How to Save on Your Electric Bill This Summer

If you feel like your electricity bills get a little higher every summer, it’s not your imagination. For the June-through-September period of 2024, the average U.S. electric bill is projected to be $719, a nearly 8% increase year over year and the highest average in 10 years.

Fortunately, there are some simple things you can do to shrink your bills back down to size. Better yet, they don’t involve sacrificing comfort. While some measures require a small upfront investment, others are completely free. Read on for some of the most effective ways to save on your electric bill this summer.

Review Your Summer Electric Usage

If high electric bills are impacting your bank account this summer, a good first step is to review your electricity use patterns. Many utilities offer dashboards where you can view your daily and monthly usage to learn when you use the most energy. Some utilities even offer a mobile app that allows you to see your electricity usage in monthly, daily, and 15-minute time intervals to help you manage your energy consumption.

Knowing when you tend to use the most electricity — and how this is impacting your bill — can help you become more mindful of your energy usage. It can also give you motivation to make some changes.

Recommended: 8 Ways to Organize Your Bills

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Optimizing Your Air Conditioning System

Air conditioning accounts for about 19% of electricity consumption in U.S. homes, according to the U.S. Energy Information Administration’s most recent statistics. So one of the best ways to save on utility bills is to maximize the efficiency of your air conditioning system.

If you have central air, it’s a good idea to have a professional HVAC specialist perform annual maintenance on your equipment. This can go a long way in ensuring your air conditioner runs at peak efficiency. There are also some simple things you can do yourself to optimize the performance of your air conditioning system:

•  Vacuum air intake vents regularly. This will remove any dust buildup and allow the unit to function at a higher efficiency.

•  Regularly clean or replace air filters. Dirty air filters can restrict airflow, causing air conditioners to work harder and less efficiently.

•  Keep outdoor units clean. If you have a central unit outside, you can optimize performance by keeping your outdoor unit clear of debris and plant growth. The outdoor unit needs space to release heat, so make sure it has at least two feet of clearance on all sides.

•  Use fans to your advantage: Utilizing ceiling fans to circulate air can help you maintain a comfortable temperature while reducing the load on your air conditioner. For the most cooling effect, be sure the fan is turning counterclockwise (if it’s going the other way, you can typically change it by flipping a switch on the fan body).

•  Click up the thermostat: While the most energy efficient temperature is 78°F, that may not be cool enough to keep you comfortable. However, any uptick in your thermostat is helpful. In fact, you’ll save about 3% on your utility bill for every degree you raise the set temperature for your central air.

•  Install a smart thermostat. A smart thermostat can learn your schedule and adjust temperature automatically, ensuring energy is not wasted.

Recommended: How to Split Bills With Roommates

Energy-Efficient Cooling Alternatives

While air conditioning is effective, it is not the only way to keep your home cool. Consider these energy-efficient cooling alternatives to reduce your reliance on AC and lower your electric bill.

Attic Fan

Air from a hot attic can seep into your house and make your air conditioner work harder and more often. Not only does that increase your electricity bill, but it can also shorten the life of your AC system. An attic fan can help by circulating air and pushing stuffy, warmer air out of the house. This, in turn, can keep the entire house cooler. On days when it’s not too hot, it could be all you need.

Geothermal Heating/Cooling

Geothermal systems rely on stable underground temperatures for heating and cooling. They work by circulating liquid through buried tubes, exchanging heat between your home and the ground. It’s an efficient process that uses 25% to 50% less electricity than traditional HVAC systems, according to the Department of Energy. This can lead to a significant savings on utility bills over time.
On the downside, installing a geothermal system involves substantial digging to bury the pipes, which can be costly. Despite the initial expense, however, the long-term energy savings can make it a worthwhile investment.

Recommended: 15 Easy Ways to Save Money

Evaporative Coolers

In dry climates, evaporative coolers (also known as swamp coolers) can be an efficient, cost-effective cooling option. These units work by using a fan to blow air through a water-soaked pad, cooling the air before it enters your home. By cracking windows, hot air can escape, and cool air circulates effectively.

These coolers use less energy and water compared to traditional air conditioning, leading to lower utility bills. However, they are generally only effective in low-humidity climates.

Reducing Heat Gain in Your Home

One of the best ways to use less air conditioning is to reduce the overall heat that comes into your home. If you stop heat from coming inside in the first place, then you don’t have to pay to cool it. This can be one way to lower your energy bill when you’re working from home or if you’re home a lot during the day.

Some strategies include:

•  Ensure you have adequate insulation in the attic and walls. This greatly reduces the flow of heat into your home in the summer.

•  Seal up any cracks. Adding weatherstripping or caulk around doors and windows can help seal up any openings. This prevents the warm exterior air from leaking into your home.

•  Close windows and doors. Whenever it’s warmer outside than inside, it’s wise to close all windows and doors and latch them tightly to reduce heat gain.

•  Cover the windows. Another way to keep the heat outside is to cover windows with shades, blinds, or curtains during the day to block out the sunlight.

Recommended: 14 Reasons Why It’s So Hard to Save Money Today

Smart Appliance Usage and Vampire Energy

Vampire energy refers to electricity that devices consume while not actively in use but in “standby mode.” Common offenders include TVs, desktop computers, printers, device chargers, and kitchen appliances. While each device uses a small amount of power, when added all together, it can make up a significant source of your home’s electricity use.

The simplest way to cut standby power consumption in the summer (and year round) is to unplug devices, or turn off the power strips they are plugged into, when you’re not using them. Another option is to get some smart power strips. These strips help reduce energy waste by automatically turning off power to connected electronics when they are not in use.

When it comes time to replace an old appliance, consider purchasing an Energy Star-certified device. These appliances are designed to minimize phantom loads and improve your home’s efficiency.

The Takeaway

If you’re seeing significantly higher electric bills this summer, know that there are several steps you can take to save on the cost of electricity, even during the hottest months of the year. Some strategies — like cleaning your AC unit or reducing heat gain in your home — require just a small upfront cost, if any. Others (like replacing your heating/cooling system) call for a more significant investment, but can pay off over time by cutting your electricity bills both in the summer and year round.

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FAQ

What temperature should I set my thermostat to save money?

To save energy, as well as money, the U.S. Department of Energy recommends setting the thermostat to between 68°F and 70°F while you’re awake, and then making it a higher temperature (or, if it’s winter, a lower temperature) while you’re sleeping or away from home.

Are ceiling fans effective in lowering electric bills?

Yes, ceiling fans enhance air circulation and create a cooling effect, allowing you to raise the thermostat by about 4°F without sacrificing comfort.

During the summer, be sure your ceiling fan is turning counterclockwise — this creates a downward draft and circulates the cool air around you. If your fan blades are turning clockwise, you can typically reverse it by turning off the fan and flipping the switch on the fan body. You may also be able to do this using your ceiling fan’s remote.

How much can LED bulbs reduce my summer electric costs?

Lighting accounts for around 15% of an average home’s electricity use, so switching out your incandescent bulbs with more energy-efficient LED bulbs can lead to significant savings over time. According to the U.S. Department of Energy, the average household can save about $225 in energy costs per year by using LED lighting.


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Although we do our best to recognize all Eligible Direct Deposits, a small number of employers, payroll providers, benefits providers, or government agencies do not designate payments as direct deposit. To ensure you're earning 3.80% APY, we encourage you to check your APY Details page the day after your Eligible Direct Deposit arrives. If your APY is not showing as 3.80%, contact us at 855-456-7634 with the details of your Eligible Direct Deposit. As long as SoFi Bank can validate those details, you will start earning 3.80% APY from the date you contact SoFi for the rest of the current 30-day Evaluation Period. You will also be eligible for 3.80% APY on future Eligible Direct Deposits, as long as SoFi Bank can validate them.

Deposits that are not from an employer, payroll, or benefits provider 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 Eligible Direct Deposit activity. There is no minimum Eligible Direct Deposit amount required to qualify for the stated interest rate. SoFi members with Eligible Direct Deposit are eligible for other SoFi Plus benefits.

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SoFi Bank shall, in its sole discretion, assess each account holder’s Eligible 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 an Eligible Direct Deposit or receipt of $5,000 in Qualifying Deposits to your account, you will begin earning 3.80% 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 Eligible 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 Eligible 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 Eligible 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 Eligible Direct Deposit or Qualifying Deposits until SoFi Bank recognizes Eligible Direct Deposit activity or receives $5,000 in Qualifying Deposits in a subsequent 30-Day Evaluation Period. For the avoidance of doubt, an account holder with both Eligible Direct Deposit activity and Qualifying Deposits will earn the rates earned by account holders with Eligible Direct Deposit.

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

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What Is Principal, Interest, Taxes, Insurance (PITI)? A Comprehensive Guide

When your mortgage payment comes due every month, it may look like a single bill. But in reality, you’re likely paying four separate things: principal, interest, taxes, and insurance. PITI is an acronym that bundles these four elements together. But in order to better understand where, exactly, your monthly mortgage money is going, we’re going to take PITI apart and explain each element for you.

Understanding PITI

As discussed above, PITI is the acronym for the four basic components of a monthly mortgage payment. PITI includes:

•  Mortgage principal (the amount you borrowed from the bank)

•  Mortgage interest (the amount the bank charges you for the loan)

•Property taxes (levied by the local government)

•  Homeowners insurance (which covers the cost of repairing or replacing your home under certain covered circumstances)

Importance in Mortgage Payments

Together, these amounts add up to your total monthly mortgage payment — though that amount is not the same as your total monthly home expenses, which also include things like utilities and maintenance. (More on that below.)

Breaking down your PITI and calculating each separate component helps you better understand where your money is going each month. During the home-buying process, it helps you narrow your home search to those that are actually affordable on your budget. And later, knowing what does PITI stand for and what numbers comprise the components of your PITI will help you if you need to request a mortgage interest deduction on your taxes.

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Breaking Down PITI Components

Principal and interest are paid to your mortgage lender, and include both the money you borrowed and the money the bank is charging you for the service of offering the loan. Keep in mind that the amount of principal versus interest will change over the lifetime of the loan in a process known as amortization. To get a full picture of how that works, try out a mortgage calculator that includes an amortization chart.

Meanwhile, your property taxes and homeowners insurance will likely flow into an escrow account, where funds will be used to pay those bills as they come due. Property taxes are almost always included in your mortgage payment, and if you owe money on your home, you will be required to carry homeowners insurance. (Even if you don’t, buying a policy is a good idea. After all, if you’re like many Americans, your home is likely the single most valuable asset in your portfolio.)

Finally, there are also other components that may be part of your monthly mortgage payment — though not part of your PITI. These include extras like PMI (private mortgage insurance) or HOA fees. Not every home purchase will come with these payments, but if you make a down payment of less than 20%, some sort of mortgage insurance is usually inevitable.

Recommended: Property Tax and Your Mortgage: Everything You Need to Know

How PITI Affects Home Affordability

PITI in real estate affects home affordability in a pretty straightforward way: Knowing your PITI ahead of time helps you ensure you’re making an offer on a house that’s truly within your budget. Knowing the cost of a home is one thing, but knowing how much the mortgage will actually take out of your account each month is another. One important rule of thumb: Most lenders prefer that your PITI is less than or equal to 28% of your gross (pre-tax) monthly income.

Fortunately, there are some things you can do to lower your interest rate — which lowers your overall PITI. By keeping your debt-to-income ratio (DTI) low and maintaining a good credit score, you can help ensure you get the lowest interest rates possible, which may expand your home-buying power by qualifying you for a lower rate, no matter the purchase price.

Calculating Your PITI

These days, the easiest way to calculate your PITI is by using an online mortgage calculator with taxes. You’ll need to estimate the home’s annual property taxes based on records kept by your county, and add the insurance premium quoted to you into the mix.

Keep in mind, however, that PITI can (and likely will) change over time as both tax rates and your insurance premiums change each year. Although a fixed-rate mortgage keeps your “PI” static, the “T” and “I” may change your overall monthly mortgage payment over the course of its term. To ensure long-term affordability, consider how increases in each of these categories might work with your budget.

PITI vs. Non-PITI Expenses

As discussed above, PITI doesn’t cover the whole range of homeownership expenses. Along with additional extras like homeowners association (HOA) fees and mortgage insurance, owning a home also means paying monthly utilities as well as any regular repair and maintenance costs.

Those costs can add up, especially if you’re not expecting them. One common rule of thumb is to set aside 1% of your home’s value for repairs each year, with exact figures depending on where you live. (In other words, in some expensive states, like Hawaii, California, and New York, repair costs may be even higher.)

Strategies to Manage and Reduce PITI

Keeping your PITI low keeps your housing expenses low, and while some parts of your mortgage may seem set in stone, others are more negotiable.

For example, did you know that you can challenge property tax assessments (that determine the amount of “T” in your PITI)? Once your home is valuated, if you disagree with the findings, you may reach out to your county or local governance to challenge them. Doing so may lower your taxable property value. (Be warned, however, that if the current valuation does not include recent renovations or, say, a new outbuilding, the taxable value could actually rise.)

Additionally, shopping around for insurance can go a long way toward lowering the second “I” in your PITI. Different insurance companies have different proprietary algorithms and therefore different rates for similar coverage. Additionally, you can play with how much coverage you buy — but use caution before skimping on protecting your home.

Finally, if you already have a home mortgage loan but your creditworthiness profile has substantially improved (and market interest rates are lower than they were when you took out the loan in the first place), refinancing may serve to substantially lower the “P” and initial “I” in your PITI. Remember, though, that you’ll pay closing costs again, so factor in that expense before deciding this is the right financial move for your situation.

Recommended: What Is a Home Inspection

The Takeaway

The acronym PITI describes the four most basic elements of a monthly mortgage payment — but they’re far from the only costs associated with homeownership. Still, understanding PITI can help you find a home that’s within a reasonable purchase price range in the short term — and taking strategic steps to reduce your PITI can help you keep your costs low for years to come.

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.

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FAQ

How does PITI change over the life of the loan?

If you have a fixed-rate mortgage, your principal and interest payments will always amount to the same total — though the ratio of how much of those funds go toward interest versus principal will shift over the lifetime of the loan in a process known as amortization. Your property tax rate and insurance rate may change over time based on the valuation of your home, changes in the local tax code, and insurance premium changes (or a change in insurers). Thus, your monthly housing cost could shift, and even increase, over time, even if the loan is fixed-rate.

Can I pay property taxes and insurance separately from my mortgage?

In most cases, property taxes and homeowners insurance are paid together with the mortgage, and the funds go into an escrow account where they pay their respective bills as they come due. However, it is possible to secure an escrow waiver from your home lender, which would allow you to pay these expenses separately.

How does PITI affect my ability to qualify for a mortgage?

Lenders calculate your PITI before approving your mortgage application — and if your PITI is too high, you might not get approved. Generally speaking, lenders like to see your PITI equal to or less than 28% of your gross monthly income, though some lenders may approve you if your PITI is slightly higher.

What happens if I can’t afford the full PITI payment?

If your financial circumstances change and you can no longer afford to pay your mortgage, your first move should be to contact your lender. They may be able to negotiate or offer a mortgage assistance service. Talking to a U.S. Department of Housing and Urban Development foreclosure avoidance counselor could also help — but simply allowing your loan to fall into default could lead to home foreclosure.


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

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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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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Should Homebuyers Wait for Interest Rates to Drop?

As painful as it can be to see interest rates top 7.00% when they hovered over 2.00% in late 2020, waiting for them to come down again could bite would-be homeowners. Although today’s rates mean homebuyers can expect to spend more on interest over their loan’s lifetime, they’re actually close to the 50-year average — and besides, if they plummet again, the market will once again be flooded by buyers who have been sitting on the sidelines.

Still, interest rates are a big deal when it comes to how much home you can comfortably afford — and the ongoing health of your personal finances. In an April 2024 survey of 500 would-be homebuyers, SoFi found that 45% were concerned about mortgage costs — it was one of the top concerns of prospective homeowners. One in 10 people surveyed said difficulty securing a mortgage was the biggest homebuying challenge they were facing. In this article, we’ll walk through a little bit of mortgage rate history and context, as well as offering ways to decide whether you’re ready to buy or not, regardless of the market.

Why Are Mortgage Rates So High?

Since Americans just witnessed a historic mortgage interest rate drop in 2020, today’s 7.00% and 8.00% rates seem astronomical. (And, to be fair, coupled with a median national home sales price over $400,000, they can pack a powerful punch: After interest, a 30-year mortgage could easily cost twice the amount of the loan.)

Still, it’s important to remember that when you look at the big picture, today’s rates are actually not that big a deal. Yes, they’re the highest they’ve been since the year 2000, but they’re about on par (or slightly under) the rates buyers saw in the 1990s — and less than half of the 17.00% and 18.00% interest rates buyers paid in the early 1980s.

The rise and fall of mortgage rates is tied to complicated economic factors, including inflation, the Federal interest rate, and the yield of 10-year Treasury bonds. It’s not totally predictable, but one thing’s for sure: It will continue to undulate over time. What’s more, attempting to time the market to purchase a house might not be the best financial move, even if it does save you money on interest.


💡 Quick Tip: SoFi’s Lock and Look + feature allows you to lock in a low mortgage financing rate for 90 days while you search for the perfect place to call home.

First-time homebuyers can
prequalify for a SoFi mortgage loan,
with as little as 3% down.

Questions? Call (888)-541-0398.


How Low Will Mortgage Rates Drop This Year?

While no one can fully predict the future, experts do weigh in with their predictions for the mortgage interest rate. In 2024, projections suggest a mortgage interest rate drop to about 6.00%, or slightly lower — but still, we’re likely to stay far from the 2.00% and 3.00% free-for-all we saw a few years ago.

How Your Interest Rate Impacts Your Buying Power

So how much do interest rates really impact how much house you can afford? Glad you asked! Let’s do some math.

Say you’re going to buy a $400,000 home — which is just a little less than the U.S. median sale price right now. You’ve saved up a 20% down payment, or $80,000, and plan on taking out a 30-year mortgage.

With a fixed interest rate of 7.00%, your monthly payment would be about $2,129 per month, before additional costs like homeowners insurance and property taxes. At 6.50%, that payment goes down to $2,023, and at 6.00% it drops to $1,919. (So a percentage point drop equates to $210 per month in savings, or $2,520 per year.)

However, it’s over the long term that interest really has the opportunity to add up. In the exact same scenario, over the 30-year lifetime of the loan, you’d pay approximately the following amount in total interest:

•   7.00%: $446,428

•   6.50%: $408,142

•   6.00%: $370,682

As you can see, just a single percent difference can save you nearly $100,000 in the long run. So while it’s not possible to perfectly time the market, it is worth shopping around for the lowest possible interest rates you can qualify for.

(Keep in mind, too, that you can always pull your own customized numbers using a mortgage calculator.)


💡 Quick Tip: Don’t have a lot of cash on hand for a down payment? The minimum down payment for an FHA mortgage loan is as low as 3.5%.1

Should You Wait to Buy a Home?

The question of whether you’re ready to buy a home — or if it makes more sense to wait — is one that depends on far more than the going market interest rate. Here are some ways for first-time homebuyers to decide what might be the right move, right now.

Reasons to Buy

These are good reasons to consider going ahead with the homebuying process, high interest rates or no:

•   You’re financially (and emotionally) ready. Your credit score is in tip-top shape, you’ve saved up a down payment, and you’re planning to stay in your new home for at least five years — which means you could feasibly refinance once interest rates drop substantially and still break even on closing costs. (A home affordability calculator can help you figure out just how much house you can reasonably afford.)

•   The market looks good to you. These higher interest rates mean the housing market is moving far more slowly than it used to, so the amount of available inventory may give buyers who are ready to buy more time to shop around and find something they really like. This dynamic can also drive home prices down, creating more value for you as the property appreciates over time.

•   It’s time to move. Regardless of the housing market, life goes on — and if you’re expanding your family or relocating, you may not have a choice about moving. If the opportunity is presenting itself and you’re financially ready, this could be a great time to get started on building equity and generational wealth as a homeowner.

Reasons to Wait

On the other end of the spectrum, there are some good reasons to wait on buying a home, even when interest rates are low:

•   You’re not financially (or emotionally) ready. If a monthly mortgage payment would leave you cash-poor, you don’t have a substantial emergency fund saved up, your job security is in question, or you’re not quite sure you’re ready to commit to a given locale, buying a home might not be the right move for you — yet.

•   You can’t get prequalified by a mortgage lender. Perhaps you’re in a decent amount of debt or have an iffy credit history. If you can’t qualify for a loan right now, take the time to work on those factors and get ready for the future.

•   The market looks meh to you. If you can’t find a home you like, you probably shouldn’t buy one. After all, it’s a major investment — and while we’re not suggesting you have to wait for an absolutely perfect house to come along, you should be happy with your purchase!

Should Interest Rates Influence Your Decision?

While interest rates are of course a relevant factor for would-be homeowners, so long as you’re financially prepared and planning on staying in your new home for at least a few years, higher interest rates shouldn’t deter you. After all, you can always refinance once rates drop.

The Takeaway

Waiting for interest rates to drop can be a bit like waiting for Godot: You might get stuck in the in-between. If your finances are in shape and you’ve found your dream home, now could still be the right time to take the leap and become a homeowner.

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

SoFi Mortgages: simple, smart, and so affordable.

FAQ

Is it better to wait for interest rates to go down?

Not necessarily. While lower interest rates can subtly lower a monthly mortgage payment — and save buyers potentially hundreds of thousands of dollars over the lifetime of a loan — it’s not the only factor to consider if you’re otherwise ready to buy a home. (Plus, qualified buyers can always refinance their purchase down the line when rates drop again.)

Will 2024 be a good year to buy a house?

It’s probably as good a year to buy as any. Many experts expect interest rates to drop a bit this year, from between about 7.00% and 8.00% to somewhere between 5.50% and 6.50%. And it’s unlikely that interest rates will plummet back down to 2.00% or 3.00% as they did a few years ago.

What month is the best time to buy a house?

November and December tend to be favorable times to buy a home for buyers looking for the best deal possible. That’s because the holidays and winter weather may keep some buyers from shopping during this time, which means sellers might be more motivated to make a deal. You won’t get to see your new home in the height of its summer beauty for months — but you’ll get to find out whether it’s well insulated!


Photo credit: iStock/Andrii Yalanskyi

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


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



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

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.
+Lock and Look program: Terms and conditions apply. Applies to conventional purchase loans only. Rate will lock for 91 calendar days at the time of preapproval. An executed purchase contract is required within 60 days of your initial rate lock. If current market pricing improves by 0.25 percentage points or more from the original locked rate, you may request your loan officer to review your loan application to determine if you qualify for a one-time float down. SoFi reserves the right to change or terminate this offer at any time with or without notice to you.

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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5 Tips for Finding a Mortgage Lender

Choosing a mortgage is one of the biggest financial decisions you’ll make. Luckily, there are plenty of possible lenders borrowers can select from. There are online lenders, credit unions, direct lenders, and mortgage brokers with a vast array of loan programs to choose from, to name just a few. The trick is narrowing down a crowded field to find a mortgage lender you trust that offers the loan program you want.

So what’s important when choosing a lender? SoFi asked 500 would-be homebuyers what they considered to be the most important factors in choosing a mortgage lender in an April 2024 survey. Far and away, interest rates won out, with 64% of people saying rates were a key consideration. About half of borrowers ranked closing costs and fees as significant. Loan terms and conditions, the availability of incentives, and customer service and reputation were also rated highly, but interest rates still won the day.

But interest rates aren’t the whole story. Here are five tips on how to find the best mortgage lender for you.

Tips for Shopping For a Mortgage Lender

1. Decide What’s Important

Throughout the process of obtaining a loan, you’ll have a lot of conversations with a bunch of different people. Before jumping in headfirst, take some time to understand what loan programs you may qualify for, the amount of downpayment you have to work with, and if you are a veteran, what lenders offer VA loans.

Once you narrow down the type of mortgage loan program you will be shopping for you can think about what other elements are important to you.

For one thing, there’s the type of communication you’ll want to have with the mortgage lender. Good mortgage lenders should be clear and upfront about the loan process and all associated costs. They should be willing to answer all your questions — and whether you’re a first-time homebuyer or not, you should feel comfortable asking any questions you may have.

You may even want to ask about how a mortgage lender will be communicating with you so you’ll know what to expect. For instance, you could ask them: “Do you communicate by phone, email, or text?” and “How quickly do you respond to questions?”

This is important because there are multiple steps that require back-and-forth correspondence and paperwork when applying for a mortgage. Maybe it’s critical for you to have someone who responds quickly. Ask your potential mortgage lender: “What are your turnaround times on things like preapproval, appraisal, final approval and closing?”


💡 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.

2. Be Prepared

Part of knowing how to find the best mortgage lender is to learn the vital details about the mortgage you want to take out. It’s hard to choose between lenders if you don’t truly know what you’re looking for, especially when there’s as much fine print as is typically involved in taking out a mortgage loan.

First, know the costs involved in taking out the type of mortgage you need in addition to the interest rate. There will likely be various fees associated with taking out a mortgage, such as origination and application fees, appraisal fees, and other third-party fees.

Fees can vary by lender, so have some idea of what is common and what to look out for. For example, if the rate quote is lower, are the fees higher as a result?

Next, it’s smart to have an idea of how much home you can afford and how much of a down payment is required under your preferred type of loan program. Be aware that the same loan program can have different down payment requirements at different lenders.

Knowing this type of information may help you narrow your search to the lenders who best fit your needs. Also, having your financial details in order will tell you how much you have to work with so you can get down to business with the lender of your choice.

How you have managed your credit and the resulting credit scores will come into play throughout the mortgage process. Your credit score may be one of the determining factors on what mortgage lenders you can choose from based on the loan programs you may be eligible to qualify for.

You may want to take some time to make sure your credit profile is in good enough shape for the loan program you want to qualify for before starting the process of searching for a mortgage lender.

3. Know Your Options

Finding the right mortgage lender means being able to navigate who you can work with in the big world of mortgage lending. Here are some of the major types of mortgage lenders out there. Many may offer similar types of loan programs, but possibly with different fees and qualifying criteria.

Mortgage bankers: Bankers work for a financial institution that underwrites loans, but does not take deposits. Mortgage bankers can sometimes also broker out loans.

Retail lenders: Similar to mortgage bankers and also known as direct lenders, retail lenders only originate mortgage products offered by their financial institution.

Mortgage brokers: Mortgage brokers don’t generally work with one institution, but instead act as an intermediary between the borrower and a wholesale lender. For the service of pairing you with a mortgage loan from one of the lending institutions they are approved to work with, the mortgage broker will generally take a commission that is a percentage of the loan amount. The loan is approved and funded by the wholesale lender.

Online lenders: A newer option for borrowers, online lenders like SoFi offer mortgage loans and focus on competitive rates and a more streamlined application.

Correspondent lenders: Typically, correspondent lenders are local mortgage loan companies that have the capital to fund a loan, but then turn around and sell the loan to a major financial institution.

Wholesale lenders: Unlike retail lenders, wholesale lenders don’t interact with borrowers and typically rely on brokers to sell their products.

Portfolio lenders: These lenders originate and fund loans from bank deposits and do not typically resell them after closing. They typically include community banks, credit unions, and savings and loan institutions.

Still, wondering how to find a reputable mortgage lender from these options? One thing you can do is read online reviews, like those on the Better Business Bureau’s website. You can also check to make sure that your lender is registered to originate loans with the Nationwide Multistate Licensing System Registry in your state.

4. Compare Lenders

It’s a good idea to shop around for mortgage rate quotes with a number of different lenders. Check with banks, online lenders, credit unions, and other local independent lenders to compare loan terms, interest rates, fees, and closing timelines. Request quotes in writing.

You can plug offers into a mortgage calculator to get an idea of the total interest costs. With a mortgage calculator, you can also compare different down payment options.

And remember, the interest rate isn’t the only cost to take into consideration. You’ll want to account for all of the fees associated with each rate and program offer.

Third-party fees should generally be the same no matter what lender you choose, so it’s the lenders’ loan terms, (qualifying) rate, and fees to compare apples to apples.

Checking on costs isn’t the only reason to get multiple quotes. It also allows you to experience a number of communication styles, and you’ll have a look into the process for each lender.


💡 Quick Tip: Generally, the lower your debt-to-income ratio, the better loan terms you’ll be offered. One way to improve your ratio is to increase your income (hello, side hustle!). Another way is to consolidate your debt and lower your monthly debt payments.

5. Get Preapproved

Once you’ve narrowed it down to your chosen lender, apply for mortgage preapproval. During preapproval, you’ll be asked to provide documentation on your financials, such as your paystubs, W2s, tax returns, bank account balances, and credit information.

This step is valuable when placing an offer on a home. A preapproval letter shows that you have been vetted for the first (credit) portion of the loan process.

Once you apply with a lender you will receive a Loan Estimate laying out the down payment, fees, estimated monthly payment, and more.

This is the time to ask any lingering questions on the terms of the loan such as lending fees, rates, commissions, mortgage points, and any other fine print you may not understand.

Don’t be shy! This is a huge, important decision and you should feel welcome to ask every question twice if you need to.

At this stage, you may even want to consider negotiating your offers. If at all possible, use the competing offers as leverage to obtain better pricing. If the very thought of asking is intimidating to you, just remember that it never hurts to ask and the worst they can say is no. You might be surprised at what you can get by speaking up.

The Takeaway

Finding the right mortgage lender is one of the most important decisions you’ll make in the home-buying process. You’ll want to compare different lenders and choose one you feel comfortable working with and who will answer your questions and get back to you quickly.

The right mortgage lender can help you get the best mortgage, and the best rate, for your needs. Be sure to weigh the options and compare and contrast different loan estimates to find the right deal for you.

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


SoFi Mortgages: simple, smart, and so affordable.




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.

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 .

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

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


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



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

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What Is a Mortgage? Understanding the Basics

If you’re dreaming of owning your own home, whether that means a cute Colonial or a loft-style condo, you are likely contemplating financing, and that can mean a mortgage. A home loan can give you the funds required to purchase a property, but there can be a learning curve involved, especially if you are a first-time homebuyer. For instance, what term should you select? How do mortgage interest rates work, and is a fixed rate typically best?

In this guide, you’ll get the scoop on how home loans work, what kind of options you have, and how to assess which loan could be right for you.

What is a Mortgage?

A mortgage loan, also known simply as a mortgage, is issued to a borrower who is either buying or refinancing real estate.

The borrower signs a legal agreement that gives the lender the ability to take ownership of the property if the loan holder doesn’t make payments according to the agreed-upon terms.

Once issued a mortgage, the homebuyer will pay monthly principal (that’s the lump sum of the loan) and interest payments for a specific term. The most common term for a fixed-rate mortgage is 30 years, but terms of 20, 15, and even 10 years are available.

A shorter-term translates to a higher monthly payment but lower total interest costs. Put another way, you pay more every month, but the amount of interest over the life of the loan is lower.


💡 Quick Tip: You deserve a more zen mortgage loan. When you buy a home, SoFi offers a guarantee that your loan will close on time. Backed by a $5,000 credit.‡

A Buffet of Mortgage Choices

When homebuyers apply for a loan, they’ll need to choose whether they want a fixed interest rate or an adjustable rate and the length of the loan.

Fixed-Rate Mortgage

The interest rate on the home loan doesn’t change, so the monthly principal and interest payment remains the same for the life of the loan. Whether mortgage rates increase or decrease, the loan holder is locked in for their monthly payment.

Adjustable-Rate Mortgage (ARM)

With an ARM, the interest rate is generally fixed for an initial period of time, such as five, seven, or 10 years, and then switches to a variable rate of interest. The rate fluctuates with the rate index that it’s tied to.

As the rate changes, monthly payments may increase or decrease. These loans generally have yearly and lifetime interest rate caps (or maximums) that limit how high the variable rate can adjust to.

Next, borrowers will need to decide what type of mortgage loan works best for them.

Conventional Loans

Conventional loans are loans that are not backed by a government agency and must adhere to the requirements of Fannie Mae, Freddie Mac, or other investors. Typically, conventional loans are issued with at least 3% down. However, it’s worth noting that private mortgage insurance (commonly known as PMI) is generally required on loans with a down payment of less than 20%.

The coverage protects the lender against the risk of default. Your mortgage servicer must cancel your PMI when the mortgage balance reaches 78% of the home’s value or when the mortgage hits the halfway point of the loan term, if you’re in good standing.

PMI typically costs 0.2% to 2% of the loan amount per year.

Down payment: Generally between 3% and 20% of the purchase price or appraised value of the home, depending on the lender’s requirements.

FHA Loans

Loans insured by the Federal Housing Authority, or FHA loans, can be attractive to first-time homebuyers or those who struggle to meet the minimum requirements for a conventional loan. In a SoFi survey of 500 would-be homeowners conducted in April 2024, 28% of people who had filled out a loan application had applied for this type of loan, and fully 63% of those who filled out an application had applied for some type of government-backed financing.

These loans usually require a one-time upfront mortgage insurance premium (or MIP vs. PMI), which typically can be added to the mortgage, and an annual insurance premium, which is collected in monthly installments for the life of the loan in most cases.

Down payment: Starts at 3.5%

Recommended: First-Time Homebuyer Guide

VA Loans

Loans guaranteed by the U.S Department of Veterans Affairs are available to veterans, active-duty service members, and eligible surviving spouses. SoFi’s survey showed that 12% of potential homebuyers who applied for a loan had filled out a VA loan application.

VA-backed loans require a one-time “VA funding fee,” which can be rolled into the loan. The fee is based on a percentage of the loan amount and may be waived for certain disabled vets. The current range is from 1.5% to 3.3% of the loan amount.

Down payment: None for approximately 80% of VA-backed 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.†

How Does a Mortgage Work?

There are several components to a monthly mortgage payment.

Principal: The principal is the value of the loan. The portion of the payment made toward the principal reduces how much a borrower owes on the loan.

Interest: Each month, interest will be factored into payments according to an amortization schedule. Even though a borrower’s fixed payment may stay the same over the course of the loan, the amount allocated toward interest generally decreases over time while the portion allocated to principal increases.

Taxes: To ensure that a borrower makes annual property tax payments, a lender may collect monthly property taxes with the monthly mortgage payment. This money can be kept in an escrow account until the property tax bill is due, and the lender can make the property tax payment at that time.

Homeowners insurance: Mortgage lenders usually require evidence of homeowners insurance, which can cover damage from catastrophes such as fire and storms. As with property taxes, many lenders collect the insurance premiums as part of the monthly payment and pay for the annual insurance premium out of an escrow account. Depending on your property location, you may have to add flood, wind, or other additional insurance.

Mortgage insurance: When a borrower presents a down payment of less than 20% of the value of the home, mortgage lenders typically require private mortgage insurance. When developing a budget for owning a home, it’s important to know the difference between mortgage insurance and homeowners insurance and whether both are required.

Reverse Mortgage Loans: What Are They?

A reverse mortgage is available to homeowners 62 and older to supplement their income or pay for healthcare expenses by tapping into their home equity.

The loan can come in the form of a lump-sum payment, monthly payments, a line of credit, or a combination, usually tax-free. Interest accrues on the loan balance, but no payments are required. When a borrower dies, sells the property, or moves out permanently, the loan must be repaid entirely.

The fees for an FHA-insured home equity conversion mortgage, typically the most common type of reverse mortgage, can add up:

•  An initial mortgage insurance premium of 2% and an annual MIP that equals 0.5% of the outstanding mortgage balance

•  Third-party charges for closing costs

•  Loan origination fee

•  Loan servicing fees

You can pay for most of the costs of the loan from the proceeds, which will reduce the net loan amount available to you.

You remain responsible for property taxes, homeowners insurance, utilities, maintenance, and other expenses.

A HUD site details all the criteria for borrowers, financial requirements, eligible property types, and how to find an HECM counselor, a mandatory step.

If you’re considering a reverse mortgage, learn as much as you can about this often complicated kind of mortgage before talking to a counselor or lender, the Federal Trade Commission advises.

How to Get A Mortgage

For many people, it can be a good idea to shop around to get an idea of what is out there.

Not only will you need to choose the lender, but you’ll need to decide on the length of the loan, whether to go with a fixed or variable interest rate, and weigh the applicable loan fees.

The first step is to have an idea of what you want and then seek out quotes from a few lenders. That way, you can do a side-by-side comparison of the loans.

Once you’ve selected a few lenders to get started with, the next step is to get prequalified or preapproved for a loan. Based on a limited amount of information, a lender will estimate how much it is willing to lend you.

When you’re serious about taking out a mortgage loan and putting an offer on a house, the next step is to get preapproved with a lender.

During the preapproval process, the lender will take a closer look at your finances, including your credit, employment, income, and assets to determine exactly what you qualify for. Once you’re preapproved, you’re likely to be considered a more serious buyer by home sellers.

When shopping around for a mortgage, it can be a good idea to consider the overall cost of the mortgage and any fees.

For example, some lenders may charge an origination fee for creating the loan, or a prepayment penalty if you want to pay back the loan ahead of schedule. There may also be fees to third parties that provide information or services required to process, approve, and close your loan.

To compare the true cost of two or more mortgage loans, it’s best to look at the annual percentage rate, or APR, not just the interest rate. The interest rate is the rate used to calculate your monthly payment, but the APR is an approximation of all of the costs associated with a loan, including the interest rate and other fees, expressed as a percentage. The APR makes it easier to compare the total cost of a loan across different offerings so you can assess what is a good mortgage rate for your budget.

The Takeaway

If the world of mortgages feels like a mystery to you, you are not alone. Before taking on this colossal commitment, it can be best to soak up as much as you can about how mortgage loans work, what kinds of mortgages are available, potential challenges, and steps to qualify. You’ll be better prepared to take on what can be a major step in your personal financial journey.

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


SoFi Mortgages: simple, smart, and so affordable.


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

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

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


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


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.


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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