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Conventional loans are the most popular kind of mortgage, but a government-backed mortgage like an FHA loan is easier to qualify for and may have a lower interest rate. FHA home loans have attractive qualities, but borrowers should know that mortgage insurance usually tags along for the life of the loan.

As of March 2023, new FHA borrowers will pay less for insurance. The Biden-Harris Administration announced it was reducing premiums by .30 percentage points, lowering annual homeowner costs by $800 on average. The administration hopes the cuts will help offset rising interest rates.

What Is an FHA Loan?

The Federal Housing Administration has been insuring mortgages originated by approved private lenders for single-family and multifamily properties, as well as residential care facilities, since 1934.

The FHA backs a variety of loans that cater to the specific needs of a borrower, such as FHA reverse mortgages for people 62 and older and FHA Energy Efficient Mortgages for those looking to finance home improvements that will increase energy efficiency (and therefore lower housing costs).

But FHA loans are most popular among first-time homebuyers, in large part because of the relaxed credit requirements.

Recommended: Tips to Qualify for a Mortgage

FHA Loan Requirements

If you’re interested in an FHA home loan to buy a single-family home or an owner-occupied property with up to four units, here are the details on qualifying.

FHA Loan Credit Scores and Down Payments

Borrowers with FICO® credit scores of 580 or more may qualify for a down payment of 3.5% of the sales price or the appraised value, whichever is less.

Those with a poor credit score range of 500 to 579 are required to put 10% down.

The FHA allows your entire down payment to be a gift, from a family member, close friend, employer or labor union, charity, or government homebuyer program. The money will need to be documented with a mortgage gift letter.

FHA Loan DTI

Besides your credit score, lenders will look at your debt-to-income ratio, or monthly debt payments compared with your monthly gross income.

FHA loans allow a DTI ratio of up to 50% in some cases, vs. a typical 45% maximum for a conventional loan.

FHA Mortgage Insurance

FHA loans require an upfront mortgage insurance premium (MIP) of 1.75% of the base loan amount, which can be rolled into the loan. As of March 2023, monthly MIP for new homebuyers is 0.15% to .75% — most often 0.55%.

For a $300,000 mortgage balance, that’s upfront MIP of $5,250 and monthly MIP of $137.50 at the 0.55% rate.

That reality can be painful, but MIP becomes less expensive each year as the loan balance is paid off.

There’s no getting around mortgage insurance with an FHA home loan, no matter the down payment. And it’s usually only shed by refinancing to a conventional loan or selling the house.

FHA Loan Limits

In 2023, FHA loan limits in most of the country are as follows:

•   Single unit: $472,030

•   Duplex: $604,400

•   Three-unit property: $730,525

•   Four-unit property: $$907,900

The range in high-cost areas is $1,089,300 (for single unit) to $2,095,200 (four-unit property); for Alaska, Hawaii, Guam, and the U.S. Virgin Islands, the range is $1,633,950 (for single unit) to $3,142,800 (for four-unit property).

FHA Interest Rates

FHA loans usually have lower rates than comparable conventional loans.

The annual percentage rate (APR) — the annual cost of a loan to a borrower, including fees — may look higher on paper than the APR for a conventional loan because FHA rate estimates include MIP, whereas conventional rate estimates assume 20% down and no private mortgage insurance.

The APR will be similar, though, for an FHA loan with 3.5% down and a 3% down conventional loan.

FHA Income Requirements

There are none. High and low earners may apply for an FHA loan, but they must have at least two established credit accounts.

Recommended: How to Afford a Down Payment on Your First Home

Types of FHA Home Loans

Purchase

That’s the kind of loan that has been described.

FHA Simple Refinance

By refinancing, FHA loan borrowers can get out of an adjustable-rate mortgage or lower their interest rate.

They must qualify by credit score and income, and have an appraisal of the property. Closing costs and prepaids can usually be rolled into the new loan.

FHA Streamline Refinance

Homeowners who have an FHA loan also may lower their interest rate or opt for a fixed-rate FHA loan with an FHA Streamline Refinance. Living up to the name, this program does not require a home appraisal or verification of income or credit.

Note: SoFi does not offer FHA streamline refinance, FHA 203(k) loan, or FHA cash-out refinance at this time. However, SoFi does offer FHA loan options.

The new loan may carry an MIP discount, but you’ll pay the upfront MIP in addition to monthly premiums. An exception: The upfront MIP fee of 1.75% is refundable if you refinance into an FHA Streamline Refinance or FHA Cash-out Refinance within three years of closing on your FHA home loan.

Closing costs are involved with almost any refinance, and the FHA doesn’t allow lenders to roll them into a Streamline Refinance loan. If you see a no closing cost refinance for an FHA loan, that means that instead of closing costs, a lender will charge a higher interest rate on the new loan.

You’ll continue to pay MIP after refinancing unless you convert your FHA loan to a conventional mortgage.

FHA Cash-Out Refinance

You don’t need to have an FHA loan to apply for an FHA Cash-Out Refinance. Whatever kind of loan the current mortgage is, if the eligible borrower has 20% equity in the home, the refinanced loan, with cash back, becomes an FHA loan.

The good news: Homeowners with lower credit scores may be approved. The not-great news: They will have to pay mortgage insurance for 11 years.

Any cash-out refi can trigger mortgage insurance until a borrower is back below the 80% equity threshold.

FHA 203(k) Loan

In addition to its straightforward home loan program, the FHA offers FHA 203(k) loans, which help buyers of older residences finance both the home purchase and repairs with one mortgage.

An FHA 203(k) loan can be a 15- or 30-year fixed-rate or adjustable-rate mortgage.

Some homeowners take out an additional home improvement loan when the need arises.

FHA vs Conventional Loans

Is an FHA loan right for you? If your credit score is between 500 and 620, an FHA home loan could be your only option. But if your credit score is 620 or above, you might look into a conventional loan with a low down payment.

You can also buy more house with a conventional conforming loan than with an FHA loan. Conforming loan limits in 2023 are $726,200 for a one-unit property and $1,089,300 in high-cost areas.

Borrowers who put less than 20% down on a conventional loan may have to pay private mortgage insurance (PMI) until they reach 20% loan-to-value. But borrowers with at least very good credit scores may be able to avoid PMI by using a piggyback mortgage; others, by opting for lender-paid mortgage insurance.

One perk of an FHA loan is that it’s an assumable mortgage. That can be a draw to a buyer in a market with rising rates.

The Takeaway

An FHA home loan can secure housing when it otherwise could be out of reach, and FHA loans are available for refinancing and special purposes. But mortgage insurance often endures for the life of an FHA loan. The Biden-Harris Administration recently reduced monthly MIP for new homebuyers to help offset higher interest rates.

Some mortgage hunters might be surprised to learn that they qualify for a conventional purchase loan with finite mortgage insurance instead. And some FHA loan holders who have gained equity may want to convert to a conventional loan through mortgage refinancing.

SoFi offers conventional fixed-rate mortgages with competitive interest rates and cancellable PMI, as well as refinancing. Check out SoFi’s low rate home mortgages.

Qualifying first-time homebuyers can put as little as 3% down, and others, 5%.

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

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

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

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

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The decision to buy a home is a significant milestone in life, representing stability, security, and investment. The process of purchasing a home, however, can be complex and overwhelming, especially for first-time homebuyers. There are numerous steps involved, some more complex than others, and you generally need to follow the steps in a certain order to ensure everything goes smoothly.

To help you navigate the home-buying process successfully, we’ve created a simple step-by-step home-buying checklist. Each item you cross off the list will bring you one step closer to achieving your dream of home ownership.

10 Key Steps to Buying a House

1. Determine How Much House You Can Afford

The first step in the home-buying process is to evaluate your financial situation and determine a realistic budget. While a lender can tell you how much of a mortgage you can get approved for, you may want to do some calculations on your own to make sure your budget doesn’t get stretched too thin. A general rule of thumb is to spend no more than 28% of your gross monthly income on housing costs, including mortgage (interest and principal), property taxes, insurance, and any association fees.

Using a home affordability calculator can help you determine how much house you can afford to buy by taking into account your income, debts, location, and down payment amount.

2. Make a Plan for the Down Payment

Once you have a budget in mind, you’ll need to plan for the down payment. You may have heard that you need to make a 20% down payment on a home, but that’s really just the threshold many lenders use for requiring private mortgage insurance (PMI) on a conventional loan.

The minimum down payment you need to make for a house will depend on the type of mortgage you’re planning to apply for. Loans guaranteed by the U.S. Department of Veterans Affairs (VA) usually do not require a down payment, while FHA loans, which are backed by the Federal Housing Administration, may require as little as 3.5% down.

When choosing how much to put down, however, you’ll want to keep in mind that a higher down payment brings down the principal (and lifetime interest payments), which can lower the total cost of homeownership.

3. Get Preapproved for Your Mortgage

Working with a lender to get preapproved for a mortgage is an essential step that demonstrates your seriousness as a buyer and strengthens your position in negotiations. You may want to shop around and look at mortgage offerings and rates from different lenders before you choose a lender for preapproval. Keep in mind, though, that you do not have to use the same lender to finance your loan that you use for your preapproval.

In order to get preapproved, a lender will usually require a significant amount of information and documentation. This may include:

•  Income statements (such as W2s, 1099s, and tax returns)

•  Proof of assets (such as bank statements and retirement accounts)

•  Debts (including student loans, credit cards, and any other mortgages)

•  Records of bankruptcies and foreclosures

•  Current rent

Once you submit all your paperwork, the lender will assess your financial situation and preapprove you for a specific loan amount, which will be spelled out in a preapproval letter. This letter will give you a clear understanding of your buying power. It can also come in handy when submitting an offer, since it shows sellers and real estate agents that you’re a serious buyer who will be able to get financing.

A preapproval letter is typically valid for only 90 days (sometimes less), after which it will need to be updated.

💡 Quick Tip: Buying a home shouldn’t be aggravating. Online mortgage loan forms can make applying quick and simple.

4. Find the Right Real Estate Agent

The right real estate agent can make a significant difference in your home-buying experience. A knowledgeable and experienced agent will guide you through the process, provide valuable insights, and negotiate on your behalf. Ideally, you want to choose an agent who understands your needs, has expertise in the local market, and communicates effectively. You may want to ask for recommendations from friends, family, and colleagues, then interview at least three agents before choosing the one you want to work with.

Recommended: Preparing to Buy a House in 8 Simple Steps

5. Shop for Your Home

With the help of your real estate agent, you can begin the fun part of the home-buying process — searching for your dream home. Before you start, it can be a good idea to create a list of your must-haves and nice-to-haves, considering factors such as location, size, amenities, and proximity to schools, workplaces, and amenities. This will help guide your realtor in finding the right homes to show you.

6. Make an Offer

When you find a home that fits the bill, you’ll want to work with your agent to make a competitive offer that reflects your budget and market conditions. Your agent will then prepare a complete offer package, which will include your offer price, any special terms or contingencies, your preapproval letter, and (in some cases) proof of funds for a down payment. If the seller accepts your offer, congratulations — you only have a few more steps left in the home-buying process. At this point, you will likely need to write a check that will serve as a deposit on the home. This typically goes into an escrow account.

7. Get a Mortgage

Once your offer is accepted, you’ll need to get official approval for a mortgage. You’re not obligated to go with the same lender that issued your preapproval, so you may want to shop around and compare rates and terms from different banks, credit unions, and online lenders.

If you do decide to officially apply for your loan with the same lender that did your preapproval, they already have many of the documents you’ll need for your application. However, you will likely need to provide updated and perhaps additional financial statements. If you apply with a new lender, you’ll need to supply much of the same information as you did for preapproval.

The lender will evaluate your financial information, review your creditworthiness, and conduct an appraisal of the property. You’ll want to be sure to work closely with your lender and respond quickly to any requests to ensure a smooth and timely mortgage approval process.

8. Get a Home Inspection

A home inspection is a crucial step to uncover any potential issues or defects in the property. For this step, you’ll likely need to hire a professional home inspector to assess the condition of the home, including its structure, systems, and components. The inspector will provide a detailed report highlighting any areas of concern. Once you receive the inspector’s report, you’ll want to review it with your real estate agent and discuss potential repairs or negotiating points with the seller.

9. Negotiate any Repairs or Credits with the Seller

Based on the home inspection and lender’s appraisal results, you may need to negotiate repairs or credits with the seller. Your real estate agent will guide you through this process, helping you assess the necessary repairs/credits and determine fair solutions.

Your ability to negotiate with the seller will likely depend on the current real estate market. If it’s a hot seller’s market, for example, it may be challenging to get concessions, since the seller can move on to the next offer. However, if it’s an issue that will likely come with other buyers, you may have success. In a buyer’s market, there will typically be more room for negotiation at this stage of the process.

10. Close the Sale

The final step in the home-buying process is the closing. During the closing, you and the sellers will sign legal and financial documents and ownership of the property is transferred to you. It’s important to review all the closing documents carefully, including the settlement statement, loan documents, and homeowner’s insurance. You’ll also need to provide all the necessary funds, including the down payment and closing costs. Once the final paperwork is executed, you will receive the keys to your new home. Congratulations, you’re a homeowner!

The Takeaway

Buying a home is a multi-step process that starts with assessing your current income and expenses and determining how much you can afford to spend on a home. You then need to start saving up for a downpayment, get preapproved for financing, and find the right home. Once you have an offer accepted, it’s time to secure a mortgage, conduct an inspection, negotiate repairs, and close on the sale. It’s a lot. But taking a systematic approach — and following a home-buying checklist — can help ensure a smooth and stress-free home-buying experience.

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

FAQ

What are the 3 most important things when buying a house?

Three of the most important things to consider when buying a house are:

•  Location The location of a property impacts your life in a number of key ways, including commute times, access to amenities, schools, safety, and future property value.

•  Affordability A home’s affordability includes not just the purchase price but also ongoing expenses, such as mortgage payments, property taxes, insurance, and maintenance costs. You’ll want to be sure you can comfortably afford the monthly payments without stretching your finances too thin.

•  Condition of the property It’s important to assess the condition of the property through an inspection before you buy. Consider factors such as age, maintenance requirements, repairs needed, and potential future costs.

What is the most difficult step in buying a house?

Securing financing and obtaining a mortgage is often the most challenging step in buying a house. To qualify for a mortgage, you generally need to meet certain criteria, understand various mortgage options, and navigate the loan approval process, which involves providing extensive financial documentation and meeting strict timelines.

What are the 5 phases of buying a home?

The process of buying a home can be broken down into five distinct phases:

•  Planning and preparation This involves evaluating your finances, establishing a budget, saving for a down payment, and obtaining preapproval for a mortgage.
Property search In this phase, you actively search for properties that align with your criteria and budget.

•  Offer and negotiation Once you find your ideal property, you submit an offer to the seller. This phase may involve negotiation, where you and the seller work to find mutually acceptable terms with the help of your real estate agent.

•  Closing process The closing process includes reviewing and signing various legal and financial documents, such as the purchase agreement, mortgage paperwork, and insurance policies.

•  Ownership and moving in At this stage, you complete the closing, make the necessary payments, and receive the keys to your new home. You may also need to coordinate with movers, set up utilities, and take care of other logistics related to the move.

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.

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For a conventional mortgage loan, you typically need a credit score of 620 or higher to indicate that you are likely to repay your debt on time and get approved. However, there are other types of loans that may be available for people with lower scores. In addition, with a higher score, you may qualify for more favorable rates and terms.

For many, buying a home is a huge financial step, representing the biggest purchase they’ll ever make in their life. Read on to learn more about how your credit score impacts your ability to access a home loan and which terms are available to you.

Average Credit Score to Buy a House

About 70% of mortgages are conventional loans, making these far and away those most common mortgage type. For a conventional mortgage, lenders will typically require a minimum credit score of 620. That said, on average, homebuyers had a credit score of 758 in 2024, considerably higher than the required minimum.

On the topic of credit scores, here’s how the FICO® Score, a popular credit-scoring model, arranges its credit score ranges:

•   300-579: Poor

•   580-669: Fair

•   679-739: Good

•   740-799: Very good

•   800-850: Exceptional or excellent

Recommended: What Is the Starting Credit Score?

What Credit Score Do I Need to Buy a House?

As mentioned above, the credit score you need to buy a house will vary depending on the loan type you apply for. In general, necessary credit scores will range from 500 to 700. The higher the score, the easier it generally is to secure credit and qualify for favorable terms and interest rates.

Minimum Credit Scores by Home Loan Type

There are several different types of home loans you may apply for depending on your circumstances, including conventional loans, jumbo loans, FHA loans, VA loans, and USDA loans. Each type of loan has a different minimum credit score requirement.

Conventional Loans Minimum Credit Score

A conventional loan is a home loan that is backed by private lenders. It is not backed or insured by the government. This is the most common type of home loan and usually requires a minimum credit score of 620. If your credit score is higher than that (say, in the very good or excellent ranges), you may qualify for lower interest rates and better terms.

Jumbo Loans Minimum Credit Score

Jumbo loans are loans that are too big to be covered by conventional loans as determined by the Federal Housing Finance Agency (FHFA). According to the FHFA, in 2025, loans bigger than $806,500 require a jumbo loan in most counties. Jumbo loans usually have a minimum credit score of 700, one of the highest credit score thresholds among mortgage options.

FHA Loans Minimum Credit Score

A Federal Housing Administration, or FHA, loan is one that is backed by the federal government. This program helps make buying a house more affordable for families with low or moderate incomes. Government backing means these loans may be extended to individuals who would otherwise likely be seen as risky by conventional lenders. FHA loans typically have a low minimum credit score requirement of 500 with a 10% down payment and a 580 credit score with a 3.5% down payment.

VA Loans Minimum Credit Score

A VA loan is partially guaranteed by the Department of Veterans Affairs. They are available to veterans, service members, and their families, and some lenders will require a minimum credit score of 620. That said, there is no official minimum credit score requirement, so you may be able to access a VA loan with a lower score. If that is your situation, you may have to provide additional documentation in order to be approved.

USDA Loans Minimum Credit Score

USDA loans are guaranteed by the U.S. Department of Agriculture and are available in certain individuals in rural areas. They often look for a minimum credit score of 580, but as with VA loans, there isn’t a strict requirement. You might qualify for a USDA loan with a lower score if a lender reviews your financials and determines you are creditworthy.

Related: The 52 Week Savings Challenge

How Your Credit Score Affects Mortgage Rates

Your credit score is a three-digit representation of your credit history. Higher scores demonstrate that you have been responsible with your credit, paying bills on time and avoiding taking on more debt than you can manage. Lenders see potential borrowers with high scores as being less risky than those with lower scores. If you’ve managed credit wisely in the past, you may well do so again in the future.

As a result, lenders may offer borrowers with high scores credit with better terms and lower interest rates. Lenders may also extend credit to borrowers with lower scores. However, to compensate for the extra risk they are taking on, they may charge higher interest rates, which increases the overall cost of borrowing.

Here’s an example of mortgage interest rates for conventional loans by credit score as of mid-2024:

•   Those with a credit score of 760-850 would have a 6.976% APR

•   Those with a credit score of 660-679 would have a 7.589% APR

•   Those with a credit score of 620-639 would have an 8.565% APR

While these differences among rates may not sound huge, over the life of a loan, an additional percent or so in interest can really add up.

Other Factors Mortgage Lenders Consider

In addition to your credit score, lenders will also likely look at some other factors:

•   Your employment status and income. They may want to see that you have a steady stream of cash to pay your monthly mortgage bill.

•   How much money you have for a down payment. The more money you put down, the less risk the lender has to take on. As a result, higher down payments may help you qualify for loans and lower interest rates.

•   Other assets you have that could be used to make debt payments in case you don’t have enough income.

•   The value of any other property you own.

•   Your debt-to-income ratio (DTI). This is a comparison of how much debt you owe versus how much money you have coming in. It’s a quick way to let lenders know whether you have enough income to cover your liabilities.

Can You Get a Mortgage With a Bad Credit Score?

The lowest credit score category is poor, which ranges from 300 to 579. With a score in this range, you may not qualify for a conventional loan.

However, you can get a mortgage with a low credit score as long as it meets minimum score requirements. A government-backed loan may be your best bet, since some lenders may approve a borrower with a credit score below 580 (say, 500 and up). That said, you may pay more in interest than those with higher scores. You might prefer to wait and build your score before applying for a home loan.

How to Build Your Credit Before Getting a Mortgage

It may be worthwhile to build your credit before you apply for a loan. There are several factors that affect your credit score.

One of the best ways to build your credit score can be to always pay your bills on time. This is the number-one factor in determining the most common credit scores, including FICO and VantageScore.

The second biggest factor is your credit utilization rate, or how much of your available credit you’re using. In general, the less the better. Lenders typically prefer that you use no more than 30% of your available credit. Pay down debt to lower your utilization rate and raise your score.

Recommended: How Long Does It Take to Build Credit?

Factors in Mortgage Preapproval

A mortgage preapproval is a statement from a lender that you are likely to qualify for a mortgage. It can be a helpful document to show sellers as it can demonstrate that you are serious about making a purchase and likely to receive financing.

For a preapproval, lenders typically look at such factors as credit score, income, assets, DTI, and employment verification. Thanks to this financial review, being preapproved can give you a sense of confidence about your ability to go house shopping.

Credit Score Tips

Your credit score is not static. It changes over time, and your score may vary depending on the scoring system used.

The credit reporting bureaus update your score after anything happens that affects your credit. So if you are late with a payment or if your credit utilization climbs higher, you may see your score drop. On the other hand, if you were to lower your credit utilization, you might positively impact your score. These actions can all help build your score: paying your bills on time, every time; managing your credit utilization; not applying for too much credit in a short period of time; having a good mix of credit; and maintaining a longer credit history.

It’s also important to monitor your credit score and regularly examine your credit report for errors. (You can check your credit report without paying each week from each of the credit reporting bureaus: Experian®, Equifax®, and TransUnion®.)

If you catch a mistake, dispute the error with the credit reporting bureau immediately to prevent it from dinging your score.

You may be able to build a stronger credit score with the help of healthy financial habits, such as budgeting and saving regularly, which can help you stay out of debt and manage payments. You might use spending apps and money tracker apps in this pursuit. A good place to start: See what your financial institution offers. You can also search online for third-party tools.

Recommended: Why Did My Credit Score Drop After a Dispute?

The Takeaway

Your credit score can impact the type of loans you qualify for, as well as the terms and interest rates lenders may offer. For a conventional home loan, you will typically need a score of 620 or higher, and a score of 700 and up for a jumbo loan. Government-backed loans, such as FHA, VA, and USDA loans, however, may accept credit scores in the 500s. Those with lower scores will typically pay higher interest rates.

While you may qualify for a loan with the minimum required credit score, it may be beneficial to monitor and build your score before taking out a loan to reduce the overall cost of borrowing.

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

FAQ

What is a decent credit score for buying a house?

On average, homebuyers had a credit score of 758 in 2024, but you may be able to qualify for a loan with a lower score. Typically, conventional loans are available to those with scores of 620 and up. Usually, higher scores can give access to more favorable rates and terms.

Can you buy a house with a 600 credit score?

With a credit score of 600, you may be able to qualify for a government backed loan, such as an FHA, VA, or USDA loan. Or you might choose to wait and build your score to 620 or higher, which could then give you access to a conventional home loan.

How much house can I afford if I make $70,000 a year?

There are several rules of thumb about how much to spend on housing each year. One common one is that you shouldn’t spend more than 30% of your gross income each month on housing costs including your mortgage and property taxes. That works out to a mortgage payment of about $1,650 each month. You can then use online mortgage calculators to explore how much you can borrow to fit this monthly budget. In some tight housing markets, people may spend more. In fact, one recent study found that more than 20% of homeowners indeed exceeded this amount.

What credit score is needed to buy a $400,000 house?

Securing a mortgage isn’t just a matter of your credit score versus how much the prospective home costs. Several factors will be evaluated by lenders in addition, such as down payment amount, income, and more. For a conventional loan, you likely need a credit score of 620 or higher, while you may access a government-backed loan with a lower score (say, 500 and above) if you meet certain criteria.

Is a 580 credit score good enough to buy a house?

With a credit score of 580, you may qualify for an FHA, VA, or USDA loan. You can work with online tools and specific lenders to see what your odds of qualifying are or seek out preapproval.

How much income do I need for a 300K FHA loan?

The income you need will vary depending on the lender guidelines and other factors, such as down payment funds you may have available, your credit score, and more. It could be helpful to discuss your qualifications with a lender or use an online calculator to see what you could qualify for.

Photo credit: iStock/angkhan

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

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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 .

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If you’re looking to buy a condo or townhome, understanding the distinctions may help you home in on the choice that better suits your lifestyle and needs. Read on to learn the major differences between these two kinds of property.

What Is a Condo?

A condominium is a private property within a larger property, whether that be a single building or a complex. Residents share amenities like clubhouses, gyms, pools, parking, and the common grounds, and pay homeowners association (HOA) dues to support those shared assets. If you buy a condo, you’ll own your interior space only.

What Is a Townhouse?

A townhouse is a single-family unit that shares one or more walls with another home, usually has two or more floors, and may have a small backyard or patio. If you buy a townhouse, you’ll own the interior and exterior of the unit and the land on which it sits. Upkeep of the exterior could be split between you and the homeowners association (HOA).


💡 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.

Condo vs Townhouse: Differences

Both are part of a larger structure, unlike some other house types, and both usually share one or more walls, but some similarities end there. Here are the key differences.

1. Construction

In the condo vs. townhouse debate, construction differs. A townhouse will share at least one wall with a property next door. A condo could have another unit below and above it, in addition to neighbors on either side. That could mean sharing all surrounding walls and floors/ceilings.

2. Actual Ownership

If you’re considering townhouse vs. condo, what would you actually own? With townhomes, the buyer owns the land and the structure. That could mean some creativity with decorating the lot or the home’s exterior. With condos, the buyer owns the interior of the unit and an “interest” (along with all of the other owners) in the common elements of the condominium project.

3. Community

With both condos and townhouses, residents will have fairly close contact with their neighbors. With shared walls and spaces, residents may have more social relationships with their community than they would with a single-family home. That means it’s important for buyers to research the community when condo shopping. Is the condo social? Does it plan a lot of events, or do people generally keep to themselves? Since there are many shared spaces, understanding how the community functions could directly affect living there.

If a townhome isn’t part of an HOA, living in the complex could feel similar to living in a single-family home. In that case, it could be up to the buyer to create a sense of community.

4. Homeowners Associations

Condos come with an HOA, a resident-led board that collects ongoing fees that can range from $200 to thousands of dollars, and mandates any special assessments. The HOA also enforces its covenants, conditions, and restrictions (CC&Rs).

Not all townhouse communities have an HOA, but if they do, townhouse owners usually pay lower monthly fees than condo owners because they pay for much of their own upkeep.

5. Obligations and Regulations

What’s the difference between a townhouse and a condo when it comes to rules and regulations? Condo owners will be required to meet all HOA standards. That could dictate anything from what residents want to hang on their front door to whether they can have pets, how many, and whether Biff needs to be registered as a service animal or emotional support animal. If an owner wants to renovate their condo, they may have to get the work approved by the HOA.

If a townhome is part of an HOA, many of the above restrictions could apply. However, if it’s not an HOA community, townhouse owners have more freedom to decorate the exterior of their home or maintain their landscape as they see fit.

6. Insurance

Condos have their own form of property insurance. HO-6 provides coverage for the interior of a condo and the owner’s personal belongings. In addition, the entire building needs to be insured, which is paid for with HOA dues.

If a townhouse is part of an HOA community, each property requires HO-6 insurance and coverage for the community through HOA dues. When a townhouse isn’t part of an HOA, buyers are typically required to have homeowners insurance.

7. Fees and Expenses

HOA fees for condos are usually higher than for townhouses because they cover exterior maintenance and shared amenities. If townhouse owners are part of an HOA, they’ll usually pay lower monthly fees because they pay for much of their own upkeep.

Condo owners don’t have to worry about repairing the roof or replacing siding. Everything exterior-facing is managed collectively and paid for with HOA dues, but those fees may be high and are periodically reevaluated, and so may rise over time.

8. Financing

It can be harder to obtain financing for a condo than for a townhouse. Condos may be eligible for conventional mortgage loans and government-insured loans. (Study the mortgage basics to learn more about the difference between these types.) Lenders of conventional loans will review the financial health of an HOA, whether most of the units are owner-occupied, and ownership distribution. Interested in an FHA loan or a VA loan? Both agencies maintain respective lists of approved condos.

In the case of a townhouse, the financing process is similar to that of a traditional mortgage because a townhouse includes the land it’s built on. Its value is factored into the process.

9. Resale Value

A large factor in a condo holding value is the management, which isn’t always in the hands of the owner. Strong management can help a condo maintain or grow in value. Additionally, where the condo is located will influence resale value. Condos generally hold value but don’t see the boost in resale expected with single-family homes. Similarly, buying a townhouse may not usher in the appreciation of most single-family homes.


💡 Quick Tip: Your parents or grandparents probably got mortgages for 30 years. But these days, you can get them for 20, 15, or 10 years — and pay less interest over the life of the loan.

Condo vs Townhouse: Which May Be Right for You?

Condos and townhomes have their fair share of differences, as well as some similarities. Overall, condos can offer a low-maintenance property where owners simply look after their condo interior. With condo ownership comes the added perk of shared amenities. But condos come with monthly HOA fees, which must be factored into any purchase. Additionally, the community association and its management of the property will likely have a large impact on what life is like in a particular condo complex. Condo buyers may be more community-minded, as they share space with their neighbors. (If a condo feels like the right choice, read a guide to buying a condo as you embark on your search.)

Townhouses offer more freedom and privacy than condos. Owners may have the option of personalizing their exterior and enjoying outdoor space if the property has a patio or backyard. Townhomes generally require more responsibility and upkeep than a condo, even if there’s an HOA involved. Exterior maintenance will be required. If this sounds like a good fit, dig deeper by reading a guide to buying a townhouse.

Of course, you may be better suited to a different living situation altogether. House or condo? Take a quiz to learn which of these options might be best for you.

The Takeaway

When it comes to finding a home, the perfect fit is up to the individual, but buyers may want to take a hard look at monthly fees, community rules, how social they intend to be, and precisely what they own and must maintain.

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

FAQ

Between condos and townhouses, which is cheaper to buy?

The cost of a condo and townhome will vary based on location and size, but condos are often less expensive than townhouses because they come with no land.

Do you own the land around a condo if you buy it?

No. The purchase of a condo only includes the interior.

Is the resale value higher for a condo or townhouse?

In general, condos and townhomes don’t appreciate as quickly as single-family homes. The value will vary based on area, upkeep, and other conditions.

Between condos and townhouses, which has better financing options?

Financing a townhome is like financing a single-family home. A buyer can choose from multiple types of mortgages.

Financing a condo, on the other hand, involves a lender review of the community or inclusion on a list of approved condominium communities. Because a private lender could see a condo as a riskier purchase, the interest rate could be higher unless a large down payment was made.

Photo credit: iStock/Inhabitant

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.

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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Navigating a small kitchen can be challenging, especially if you love to entertain or have numerous mouths to feed. If your snug cooking area needs an upgrade, you might be craving ways to create more elbow room and storage areas.

Fortunately, choosing from the buffet of small-kitchen remodel ideas can help you expand your culinary space without breaking the bank.

What Is the Average Size of a Small Kitchen?

Today, the average small kitchen is considered to be 70 square feet. Many apartments in big cities have kitchens of 50 square feet or less.

Isn’t that a shame? Not always. Unsurprisingly, millennial homebuyers, who have constituted the biggest share of buyers for years, are far less likely than baby boomers and Gen Xers to cook dinner at home.

A little kitchen might suit them you, but you still may like the idea of zhuzhing it up.

10 Small-Kitchen Remodel Ideas on a Budget

You don’t need to demo a wall or take out a reverse mortgage to improve your cozy canteen. At an average of $150 per square foot for both materials and labor, a homeowner might spend $10,500 for a 70-square-foot kitchen remodel. Some will spend much more, and some, much less.

Here are 10 small-kitchen remodel ideas on a budget that will work for most kitchen configurations.

1. Go for a New Backsplash

Installing a festive new backsplash can range from $10 to $95 per square foot. Stick with ceramic tile, brick, or tin for more affordable options than marble or glass. Adding a backsplash with geometric patterns can make a small kitchen seem larger.

2. Install Open Cabinets and Shelves

Open cabinets and shelves offer a contemporary feel and a chance to display your favorite dishware. The look can also be a less expensive option than traditional cabinets while lending a sense of airiness to a once-cramped kitchen.

3. Change the Flooring

Installing a new floor can be an affordable way to revamp the look of your small kitchen. Vinyl kitchen flooring comes in a variety of snazzy colors and patterns, and costs between $1 and $5 per square foot, or up to $12 for high-end materials.

4. Paint With Light Colors

A fresh coat of paint can give an instant facelift to any small kitchen. But dark colors tend to absorb light and constrict the space. By choosing light colors, you can brighten and open up the room.

5. Add Style and Storage Above

Maybe you bought a starter home, and the kitchen isn’t all that. Or perhaps downsizing your home seems like the thing to do, little kitchen and all.

Whatever the case, small kitchens generally need more storage space. Inexpensive stylish bins or decorative baskets on top of kitchen cabinets can help.

6. Hang a Ceiling Rack for Pots and Pans

Create vertical storage for your pots and pans with a rack hung from the ceiling. Moderately priced pot racks range from modern to rustic-chic in style.

7. Hang Your Kitchen Utensils

Carve out more room in your kitchen with a magnetic knife rack. Decorate a wall with your most-used wooden spoons and cutting boards.

8. Use the Space Under Your Cabinets

To free up more counter and cabinet space, install a paper towel holder or a wine rack underneath the upper kitchen cabinets. You could also add an extra shelf for spices or coffee mugs.

9. Opt for a Single Sink

If you have a small kitchen, you probably don’t want a sink eating up a big chunk of your counter space. Single butler sinks can provide plenty of depth for dishwashing and come in a variety of prices for the budget-conscious.

10. Choose Compact Appliances

Compact dishwashers are ideal for small kitchens and can cost less than standard-size options. And if you are a one- to two-person household, a slimline refrigerator can be a great space saver; they come in fun colors and retro styles.

Recommended: 33 Inexpensive Ways to Refresh Your Home Room by Room

10 Small U-Shaped Kitchen Remodel Ideas

A U-shaped kitchen, also called C-shaped or horseshoe-shaped kitchen, can provide a great layout for small kitchen spaces, giving one or more chefs room to maneuver.

Its open configuration offers functionality, but you can lose some storage and counter space.

Here are 10 small U-shaped kitchen remodel ideas to give you a little more whisking room.

1. Implement a Triangle Workflow

To maximize the layout in your small U-shaped kitchen, a triangle workflow plan can allow for the right amount of spacing between your sink, stove, and refrigerator.

Configure your three major “work” areas at adjacent countertops, ideally placing the fridge and the stove across from each other on the peninsulas, with the sink in the connecting, middle counter.

2. Create a Breakfast Bar

Try turning one of the lengths of your U-shaped kitchen into a breakfast bar/seating area. It only needs to be wide enough to hold a cup of coffee and a cereal bowl, and deep enough to slide in some stools underneath.

3. Place Plants Over the Sink

A window over the kitchen sink is a fantastic way to bring the great outdoors into your U-shaped kitchen. But if you don’t have a window (or the funds to install one), try placing a hanging plant or small plant shelf above your sink so you can savor nature while washing the dishes.

4. Get Depth With Contrasting Colors

While dark paint colors aren’t typically the best choice for a small U-shaped kitchen, there are ways to create space by using slightly darker shades. For example, if you have white cabinets, painting the surrounding walls and backsplash area a light gray can give the illusion of depth.

5. Consider a Darker Countertop

If you have light-colored cabinets, the contrast of a rich brown or black marble countertop can trick the eye into seeing more depth.

6. Install Recessed Lighting

Hanging light fixtures can break up the flow in a small U-shaped kitchen, but recessed lighting can give a chic, streamlined look while increasing the amount of light in the room.

7. Make a Statement With a Black and White Contrast

White cabinets against black countertops and flooring can make a striking design statement while adding dimension. If you choose a reflective black paint or vinyl for the floor, it will shine when the light hits it.

8. Designate a Wall of Cabinets

You can stretch the space and amount of storage by dedicating an entire wall to cabinets. You’ll lose some counter space but reduce clutter. Try extending the cabinets to the ceiling for an elongated effect.

9. Choose Glass for Your Cabinets

Glass panes on your kitchen cabinets can reflect light, creating the illusion of more space. They also make it easy for you and your guests to find cookware and wine glasses.

10. Ditch the Cabinet Hardware

If you are replacing your cabinets, consider a style with no handles or knobs. Doing so could offer a sleek, modern look that won’t cramp the design flow.

Ways to Finance a Small-Kitchen Remodel

If you don’t have the cash to pay for your renovations, there are several financing options to help you get that new kitchen sink without draining your savings.

Home Improvement Loan

A personal loan for home improvements allows you to receive a lump sum, often the same day, with no collateral required. You’ll repay the money, plus interest, in monthly installments. This type of unsecured loan may come with a fairly high interest rate.

HELOC

If you have enough home equity, you may be eligible for a home equity line of credit (HELOC) by using your home as collateral. The rate will typically be lower than that of a personal loan or credit card. Plus, you’ll only make payments on the amount of the credit line that you use, and during the HELOC’s initial draw period, you can often make interest-only payments. (An interest-only repayment calculator can help you compute costs.)

HELOCs do have some closing costs, fees, and some may also have a minimum-withdrawal requirement. Most have a variable rate, which could eventually go up. Your home could be at risk if you default on a HELOC.

Cash-Out Refinance

With a cash-out refinance, you can use the equity in your home to help redo your small kitchen. You would refinance your mortgage for more than you owe and use the additional funds you borrow to cover the project costs.

The downsides of a cash-out refinance? Your overall debt on your house will increase, and closing costs will typically be 2% to 5% of the loan amount. If current interest rates are higher than the rate you have on your original home loan, you may want to think twice about refinancing; do the math to make sure it makes sense.

Credit Card

If you have a 0% or low-rate credit card and can pay off the debt quickly, it could be a smart way to pay for a kitchen remodel while earning some travel miles. But a high-interest card could result in hefty monthly payments, and missing even one payment damages credit scores.

Recommended: The Different Types of Mortgage Loans

The Takeaway

A small-kitchen remodel can increase the value of your home and raise your joy factor. You can put your little-kitchen project on the front burner with a range of financing options.

SoFi now offers flexible HELOCs. Our HELOC options allow you to access up to 90% of your home’s value, or $500,000, at competitively low rates. And the application process is quick and convenient.

FAQ

What is the average cost of remodeling a small kitchen?

The average cost of a small-kitchen remodel is $10,500, given an industry average of $150 per square foot for materials and labor and an average small-kitchen size of 70 square feet.

Can you remodel a small kitchen for $5,000?

A do-it-yourselfer can remodel a small kitchen for as little as $5,000 by painting the walls and existing cabinets, installing new hardware (or none at all), laying vinyl flooring, and buying white or black appliances instead of stainless.

What is the best layout for a small kitchen?

U-shaped kitchens are popular because they maximize cabinet and surface areas. If an island won’t fit, try a peninsular breakfast bar connected to the wall. In a narrow kitchen, aim for a double galley.

Can you update an old small kitchen?

Of course you can. Plan it, budget for it, and add about 20% for emergencies.

Photo credit: iStock/martin-dm

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.

^²SoFi Bank, N.A. NMLS #696891 (Member FDIC), offers loans directly or we may assist you in obtaining a loan from SpringEQ, a state licensed lender, NMLS #1464945.
All loan terms, fees, and rates may vary based upon your individual financial and personal circumstances and state.
You should consider and discuss with your loan officer whether a Cash Out Refinance, Home Equity Loan or a Home Equity Line of Credit is appropriate. Please note that the SoFi member discount does not apply to Home Equity Loans or Lines of Credit not originated by SoFi Bank. Terms and conditions will apply. Before you apply, please note that not all products are offered in all states, and all loans are subject to eligibility restrictions and limitations, including requirements related to loan applicant’s credit, income, property, and a minimum loan amount. Lowest rates are reserved for the most creditworthy borrowers. Products, rates, benefits, terms, and conditions are subject to change without notice. Learn more at SoFi.com/eligibility-criteria. Information current as of 06/27/24.
In the event SoFi serves as broker to Spring EQ for your loan, SoFi will be paid a fee.

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