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Buying a home is likely one of the biggest moves you’ll make in your personal and financial life, and your home may represent one of your largest assets.

If you take out a mortgage to help you buy it, you will end up making mortgage payments — and if your lender ends up servicing your loan after closing — you will make payments to that lender, possibly for decades. That’s why it’s important to shop around before committing to a mortgage lender and loan program that’s right for you.

Today, borrowers have more choices than ever. With the rise of online and marketplace lenders, there’s increased competition, which fuels improvements in process, service, and cost — and can mean a much better experience for you.

With so much choice, however, finding the right lender can feel overwhelming. To help simplify the process, we’ve listed five key things you may want to consider when shopping for a mortgage lender.

1. Does the lender offer competitive interest rates?

A good first step is to get the lay of the land by looking at various lenders and the rates and fees they advertise. Taking this step may help you understand what the market looks like overall and who may be offering competitive rates.

Remember that the rates and programs you are ultimately eligible for will likely depend not only on the lender you choose but also your needs and financial situation. However, this initial comparison can give you a baseline to start working from.

You’ll also want to look at the common loan types offered. Interest rates for fixed-rate loans do not change over the life of the loan. Interest rates for adjustable-rate mortgages (ARMs) can change over the life of the loan and are influenced by benchmark interest rates.

Hybrid adjustable-rate mortgages are mortgages that offer an initial fixed rate for a certain period of time. These hybrid ARMs often offer a low introductory rate for either 1, 3, 5, 7 or 10 years. Some hybrid ARMs will also offer an interest-only payment option for a specified period of time such as 10 years.

When the initial fixed-rate period is over, the interest rate is normally reviewed on an annual basis for adjustment. Although the benchmark index tied to the ARM rate may have moved much higher, these loans typically have yearly and annual interest rate caps to control rate and payment fluctuations.

When talking to a lender about their mortgage offerings, it’s a good idea to not only ask about interest rate, but also about APR, or annual percentage rate. This figure takes into account certain fees like broker fees, points, and other applicable credit charges, giving you an easier way to compare loan offers.

2. Does the lender offer loan products with terms that suit your needs?

Your needs and financial situation can play a large part in which mortgage programs you choose and are eligible for. For example, some lenders require a 20% down payment to qualify for a mortgage.

If you can’t pay 20%, lenders may require that you have private mortgage insurance (PMI), which covers them in case you default on your mortgage payments. Mortgage insurance premiums vary depending upon many factors.

It’s a good idea to ask your chosen lender how much insurance payments will add to your monthly payment. Also keep in mind that, in certain circumstances, PMI does not apply, such as with some jumbo loan programs. In addition, PMI can be eligible for removal from your home loan later if certain criteria is met.

If you can’t afford a 20% down payment, you can look for lenders who offer more flexible down payment requirements. Also, consider what term — the length of time you’ll be paying off your loan — works best for you. See what kinds of terms lenders offer and the interest rates that accompany those terms.

A shorter term will likely come with higher monthly payments, but lower interest rates that result in lower interest charges over time. Not everyone can afford those higher monthly payments, however, in which case a longer term may be preferable. Note that longer terms usually mean that you end up paying more in interest over the life of the loan.

Once you’ve found a loan with rates and terms that work for you, you can typically obtain a rate lock from your lender, generally for the time it takes to close on the transaction, such as 30 or 45 days.

You may have to pay a fee if you want to lock in the rate for a longer extended period of time. However, once you do, it will guarantee that you have access to the mortgage at a specific rate during the lock-in period, even if interest rates rise while your loan is being processed.

3. What type of origination, lender, and other fees might you be responsible for?

We’ve already alluded to the fact that you’ll likely be on the hook for other costs in addition to your down payment. One good idea is to request a Loan Estimate (LE) for any mortgage you’re considering to see a solid estimate of what costs you may be on the hook for.

Keep your eye out for things like:

•   Commissions Mortgage brokers are paid on commission, which is either paid by you, your lender, or a combination of both.
•   Origination fees These fees may cover the cost of processing your loan application.
•   Appraisal fees Appraisal fees cover the cost of having a professional come in and put a value on the home you want to buy. You must have a property valuation of some type in order to borrow money to buy a home and in most cases a full appraisal is required.
•   Credit report fee This covers the cost of the bank obtaining your credit report from the credit reporting bureaus.
•   Discount points Optional fee the borrower can pay to reduce or buy down their interest rate.

Unless you receive a seller or lender credit towards closing costs, the added fees will impact the overall cost of buying the home, so doing your research and reading the fine print up front might pay off.

Depending on the loan terms and fees charged, some will be paid upfront at the beginning of the application process (such as credit report and appraisal), while other fees might be paid at loan closing (such as lender fees and title insurance).

In some cases, under certain loan programs, you can borrow the money to cover these fees, which will increase your overall mortgage payment(s). Therefore, having a clear understanding of what fees you’ll owe is critical to understanding how much you’ll end up paying.

It’s a good idea to request from your lender a quote on all the costs and fees associated with the loan. A Loan Estimate (LE) is a typical form used to disclose loan fees to a borrower. Ask questions about what each fee covers. Have your lender explain any fees you don’t understand, and then find out which ones may be negotiable or can be waived entirely.

4. How much of the process is online vs. on paper or in person?

How much facetime you have to put in to apply for a mortgage can vary by lender. Some online banks will have you complete the process entirely online, while brick and mortar banks may require an in-person visit.

In the past, applying for a mortgage required a lot of physical paperwork. But much of this has now been replaced by online interactions. For example, you are now likely able to send your financial information like bank statements and W-2s electronically.

Lenders who complete much, or all, of the mortgage application process online may be able to offer lower rates or fees, since they don’t have the cost of brick and mortar bank locations and their employees to maintain.

That said, if you’re someone who likes face-to-face help, you may consider a lender that allows you to apply in person or a lender who utilizes facetime.

5. How quickly can the lender close once you’re in contract?

Once you’ve found the home you want to buy and you’re under a purchase contract with the seller, the amount of time it takes to close on a loan can vary. Depending on the situation, you may have to wait for inspections, appraisals, and all sorts of paperwork to go through before you can close.

However, your lender may offer you ways to speed up the process. For example, you may be able to get preapproved for a loan, which takes care of a lot of potentially time-consuming paperwork upfront before you’ve even started shopping for a home.

Ask your lender how much time their closing process usually takes and what you can do to expedite it. Especially if you’re crunched for time, their answer can have a big impact on which lender you choose. After all, the faster you’re financed, the sooner you’ll be able to move in.

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
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.

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.

SOHL0723014

With an abundance of Americans reaching retirement age—10,000 people will turn 65 every day for the next two decades—some of those will be looking for a new place to call home and a way to finance it.

You might think of the young and middle-aged as typical homebuyers and older people as more likely to have paid off, or nearly paid off, their homes and wanting to stay put. But with opportunity in the air and a desire to downsize—and sometimes upsize—more retirees could well be in the market for a new home.

Lenders and Age: No Legal Gray Area

Mortgage lenders look for a variety of things when qualifying a home loan applicant. What they can’t do is take age into consideration when making a lending decision.

The Equal Credit Opportunity Act bans creditors from using age to influence a loan application decision.

Retirees applying for a home loan, like people still working, generally just need to have good credit, minimal debt, and enough ongoing income to repay the mortgage.

Here are some of the main factors you need to buy a house that lenders look for:

•   Proof of income
•   Low debt-to-income ratio
•   Decent credit profile
•   Down payment
•   If it’s a primary or secondary home

Let’s take a look at each.

Proof of Income

While many retirees live on a fixed income, putting multiple sources of income together can help establish income that is “stable, predictable, and likely to continue,” as Fannie Mae instructs lenders to look for.

Social Security. The average monthly Social Security payout was $1,827 in 2023, enough to contribute to a mortgage payment. But if Social Security is an applicant’s only source of income, they may have trouble qualifying for a certain loan amount.

Investment income. Sixty-nine percent of older adults receive income from financial assets, according to the Pension Rights Center. But half of those receive less than $1,754 a year, the center says.

But for those who do receive investment income, it’s important to know that a lender generally looks at dividends and interest, based on the principal in the investment. If an applicant plans to use some of the principal for a down payment or closing costs, the lender will make calculations based on the future amount.

Lenders may view distributions from 401(k)s, IRAs, or Keogh retirement accounts as having an expiration date, as they involve depletion of an asset.

Home loan applicants who receive income from such sources must document that it is expected to continue for at least three years beyond their mortgage application.

And lenders may only use 70% of the value of those accounts to determine how many distributions remain.

Annuity income can be used to qualify, as well, as long as the annuity will continue for several years (three years is likely the minimum).

Part-time work. Retirees who earn money driving for a ride-share service, teaching, manning the pro shop, and so forth add income to the pot that a lender will parse.

Clearly, the more income a retiree can note on a mortgage application, the better the odds of a green light.

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

Debt

If your income level falls into a gray area, mortgage lenders are even more likely to focus on your debt-to-income ratio.

Debt-to-income is a straightforward proposition. It’s calculated as a percentage and it’s vetted by lenders and creditors as a percentage. Simply divide your regular monthly expenses by your total monthly gross income to get your debt-to-income ratio.

Let’s say you have $5,000 in regular monthly gross income and your regular monthly debt amount is $1,000. In that scenario, your debt-to-income ratio is 20% (i.e., $1,000 is 20% of $5,000.)

By and large, the higher your DTI ratio, the higher the risk of being turned down for a mortgage loan.

If you have a spouse who also has regular income and low debt, adding that person to the mortgage application could help gain loan approval. Then again, married couples applying for a loan may want to consider how a spouse’s death would affect their ability to keep paying the mortgage.

Lenders, though, cannot address that matter in the loan application.

Recommended: 11 Work-From-Home Jobs Great for Retirees

Credit Profile

Mortgage lenders also give great weight to consumer credit scores when evaluating a home loan application. That’s understandable, as a high FICO® credit score—740 or above is considered generally quite mortgage-worthy—shows lenders that you pay your bills on time and that you’re not a big credit risk.

It might be smart to take some time before you apply for a mortgage to review your credit report, making sure all household bills are up-to-date and no errors exist that might trip you up. And it’s a good idea to limit credit inquiries on big-ticket items.

You can get a free copy of your credit scores at annualcreditreport.com and at any of the “big three” credit reporting agencies: Experian, Equifax, and Transunion.

The Property

Mortgage lenders will also take a close look at the home you wish to purchase.

In general, it’s easier to obtain a mortgage for a primary residence, as it represents the home you’ll live in long term and there’s only one mortgage to pay.

A second home, either as a vacation or investment property, is a riskier proposition, as it represents another mortgage to pay and may bring more debt to the lender’s mortgage approval score sheet.

💡 Quick Tip: Because a cash-out refi is a refinance, you’ll be dealing with one loan payment per month. Other ways of leveraging home equity (such as a home equity loan) require a second mortgage.

Down Payment

Using the asset depletion method, a lender will subtract your expected down payment from the total value of your financial assets, take 70% of the remainder (if it’s a retirement account), and divide that by 360 months.

Then the lender will add income from Social Security, any annuity or pension, and part-time work in making a decision.

For borrowers, putting at least 20% down sweetens the chances of being approved for a mortgage at a decent interest rate.

Recommended: Home Affordability Calculator

The Takeaway

As a retiree, if your income, debt-to-income ratio, and credit score are solid, you’re as likely as any other borrower to gain approval for a new home loan. Lenders cannot legally take age into consideration when making their decisions.

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
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.

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.

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.

SOHL0623061

A first-time homebuyer isn’t just someone purchasing a first home. It can be anyone who has not owned a principal residence in the past three years, some single parents, a spouse who has not owned a home, and more.

If the thought of a down payment and closing costs put a chill down your spine, realize that first-time homebuyers often have access to special grants, loans, and programs.

‘First-Time Homebuyer’ Under the Microscope

To get a sense of who qualifies for a mortgage as a first-time homebuyer, let’s take a look at the government’s definition.

The U.S. Department of Housing and Urban Development (HUD) says first-time buyers meet any of these criteria:

•   An individual who has not held ownership in a principal residence during the three-year period ending on the date of the purchase.

•   A single parent who has only owned a home with a former spouse.

•   An individual who is a displaced homemaker (has worked only in the home for a substantial number of years providing unpaid household services for family members) and has only owned a home with a spouse.

•   Both spouses if one spouse is or was a homeowner but the other has not owned a home.

•   A person who has only owned a principal residence that was not permanently attached to a foundation (such as a mobile home when the wheels are in place).

•   An individual who has owned a property that is not in compliance with state, local, or model building codes and that cannot be brought into compliance for less than the cost of constructing a permanent structure.

For conventional (nongovernment) financing through private lenders, Fannie Mae’s criteria are similar.

💡 Recommended: The Complete First-Time Home Buyer Guide

Options for First-Time Homebuyers

First-time homebuyers may not realize that they, like other buyers, may qualify to buy a home with much less than 20% down.

They also have access to first-time homebuyer programs that may ease the credit requirements of homeownership.

Federal Government-Backed Mortgages

When the federal government insures mortgages, the loans pose less of a risk to lenders. This means lenders may offer you a lower interest rate.

There are three government-backed home loan options: FHA loans, USDA loans, and VA loans. In exchange for a low down payment, you’ll pay an upfront and annual mortgage insurance premium for FHA loans, an upfront guarantee fee and annual fee for USDA loans, or a one-time funding fee for VA loans.

Note: SoFi does not offer USDA loans at this time. However, SoFi does offer FHA, VA, and conventional loan options.

FHA Loans

The Federal Housing Administration, part of HUD, insures fixed-rate mortgages issued by approved lenders. On average, more than 80% of FHA-insured mortgages are for first-time homebuyers each year.

If you have a FICO® credit score of 580 or higher, you could get an FHA loan with just 3.5% down. If you have a score between 500 and 579, you may still qualify for a loan with 10% down.

USDA Loans

The U.S. Department of Agriculture offers assistance to buy (or, in some cases, even build) a home in certain rural areas. Your income has to be within a certain percentage of the average median income for the area.

If you qualify, the loan requires no down payment and offers a fixed interest rate.

VA Loans

A mortgage guaranteed in part by the Department of Veterans Affairs requires no down payment and is available for military members, veterans, and certain surviving military spouses.

Although a VA loan does not state a minimum credit score, lenders who make the loan will set their minimum score for the product based on their risk tolerance.

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

Government-Backed Conventional Mortgages

Fannie Mae and Freddie Mac, government-backed mortgage companies, do not originate home loans. Instead, they buy and guarantee mortgages issued through lenders in the secondary mortgage market.

They make mortgages available that are geared toward lower-income, lower-credit score borrowers.

Freddie Mac’s Home Possible program offers down payment options as low as 3%. There are also sweat equity down payment options and flexible terms.

Fannie Mae’s 97% LTV (loan-to-value) program also offers 3% down payment loans.

A Mortgage for Certain Civil Servants

If you’re a law enforcement officer, firefighter, or EMT working for a federal, state, local, or Indian tribal government agency, or a teacher at a public or private school, the HUD-backed Good Neighbor Next Door Program could be a good fit. It provides 50% off the listing price of a foreclosed home in specific revitalization areas. In turn, you have to commit to living there for 36 months.

Homes are listed on the HUD website each week, and you have to put an offer in within seven days. Only a registered HUD broker can submit a bid for you on a property.

If using an FHA loan to buy a home in the Good Neighbor Next Door Program, the down payment will be $100. If using a VA loan to purchase a house through the program, buyers will receive 100% financing. If using a conventional home loan, the usual down payment requirements stay the same.

State, County, and City Assistance

It isn’t just the federal government that helps to get first-time buyers into homes. State, county, and city governments and nonprofit organizations run many down payment assistance programs.

HUD is the gatekeeper, steering buyers to state and local programs and offering advice from HUD home assistance counselors.

The National Council of State Housing Agencies has a state-by-state list of housing finance agencies, which cater to low- and middle-income households. Contact the agency to learn about the programs it offers and to get answers to housing finance questions.


💡 Quick Tip: Jumbo mortgage loans are the answer for borrowers who need to borrow more than the conforming loan limit values set by the Federal Housing Finance Agency ($806,500 in most places, or $1,209,750 in many high-cost areas). If you have your eye on a pricier property, a jumbo loan could be a good solution.

Using Gift Money

First-time homebuyers might also want to think about seeking down payment and closing cost help from family members.

If you’re using a cash gift, your lender will want a formal gift letter, and the gift cannot be a loan. Home loans backed by Fannie Mae and Freddie Mac only allow down payment gifts from someone related to the borrower. Government-backed loans have looser requirements.

Want to use your 401(k) to make a down payment? You could, but financial advisors frown on the idea. Borrowing from your 401(k) can do damage to your retirement savings.

The Takeaway

First-time homebuyers are in the catbird seat if they don’t have much of a down payment or their credit isn’t stellar. Lots of programs, from local to federal, give first-time homeowners a break.

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
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.

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.

SOHL0623081

Whether relocating down the block or across the country, there is a lot of work and planning that goes into moving. For current homeowners, there may be more logistics when simultaneously buying and selling houses.

If you’re figuring out how to sell and buy a house at the same time, there are some options to choose from based on your own budget, situation, and tolerance for risk.

Although this situation can be complex, it is not uncommon. In fact, 74% of home buyers owned their previous residence.

To help you navigate this juggling act, this guide will go over potential challenges and outline some alternative options and tips to close on both deals.

Evaluating the Local Housing Market

Taking stock of the local housing market can help inform how to sell and buy a house at the same time. Not only does the market influence home prices, it can also impact the length of closing on a sale or purchase.

You may be faced with a housing market that favors buyers over sellers or vice-versa. Researching your local housing market ahead of time can help guide your efforts in finding a new house.

When It’s a Buyer’s Market

A buyer’s market has more houses for sale than people actively looking to purchase a home. Generally, finding a new house in areas with a higher concentration of sellers can be easier than selling. At the same time, an accurate listing price and contingencies can factor into the equation.

Since there is less competition in the market, buyers can consider requesting an extended closing to allow time to sell their own house or include other contingencies in their offer. For instance, a home sale contingency can be included in a contract to coordinate a purchase with the sale of the buyer’s house.

A home sale contingency asks for the patience of a seller depending on their situation. Complications may arise in the event that all parties involved are simultaneously buying and selling homes.

On the flipside, sellers in a buyer’s market could benefit from setting a competitive asking price and getting ahead of inspection by buttoning up any lingering home maintenance issues.

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

When It’s a Seller’s Market

If there are more buyers in the housing market than there are homes for sale, it’s considered a seller’s market. Often, selling a house where there’s a high percentage of homebuyers takes less time and can fetch a higher price.

Sellers may be able to take advantage of the housing scarcity and go with a more ambitious asking price. If this pays off, the extra cash could be especially useful if you are shopping for houses in a seller’s market yourself. Making a competitive offer may be helpful if you are trying to beat out other bids and quickly secure a home.

It’s also not uncommon for houses to receive multiple offers in a seller’s market. If this is the case, sellers may have more success negotiating favorable terms that suit their sell and buy situation.

For example, a rent-back agreement allows sellers to lease their former house from the new owners for a set period of time. This gives them more time to find their new home, but may not be an acceptable condition for every prospective buyer.

Recommended: How Does Housing Inventory Affect Buyers & Sellers?

Calculating Home Equity

Getting your finances in order to buy and sell a home isn’t just about counting savings and building budgets. Home equity is another important consideration.

To calculate home equity, subtract the money owed on a mortgage loan from the current market value of a house. For example, if your home is worth $250,000 and you still owe $150,000 on your mortgage loan, you have $100,000 of equity in your home.

Depending on your financial situation, home equity may be necessary to buy a new home. Keep in mind that equity does not become available until the closing is complete. Typically, lenders will limit borrowers to 80% to 90% of their available equity, depending on factors such as credit history and income, among others.

Unless you’re selling a home shortly after buying it, the market value of a home could likely differ from the initial purchase price. These changes could either increase or decrease your home equity.

Generally speaking, the average home sale price in the United States increases year-to-year, barring notable exceptions like the 2008 financial crisis and subsequent recession. Yet, these trends don’t account for regional housing booms and busts.

Getting an official valuation from a real estate appraiser, which typically costs between $300 and $400, is one way to get a more accurate idea of your home equity and a feasible sale price. Researching comparable homes that recently sold in your community can give you a ballpark estimate, too.

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

Prequalification vs Preapproval

Being aware of your own financial situation is useful for a variety of reasons, especially when buying a house. But if you’re among the majority of buyers who finance their home purchase, your mortgage lender will consider factors besides your own number crunching and goals when deciding their loan total.

For many prospective homebuyers, prequalifying is the first step to getting an estimate of how large a loan they would likely qualify for. Lenders generally evaluate factors like a buyer’s debt, assets, and income, which may take just a matter of days.

Becoming prequalified does not lock buyers into a set mortgage rate. Rather, it gives buyers a more accurate picture of their financing options and what houses are in their price range. Before making an offer, it is generally advisable that buyers are prequalified, which can be demonstrated with a letter from your lender. This can signal to the sellers that you are a serious buyer.

To ultimately obtain a mortgage loan, buyers still need to go through preapproval. In doing so, lenders perform a more thorough credit and financial background check to arrive at a specified preapproved loan amount.

Sellers may consider offers from preapproved buyers to be more favorable than those with just prequalification since there is less concern about a rejected mortgage application pending a deal. It may also get you to the closing table faster, which can be a big plus if you’re in a competitive market.

Selling Before Buying

Whether by intention or pure circumstance, you could face a choice of selling your house before buying your next home.

Selling first can potentially be beneficial for qualifying for a mortgage loan. After the sale closes, you may be able to use that money to finance a down payment on a new home, as well as having a lower debt-to-income ratio.

Yet, selling before buying may create complications for finding a place to stay until you purchase a new home. If the new buyers are not willing or able to do a rent-back agreement, you may end up having to find temporary housing in the meantime.

Apartments and rental properties may require signing up to a 12-month lease. For prospective homebuyers, a lengthy rental commitment with penalties for leaving early may be costly. Instead, finding a month-to-month rental option can grant more flexibility and sync up with a storage unit lease, if needed.

Buying Before Selling

When you find your dream home, you may want to pull the trigger and make an offer right away. But what does that mean if your house hasn’t sold yet?

If your budget allows you to buy a home with cash vs. a mortgage, you may be in a position to move forward with the offer.

For some, making a down payment or home purchase before selling with savings alone is not feasible. In other cases, your debt-to-income ratio and credit may prevent you from getting a second mortgage.

There are several options available if this is the case. A Home Equity Line of Credit (HELOC) can let prospective buyers borrow against the equity of their current home. A buyer’s credit and existing home equity are taken into account to qualify for a HELOC.

If approved, buyers can use the HELOC to access money for a down payment, which could then be paid off when their house sells. Take note of the repayment terms and interest rate on the HELOC, as these can vary from lender to lender.

Taking out a bridge loan is another possibility. These short-term loans are usually structured to cover a down payment and become due after several months. Bridge loans generally have high interest rates and may require an origination fee. Sellers who cannot unload their house in time may need to request an extension or begin repaying the loan while still paying their mortgage.

Choosing a Real Estate Agent

A savvy real estate agent can help reduce the stress and uncertainty of selling and buying a house at the same time. Their expertise can come in handy for setting an accurate listing price, scheduling showings, and staging a home.

If you had a positive experience with the agent you worked with to buy your home, their familiarity with your property could help expedite the process and give you peace of mind in case you have to move out of the area before selling.

There are benefits to using the same agent for buying and selling when geography allows. For instance, they can simplify the lines of communication and more easily coordinate the closing of both homes with your ideal timeline.

Sometimes it may not be possible to use the same realtor. The obvious case is when you’re moving a significant distance to a new area.

The need to use two realtors could arise if you’ve chosen a reputable realtor who exclusively works with buyers or sellers alone. If you decide to hire such a realtor, they may be able to recommend a trusted colleague in their agency to handle your other deal.

Timing Your Closing Dates

There is a lot to consider when selling and buying a house at the same time. The timing of both deals can impact financing options, having to find temporary housing, and figuring out how to store or move your belongings.

Setting a closing date is part of the negotiating process for any real estate deal, and coordinating closings for the same date can streamline the process.

Still, closings can be delayed due to reasons outside your control. Having a back-up plan, such as a rent-back agreement, can keep you in your home while you find a new house. Putting additional contingencies in a contract can help with rescheduling closings as needed or even walking away without much financial loss.

Obtaining a Mortgage

Buying and selling houses at once may not always be easy, but it is doable.

If you cannot purchase a house with cash or home equity, you’ll need to figure out how much you can borrow.

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.

*Terms and conditions apply. Applies to conventional purchase loans only. Rate will lock for 90 calendar days at the time of pre-approval subject to payment on 60th day of the fee below. If you submit a fully executed purchase contract within 30 days of the initial rate lock, SoFi will reduce the interest rate by an additional 0.125% at no cost. If current market pricing has improved by .75 percentage points or more from the original locked rate, you may qualify for an additional rate reduction. If you have not submitted a fully executed purchase contract within 60 days of your initial rate lock, you will be charged $250 to maintain the rate lock through the 90-day period. The $250 fee will be credited back to you at the time of closing. SoFi reserves the right to change or terminate this offer at any time with or without notice to you.
*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 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.

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.

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.

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After months of searching, you’ve found your dream home. There’s just one problem: It’s marked as contingent. Can you still make an offer on a house that is contingent? In a word, yes.

Here’s what you need to know about contingent homes and what they mean for hopeful buyers.

What Does Contingent Mean On a House?

When scrolling through online real estate listings, you’re likely to come across a few different listing classifications. These tell you what stage of the real estate process a property is in.

A listing classified as “active” means the home is currently for sale and potential buyers are welcome to view the home and make an offer. A home listed as “pending” means a closing date has been set and all contingencies have been met. A home listed as “sold” is officially off the market.

In real estate, contingent means an offer has been accepted on a home, but before the sale can go through, certain criteria (specified in the contract) need to be met.

Many buyers don’t fully understand the contingent house meaning when it comes to their options. Unfortunately, this could mean buyers are throwing away real estate opportunities.

💡 Quick Tip: Thinking of using a mortgage broker? That person will try to help you save money by finding the best loan offers you are eligible for. But if you deal directly with an online mortgage lender, you won’t have to pay a mortgage broker’s commission, which is usually based on the mortgage amount.

Can a Contingent Home Fall Through?

Yes, it can.

In 2023, the National Association of Realtors® found that 5% of contracts over a three-month time period were terminated. Reasons for a contract falling through include job loss, unmet contingencies (such as the buyer not being able to sell their home), trouble with financing, home inspection issues, and more.

Financing Falls Through

According to a NAR® report, 87% of homebuyers financed their home. Home loans aren’t finalized until closing, so until a buyer signs on the dotted line on closing day, financing isn’t guaranteed.

Even though buyers may be pre-approved for financing, finalizing the process involves diving deeper into their financial matters. Sometimes unanswered debts come up or loan seekers have overestimated their assets.

Whatever the reason, financing can fall through at any time and push a home back on the market.

Appraisal Is Low

An appraisal must be completed when a home is being bought with a mortgage loan. A qualified appraiser determines the value of the home through a variety of measures, including condition and location.

An appraisal that comes in much lower than expected can push a home back on the market. Buyers might decide they are no longer interested, sellers might not agree to a lower price, or the financial institution providing funding could stop the transaction from taking place.

Surprises in the Home Inspection

A home inspection that turns up unexpected issues can void a contingent contract. Unless the buyer and seller can come to an agreement about who will absorb the cost of each necessary fix, it’s unlikely a new offer will be made or accepted.

A home inspection that finds a home to be in severe disrepair could make it difficult or impossible to secure funding, as well.

The Buyer Is Unable to Sell Their Home

One of the most common requirements written into a contingent offer is that the sale can’t go through until the buyer sells their home. Many homeowners can’t afford two mortgages at once, and this is the best way to prevent an overlap.

However, this leaves the seller in an uncomfortable position, not knowing if their home will officially sell in one week or three months. Unless specifics are written into the contingency contract, a seller may back out of the contract or accept another offer if they feel the sale is moving too slowly.

💡 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.

How to Put in an Offer on a Contingent Home

In most cases, putting an offer in on a contingent home is an option to consider. Although it doesn’t guarantee you’ll close on the home, it does mean you could be first in line should the current contract fall through.

Putting an offer in on a contingent home is similar to the homebuying process of any active listing. Here are a few responses you could receive:

•   Crickets. In some cases, a seller and buyer may have already gone through the requirements and are approaching a closing date. If this is the case, you’re likely to hear crickets. Don’t take it personally.

•   We’ll get back to you. If your offer is appealing, you can expect the seller’s agent to want to speak with yours. A quick conversation between the professionals will likely reveal if the deal can take place or not. Keep in mind that if the sellers have accepted a contingent offer without a “kick-out clause,” they may not be able to back out of the contract.

•   Yes! If a motivated seller is not happy with the speed of the current buyer, your tantalizing offer could win them over quickly. If your offer is accepted, you’ll move forward with the process required by your lender. If you’ve offered cash, closing may happen rather quickly.

Buying a Contingent Home Is Possible, But Is It Worth It?

The answer to this question really depends on how much you want to own the home in question.

Making an offer on a contingent home can take you on a rollercoaster ride. Before you hop on, consider the benefits and potential pitfalls.

Pros

Fast closing. The sellers may be tired of their current contract and ready to move on. If you can put in a better offer, you could be closing sooner rather than later. Before you make an offer, make sure you’re really ready to buy a home.

Less competition. It may not be obvious on an online listing, but a contingent home’s contract could be dead in the water. And while other buyers scroll past the listing because they don’t realize they can still make an offer, you might be able to swoop in and get the home without worrying about competing bids.

Cons

Higher price. It’s less likely you’ll get a great deal when making an offer on a contingent home. In most cases, a contingent offer is high to encourage sellers to hold out if the closing process takes longer than anticipated. You may have to cough up a bit extra to get the home, which is why you should only put an offer on a contingent home that you absolutely love.

Wasted time. Think of putting an offer on a contingent home like asking someone out who is already in a committed relationship. Sure, there’s a chance they’ll say yes. But there’s no way to know if your efforts will be worth it.

The Takeaway

Can you still make an offer on a house that is contingent? Yes. But before you do, make sure the house is worth the added effort and be prepared to move forward quickly in the homebuying process.

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

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

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.

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.

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.

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