if your DTI or credit score is less than ideal, a higher down payment could potentially help you compensate for these factors.

Though making a large down payment can be a financial boon, you may want to make sure that you don’t deplete your savings so much that you no longer have extra cash to cover other expenses like closing costs.

Income and assets: Your lender will typically want to see that you have two years worth of steady and ongoing income to qualify for a mortgage. They also may want to see recent statements from any monetary assets you have such as a checking account, savings account, CD, IRA, 401(k), etc. Lenders may also want to see reserve funds. The amount of required reserves will vary from lender to lender and loan program to loan program, but each month of reserves is equal to one month’s worth of payments on your first and additional mortgage. One month of mortgage payments is defined as principal, interest, taxes, insurance, and other miscellaneous costs (such as flood insurance or HOA dues).

💡 Quick Tip: To see a house in person, particularly in a tight or expensive market, you may need to show the real estate agent proof that you’re preapproved for a mortgage. SoFi’s online application makes the process simple.

Estimate How Much You Can Afford

This home affordability calculator helps estimate the cost of purchasing a home and what your monthly payment would be — including closing costs, insurance, and property tax.

The Takeaway

It’s usually a good idea to shop around. As you search for an additional mortgage, consider checking out multiple lenders to make sure you’re getting the best deal for you on interest rates, terms, and fees.

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 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.

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.

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.

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The median home size in the US is currently about 2,014 square feet, but there’s lots of interest in tiny houses these days. How big is that? A typical definition of a tiny house is that it’s smaller than 500 or 600 square feet. Some people pride themselves on living in a mere 225 square feet or even under 100 square feet.

Living in a tiny house can be affordable, eco-smart, and part of a minimalist ethos, whether your tastes run towards cottage charm or contemporary. But how much does it cost? And what if you’re in a small home and want to remodel it; is that even possible?

Read on to learn more about tiny houses and the related costs to decide if this style of living is right for you.

Creative Tiny House Designs

Sixty-three percent of Millennials said they’d consider living in a tiny home, according to a survey by Technovio. That’s a lot of people, with a lot of different tastes and preferences when it comes to home styles.

There are small houses that look like classic woodsy cabins, A-frames, treehouses, charming Victorian structures, ultra-modern boxes, and more.

Some are built on site; others are fabricated wholly or partially elsewhere and brought to your site. You may see terms like prebuilt or prefabricated used.

House Beautiful, Country Living, and other design publications often highlight inspiring tiny house designs, and you can also find ideas on Pinterest, Instagram, and other social media platforms.

Typically, tiny houses are all about flexibility and functionality. Just as you budget your money, the square footage in a small home must be allocated. Some are one open room with different zones for living. Others may be divided into separate spaces with privacy, but there is usually an element of multifunctionality to allow the house to serve whatever the resident’s needs are, from working to relaxing, from sleeping to entertaining.


💡 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.

Downsizing into a Tiny House

If you’ve recently purchased a home that’s tiny and are seriously considering doing so, you will probably need to downsize more first. If you’re the kind of person who has drawers’ full of workout wear, hundreds of books, and/or a growing art collection, you may need to do some pruning. Here are some tips:

•   In a tiny house, virtually everything needs a purpose—and ideally, can have multiple purposes. Dishes that are purely decorative, for example, are less likely to have a place in your home than beautiful ones that are also functional. Have an adorable cup that you love? Great, but will it double as a pencil holder?

•   Most people who downsize their home quickly realize that a good percentage of their belongings have been kept for sentimental reasons. Some people moving into tiny houses have found that, if they carefully photograph these items and then find an excellent new home for them, then a scrapbook containing these photos provides pleasure without taking up much space.

•   It can help gamify the process of downsizing to challenge yourself to toss, regift, or give away an item a day.

•   Do consult the works of Marie Kondo, of the “KonMari” method fame, for guidance on deciding how to keep what truly sparks joy and jettison the rest.

•   Hold a “take it or pack it” party. Set up a table full of stuff you don’t want for friends to take as they help you box up what you do want to take with you when you move.

•   Sell your stuff that you no longer want or need to raise funds for your new home.

•   Keep furniture that has multiple purposes. A sofa, for example, may be what the family uses during the day and a guest sleeps on at night.

Recommended: How to Lower Credit Card Debt Without Ruining Your Credit

Tiny House Design Tips

As you move towards tiny house living, consider these design pointers to help ensure that your little kingdom works as well as possible for you. This advice can also help if you are remodeling a tiny house.

•   Prioritize your needs so the space can accommodate what is truly important. Do you need to be able to work from home and be on Zoom calls regularly? Or is this a place where you want to carve out room to cook with your best friend? Be ultra-clear about your top priorities because there is no room for error in these compact homes.

•   If you are renovating a tiny home, don’t forget to consider how your remodel can impact your house’s value. You likely want to add value to your home vs. invest money that can’t be recouped. Using a home project value estimator can help you understand your project’s potential return.

•   Think storage, storage, storage. For instance, consider adding a sleeping loft and then using the space beneath the stairs leading to the loft for more storage. Drawers can be built into loft stairs and there can be a space reserved for hanging your clothes. You can store plenty beneath your bed, or even try drawers under your couch.

In your kitchen, you can hang appliances beneath cabinets (which can extend right up to the ceiling) to keep counter space free, add drawers to the kick plates of your cabinets—and even choose plug-in kitchen appliances (including a stovetop) that can be put away, as needed, for extra space.

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

Costs to Expect with a Tiny House

The cost of a tiny home can vary tremendously, as you might imagine. Here are some guidelines to get you started:

•   Overall, tiny houses tend to be less expensive to build and own than a larger home, due to economies of scale. However, the per-square-foot costs are typically higher. To build a tiny house may run $300 per square foot vs. $150 per square foot for a standard-size home.

•   Prebuilt tiny homes can cost around $75,000 (this doesn’t include the land they are on), and purchasing a pre-owned one can be as little as $30,000. Building your own can easily cost $100,000 or more, depending on the complexity and detailing. However, when you compare this to the average home value of $410,200 mid-2023, you see that the savings can be significant.

•   Tiny homes can use a fraction of the energy (even less than 10%) vs. a typical-size home. This is due to the smaller size, certainly, as well as there may be other efficiencies in terms of their design.

Using a Personal Loan for Your Tiny House Expenses

If you already own a tiny home but want to renovate it or are buying one and want to remodel your home right away, it may be tempting to put the costs on your credit card. After all, a small home means small expenses, right?

Not necessarily. Even if the costs are low, by putting them on a credit card, which probably charges a high interest rate, you can wind up with debt that is hard to pay off. That interest can have a way of accumulating quickly.

A better solution might be a personal loan vs. a credit card, which can offer a significantly lower interest rate. You’ll have a fixed, predictable monthly payment instead of potentially multiple fluctuating credit card bills.

If you think a personal loan could be the right move for you and your tiny home plans, shop around to see what offers are available.

Picking a Personal Loan

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.

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.

Disclaimer: Many factors affect your credit scores and the interest rates you may receive. SoFi is not a Credit Repair Organization as defined under federal or state law, including the Credit Repair Organizations Act. SoFi does not provide “credit repair” services or advice or assistance regarding “rebuilding” or “improving” your credit record, credit history, or credit rating. For details, see the FTC’s website .

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.

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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There is no waiting period for borrowers who want to refinance an FHA loan and switch to a conventional loan. But that doesn’t mean it’s automatically a good idea. When you refinance a mortgage, you want to benefit — maybe enjoy lower monthly payments, or perhaps save money on interest over the loan term.

To decide whether or not to refinance, it first helps to understand the difference between an FHA loan and a conventional mortgage. An FHA loan is a home loan backed by the Federal Housing Administration. The FHA doesn’t directly loan to borrowers; instead, it insures loans for lenders to alleviate some of the risk the lender takes on when lending money. Borrowers can usually meet FHA loan requirements with a lower credit score, and can provide a lower down payment than would be necessary with some conventional loans. For this reason, FHA loans are popular with first-time homebuyers.

A conventional loan, on the other hand, is a home mortgage loan not backed by the federal government. Borrowers with less-than-stellar credit ratings or minimal down payments aren’t always able to get a conventional loan. Or if they do, a conventional loan might have a higher interest rate than an FHA loan.

You don’t have to wait to make the switch from FHA loan to conventional. But why would you want to refinance, should you do it, and what are the pros and cons? Let’s have a look at these questions.

💡 Quick Tip: Buying a home shouldn’t be aggravating. SoFi’s online mortgage application is quick and simple, with dedicated Mortgage Loan Officers to guide you through the process.

Can You Refinance an FHA Loan to a Conventional Loan?

Yes, you can refinance an FHA loan to a conventional loan. However, a lender won’t just approve you for a refinance immediately. If you currently have an FHA loan, you must qualify to refinance to a conventional loan.

Why Should You Refinance From an FHA to a Conventional Loan?

One reason you might refinance from an FHA to a conventional loan is that FHA loans require you to pay a mortgage insurance premium (MIP). First, there is a required upfront mortgage insurance premium that you make when you purchase your home. You also pay an additional mortgage insurance premium on top of your mortgage payments each month. The ongoing annual MIP of 0.45% to 1.05% is divided by 12 and added to your monthly mortgage payment.

FHA borrowers must pay MIP for either 11 years or throughout the loan term, depending on the amount you put down. Getting rid of MIP is one of the top reasons to refinance to a conventional loan.

You may also find that you can get a lower interest rate by refinancing to a conventional loan. If that’s the case, a refinance could save you thousands of dollars over your home mortgage loan term.

It’s also possible that you can increase or lower your mortgage payment with a refinance. If you find it difficult to make your monthly payments, a refinance may help you lower them. But note that a lower payment often comes with a longer loan term. On the other hand, you may decide you can pay off your mortgage faster, and so you refinance to decrease your loan term from 20 to 15 years, saving time and money.

Ultimately, you want a refinance to benefit you, so learn more from lenders and use an FHA loan mortgage calculator.

Recommended: How Do Low-income Home Loans Work

Requirements to Refinance From an FHA Loan to Conventional

You must qualify for a refinance through your credit score and debt-to-income ratio (DTI):

•   Credit score: Many lenders look for at least a 620 credit score for a conventional mortgage refinance.

•   DTI: Your DTI refers to the amount of debt you have relative to your income. There are no hard-and-fast requirements for DTI, but many lenders like to see a DTI of at least 43%. You can calculate your DTI by dividing your monthly debt payments by your gross income and converting that figure into a percentage.

Once you think you have your ducks in a row with your credit score and DTI, you must fill out applications with several lenders. Consider checking out the same type of interest rate and loan term so you can compare apples to apples among several lenders.

Get ready to submit your documents to prove your income and assets — pay stubs, tax returns, bank statements, proof of investments — to show underwriters that you indeed have those assets at your disposal.

Not sure you’ll qualify? A lender can walk you through all the requirements and help you determine whether a refinance to a conventional loan makes sense for you.


💡 Quick Tip: You can use money you get with a cash-out refi for any purpose, including home renovations, consolidating other high-interest debts, funding a child’s education, or buying another property.

Pros of Refinancing From an FHA to Conventional Loan

Refinancing from an FHA to a conventional loan has some definite benefits. Let’s look at a few reasons:

•   Get a lower interest rate: Many lenders require a minimum 580 credit score (or 500 with a larger down payment). You may qualify for a lower interest rate if your credit score has increased from the 500s.

•   Get rid of MIP: As noted above, lenders charge MIP to compensate for an FHA loan’s lower credit and down payment requirements. Getting rid of MIP will save you money.

•   Save on interest: Qualifying for a lower interest rate could save you thousands of dollars over your loan term.

Cons of Refinancing From an FHA to Conventional Loan

There are downsides of refinancing from an FHA to a conventional loan.

•   Tougher qualifications: You must meet stiffer requirements to qualify for a conventional loan than an FHA loan. Again, there are no hard-and-fast rules governing qualifications, but so your best bet is to talk to lenders about your situation.

•   Private mortgage insurance (PMI): You may not be off the hook for mortgage insurance. If you don’t have at least 20% equity in your home, you must pay PMI, which automatically cancels once you reach 22% equity. Consider how much you’d pay in MIP vs. PMI over time before you refinance your home.

•   Closing costs: Refinancing requires you to pay closing costs, typically between 2% and 5% of the full loan amount.

Recommended: The Cost of Living By State

Alternatives to Refinancing Your FHA Loan to a Conventional Loan

Instead of a conventional loan, you can choose to refinance your existing FHA loan to another FHA loan using a few options:

•   FHA streamline refinance: A streamline refinance allows for limited documentation and underwriting. In order to obtain a streamline refinance, you may not be delinquent on your current loan, and refinancing must confer a net tangible benefit, meaning it must save you money. Some lenders offer “no cost refinances” by charging a higher interest rate in lieu of closing costs.

•   FHA simple refinance: A simple refinance replaces your existing FHA loan, just like a streamline refinance. You get a new fixed- or adjustable-rate loan faster than when you received your original loan. A fixed-rate loan stays the same throughout a loan term, while an adjustable-rate loan interest rate changes over the loan term. One difference between the simple and streamline refinance is that the simple version typically requires a credit check and an appraisal of your home.

•   FHA cash-out refinance: A cash-out refinance allows you to refinance with a larger loan amount and take the difference out in a lump sum. A cash-out refi could make sense if you need cash for a home project, education, or other reasons. The amount you can take out depends on how much your home is worth.

•   FHA 203(k) refinance: How do FHA loans 203k work? An FHA 203(k) refinance allows you to roll any home improvement or renovations you want to make into your home loan. You can choose from a limited 203(k) refinance or a standard 203(k) refinance. The standard doesn’t have a ceiling on the amount you can spend, while the limited refinance supplies up to $35,000.

You may face time and payment restrictions when replacing an existing FHA with an FHA refinance. For example, an FHA streamline refinance requires you to have an FHA loan for at least 210 days and make on-time mortgage payments for six months.

The Takeaway

You don’t have to wait to refinance from an FHA to a conventional loan. Still, it’s essential to consider all the ramifications of refinancing — especially the costs and savings. You may have qualified as a first-time homebuyer for your original FHA loan. The process looks different when you refinance. If you plan to refinance to a conventional loan, check your credit report, debt-to-income ratio (DTI), and other factors, and talk through what you need to present to a lender to get a conventional loan. Ultimately, you want to ensure that you will benefit from a switch before you make your move.

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.

FAQ

Can you refinance an FHA loan within 6 months?

Yes, you can refinance from an FHA loan to a conventional loan within six months. However, you would first want to consider whether doing so would save you money.

How long do you have to wait to refi a conventional loan?

In most situations, you can refinance a conventional loan immediately. However, you might have to wait six months before refinancing with the same lender. Check with your lender for more information about how long you’ll have to wait for a conventional loan refinance.

Can you have an FHA loan and a conventional loan at the same time?

You might find it difficult to qualify for a conventional loan with an FHA loan because FHA loans typically go to borrowers who have less financial stability. Lenders will want to ensure that you can make payments on both your first and second home before they approve you for a conventional loan. Talk to your lender for more information about your options.

Photo credit: iStock/jhorrocks

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.

^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.
*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.

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.

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The U.S. Department of Veterans Affairs (VA) offers a mortgage financing program known as VA loans. This is designed to help veterans, active-duty service members, and surviving spouses get financing for a home loan.

When applying for any mortgage, there are additional costs on top of the purchase price of the property. These costs can be complex to figure out for first-time homebuyers, so there are calculators available to help.

A loan closing costs calculator is used to estimate the closing expenses associated with a mortgage loan such as a VA loan. These costs can include appraisal fees, loan origination fees, title and homeowner’s insurance, lawyer’s fees, and property taxes. The calculator takes into account the amount of the loan, the term of the loan, the interest rate, and the purchase price.

This guide will help you understand these costs and also calculate what these expenses might look like for your loan.

Why Use a VA Loan Closing Costs Calculator Table?

A VA loan closing costs calculator is a useful tool for anyone looking into applying for a VA loan. Because, yes, you do pay closing costs with a VA loan.

Although calculators only provide an estimate and not the final closing costs, you can enter the property and loan details and immediately get an idea about the total closing expenses you will be paying if you go through with the loan.

This helps with budgeting, comparing the cost of living in different locations, looking at different properties and loan options, and negotiation. It also helps educate borrowers about the loan process.


💡 Quick Tip: When house hunting, don’t forget to lock in your home mortgage loan rate so there are no surprises if your offer is accepted.

How to Calculate Your VA Loan Closing Costs

Whether you are a first-time homebuyer or have been through the process before, it can be a good idea to acquaint yourself in advance with the fees you’ll pay when you get a home mortgage. The following are some of the common costs associated with VA loans:

•   VA funding fee: This is a required fee calculated as a percentage of the loan amount. The amount of this fee depends on factors such as the down payment amount and the type of service member applying. Worth noting: This is the one fee that you may be able to roll into the loan vs. pay separately.

Also, some people may be exempt from paying a funding fee, such as those who receive compensation for a service-related disability, among other scenarios.

•   Loan origination fee: This is a fee for processing the loan application (it’s charged by the lender, not the VA) and is generally a percentage of the loan amount. With a VA loan, it typically has a maximum and will not exceed 1% of the loan value.

•   Discount points: These are upfront payments that can be made to reduce the loan’s interest rate. Each percent of the loan amount is equal to one point.

•   Credit report: This is a fee for obtaining a credit report, which is used to determine the borrower’s creditworthiness. Having good credit is just one important part of qualifying for a home loan.

•   Appraisal fee: There is a fee for hiring an appraiser, who determines the value of the property being purchased.

•   Homeowners insurance: This is to secure the property against damage and losses. Borrowers generally pay the first year upfront.

•   Real estate taxes: If there are any unpaid property taxes, some or all may need to be paid at closing.

•   State and local taxes: Some states or cities may impose taxes or property transfer fees.

•   Title insurance: Title insurance protects against issues with the property’s title and is generally required by lenders.

•   Recording fee: This fee covers the cost of recording the mortgage and any related documents with the government.

Worth noting: With VA loans, you can save big because private mortgage insurance (PMI) isn’t required for those putting down less than 20%, as it might be with other kinds of home loans.


💡 Quick Tip: A VA loan can make home buying simple for qualified borrowers. Because the VA guarantees a portion of the loan, you could skip a down payment. Plus, you could qualify for lower interest rates, enjoy lower closing costs, and even bypass mortgage insurance.†

2024 VA Loan Funding Fee Calculator Table

Now that you understand the different fees that may be assessed when you take out a mortgage, take a closer look at what some of these fees look like for a typical VA loan. (Rates may differ for other types of VA loans, such as those for manufactured homes or that are part of the Native American Direct Loan program.)

Examples of VA Loan Closing Costs Calculations

Below are a few examples of closing costs for a VA loan in 2023:

Example 1: First-time homebuyer with no down payment

Loan Amount: $250,000
Down Payment: 0% (No down payment)
Funding Fee: 2.15% (First-time user)
Other Closing Costs: $5,000

Closing Costs Calculation:

Funding fee: $250,000 x 2.15% (0.0215) = $5,375
Other closing costs: $5,000
Total closing costs: $5,375 (funding fee) + $5,000 (other closing costs) = $10,375

Example 2: First-time homebuyer with a 5% down payment

Loan amount: $300,000
Down payment: 5% ($15,000)
Funding fee: 1.50% (first-time user)
Other closing costs: $6,500

Closing Costs Calculation:

Funding fee: ($300,000 – $15,000) x 1.50% (0.0165) = $4,275
Other closing costs: $6,500
Total closing costs: $4,275 (funding fee) + $6,500 (other closing costs) = $10,775

Example 3: Subsequent homebuyer with a 15% down payment

Loan amount: $400,000
Down payment: 15% ($60,000)
Funding fee: 1.25% (subsequent user)
Other closing costs: $7,000

Closing Costs Calculation:

Funding fee: ($400,000 – $60,000) x 1.25% = $4,250
Other closing costs: $7,000
Total closing costs: $4,250 (funding fee) + $7,000 (other closing costs) = $11,250

Recommended: The Cost of Living in California

Reasons to Calculate Your VA Loan Closing Costs First

Calculating VA loan closing costs is beneficial for a few reasons:

1.    Financial planning: Calculating closing costs for a VA loan upfront helps with planning finances and budgeting to make sure you have enough money to afford purchasing a home. It prevents unforeseen expenses and reduces stress throughout the buying process.

2.    Analyze affordability: Knowing closing costs can help you determine whether you can afford a property.

3.    Comparison shopping: Calculating closing expenses also helps with comparing various home mortgage loans so you can choose the terms that work best for you and potentially save money. While VA loans are one option, there are many types of mortgage loan choices that may be a good choice depending on your individual circumstances.

4.    Negotiation: Understanding closing costs provides a starting point for negotiation. Certain fees or terms may be negotiable, and having the knowledge of the starting points provides you, the borrower, with the information needed to get the best deal.

5.    Avoid surprises: Planning ahead can help prevent unforeseen costs that may arise during the closing process. It also allows you to compare the estimate to the final closing costs to make sure they are all accurate.

Recommended: How Long Does It Take to Close on a House?

Tips on How to Save on Your VA Loan Closing Costs

Here are some tips for how to save on VA loan closing costs:

•   Shop around for lenders: Compare closing cost estimates from various lenders by requesting quotations from them all. It’s important to shop around for a mortgage and look into different options to find the best rates and terms.

•   Negotiate with the lender: Don’t hesitate to ask for lower fees and discuss terms. Eligible borrowers with good credit may be able to negotiate loan conditions.

•   Consider seller concessions: In some cases it may be possible to persuade the seller of the home to cover some of the closing costs. Consult with the real estate agent during the negotiation process about this possibility to reduce costs.

•   Utilize VA loan programs and benefits: Take advantage of the benefits offered by the VA loan program. For instance, the VA funding fee can be rolled into the loan amount, and the VA has restrictions on fees which can help keep closing costs down.

•   Consider rate options: Evaluate different interest rate options and the impact they have on closing costs. For instance, a higher interest rate may offer lender credits that can be applied to closing costs. If one intends to live in the house for a long time, this may be a good option.

•   Read the Closing Disclosure (CD) carefully: The final closing costs are listed in the Closing Disclosure document. It’s important to carefully review this document to make sure there are no errors or unforeseen closing costs.

Dream Home Quiz

The Takeaway

VA loan closing costs include the financing fee, credit report fees, appraisal fees, title insurance, and other expenses associated with obtaining a VA loan. It’s important for borrowers to calculate their estimated closing costs in advance to compare loan options, negotiate fees, and prepare themselves financially for buying a home.

It’s also wise to consider a variety of loan options, from the VA or not, to make sure you are getting the right fit for your financial needs.

SoFi offers VA loans with competitive interest rates, no private mortgage insurance, and down payments as low as 0%. Eligible service members, veterans, and survivors may use the benefit multiple times.

FAQ

What is the VA funding fee for 2023?

The VA funding fees for 2023 are, for first use, dependent on your down payment amount: less than 5%, 2.15%; 5% to 10%, 1.5%; and over 10%, 1.25%. After first use, the rates shift to: less than 5%, 3.3%; 5% to 10%, 1.5 %; and move than 10%, 1.25%.

What percentage of closing costs can be included in a VA loan?

There is no specific limit on the percentage of closing costs that can be included in the loan amount, but the VA restricts the types of fees that can be charged. The VA has a “4% rule,” which states that the total allowable closing costs and certain fees paid by the borrower cannot exceed 4% of the loan amount.

What is an example of a VA funding fee?

The VA funding fee is a one-time fee paid by borrowers using a VA loan, and the amount is calculated based on factors such as the loan amount, down payment, and the borrower’s service category. For example, a first-time borrower with a $300,000 loan amount and no down payment may have a funding fee of 2.15%, resulting in a fee of $6,450.

Photo credit: iStock/Ole Schwander

^†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.
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.

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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Thanks to rapidly rising home prices, VA loan limits got a substantial boost in 2023.

For most U.S. counties, the baseline limit for VA loans is now $726,200, compared to $647,200 in 2022. And loan limits for single-family homes in counties with higher home costs also increased — from a maximum (or “ceiling”) of $970,800 in 2022 to $1,089,300 in 2023.

What could higher loan limits mean for you? If you’re a veteran considering a VA-backed home loan, read on for a breakdown of what you can expect if you purchase a home this year.

What Is the VA Loan Limit?

To be clear: The VA doesn’t limit how much an eligible veteran, service member, or survivor using a VA loan benefit can borrow to finance a home. There are only limits on how much of the loan amount the VA will guarantee if the borrower is unable to repay the mortgage. And that limit can vary based on the status of the borrower’s VA entitlement.

Most borrowers who apply for a VA loan have something called “full entitlement.” This means that if the borrower defaults, the VA will guarantee — or repay the lender — up to 25% of whatever loan amount the lender approved based on its own criteria. If you’re a first-time homebuyer, or if you’ve paid off a past VA loan, you can expect to have a full entitlement.

But if a borrower has what the VA refers to as a “remaining entitlement” (they have a VA loan they’re still paying back), the VA will limit its guarantee based on the Federal Housing Finance Agency (FHFA) loan limit in the county where the home is being purchased.

Instead of paying the lender up to 25% of the full loan amount if the borrower defaults, the VA will limit its guarantee to up to 25% of the applicable FHFA loan limit minus the amount of the entitlement the borrower already used. Borrowers can still get a VA loan using their remaining entitlement, but they may have to make a down payment to get that loan if the loan amount is more than $144,000.

To check your VA entitlement status, you can request a certificate of eligibility (COE) through your lender, online, or by mail.


💡 Quick Tip: Buying a home shouldn’t be aggravating. SoFi’s online mortgage application is quick and simple, with dedicated Mortgage Loan Officers to guide you from start to finish.

When Do VA Loan Limits Apply?

You may wonder when VA loan limits apply and, more specifically, how annual changes to loan limits are calculated. The VA bases its loan guarantee limits on the same conforming loan limits (CLL) the FHFA sets for conventional home mortgage loans that are eligible for purchase by Fannie Mae and Freddie Mac.

By law, the FHFA must adjust these limits annually to reflect changes to home prices in the U.S. Between the third quarters of 2021 and 2022, home prices increased, on average, by 12.21%, based on the FHFA House Price Index. So the 2023 baseline CLL increased by that percentage.

But your county’s loan limit could be considerably higher, depending on average home prices in your area.

These differences are, in part, due to the variability of cost of living by state.

2023 VA Loan Limit Calculator Table

Higher home prices across the U.S. brought the FHFA’s baseline limit (and, therefore, the VA’s baseline limit for 2023) to $726,200 for a single-family home in most counties.

But in counties where 115% of the median home value is higher than the baseline CLL, the limit has been increased by a percentage that reflects those higher prices. There is a ceiling, or cap, however, of 150%.

Here’s what that looks like for a single-family home in 2023 vs. 2022.

VA Loan Limits in 2023 and 2022

If you’re buying in Alaska, Hawaii, Guam, or the U.S. Virgin Islands, special statutory provisions dictate the loan limit, which in 2023 is $1,089,300 for a single-family home.

VA Loan Limit Example

Here’s a hypothetical example of how a borrower could be affected by the county loan limit on a VA loan.

Let’s say Joe, a Navy veteran, wants to buy a home in San Diego County, even though he knows the cost of living in California is higher than average. Joe manages to find a $600,000 single-family home and he wants to buy with a VA loan, but he still owes $100,000 on another VA loan.

The 2023 limit in San Diego County is $977,500. Since the VA will guarantee up to a quarter of that amount, Joe has a maximum entitlement of $244,375.

$977,500 x .25 = $244,375

But Joe has to subtract the amount of his entitlement he’s already used, which leaves him with $144,375.

$244.375 – $100,000 = $144,375

So, the VA would guarantee up to $144,375 of Joe’s loan.

Since most lenders want at least 25% of a borrower’s loan amount to be covered by the VA entitlement and/or a down payment, Joe might have to make a $5,625 down payment to get a VA loan for this home.

$600,000 x .25 = $150,000

$150,000 – $144,375 = $5,625


💡 Quick Tip: Apply for a VA loan and borrow up to $1.5 million with a fixed- or adjustable-rate mortgage. The flexibility extends to the down payment, too — qualified VA homebuyers don’t even need one!^{†^}

How Does My County Loan Limit Affect Me?

Just like Joe in the example above, if you’re using a remaining entitlement and your loan amount is over $144,000, your county loan limit could determine whether you’ll have to make a down payment to buy the home you want.

It doesn’t mean you can’t get the loan. If you have enough to make the down payment required by your lender, you may even qualify for a VA-backed loan that’s more than your county loan limit.

It’s important to note that though the example provided here is for a home purchase, the same entitlement limits apply if you’re considering refinancing your VA loan. In that case, your county limit could affect how much you’ll be asked to pay in closing costs.

How to Apply for a VA Home Loan

Most VA loans are “VA-backed” loans, which means they’re issued by approved private lenders. The VA’s guarantee that it will help repay the lender if a borrower defaults is an incentive for lenders to offer these loans with attractive terms.

Still, it can be a good idea to shop around for the loan that best meets your family needs, and compare interest rates, fees, customer service, and any additional benefits various lenders might be offering.

You also may want to compare the terms of your top VA loan offer to what you can get with different types of mortgage loans, including a conventional loan.

Of course, no matter which type of loan you ultimately choose, you’ll still have to qualify for a mortgage with a lender.

There isn’t a requisite minimum credit score for VA loans. Instead, the VA asks lenders to review the borrower’s “entire loan profile,” which could include your credit history, DTI ratio, employment history, and assets. Individual lenders also may have their own approval criteria you should be aware of when you’re ready to apply for a VA loan.

Pros and Cons of VA Loan Limits

The VA loan limit is just one of several factors you may want to consider if you’re thinking about using a VA loan for a home purchase or a mortgage refinance. Like any other mortgage option, VA loans have their pros and cons. Here are a few to keep in mind:

VA Loan Pros

The upsides of VA loans can include:

•   Interest rates may be lower with a VA loan than with a conventional loan.

•   You may not need to make a down payment or pay mortgage insurance.

•   Though non-VA jumbo loans may require a higher down payment, this isn’t necessarily true with a VA jumbo loan.

•   If you decide to sell your home, you can allow the buyer to assume (or take over) your existing mortgage.

VA Loan Cons

Now, for the downsides:

•   VA purchase loans are only for primary homes; you can’t use the loan to buy a vacation home or to invest in a home that isn’t your main residence.

•   The VA charges a one-time “funding fee” that’s designed to cover foreclosure costs when homebuyers default on a loan. Currently, the fee ranges from 1.25% to 3.3% of the loan.

•   The home you hope to buy must be evaluated by a VA-approved appraiser to ensure it meets the VA’s minimum property standards. If the home you want is too rundown, it may not pass this appraisal.

Recommended: 2023 Home Loan Help Center

The Takeaway

VA loan limits are based on home prices in the U.S., and they’re adjusted annually to reflect price increases.

If you’re a first-homebuyer or you’ve paid off a past VA loan, you shouldn’t have to worry about VA loan limits. But if you want to buy a home and you already have a VA loan, the loan limit for your county could determine whether you’ll have to make a down payment to qualify for the amount you hope to borrow.

SoFi offers VA loans with competitive interest rates, no private mortgage insurance, and down payments as low as 0%. Eligible service members, veterans, and survivors may use the benefit multiple times.

Our Mortgage Loan Officers are ready to guide you through the process step by step.

FAQ

Will VA home loan limits increase in 2023?

Yes, VA home loan limits increased significantly in 2023. The baseline limit for VA loans is now $726,200, compared to $647,200 in 2022.

What is the conforming limit for 2023?

The national baseline conforming loan limit for 2023 is $726,200 in 2023. But the VA loan limit may be higher in U.S. counties where home prices are especially high.

What is the DTI limit for a VA loan in 2023?

The Department of Veterans Affairs hasn’t set a hard-and-fast limit on the debt-to-income ratio it requires for its loans. But generally, lenders allow a 41% maximum for a VA loan.

Photo credit: iStock/Thai Liang Lim
^†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.
^{^}SoFi VA ARM: At the end of 60 months (5y/1y ARM), the interest rate and monthly payment adjust. At adjustment, the new mortgage rate will be based on the one-year Constant Maturity Treasury (CMT) rate, plus a margin of 2.00% subject to annual and lifetime adjustment caps.
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.

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.

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