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Buying a house is an exciting milestone, but it can also be stressful — especially if you’re self-employed and have to jump through extra hoops to secure a loan. Self-employed borrowers may have even more difficulty when applying for a jumbo loan for a more expensive house.

Below, we’ll walk through jumbo loans for the self-employed: types of loans available, typical requirements, and what the lending process is like.

What Are Jumbo Loans for the Self-Employed?

Each year, the Federal Housing Finance Agency (FHFA) sets a maximum limit on the dollar amount of mortgages that government-sponsored Freddie Mac and Fannie Mae will purchase. Loans within those limits are called conforming loans.

But what if you want a more expensive house and need a larger mortgage? That’s where jumbo loans come in. Jumbo loans, also called non-conforming loans, pose a higher risk to the lender and thus come with stricter requirements for borrowers.

Self-employed individuals can get conforming mortgages just like any other borrowers, though they may be asked for additional documents to prove their income. (The same is true when it comes to personal loans for the self-employed.) But what about jumbo loans for self-employed individuals? Are those possible?

Many lenders allow self-employed individuals to apply for and secure a non-qualified mortgage, also called a non-QM loan. Lenders enable borrowers to qualify for a non-qualified mortgage using alternative methods, particularly for income verification. Some examples of non-QM loans include 1099-only loans, bank statement loans, and investor cash flow loans.

1099-Only Loan

A 1099-only loan is just what it sounds like. Self-employed individuals typically receive 1099s, not W-2s, at tax time. Though lenders usually review an applicant’s W-2s, a self-employed individual may be able to apply for a jumbo loan by showing 1099s from previous years. Loan requirements will vary by lender.

Why not just look at previous tax returns? All 1099 income appears on your tax return, after all. However, self-employed workers write off business expenses to lower their taxable income and reduce their overall tax burden. An individual who brings in good money but has a lot of write-offs may have a harder time qualifying based on their tax return, which shows adjusted gross income, but could qualify based on their 1099.

Bank Statement Loan

Another route that self-employed individuals can take to get a jumbo mortgage loan is through bank statements alone. Again, requirements will vary by lender, but lenders offering bank statement mortgages will often approve self-employed individuals for jumbo loans with just recent bank statements (personal or business) demonstrating income, rather than with traditional tax documents.

Investor Cash Flow Loan

Self-employed individuals who want to diversify by purchasing an investment property may be able to get a jumbo loan with no income verification at all. Instead, with an investor cash flow loan, borrowers can get a loan by using the anticipated cash flow from the rental property.


💡 Quick Tip: One answer to rising house prices is a jumbo loan. Apply for a jumbo loan online with SoFi, and you could finance up to $2.5 million with as little as 10% down. Get preapproved and you’ll be prepared to compete in a hot market.

Challenges Faced by Self-Employed Borrowers

These non-QM loan options for self-employed borrowers address typical challenges that self-employed borrowers face when applying for a mortgage, particularly a jumbo mortgage. For instance, self-employed borrowers:

•   Can’t produce W-2s to verify their income or employment.

•   May have a lot of write-offs on their tax return that make it look like they earn less.

•   May otherwise need to provide a lot of complicated business documents for underwriting.

Recommended: Benefits of Being an Entrepreneur

Jumbo Loan Underwriting Guidelines

Jumbo loans may allow you to buy a more expensive home, but you’ll have to meet a lot of strict requirements, self-employed or not. Below are the core underwriting guidelines that lenders use when considering jumbo loan applications:

•   Credit score: Credit score requirements for jumbo loans will vary by lender, but expect to need a higher credit score than you’d need for a more traditional loan. A credit score of 700 or above should do the trick, although some lenders will have more lenient standards, while some may have tighter restrictions for a second home or investment property.

•   Debt-to-income ratio: Lenders may have varying income requirements for jumbo loans, but they’ll also look at your debt-to-income (DTI) ratio. If you have significant monthly debt obligations compared to your monthly income, you may not qualify for a jumbo loan.

•   Cash reserves: For certain loans and certain applicants, lenders may require you to have mortgage reserves — liquid assets (money in a bank account or certificate of deposit, stocks and bonds, or vested retirement funds, for instance) set aside to cover a certain number of months’ worth of housing costs. The money you’ll spend on your down payment and closing costs is not considered part of your cash reserves. For a jumbo loan, it’s possible you’ll need to have six to 12 months’ worth of reserves.

Tips for Increasing Chances of Approval

As a self-employed borrower, it’s crucial that you work on your credit score, reduce your monthly debts, and have strong evidence of solid monthly income before trying to qualify for a mortgage, particularly a jumbo loan. Here are a few tips to increase your chances of approval:

•   Work on your credit score first: Having a high credit score is one of the major requirements for approval. If you’re right beneath the 700 threshold, it may be worth it to wait a few months if you’re actively working on maintaining a good credit score.

•   Pay off outstanding debts: An easy way to decrease your DTI (and thus increase your chances of approval) is to pay off debts before buying a house. Stop accruing new credit card debt, and work on paying off existing debts before applying. If you’re able to knock out your credit card debt or pay off your car before applying for a jumbo loan, you may have a better shot.

•   Collect all the documentation you can: Having documentation of your income and employment is key. As a self-employed individual, it might be worth it to work with an accountant to compile all the paperwork.

Understanding the Jumbo Loan Process

The jumbo loan process is similar to the standard conforming loan process, but it may take longer. Here are the general steps for getting a jumbo loan:

1.    Make sure you’re qualified: Review your credit score, DTI, and cash reserves to make sure you’re likely to get approved for a jumbo loan. Gather all the necessary documents.

2.    Find a lender: Not every lender offers jumbo loans to self-employed borrowers. Do some research to find out which lenders will offer you the best chances. Loan terms and interest rates will vary depending on the lender, the current market, and your finances. Get preapproved for a loan.

3.    Make an offer on a home: Once you have funding approved, find a house you love and put in an offer.

4.    Get an appraisal: As with a conforming mortgage, the lender will require a home appraisal to ensure the home is worth what you’re borrowing.

5.    Close on the home: Because jumbo loans are larger, expect to need a larger down payment. Closing costs will also be higher. Because jumbo loans pose more risk to lenders, the timeline between the offer and closing may take longer than for a traditional home loan.

💡 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.

Pros and Cons of Jumbo Loans for Self-Employed Individuals

Jumbo loans are possible for self-employed individuals, but there are also some drawbacks to consider. Self-employed borrowers should keep the tough requirements in mind when considering purchasing a home above the FHFA conforming loan limits, but if they really want that more expensive home, it could be worth the effort.

Here are the pros and cons to consider:

Pros

•   Higher loan limits: Self-employed individuals who make enough money to justify buying a house priced above conforming loan limits can get jumbo loans to finance their dream home.

•   Flexible underwriting: By using non-QM loans, self-employed borrowers can use documentation like 1099s or bank statements instead of W-2s and tax returns to demonstrate their income and employment.

Cons

•   Higher interest rates: Jumbo loans may have higher interest rates because they pose a greater risk to the lender.

•   Stricter qualification criteria: Anyone applying for a jumbo loan should be prepared for stricter qualification criteria, but self-employed borrowers may have even more hurdles to clear. Lenders might want to see multiple years’ worth of income — and the income, credit score, and DTI thresholds may be higher than for a conforming loan.

Recommended: What to Consider When Choosing a Mortgage Lender

The Takeaway

Self-employed individuals may have a tougher time getting approved for a jumbo loan, but it’s not impossible. Having a strong credit score and low DTI are important, but having the proper documentation to demonstrate stable income is also crucial.

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%.

FAQ

How many years of tax returns do I need to provide for a jumbo loan?

Typical borrowers will need to provide at least two years of tax returns to get a jumbo loan. Self-employed individuals, however, may need to provide additional documentation to get approved for funding.

Can I use 1099 income to qualify for a jumbo loan?

Some lenders allow you to use 1099 income to qualify for a jumbo loan. Self-employed individuals who don’t receive any W-2 income may want to consider lenders that offer 1099-only loans.

What is a 1-year self-employed mortgage and how does it work?

Lenders typically want to see at least two years of stable income. Borrowers who have been self-employed for just one year, however, may be able to get a mortgage from specific lenders.This mortgage can be more challenging to get: Lenders will need borrowers to demonstrate the stability of their income, the financial strength of their business, and a promising business outlook. Usually, the self-employed borrower needs to have been in the industry longer than a year, even if they’ve only been self-employed in said industry for a year.

Are there any special requirements for 1099 home loans?

Each lender will have its own requirements for a 1099 home loan, like minimum credit score, maximum DTI, and loan limits. Check a lender’s requirements before applying.

What is the minimum credit score required for a jumbo loan?

Credit score requirements for jumbo loans vary by lender, but typically, you’ll need at least a 700 score to qualify. Before applying, ask potential lenders what their minimum credit score requirements are. Some lenders may approve loans for borrowers with scores below 700, but interest rates may be higher.

How much of a down payment do I need for a jumbo loan?

Down payment requirements for jumbo loans vary by lenders. Many lenders require that you put at least 20% down for a jumbo loan, but in some cases, lenders may approve jumbo loans with as little as 5% down.

Photo credit: iStock/SeventyFour

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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Buying homeowners insurance involves a few simple steps that ensure you’re purchasing a policy tailored to your needs. By investing a little time, you’ll be rewarded with coverage that protects your home and your belongings at the right price. This holds true whether you’re buying a house and insurance for the first time or shopping around for a better rate.

Insurance can be tricky, and many policies have a flurry of exceptions when it comes to what’s covered and what isn’t. Having an insurance policy with certain kinds of exceptions can wind up costing you hundreds of dollars for coverage that might fall short when it’s needed.

Fortunately, you can avoid that scenario. Here, we’ll walk you through how to buy homeowners insurance as well as offer some tips on how to find the best rate on your policy this year.

5 Steps to Shopping for Homeowners Insurance

When shopping for homeowners insurance, it’s a good idea to compare similar policies. You want to be sure you’re reviewing what different insurers charge for policies with almost identical coverage.

You’ll also want to shop around to get the best deal you can. Policies from the same company can vary widely by geography, property type, and even between two different zip codes.

It’s also a smart move to compare some intangibles, such as a company’s reputation for customer service and claims satisfaction. They can have a big impact when it comes time to file a claim.

Now, let’s walk through the steps of how to shop for homeowners insurance.

Step 1: Decide How Much Coverage You Need

When deciding how much homeowners insurance coverage you need, you’ll want to make sure that you have enough coverage to replace your most important belongings; rebuild your house in the event it’s destroyed; and cover any liability for injuries that might occur on your property. Your policy will be there in case a fire, storm, or crime causes a loss.

In industry terms, homeowners insurance coverage for the aforementioned events is typically broken into four categories:

•   Personal property coverage: Insures against losses to personal property — including furniture, clothing and electronics — in the event of a covered incident.

•   Dwelling coverage: Covers the repair or replacement of your property and any attached structures, like a garage, fence, or any sheds.

•   Liability coverage: Protects against any medical or legal expenses that you may be liable for as a result of injuries that occurred on your property.

•   Additional living expense coverage (ALE or Loss of use coverage): Pays for temporary housing and related costs in the event you’re displaced from your home due to a covered loss.

Each of the coverages listed above are subject to their own insurance limits. These are calculated based on both the insurers’ proprietary formulas and the amount coverage you choose to purchase. Here’s a closer look at each kind of coverage and how much you might want to buy.

Personal Property Coverage

Just as the name suggests, personal property coverage covers the cost of any personal property that you would need replaced in the event of a covered loss. This can include all the contents of your home, including furniture, electronics, kitchenware, and jewelry.

Generally, you’ll want enough personal property coverage to cover the cost of replacing all of your important belongings. To help you calculate how much this might cost, create a written inventory of all your major belongings and their cost. This allows you to better estimate how much personal property coverage you need and gives your insurer a reference point for how much insurance you might need. You might even consider doing a video inventory to keep track of your property.

Bear in mind that not all items are covered under your home insurance policy. For example, any vehicles damaged while housed in your garage should be covered under your auto insurance. Additionally, rare and high-value items, like art, fine jewelry, and antiques, may be subject to value caps under your policy and may require separate/supplemental insurance policies for full coverage.

Recommended: Should I Sell My House Now or Wait?

Dwelling Coverage

Dwelling coverage covers the cost to repair or rebuild the building on your property, in addition to any attached structures, like garages, balconies, or fences. When you think about the dollar amount here, you probably want to be prepared for the worst-case scenario of totally rebuilding your home. Though rare, this kind of catastrophic incident can happen.

Liability Coverage

Liability coverage helps shield you from lawsuits in the event you’re found liable for any accidents that occur on your property. These can range from slips and falls to any damage caused by falling trees from your property.

Generally, the more assets you have, the more liability insurance you’ll want to purchase. However, liability coverage will only pay out to a set dollar limit as listed on your policy, with you responsible for any balance. If you’re looking for added liability coverage, you may want to look into a personal umbrella policy.

Additional Living Expense Coverage

Additional living expense coverage, or loss of use coverage, pays for reasonable housing and living costs if you’re displaced for an extended period due to a covered event. Imagine that a storm sent a tree branch crashing through your roof and your bedrooms became uninhabitable — that’s the kind of situation that would lead you to move out and tap what’s sometimes called ALE coverage.

Typically, your loss of use coverage will encompass a fixed percentage of your dwelling coverage. Larger families may wish to opt for more coverage if your weekly living expenses are particularly burdensome.

Learn the Difference Between ACV, RCV, and GRC Coverage

Once you have some ballpark numbers in mind for the amount of coverage you need, you also need to decide what kind of coverage you want in terms of potential payout. There are three terms to know — ACV, RCV, and GRC — and these will impact how claim amounts are determined as well as your premiums.

•   Actual Cash Value (ACV): Typically the cheapest option, ACV calculates your home and property’s value based on its current market value minus depreciation. Depreciation occurs naturally over time. Let’s say you had a 10-year-old refrigerator that had cost $1,000 when you bought it. After 10 years, its “cash value” might be, say, $100, so that is what ACV would reimburse you if it were destroyed during a covered event. This would not enable you to go out and buy a similar unit.

•   Replacement Cost Value (RCV): This policy is more expensive. In the event of loss, it insures your home for the cost it takes to rebuild it like new and replace the items in it at their full cost. Unlike actual cash value, RCV does not factor in depreciation.

•   Guaranteed Replacement Cost (GRC): The most expensive policy of the bunch, this policy insures your home and property for its replacement cost value plus a certain percentage over that amount, which can help protect against inflation.

💡 Quick Tip: If you have a mortgage, a homeowners policy may be required by your lender. Surprisingly, unlike auto insurance, there is no legal mandate to carry insurance on your home.

Step 2: Verify Details About Your Home

Before an insurer can give you a quote, you’ll need to provide them with details about you and your home so they can accurately price your home insurance policy.

Keep in mind that insurance agents will take steps to verify the accuracy of this information, so be sure to answer to the best of your ability. Here are some of the most commonly requested details:

•   Property size and foundation

•   Roof type, material, and age

•   Age of structure and building materials

•   Age and type of electrical, plumbing, and heating system

•   Presence of any adjacent structures, pools, fences, etc.

•   Presence and number of pets

•   Intended use of property (rental, secondary, or primary home)

You can ask your real estate agent to forward you this information or obtain it from publicly available sources. Often, many of these details can be found in your home inspection and appraisal reports. Remember to disclose any improvements or renovations that have been made over time.

Step 3: Consider Whether You Need Added Coverage

A typical homeowners insurance policy goes a long way towards protecting you from damage to or loss of your home and property. But it doesn’t cover everything. Acquaint yourself with these details and decide if you want additional coverage.

According to FEMA, a common myth among many Americans is that homeowners insurance covers flooding. However, it does not.

In fact, here’s a list of common events that are often NOT covered under most home insurance:

•   Floods

•   Earthquakes

•   Sinkholes

•   Water and sewer backup

It’s important to review your insurance policy for any exceptions or issues not mentioned that you may want covered. You may be able to purchase additional insurance coverage for the above-mentioned issues as part of a separate policy, or what’s known as an endorsement, on your existing home insurance policy.

Also remember that personal property coverage often has a reimbursement cap on valuable items, which may limit the recoverable amount on certain rare or valuable goods. If you inherited valuable artwork or saved like crazy to afford a luxury watch, you may want to purchase additional endorsements for these.

Step 4: Take Advantage of Any Discounts Your Insurer Offers

Before finalizing your policy, check with the insurer about any discounts they offer and how many you might qualify for.

These can take them form of bundling discounts, which reward you for purchasing other policies (e.g. auto and life) through the same insurer; retention discounts which reward you for staying with a single insurer for an extended period of time; and even safety discounts, which reduce your premiums based on various improvements that you make to your home (e.g. adding a security system).

Each insurer has its own batch of discounts that you may be eligible for. Make sure to check with each potential policy provider to confirm that you’re getting the best deal possible.

Recommended: How Much Is Homeowners Insurance?

Step 5: Finalize Your Policy and Figure Out Your Payments

Now that you’ve selected the coverage you want, at the price you want, it’s time to put the finishing touches on your homeowners insurance policy.

First, you’ll want to set your insurance policy deductible, which is the amount you agree to be personally responsible for before the insurance company pays out on any claims. This is similar to a copay on a health insurance plan and is charged on a per-claim basis.

Generally, higher deductibles lead to lower insurance premiums, because they transfer some of the financial burden of paying for claims from the insurer to you.

While you will end up paying more out of pocket when you need to file a claim, this can be a smart financial decision for newer homes and low-risk areas. Of course, this option will only make sense for you though if you are confident you can cover that deductible in an emergency.

Second, you’ll need to decide how you wish to pay your insurance premiums. Policies are typically written on an annual basis and can be paid on a monthly or quarterly basis, or even in one lump sum. Some insurers offer added discounts if you decide to pay the entire amount upfront.

Finally, you’ll need to set the date on which your policy takes effect. Generally, this should be the same day you take possession of the property if you’re buying a new home. If you’re switching insurance providers, it should coincide with the end date of the previous policy, without any lapse in coverage.


💡 Quick Tip: Your insurance needs depend on your age, dependents, assets, possessions, and economic situation. As your circumstances change, so should your insurance plans.

The Takeaway

Buying the right homeowners insurance ensures that your home is protected if disaster ever strikes. That said, shopping for a policy can feel overwhelming at first since there are a lot of new terms to be learned, figures to calculate, and decisions to be made.

As you gather the information and quotes you need to make your choice, you’ll be rewarded with a policy that suits your needs, is priced just right, and can give you peace of mind.

If you’re a new homebuyer, SoFi Protect can help you look into your insurance options. SoFi and Lemonade offer homeowners insurance that requires no brokers and no paperwork. Secure the coverage that works best for you and your home.

Photo credit: iStock/JLco – Julia Amaral

Auto Insurance: Must have a valid driver’s license. Not available in all states.
Home and Renters Insurance: Insurance not available in all states.
Experian is a registered trademark of Experian.
SoFi Insurance Agency, LLC. (“”SoFi””) is compensated by Experian for each customer who purchases a policy through the SoFi-Experian partnership.

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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If you’re looking at your chipping laminate countertops, you’re probably wondering what it would take to replace them — and maybe your whole kitchen, for that matter. That leads to the big money question: How are you going to pay for home improvements?

One option is to cash out the equity you have in your home in order to fund improvements on it, by doing a cash-out refinance. A cash-out refinance replaces your current mortgage with a new one and refunds you the difference in cash. You can use the cash however you would like.

However, it’s not your only option, and not every situation is the same. You’ll need to consider what it means to refinance for home improvements and whether or not it’s right for you.

How Cash-Out Refinancing for Home Improvement Works

When you cash out equity for home improvements, you can get a new mortgage and have some equity refunded to you in the form of cash. It’s best to look at how cash-out refinancing works with an example.

Let’s say you own a home worth $800,000 and your current mortgage amount is $500,000. Lenders allow a refinance of around 80% of the home’s value, so 80% of $800,000 is $640,000. $640,000 is the maximum amount that the lender will loan.

Let’s suppose you qualify for that loan. Next, the lender will pay off your original mortgage of $500,000. After you subtract $500,000 from $640,000, you’ll have $140,000 left. You’ll receive $140,000 in cash after you close on the loan (minus the closing costs on the loan). Your new loan amount will be $640,000.

If you want to take a closer look at how much money you would want to have on hand for a renovation, you can use a home improvement cost calculator to form an estimate of potential expenses.

What Can You Use the Cash For?

According to Fannie Mae guidelines, which are the regulations mortgage lenders follow for conforming loan types, you can use the cash from a cash-out refinance for anything. That includes whatever home improvement dreams you have — a pool, new kitchen, she-shed, pickleball court — so dream big!

Pros and Cons of a Cash-Out Refinance for Home Improvements

Benefits

Cash-out refinancing for home improvement has some benefits to consider.

•   A better loan. When you apply for a cash-out refinance loan, your loan terms will change with the new mortgage. It’s not guaranteed, but you could end up with a lower interest rate than the one you had on your previous mortgage. Depending on the scenario, it is possible that a refinance could lower the payment for the borrower while accessing cash and shortening the term.

•   Increased property value. When you refinance for home improvements, the renovations could increase your property value. New flooring or an updated kitchen could increase the value of your home by more than the amount of money you pour into the project.

•   One payment. With a cash-out refinance, there’s one payment for both your mortgage and the cash you take out for home improvement projects. It’s convenient and usually offers a lower monthly payment than other financing methods.

•   Lower interest rates than other types of loans. A mortgage has a lower interest rate than other loan types, such as credit cards or personal loans, which can reach an APR of 30%. Just keep in mind that financing over another 15- or 30-year term could add a significant amount of interest to your loan, so be judicious in how much debt you add to your home.

Drawbacks

As with any financing option, there are some drawbacks you’ll want to consider before refinancing for home improvement with a cash-out refi.

•   Loan terms may change. If you have very favorable loan terms on your original mortgage, you won’t necessarily get those same ones when you refinance. If interest rates have risen since your original closing, the mortgage refinancing cost could make your new mortgage more expensive than an old one.

•   What you can borrow depends on equity. You need a substantial amount of equity to be able to do a cash-out refinance. Your lender may only want to lend on 80% of the home’s current market value. That means you’ll need to have an original mortgage amount even further beneath that amount to be able to cash out equity for home improvements.

•   Closing costs. With a new mortgage come new closing costs, which are never fun to pay. There are usually fewer closing costs to pay with a refinance, but it’s still a cost you need to consider.

•   Long-term costs. Increasing the amount of your mortgage over a long period brings large interest costs. Take a look at an amortization table or mortgage calculator so you know exactly what the total cost of your mortgage will now be.

Requirements for a Cash-Out Refinance

To qualify for a cash-out refinance, you’ll need to qualify for a mortgage again. A lender will look at your credit score, debt-to-income ratio, as well as the amount of equity you have in your home.

Credit Score Minimum

When you’re looking to qualify for a mortgage, you want your credit score as high as possible so you can qualify for the best available mortgage rates. For the best rates, aim for a credit score of 740 or above. A credit score of 620 is needed for most home loan types, though you may be able to get a home with a credit score around 500, depending on the type of mortgage or program available in your area.

Home Equity Requirements

The amount of your new mortgage will retain around 20% equity before refunding cash (sometimes less, depending on the lender or the program). If your home is worth $500,000, that means they’ll likely be willing to lend up to $400,000 on the home. If your current mortgage sits at $300,000, the most cash you would be able to access with a cash-out refinance is $100,000.

Debt-to-Income Ratio (DTI)

A debt-to-income (DTI) ratio is the total sum of your debts divided by your income. Generally, lenders look for a DTI ratio at 43% or lower. There are exceptions, so be sure to consult with your lender.

Cash-Out Refinance vs Home Equity Line of Credit (HELOC)

Another way to pay for home improvements is with a home equity line of credit (more commonly referred to as a HELOC). A HELOC is a second mortgage loan that uses the equity in your home as collateral. It acts like a line of credit and you only borrow what you need. It’s flexible and easy to use.

It makes sense to use a HELOC instead of a cash-out refinance in a few scenarios:

•   When the interest rate on your current mortgage is very low. Changing your current mortgage to a higher-interest mortgage with a cash-out refinance would be very expensive. Paradoxically, a HELOC or personal loan will have an even higher interest rate than what you can get on a primary mortgage, but because you’re paying the HELOC or personal loan off sooner, you will spend far less in interest.

•   You can make a larger HELOC payment. A HELOC usually won’t take 30 years to pay off. On a HELOC that is paid off sooner, the monthly payment amount will be higher, but if the numbers make sense (meaning, you’re able to access enough money for your home improvements from a HELOC at a competitive interest rate and you can cover the payments), then you probably want to go with a HELOC instead of a cash-out refinance.

•   You’re not sure how much you need. With a HELOC, you apply for a credit line and are approved up to a limit, kind of like a credit card. You only take out what you need, which is convenient when you’re planning a project and are not sure exactly how much it will cost.

The Takeaway

Cashing out the equity for home improvements can be an affordable way to update, repair, or improve your home — but only if the circumstances are right. While a lump sum of cash can be a great way to pay for home improvements, be sure to factor in all the costs before you choose this method. There are other financing tools available to you if this one is too costly.

Turn your home equity into cash with a cash-out refi. Pay down high-interest debt, or increase your home’s value with a remodel. Get your rate in a matter of minutes, without affecting your credit score.*

FAQ

Can I use a cash-out refinance for ongoing or future home improvement projects?

The cash you get from refinancing your home can be used for any purpose.

How long does the process typically take for a cash-out refinance for home improvements?

The cash-out refinance process averages 30 to 45 days regardless of what purpose the excess funds will be used for.

Can I use a cash-out refinance to fund home improvements on an investment property?

Yes, however the requirements for a cash-out refinance on an investment property may be different from those on your personal residence, so it’s best to consult with a mortgage lender.

Are there any restrictions on how I can use the funds from a cash-out refinance for home improvements?

No, there are no restrictions on how to use funds from a cash-out refinance. You can pay for whatever home improvements you would like. There are restrictions, however, on whether or not you can deduct the interest you pay on the loan on your taxes. Ask your tax preparer for guidance.

Can I apply for a cash-out refinance for home improvements if I have a second mortgage or existing liens on my property?

Yes, but the second mortgage and other liens will likely need to be paid for a lender to issue a new mortgage for a cash-out refinance. There are some exceptions, so it’s best to consult with your mortgage professional on this one.

Photo credit: iStock/Kerkez

*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.

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.

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.

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Jumbo loans are just that: jumbo. For 2023, conforming loan limits for houses in most counties — set by the Federal Housing Finance Agency — are $726,200. If you want to buy a more expensive home and need to finance more than that limit, you’ll be in the market for a jumbo loan.

Homeowners often refinance traditional (i.e., conforming) mortgages to get a lower interest rate, change their loan terms, or tap into home equity. But what about homeowners with a jumbo loan: Can they refinance as well?

A mortgage refinance for a jumbo loan is possible, but it may be a little more complicated. Let’s have a look at the process of a jumbo loan refinance.

When Can You Refinance a Jumbo Loan?

There is no set timeline for refinancing a jumbo mortgage loan. In theory, you could refinance at any point during your loan, but lenders typically have strict requirements before approving a jumbo mortgage refinance. If you’ve been paying down the loan for a while, it’s possible your refinance would fall within the conforming loan limits. To determine whether or not this is the case, take a look at the conforming loan limits for your specific area. If you still need a jumbo mortgage loan, this is what you’ll want to consider:

Credit Score

Unsurprisingly, getting approved for a jumbo refinance means you’ll need a strong credit score. To refinance to a 30-year fixed-rate loan, lenders typically want to see a credit score of 680 or higher. Refinancing to a 15-year fixed or adjustable-rate mortgage has an even tougher credit score threshold: 700 or higher. And if you’re looking for a refinance for an investment or rental property, you may need a credit score as high as 760.

Recommended: Does Having a Mortgage Help Your Credit Score?

Debt-to-Income Ratio

Similarly, lenders will analyze your debt-to-income (DTI) ratio when reviewing your jumbo refinance application. While lenders typically want a DTI of 50% or lower for conventional loans, you may need a DTI as low as 36% when refinancing a jumbo mortgage loan.

Cash Reserves

Lenders will also typically want to see that you have cash reserves set aside. The amount of mortgage reserves you need will vary by lender but could be as much as six months’ worth of mortgage payments in liquid assets, more if you are self-employed.

Other Considerations

In addition, lenders may consider your payment history. If you have made one or more late payments on your current jumbo mortgage loan, you might not get approved for a refinance.

Other lenders may want you to have a certain amount of equity in your home before permitting a refinance.

And if you’ve filed for bankruptcy, it can be much more challenging to refinance. You’ll usually need to wait until the bankruptcy (or a past foreclosure) vanishes from your credit history — potentially 10 years.


💡 Quick Tip: If you refinance your mortgage and shorten your loan term, you could save a substantial amount in interest over the lifetime of the loan.

Jumbo Loan Refinance Requirements

Assuming you have the right qualifications for a jumbo refinance, here’s what you’ll typically need to provide to the lender:

•   Two previous months of bank statements

•   Proof of income, like your most recent pay stub

•   Tax returns from the last two years, including all W-2s

•   A profit/loss and balance sheet if you’re self-employed

•   Any other documentation of income, such as 1099s, that can help your chances of approval

Of course you’ll also have to go through all the steps of refinancing a mortgage that would be required with any loan.


💡 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.

Pros and Cons of Refinancing a Jumbo Loan

As with regular refinancing, jumbo mortgage refinances have a number of pros and cons to consider:

Pros

•   Faster payoff: If you refinance to a mortgage with a shorter term, you’ll pay off your home sooner — and be free from that high monthly payment.

•   Less interest: If you get a lower interest rate, you could save money over the life of the loan.

•   Predictable payments: If you switch from an adjustable-rate mortgage to a fixed-rate loan, your monthly payments will be locked in.

•   No more PMI: You may be able to get rid of private mortgage insurance when you refinance your loan.

•   Home improvements: If you do a jumbo cash-out refi, you can leverage the equity you have in your home to make home improvements. You could also use the money to pay down debt or cover college costs.

Cons

•   Closing costs: Refinancing a home loan means you’ll have to close again, and that can get expensive. According to Freddie Mac, closing costs when refinancing average about $5,000.

•   Larger monthly payments: If you shorten your loan term when refinancing, be prepared for larger monthly payments. You’ll want to feel confident that if you face a job loss, have a new baby, or experience another big life change you can still afford the higher monthly payment.

•   Lost equity: With a cash-out refinance, you borrow against the equity in your home. While it’s helpful for funding home improvements or paying down high-interest debt, you lose out on that equity you’ve built.

Recommended: How Much Does It Cost to Refinance a Mortgage?

How Will Refinancing a Jumbo Loan Affect Your Mortgage?

Refinancing a jumbo loan can have a few intended effects, including:

Lower Rate

Mortgage rates fluctuate over time. If rates drop, you might want to refinance to take advantage of the lower interest rate.

Longer Loan Term

If your current monthly mortgage payment is too high for you to handle, you may be able to lower it by refinancing and lengthening the loan term. Keep in mind, you’ll likely pay more in interest over the life of the loan — but the tradeoff for lower monthly payments might be worth it.

Shorter Loan Term

On the flip side, you might be able to shorten the length of your loan by refinancing. Your monthly payments may go up, but you’ll likely pay less in interest, and you’ll be free from the burden of a mortgage payment significantly sooner.

Take Cash Out of Equity

Many homeowners do a cash-out refinance to take advantage of some of the equity they’ve built in their home. You might refinance to get a nice lump sum to put toward home renovations, high-interest credit card debt, or another big expense.

Change Interest Structure

If your jumbo loan is an adjustable-rate mortgage, you may have trouble predicting your monthly payments. When you refinance to a fixed-rate loan, you’ll get more dependable monthly payments, which can make it easier to budget.

The Takeaway

Refinancing a jumbo mortgage is possible and could yield several benefits, like a better interest rate, better terms, and a better interest structure. The requirements to refinance your jumbo loan may be stricter than refinancing a conforming loan. Work with a lender to understand when and how you can refinance your jumbo loan.

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%.

FAQ

Can I refinance my jumbo mortgage loan with my current lender?

It may be possible to refinance your jumbo mortgage loan with your current lender. But refinancing is also a time to shop around and consider the terms other lenders have to offer. With any jumbo loan refinance, you’ll need to meet certain requirements; this might include a minimum credit score or DTI.

What are the risks associated with refinancing a jumbo mortgage loan?

Refinancing a jumbo mortgage will involve significant closing costs. Your credit score will also likely drop when you refinance because of the hard inquiry. And if it’s a cash-out refinance, you’ll lose some of the equity you’ve built in your home.

How often can I refinance my jumbo mortgage loan?

While there’s technically no limit to how often you can refinance a mortgage loan, you likely won’t want to do it too often. You’ll pay closing costs every time you refinance, and your credit score can take a hit each time.

Can I still refinance my jumbo mortgage loan if I’m self-employed?

It’s possible to refinance a jumbo mortgage loan if you’re self-employed. You may just have to jump through additional hoops to prove your income. That can mean providing a profit-and-loss and balance statement, tax returns or 1099s from recent years, and business bank statements.

Can I refinance my jumbo mortgage loan if I have an adjustable-rate loan?

Yes, you can refinance your jumbo mortgage if you have an adjustable-rate loan. One of the many reasons people consider refinancing a jumbo loan is to switch from an adjustable- to a fixed-rate mortgage.

What should I do if I’m having trouble making payments on my jumbo mortgage loan?

If you’re having trouble making payments on your jumbo mortgage loan, you may be able to refinance to get a better interest rate/and or lengthen the loan term. Both options could lower your monthly payment. However, if you’ve already missed one or more payments, getting approved for a jumbo refinance could be challenging.

How do I know if refinancing my jumbo mortgage loan is the right decision for me?

To determine if refinancing a jumbo mortgage loan is right for you, consider your current finances and long-term goals. If refinancing means your monthly payments will be more manageable, you’ll save money in the long term, or you’ll be able to leverage your equity to fund a home renovation or pay down high-interest debt, it may be a good strategy for you.

Photo credit: iStock/FG Trade

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.

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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You want to become a homeowner but aren’t sure how you’re going to save up for your down payment. Typically, you’re going to need at least 3% to 5% for a down payment for a conventional mortgage, or 20% on a loan that doesn’t require private mortgage insurance.

Fortunately, there are a number of methods you can use to stash away money for your future home. Here are some of the best ways to save for a house and get one step closer to your dream.

1. Creating a Budget

Living on a budget may not be easy, but in the long run it can help you save money to put toward a home purchase. Creating a budget to track where your money is going is a good first step in a house savings plan.

Some effective ways to do this are recording expenses in a spreadsheet or using a budgeting app to determine your spending practices and identify where changes can be made to meet your savings goal.


💡 Quick Tip: Want to save more, spend smarter? Let your bank manage the basics. It’s surprisingly easy, and secure, when you open an online bank account.

2. Using Cash Envelopes

The theory behind this method is that it may be harder to part with cash than it is to swipe a debit or credit card. The cash envelope budgeting method involves distributing cash each month (or pay period) into envelopes based on categories you establish. When you’re out of cash for each category, you stop spending.

3. Deleting Your Stored Cards

Do you store your payment information on Amazon or other e-commerce stores? If so, it’s time to consider deleting them from each store or from your browser settings. If you have to manually input your card each time you want to make a purchase, you may just stop spending so much money online.

4. Downsizing Your Life

Another one of the tips for saving for a house involves downsizing your life. This could mean moving to a smaller rental or to a more affordable area of town. Just keep in mind that there is always a flip side to downsizing. For instance, your smaller apartment may not include parking, so you might be taking on an expense you didn’t have before. Moving to a different part of town might mean spending more on transportation costs getting to work each day. It’s a good idea to weigh the pros and cons before making any big decisions.

5. Setting Up Automatic Transfers

Reaching your savings goals might happen faster by setting up automatic transfers from checking account to savings account each time you’re paid. If your paycheck is direct-deposited, you may also be able to split the deposit into more than one account, on a percentage or dollar-amount basis.

6. Postponing Vacation

This method can reap plenty of savings if your usual vacation is a costly one. Instead of taking a big trip, a staycation may be entertaining and less expensive. Check out your local newspaper’s website to find free activities and events in your area. Art museums sometimes offer free admission days, and area nature trails are generally free and can be a good way to have fun and get exercise in one fell swoop. Now is the time to be creative since you’re working on your house savings plan.

7. Tackling Your Debt

If you get 4.50% APY in your high-yield savings account, but you carry a credit card balance with an interest rate of 23.99%, it may make more sense to put your money towards your debt right now rather than savings.

8. Eating at Home

Dining out is expensive. The average American household spends more than $3,000 per year on eating out. By skipping the takeout and restaurants and cooking your meals at home, you can add that money to your house savings plan.

9. Making Your Own Coffee

It’s a cliche, but it’s true: If you skip the lattes, you could boost your savings. The average American spends $92 per month on coffee, which adds up to about $1,100 per year. Purchasing a coffee maker and brewing your own cup of joe as opposed to hitting up a coffee shop every day will likely improve your home savings plan.

10. Using Coupons at the Grocery Store

Looking for coupons for items you normally buy anyway can trim your grocery bill. Coupons can be found on coupon websites and on brands’ websites.

Recommended: Tips for Grocery Shopping on a Budget

11. Buying Things on Sale

Just because you want something doesn’t mean you need to have it right away. Waiting to buy things when they go on sale is another one of the best tips for saving for a house. Along with looking at stores’ advertised sales, you could always create a Google alert to find out when things go on sale by typing in your favorite stores’ names + sales on Google Alerts.

12. Using Promo Codes

Promo codes are like coupons for online purchases. Browser extensions that search the web for deals can bring those promo codes to you and save you precious search time and effort.

13. Cutting Out Cable

Cable television can be a major monthly expense for some households, sometimes hundreds of dollars every month. One of the best ways to save is to cut the cord, switch to streaming services, and potentially pay much less per month on your favorite entertainment by saving on streaming services.

14. Canceling Your Subscriptions

You may be spending money on monthly subscriptions without realizing how much. Canceling subscriptions to things like lifestyle boxes you aren’t using anymore or magazines you don’t read can add up to significant savings.

15. Making the Most of the Library

The local library is a fantastic resource. You can borrow books, magazines, and movies instead of buying them, and some libraries even offer access to free audiobooks. Libraries are funded by taxes, so you’re probably already contributing to this resource—there’s little reason to pay twice for items it provides as a public service.

16. Canceling Your Gym Membership

Gym memberships can be pricey, but exercise is not. Using free, online workout videos and things in your home as exercise equipment (e.g., stepping on your stairs, doing wall or table pushups, or using a chair for barre exercises), or walking around your neighborhood can save money over a gym membership.

17. Shopping Around for Insurance

You may be overpaying for insurance. Comparing rates and getting different quotes for your car, renter’s, pet, health, and other types of insurance can ensure you’re getting the best deal possible.

18. Steering Clear of Checking Account Fees

Is your bank charging you a monthly maintenance fee just to keep your account open? If so, it might be worth looking into switching banks or asking your bank how you can avoid these fees. For example, if you have a direct deposit into the account or maintain a minimum daily account balance, you may be eligible for a fee-free account.

19. Selling Your Stuff

Do you have things you never use anymore? Could they fetch some cash? Holding a garage sale or selling your stuff online might net a few dollars to add to your house savings plan. You’ll probably want to buy new things for your new home anyway, and selling your old things will allow you to save up.

20. Asking Your Boss for a Raise

During your annual performance review, consider asking for a raise, highlighting your accomplishments and why you deserve more money. Be specific about improvements you’ve made to the company by backing up your accomplishments with data.

21. Switching to a Better Job

If you aren’t making enough money in your current position, then consider switching to a higher-paying job. It’s a good idea to keep your current job until you find a new one, though.

22. Taking on a Side Hustle

If you have the time and energy, earning extra money on nights and weekends with a side hustle might be an option. For instance, you could start a dropshipping business, take up freelancing, or do affiliate marketing.

23. Signing Up for a Travel Rewards Credit Card

If you need to travel or you are still planning a vacation, using a travel rewards credit card may be a good idea. These cards offer certain rewards for different categories such as travel, gas, and dining out, and allow you to put your rewards towards flights, hotels, rental cars, and more. Plus, many of them offer other ways to save, such as providing you with rental car and baggage delay insurance or no foreign transaction fees.

Recommended: Credit Card Rewards 101: Getting the Most Out of Your Credit Card

24. Getting a Cash Back Credit Card

With a cash-back credit card, you can earn cash rewards every time you spend. Putting that cash back toward a statement credit or bank transfer will help accelerate your savings.

25. Renting Your Spare Room

If you have an extra room in your apartment that you aren’t using, you could get a roommate or list it on a rental site to reduce your overall living expenses. Just make sure that you get permission from your landlord before inviting anyone else to move in.

26. Renting Out Your Storage Space

Another one of the best ways to save for a house is to rent out your unused storage space on a peer-to-peer site. You could generate income without having to do much work at all, and you won’t have to live with someone else—just their stuff.

27. Making Your House Savings Plan Known

Your Aunt Mildred may always get you boxes of chocolates for your birthday, and your dad might give you gift cards for Amazon. But letting your family and friends know you’re trying to save for a home might plant the seed for them to give you cash instead. If you’re getting married, this is a time to tell people about your plans so that instead of registry gifts, they might give you cash for your future home.

28. Opening a High-Yield Savings Account

Putting your money into a regular savings account may not result in much of a return. However, putting money in a high yield savings account may net more interest and get you closer to reaching your savings goals. A high-yield savings account typically offers 20 to 25 times the national average of a typical savings account.

Recommended: How Do High-Yield Savings Accounts Work?

29. Hiring an Accountant at Tax Time

If you’ve been doing your taxes on your own every year, you may have missed potential tax savings you might be eligible for. A tax professional may be able to maximize your savings, possibly resulting in a larger refund, or minimize taxes you owe.

30. Saving Your Tax Refund

If you get a tax refund, consider saving it instead of spending it. The money can be a nice addition to your down payment, possibly even earning interest in high-yield savings account until you need it.

31. Changing Your Tax Withholding

Among the best ways to save for a house is by keeping more money from your paycheck. If your withholding is too high, the IRS is essentially holding your money for you all year round. Instead of getting a large tax refund, keeping your money now and investing it in an interest-bearing account will help you save up for your home.

The Takeaway

Saving for a house takes some time and effort, but there are many different ways to do it. For instance, by eating out less, you could potentially save thousands of dollars a year. Launching a side hustle could increase your income. And opening a high-yield savings account, which typically offers considerably higher interest rates than a traditional savings account, could also help your money grow — and help you achieve your dream of home ownership.

Interested in opening an online bank account? When you sign up for a SoFi Checking and Savings account with direct deposit, you’ll get a competitive annual percentage yield (APY), pay zero account fees, and enjoy an array of rewards, such as access to the Allpoint Network of 55,000+ fee-free ATMs globally. Qualifying accounts can even access their paycheck up to two days early.

Photo credit: iStock/Talaj

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

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

SoFi® Checking and Savings is offered through SoFi Bank, N.A. ©2024 SoFi Bank, N.A. All rights reserved. Member FDIC. Equal Housing Lender.
The SoFi Bank Debit Mastercard® is issued by SoFi Bank, N.A., pursuant to license by Mastercard International Incorporated and can be used everywhere Mastercard is accepted. Mastercard is a registered trademark, and the circles design is a trademark of Mastercard International Incorporated.

4.00% APY
SoFi members with direct deposit activity can earn 4.00% annual percentage yield (APY) on savings balances (including Vaults) and 0.50% APY on checking balances. Direct Deposit means a recurring deposit of regular income to an account holder’s SoFi Checking or Savings account, including payroll, pension, or government benefit payments (e.g., Social Security), made by the account holder’s employer, payroll or benefits provider or government agency (“Direct Deposit”) via the Automated Clearing House (“ACH”) Network during a 30-day Evaluation Period (as defined below). Deposits that are not from an employer or government agency, including but not limited to check deposits, peer-to-peer transfers (e.g., transfers from PayPal, Venmo, etc.), merchant transactions (e.g., transactions from PayPal, Stripe, Square, etc.), and bank ACH funds transfers and wire transfers from external accounts, or are non-recurring in nature (e.g., IRS tax refunds), do not constitute Direct Deposit activity. There is no minimum Direct Deposit amount required to qualify for the stated interest rate. SoFi members with direct deposit are eligible for other SoFi Plus benefits.

As an alternative to direct deposit, SoFi members with Qualifying Deposits can earn 4.00% APY on savings balances (including Vaults) and 0.50% APY on checking balances. Qualifying Deposits means one or more deposits that, in the aggregate, are equal to or greater than $5,000 to an account holder’s SoFi Checking and Savings account (“Qualifying Deposits”) during a 30-day Evaluation Period (as defined below). Qualifying Deposits only include those deposits from the following eligible sources: (i) ACH transfers, (ii) inbound wire transfers, (iii) peer-to-peer transfers (i.e., external transfers from PayPal, Venmo, etc. and internal peer-to-peer transfers from a SoFi account belonging to another account holder), (iv) check deposits, (v) instant funding to your SoFi Bank Debit Card, (vi) push payments to your SoFi Bank Debit Card, and (vii) cash deposits. Qualifying Deposits do not include: (i) transfers between an account holder’s Checking account, Savings account, and/or Vaults; (ii) interest payments; (iii) bonuses issued by SoFi Bank or its affiliates; or (iv) credits, reversals, and refunds from SoFi Bank, N.A. (“SoFi Bank”) or from a merchant. SoFi members with Qualifying Deposits are not eligible for other SoFi Plus benefits.

SoFi Bank shall, in its sole discretion, assess each account holder’s Direct Deposit activity and Qualifying Deposits throughout each 30-Day Evaluation Period to determine the applicability of rates and may request additional documentation for verification of eligibility. The 30-Day Evaluation Period refers to the “Start Date” and “End Date” set forth on the APY Details page of your account, which comprises a period of 30 calendar days (the “30-Day Evaluation Period”). You can access the APY Details page at any time by logging into your SoFi account on the SoFi mobile app or SoFi website and selecting either (i) Banking > Savings > Current APY or (ii) Banking > Checking > Current APY. Upon receiving a Direct Deposit or $5,000 in Qualifying Deposits to your account, you will begin earning 4.00% APY on savings balances (including Vaults) and 0.50% on checking balances on or before the following calendar day. You will continue to earn these APYs for (i) the remainder of the current 30-Day Evaluation Period and through the end of the subsequent 30-Day Evaluation Period and (ii) any following 30-day Evaluation Periods during which SoFi Bank determines you to have Direct Deposit activity or $5,000 in Qualifying Deposits without interruption.

SoFi Bank reserves the right to grant a grace period to account holders following a change in Direct Deposit activity or Qualifying Deposits activity before adjusting rates. If SoFi Bank grants you a grace period, the dates for such grace period will be reflected on the APY Details page of your account. If SoFi Bank determines that you did not have Direct Deposit activity or $5,000 in Qualifying Deposits during the current 30-day Evaluation Period and, if applicable, the grace period, then you will begin earning the rates earned by account holders without either Direct Deposit or Qualifying Deposits until you have Direct Deposit activity or $5,000 in Qualifying Deposits in a subsequent 30-Day Evaluation Period. For the avoidance of doubt, an account holder with both Direct Deposit activity and Qualifying Deposits will earn the rates earned by account holders with Direct Deposit.

Members without either Direct Deposit activity or Qualifying Deposits, as determined by SoFi Bank, during a 30-Day Evaluation Period and, if applicable, the grace period, will earn 1.20% APY on savings balances (including Vaults) and 0.50% APY on checking balances.

Interest rates are variable and subject to change at any time. These rates are current as of 12/3/24. There is no minimum balance requirement. Additional information can be found at https://www.sofi.com/legal/banking-rate-sheet.