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If you’re thinking, ‘Do I need a will?’ chances are, the answer is yes. Thinking about a will can feel morbid and unnecessary, especially when you’re young, healthy, and still growing your wealth. And it’s true that not everyone needs a will, especially if you’re single and growing your worth. What’s more, because the term “will” can be used to encompass end-of-life directives, it can confusing to know exactly what people mean if they say, “You should have a will.”

So, we’re here to clarify the topic. Read on to learn exactly which documents are needed if the worst were to happen and you were unable to make your end-of-life wishes known.

What Does a Will Really Do?

Simply speaking, a will dictates what will happen to your assets when you die. It can also be used to provide direction for who will care for any children and pets you have. Without a will, your property will be passed on according to state law, which means that your belongings may go to your spouse or nearest surviving relative, like a parent or sibling.

In some cases, this can be fine. But for people with children or people who own a home, this may not be ideal. Not only that, but dying without a will may put a burden on surviving relatives, leading to a costly and complex process.

In short, a will can communicate your wishes. For instance, it can:

•   Dictate who the executor (the person who administrates the will) is

•   Make a plan for how property will be distributed

•   Make a plan for how children or pets will be cared for

•   Make a plan for how debts and taxes will be paid

Creating a will does not need to be a long and complicated process. But it does need to be legal. While handwritten wills are acceptable in some states, they may be subject to additional scrutiny and may still need a signed witness to be valid.

Recommended: How To Make a Will: 7 Steps

What Does a Will Not Cover?

Let’s review some terms to see what different documents do:

•   A simple will determines what happens to your assets after you die.

•   A living will and other advance directives dictate what may happen if you were incapacitated and unable to make medical decisions. Both can be drawn up at the same time. These are legal documents that spell out medical treatments you would and would not want to be used to keep you alive. It typically communicates your preferences about other decisions, such as pain management or organ donation. In addition, if you have very specific wishes about whom you want to make financial and healthcare decisions if you were to be incapacitated, a living will can document those. This can be helpful if, for example, you’re not married but would want your partner (and not your parents) making these decisions if you were unable to make them yourself.

The guidelines and requirements for creating these documents can vary state by state. Attorneys, as well as online planning templates, can provide the documents to cover all potential end-of-life what-ifs, including creating a living will and advance directive, as well as a standard will to cover all bases.

Recommended: What Happens If You Die Without A Will?

When Do You Need a Will?

In a nutshell, you need a will if you have a spouse, children, or considerable assets. A will can take the guesswork out of matters if you were to die and can avoid legal complications.

Even if your life is relatively “simple” to unpack, a will can ensure there are no uncertainties and that your survivors are crystal clear about your wishes. Some times to consider a will:

•   When you want to leave things to family and friends. These may not be valuables but could be meaningful, sentimental items

•   When you own property

•   When you have a spouse and/or children

•   When you want to provide to a charity

•   When you have a positive net worth

•   When you have a complicated financial picture

In short, a will can help answer any questions your survivors may have, simplifying a process that may be emotion-filled. It can also help provide peace of mind that if you were to die, your loved ones will have a road map.

Are You Married? You Need a Will

You may think a will isn’t necessary if you’re married. After all, your assets will simply go to your spouse, right? It’s not that simple. State laws do differ. Typically, but not always, spouses, domestic partners and blood relatives are first in line when it comes to receiving inheritance. Having a will ensures that you direct where you want your estate to go, protecting the interests of those closest to you.

Another issue comes up when you pass away without a will, which is known as being intestate: the state gets involved in a potentially lengthy process called probate. A court-appointed administrator will identify legal heirs and determine how your estate is divided and bills are paid, according to the laws of your state. This can make for a complicated situation in which your spouse must wait for an inheritance, potentially causing financial hardship.

There’s another reason why a will is valuable if you’re married. It’s likely you and your spouse will create what’s known as a mutual will (these should be created with a lawyer’s help). After one partner dies, the remaining party is bound by the terms of the mutual will. This kind of document can, for example, be used to ensure that property gets passed to the deceased’s children rather than to a new spouse. In this way, a will can smoothe family dynamics in the future and ensure that your wishes are followed.

Recommended: Joint Will: What Is a Mutual Will?

Do You Have Kids? You Need a Will

One motivating factor for creating a will is when a couple has children. A will not only allows you to choose a guardian for your children, but it also allows you to name a guardian for your children’s finances — and they don’t necessarily need to be the same person.

It’s important to create a will even if the assumption is that the child’s other parent will look after the children. Not only can a will provide a template for a what-if situation if both parents were to pass away, but it can also ensure that your children will receive the share of your estate that you desire when they’re older.

Having a will can minimize disruption in case the worst were to happen and one or both parents were to pass away. If there is no will, the court will decide, and while the court will keep the best interests of the children in mind, the parents are the ones who know the kids best and may have the best solution.

In short, a will allows you to make sure:

•   Children are cared for by the people you wish

•   Children’s finances are cared for by the people you wish

•   Adult children will receive the inheritance you desire them to have

•   Any unique circumstances regarding child care is taken into account

Do You Have a Positive Net Worth? You Need a Will

Even if you’re single, a will may make sense if you have a positive net worth (aka, more assets than debt), which may include owning a house. Depending on your net worth, you may consider creating a trust. This can help your family avoid the probate process.

You can also be very specific about how you want your assets allocated in the future. For example, you may want to provide gifts to charity upon your death.

You also want to check your beneficiaries for any accounts, including retirement accounts and life insurance policies. The named beneficiary takes precedence over who’s named in a will, so it can be a good idea to double check that the named beneficiary is the person you want to receive those assets.

Are You Young, Single, Asset-free, or Without Kids? You Don’t Need a Will (Yet)

While you may not need a will if you don’t have any dependents, property, or assets, it’s still worth thinking through what you do own. For example, if you have a life insurance policy or retirement account, make sure the beneficiary you name matches who you would want to have those funds as time passes.

But a will can ensure there is no confusion over your wishes, especially if you have pets to be cared for or mementos you know would be meaningful to the people in your life.

How to Set Up a Will

A 2021 survey of over 2,500 people from Caring.com, a caregiver website, found that the past year made more people realize the importance of having estate planning documents. However, 2 out of 3 people don’t yet have a will. One big justification: Not enough time to create a will.

However, creating a will does not need to be complex. Online templates can walk you through the process. An online template may be free or may cost $100 and up, depending on the complexity. More expensive templates may be state-specific and detailed.

One critical aspect: Make sure the will is legal in your state. This may mean the will needs to be notarized and signed in front of witnesses. Once you have a will completed, it can be a good idea to make several copies and let the person you’ve named executor know where they can find the will in case you were to die.

If you have multiple, complex assets (such as several jointly-owned properties or properties jointly-owned with different people) you may need an attorney. This may cost $1,000 and up but can give you the peace of mind that everything is covered.

The Takeaway

While creating a will may not exactly be a fun activity, it doesn’t need to be very time-consuming or expensive. It’s an important process that can deliver some valuable peace of mind for the future. It lets you know your “house is in order,” and that your wishes are clearly captured. With a will in place, your worldly goods go where you want them to go, and you ensure that loved ones are taken care of in the way you see fit. When you get these documents done, you’ll also save those nearest and dearest to you from having to deal with legal red tape during an emotionally challenging time. Yes, death and wills are a topic many of us would like to avoid. But being pragmatic and taking care of this important legal concern is the right, responsible step to take.

The Simple Way to Protect Loved Ones: SoFi and Trust & Will

To help you with this important process and make sure it isn’t arduous, SoFi has partnered with Trust & Will^*, the leading online estate planning platform in the U.S. — to give our members 10% off their trust, will, or guardianship estate plans.

Photo credit: iStock/evgenyatamanenko

SoFi member benefits are provided by third parties, not by SoFi or its affiliates. Providers pay royalty fees to SoFi for the user of its intellectual property. These fees are used for the general purposes of SoFi. Some provider offers are subject to change and may have restrictions. Please contact the provider directly for details.
^*Trust & Will, a leading digital estate planning platform, is offering a 10% discount specifically for SoFi members. No promo code required. The 10% discount is automatically applied at checkout to the initial purchase of any Guardian, Will, or Trust-based estate plan.
Trust & Will 961 West Laurel Street San Diego, CA 92101 United States
Financial Tips & Strategies: The tips provided on this website are of a general nature and do not take into account your specific objectives, financial situation, and needs. You should always consider their appropriateness given your own circumstances.

External Websites: The information and analysis provided through hyperlinks to third-party websites, while believed to be accurate, cannot be guaranteed by SoFi. Links are provided for informational purposes and should not be viewed as an endorsement.

Tax Information: This article provides general background information only and is not intended to serve as legal or tax advice or as a substitute for legal counsel. You should consult your own attorney and/or tax advisor if you have a question requiring legal or tax advice.

SOPT1121004

If you’re reading this, you’ve probably already decided that you are going to buy life insurance. Smart move: Life insurance will, in the case of your untimely death, protect your loved ones. If you keep up with your monthly premiums, your beneficiaries will receive a lump sum payment that will help them replace the money you would have otherwise earned. Expenses like your mortgage, a child’s education, monthly utilities and more need to be factored in.

Wondering how to do the math? Let us help you out with some simple methods for calculating that amount of coverage that will give you peace of mind.

How to Manually Calculate How Much Life Insurance You Need

Here’s a great way to get started: Take out a piece of paper or open a document on a computer and start making lists. In one list, you are going to look at all the financial obligations that lie ahead. In another, you’ll consider all the assets you have that could be used to fund these expenses for your loved ones if you were not around.

For the financial obligations ahead, make sure you come up with a figure that includes:

•   Your income over the term of the insurance policy.

•   Daily living expenses (food, utilities, medical care) if you don’t think the income in the line above would cover that sufficiently.

•   Your mortgage. If this is covered by your income, you don’t need to add this, but if not, you want to make sure your loved ones can pay this loan off over the years.

•   Any other debts. Do you have a chunk of credit card debt? Student loans? Those will need paying. Also think about end-of-life costs. Grim as it may be, you don’t want loved ones struggling to pay for funeral costs. These are not insignificant. In 2021, the cost of a funeral and burial was typically almost $8,000. In addition to that, there may be additional costs for gravestones, an obituary, and the like.

•   Tuition. Think about how many children you have or plan to have. The current annual cost for an in-state student at a public 4-year institution is $25,615; for a private university, that number rises to $53,949. Don’t forget to account for inflation, too.

•   Childcare if applicable. Think about whether your income alone would cover this, or if more funds would be needed to pay for these costs.

Add these costs up, and those are your life insurance needs. But now, let’s look at assets that might go towards paying these costs were you not alive. Include the following:

•   Savings. What do you have in savings (include your retirement accounts if you believe your loved ones would tap into those versus keeping them aside)? Also look at any investment accounts you may own.

•   Other insurance policies. You may already have some insurance. Just keep in mind if it is something you have via a group life insurance policy at work, it will probably end if and when you change jobs.

•   College funds. If you already have, say, a 529 account that will help pay for your children’s higher education, add that to the assets list.

To find out how much insurance you need, take the first number (your financial obligations to be covered) and subtract from it the assets you have (the second number). Ta-da: You now have a number that you’d like your life insurance policy to at least equal.

3 Ways to Quickly Estimate Your Life Insurance Needs

Not everyone wants to do the math above, we get it. Here are a few other ways that may be a better match for you when it comes to estimating how much life insurance you need.

1. The DIME Formula

The DIME formula — an acronym that stands for debts, income, mortgage, and education — is a time-tested way to determine the right amount of life insurance to buy. Here’s how it works:

Debts Add them up, including car loans, student loans, personal loans, credit card balances (even if it’s a cringe-worthy number you plan on whittling down, you’ve got to include it), and so forth. Include everything except mortgage payments — because that’s the “M” portion of this formula — and add them up. What’s the total?

Income The goal of having a life insurance policy is to replace income that was coming in but would stop because of the death of the policy holder. Multiply your income and the potential number of years you want covered by life insurance.

Mortgage If you’re a homeowner, what balance remains on your home loan? If you are considering buying a home, what size mortgage would you get?

Educational costs If you have or are planning to have kids, estimate how much tuition would cost for each and determine the total needed to fund higher education.

Add up these D, I, M, and E amounts, and that’s how much life insurance coverage you need. Worth noting: This technique doesn’t recognize any assets you might have, so it might tend to have you buy more life insurance than you need.

2. Use an Online Calculator

Sometimes it’s easier to use a digital tool that holds your hand through calculations like these. If you love clicking your way to answers, try a life insurance calculator to help streamline the process. Many are available online.

3. Try the Multiplication Trick

Some people like to use a formula to figure out how much life insurance they should get. Typically, this says to take your income, multiply it by a number (usually 10, but sometimes much lower or higher) and bingo! That’s the amount. Prevailing wisdom, though, is that this can be a very inaccurate figure. And it certainly doesn’t take into account the subtleties of your situation, whether that means you have to pay whopping student loans from grad school, alimony, caregiving expenses for a parent, or another expense. So while you may hear about this shortcut, it’s not considered reliable.

Who Needs Life Insurance?

Many people would benefit from life insurance, and most Americans do have a policy. Buying life insurance protects your dependents in the event of your dying; it provides a lump sum payment that can keep them financially afloat.

If, however, you are a person without dependents or any shared debt (such as being a co-signer with your parents for a student loan or with a partner on a mortgage), then you may not need to buy a policy. But for those who do have people depending on their earning power, life insurance can be a wise buy.

Many people get a policy when they are anticipating the major “adulting” milestones of marriage or parenthood. It’s likely to be particularly important if you are the primary earner in your marriage. If tragedy were to strike and you died, your spouse could be hard-pressed to maintain their standard of living and pay the bills. The rule of thumb is that the sooner you get insurance, the better. Rates go up as you age.

Next Step: Buying Life Insurance

Once you know how much life insurance you need, it’s almost time to start shopping. Almost. Let’s take a quick look at the two main types of life insurance, term life versus whole life insurance — and the key differences between them.

Although they share the same goal of protecting families financially when a tragic loss occurs, the elements of the policies, how much they cost, their terms, and more can be quite different.

Term Life Insurance

As the name suggests, this kind of policy lasts for a certain period of time, or term. The policy is taken out for a designated dollar amount, usually with fixed premium payments — and, if the policy holder dies during that time frame, then designated beneficiaries can receive the payout they’re due. This can work well for people who think that, at the end of the term, they’ll have saved enough money that they no longer need income replacement. Or, they may believe that beneficiaries will have gained financial independence by the time the policy ends.

Whole Life Insurance

This option offers coverage for your “whole life” as the name suggests, and is a popular choice among the different kinds of permanent, or lifelong, insurance policies. Payments are typically higher, perhaps as much as five to 15 times more than the same amount of coverage as a term life policy, but part of this whole life premium is a contribution to the policy’s cash value account. This savings vehicle can grow and may be borrowed against if needed.

Choosing Term or Whole Life Insurance

If affordability is especially important, then term life insurance can make more sense. Term life may also be the right choice if coverage is only needed for a certain period of time, perhaps while money is still owed on a mortgage or young adult children are in college.

Another reason why some people may choose term insurance is because they take the difference between that premium and what they’d pay for a whole life premium, and then invest those dollars in another way.

That said, some people prefer the ongoing coverage of whole insurance and the peace of mind it can bring. Others may like watching their cash account grow. It’s a personal decision; only you can judge which kind of life insurance best suits your specific needs.

The Takeaway

Buying life insurance is an important step. It secures the financial future of your loved ones who rely on you and your income. Figuring out just how much life insurance you need is a necessary part of the process that can feel complicated. Fortunately, there are a number of different ways to get a solid estimate for that figure. The ideas we’ve shared not only help you do just that, they may also give you a deeper understanding of you and your family’s financial future.

Let SoFi Help Protect You

Once you have a rough idea of how much life insurance you’d like to buy, why not consider what SoFi is offering: affordable term life insurance in partnership with Ladder. Applicants can receive a quote in just a few minutes for policies that range from $100,000 to $8 million. It’s quick and easy to set up a policy, and the coverage amount and associated premiums can be adjusted at any time with just a couple of clicks. No hassles.

Rates are competitive with Ladder and, because the agents do not work on commission, there are no fees. Plus there are no medical exams required for qualifying applicants buying $3 million or less in coverage.

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

External Websites: The information and analysis provided through hyperlinks to third-party websites, while believed to be accurate, cannot be guaranteed by SoFi. Links are provided for informational purposes and should not be viewed as an endorsement.

Coverage and pricing is subject to eligibility and underwriting criteria.
Ladder Insurance Services, LLC (CA license # OK22568; AR license # 3000140372) distributes term life insurance products issued by multiple insurers- for further details see ladderlife.com. All insurance products are governed by the terms set forth in the applicable insurance policy. Each insurer has financial responsibility for its own products.
Ladder, SoFi and SoFi Agency are separate, independent entities and are not responsible for the financial condition, business, or legal obligations of the other, SoFi Technologies, Inc. (SoFi) and SoFi Insurance Agency, LLC (SoFi Agency) do not issue, underwrite insurance or pay claims under LadderlifeTM policies. SoFi is compensated by Ladder for each issued term life policy.
Ladder offers coverage to people who are between the ages of 20 and 60 as of their nearest birthday. Your current age plus the term length cannot exceed 70 years.
All services from Ladder Insurance Services, LLC are their own. Once you reach Ladder, SoFi is not involved and has no control over the products or services involved. The Ladder service is limited to documents and does not provide legal advice. Individual circumstances are unique and using documents provided is not a substitute for obtaining legal advice.

SOPT20010

When children first learn to walk, their parents usually hold their hand until they get the hang of it.

When children learn to ride a bike, their parents often run alongside them holding on until they get control.

In the same way, when children go off to college, parents typically want to help with the costs. College is expensive, after all, and they don’t want their kids to be buried in student debt before they ever really get on their own two feet.

So many parents offer all the support they can—even if they have to borrow the money. Which is why the government created Parent PLUS Loans—federal student loans that are extended directly to biological or adoptive parents (and, in some cases, stepparents) of undergraduate students.

The loans, which allow parents to borrow up to the cost of attendance at their student’s school, minus any other forms of financial aid received by the student, are relatively easy to get. They do require a credit check, but many private lenders have stricter eligibility criteria.

Direct PLUS Loans for parents, commonly called Parent PLUS Loans, are popular. According to the National Student Loan Data System, as of the second quarter of 2019, at least 3.5 million borrowers currently owe a collective $93.9 billion in Parent PLUS Loans.

Unfortunately, that’s becoming a problem. The Brookings Institute reported at the end of 2018 (the most recent report from them on the topic) that repayment outcomes for parent borrowers appear to be getting worse as balances continue to increase.

“Many parents supporting college students are saddled with large debt burdens,” the report states, “ultimately repaying just enough to avoid default and sometimes owing significantly more than their initial balance.”

Well-intentioned borrowing can end up backfiring on parents, who could be making loan payments for years or even decades, depending on the student loan repayment plan they choose.

That might not seem like a big deal when the loan is new—especially if the parents are nowhere near retirement age. But as the payments drag on, long after those children are settled and doing fine—perhaps with families of their own—it might make sense to rethink the debt and how it should be repaid.

For some parents, that could mean refinancing the student loans with a private lender, with the goal of getting lower monthly payment or a lower interest rate.

Some private lenders, like SoFi, allow the child to take out a refinanced loan to pay off the Parent PLUS loan. Or parents could set up an arrangement to have the child pay the Parent PLUS loan once they graduate from college.

Either way, Parent PLUS Loan refinancing is an option for getting that debt load under control. Here’s a guide to some key pros and cons and some steps to getting started:

1. So What Exactly Is Parent PLUS Loan Refinancing?

Parent PLUS Loans are federal loans offered to parents of undergraduate students. Refinancing these loans means consolidating them into one new loan from a private lender, ideally with a lower interest rate and/or better loan terms.

2. What Are the Benefits of Parent PLUS Loan Refinancing?

There are few reasons Parent PLUS Loan refinancing can make sense for a family. Moving to one manageable payment with a potentially lower interest rate might make it possible to pay off the loan faster and for less money overall.

Direct PLUS Loans typically have a higher interest rate than other federal student loans, and competitive private lenders (including SoFi) can potentially offer lower rates to qualifying borrowers.

3. Is There a Downside to Refinancing?

Yes. Federal Parent PLUS Loans come with certain borrower protections that private loans don’t offer. Payments can be deferred, and some or all of the debt may be discharged in the event of parental disability or bankruptcy or if the school closed.

(To make Parent PLUS Loans eligible for income-contingent repayment forgiveness—the only income-driven repayment plan Parent PLUS Loans are eligible for—the loans must be consolidated with a Direct Consolidation Loan—see the next topic.)

These federal benefits will be lost when refinancing to a private loan. However, some lenders offer their own benefits.

4. What’s the Difference Between a Federal Consolidation Loan and Private Loan Refinancing?

A federal Direct Consolidation Loan allows borrowers to combine multiple federal education loans into one more manageable payment.

And it may give borrowers access to additional federal loan repayment plans (including the income-contingent repayment plan). But it’s generally aimed at lowering payments by lengthening the amount of time agreed upon to pay the loan—not by lowering the interest rate.

The new fixed interest rate on a Direct Consolidation Loan is the weighted average of the interest rates on the loans that are being consolidated, rounded up to the nearest eighth of a percent. Also, parents can’t put a federal consolidation loan in their child’s name or transfer their debt to their child. So it is not the same as refinancing a Parent PLUS Loan through a private lender.

5. What Should Families Consider Before Moving Forward With Parent PLUS Loan Refinancing?

When refinancing, the new interest rate and overall eligibility for the loan may be determined by a number of factors. A bumpy credit history can affect a person’s ability to refinance.

Refinancing can be an especially attractive option for those with a steady income and strong credit histories. A borrower’s debt-to-income ratio and ability to pay when making lending decisions are typically also factors, but every lender has different criteria—so shopping around to compare offers is wise.

6. How Can Parents Get a Refinanced Loan in Their Name?

Parents can research the best refinancing interest rates, loan terms, and other benefits online, then apply for a new loan.

If the application is accepted, parents can use it to pay off the Parent PLUS Loan, then begin making scheduled payments to the new lender. The child can make payments on it if they choose as well, but the loan will still be in the parents’ names.

7. Can Parents Use Parent PLUS Loan Refinancing to Transfer That Debt Into the Child’s Name?

The short answer is “no.” The longer answer is, “but there’s another option.”

There’s no federal repayment program that will allow you to transfer your Parent PLUS Loan to your child. If the child is offering (or, at least, willing) to take over the debt, however—and if they have the means to make the payments—refinancing with a private lender can make that possible. In this case, it’s the child, not the parent, who applies for the loan.

With a few private lenders (SoFi included), your child can take out a refinanced loan and use it to pay off their parents’ Parent PLUS Loan. Your child still has to qualify and provide additional documentation (check with each lender to understand what’s required). And just like any would-be borrower, a solid credit history and a secure income (among other factors) help determine the interest rate offered.

If the child’s refinanced loan application is accepted, they can take over their parent’s PLUS loan and start paying it off. If there are any bumps in the road for the child, such as limited work history or adverse credit, parents could agree to co-sign for the new refinanced loan.

It’s important to remember, though, that a co-signer is promising to pay off the debt if the borrower stops making payments. So, parents who co-sign are still on the hook if their child can’t come up with the money every month.

If that scenario has your head spinning, it’s understandable. Refinancing might not be right for every family. But if you’re one of the many Parent PLUS borrowers who ends up with more debt than expected, refinancing to a private loan could be an option worth considering.

SoFi Student Loan Refinance
SoFi Student Loans are originated by SoFi Bank, N.A. Member FDIC. NMLS #696891. (www.nmlsconsumeraccess.org). SoFi Student Loan Refinance Loans are private loans and do not have the same repayment options that the federal loan program offers, or may become available, such as Public Service Loan Forgiveness, Income-Based Repayment, Income-Contingent Repayment, PAYE or SAVE. Additional terms and conditions apply. Lowest rates reserved for the most creditworthy borrowers. For additional product-specific legal and licensing information, see SoFi.com/legal.

SLR17108

You remember how psyched you were when you got to sign the lease for your current apartment. Especially in a huge city where finding a place that meets your specifications can be like searching for the holy grail, once you find that perfect spot, you hold on tight.

That makes sense. But even if you’re happy paying rent for your place now and have been for the last several years, you might have moved up in your career since then, or you’re thinking about having a kid and need a place that’s nearer to school districts than bars. Plus, depending on marketing conditions, putting that rent money toward owning a place would likely become a great investment.

In that goal, you’re not alone, According to a 2018 Homebuyer Insights Report , 72% of millennials say that owning a home is a top priority.

It’s an exciting time, for sure, but a major financial decision like buying a home can be daunting—or even terrifying, especially if you have student loans to worry about.

Since you don’t want to be hasty or over-buy and hinder your efforts to reach financial wellness, here a few ways to help you know if you’re ready to take the leap to homeownership.

You’ve Saved for a Down Payment & Homeownership Costs

This is one of the most important steps in the home buying process. According to a 2018 report report from the National Association of Realtors (NAR), of the buyers who took out a mortgage, 5% of them made a downpayment worth 6% or less of their home value. So, the traditional 20% down isn’t as common as believed. But, 6% down is still a chunk of change. And, the down payment is just one of the costs associated with buying a home.

It is important to consider other costs such as mortgage payment, closing costs, insurance, taxes, and more. So, when you are thinking about buying a home you should factor in all of these potential costs and make sure you have that saved or a plan of action to pay for these costs.

Double-Check How Much Home You Can Afford

As mentioned above, it’s a good idea to check if you can afford the additional costs that are associated with the home buying process. Use the home affordability calculator below to estimate the cost of purchasing a home and your monthly payment – including additional costs such as property tax, insurance, and closing costs.

You’re a Good Candidate for a Mortgage Loan

Not surprisingly, mortgage lenders pay close attention to job continuity and consistent income.

Another biggie is your debt-to-income ratio, which will give lenders insight into whether you can truly afford mortgage payments (seeing whether or not you have too much debt to buy a house). To determine your ratio, it is a good idea to get prequalified for a mortgage loan to see what you would qualify for.

Then, you would take that estimated housing payment which would include principal, interest, taxes, insurance, and HOA (if applicable, along with ongoing monthly debt payments to help you understand what your DTI is.

If you’re at that threshold, but haven’t saved enough for a huge down payment, don’t worry. Some lenders are prepared to help—SoFi, for example, offers flexible down payment options starting at as little as 10% on loans up to $3 million, with competitive rates.

Remember, there’s a lot of competition among lenders, so shop around to choose the one that offers terms to suit your needs.

You’re Ready to be Your Own Landlord

Are you ready to handle home repairs? If something breaks it is all on you.

A condo can be a good choice if you travel a lot or if you don’t want the responsibility of maintaining a yard. Condos can be a good stepping stone to owning a house as the property is less time consuming because you don’t have any exterior or lawn maintenance to handle.

But you’ll still need to be prepared to make small repairs yourself, hire a pro, and replace big-ticket items, such as major appliances, now and then. So make sure there’s enough money in your reserve fund to cover the routine stuff and the surprises.

A good rule of thumb is to set aside about 1-3% of the home’s value each year. Some years, you might not need to pay that much. But, if you live in your home long enough, you’ll likely shell out for hefty repairs in other years. Once you buy your home you can use SoFi’s Home Improvement Cost Calculator to get an idea of how much your renovation projects will cost.

You’re Ready to Settle Down

It is harder to move cities once you buy a home. You can’t just pick up and leave as you can if you are renting. Buying a home is a big decision, so it is important to make sure you are ready to settle down in that location for a while.

You Know Location is Everything

Ernst and Young’s The Millennial Economy 2018 study reported that 62% of Millennials live outside of the city either in the suburbs, small towns, or in rural areas. The location of your home—whether it’s a big city or on the outskirts—could impact your budget and overall enjoyment as a homeowner.

If you’re serious about buying your first home, you’ve already taken the time to scope out neighborhoods and to understand how to choose a location best fits your lifestyle. You know that the overall feel of a neighborhood, the quality of life it offers, and its proximity to your job matters—a lot.

Preparing to Take the Next Big Step

If you’re definitely ready for homeownership, you’ll need to get your financial ducks in a row. Here are a few tips to get you started:

Getting Out of the Student Loan Debt Shadow

Don’t fret if your student loans aren’t paid off yet. You can Look into refinancing your student loans, which may lower your monthly payments, and/or decrease the loan term, and allow you to save faster for a home down payment.

Hitting the Homebuyer Books

Download The SoFi Guide to First Time Home Buying to learn some essential steps to take, the types of mortgages available, and common real estate terms.

Keeping Track of Your Credit Blemishes

Your credit score is one factor that will help a lender determine if you qualify for the loan; if it’s high enough, you could possibly snag better terms on your mortgage loan.

Follow a step-by-step plan for paying down debt so you can work toward boosting your credit rating. Buying a home with a significant other or a spouse is a huge personal accomplishment and major financial milestone.

External Websites: The information and analysis provided through hyperlinks to third-party websites, while believed to be accurate, cannot be guaranteed by SoFi. Links are provided for informational purposes and should not be viewed as an endorsement.

Tax Information: This article provides general background information only and is not intended to serve as legal or tax advice or as a substitute for legal counsel. You should consult your own attorney and/or tax advisor if you have a question requiring legal or tax advice.

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 .

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

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

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If you’re currently in the process of planning a wedding, you’re likely enjoying the endless cake samples and making difficult decisions, like whether to have a donut bar or a candy station at the reception.

Unfortunately, wedding planning isn’t just about delicious dessert samples and seating arrangement logistics.

It can be stressful, especially when it comes to figuring out how you’ll pay for all those savory and sweet treats and gift bags for your guests—let alone the rest of it like, you know, a dress, the actual reception hall, a minister, food, and an open bar if you’re lucky.

According to The Knot’s 2018 Real Weddings Survey, the costs of planning a couple’s special day now averages $33,931, though this number can vary greatly depending on where you live.

Expensive, densely populated cities like New York and Chicago will likely be more expensive than hosting a wedding in a more rural locale.

While there are ways to save on wedding costs—like cutting back on pricey place settings, keeping the wedding parties smaller, opting for a cash bar, and doing a bit of do-it-yourself craft work on flower arrangements—more couples are finding that they need a little bit of extra cash to get them through the wedding planning process. This is especially true when every vendor seems to require an immediate deposit.

That’s why some turn to wedding loans as an alternative to funding their weddings upfront.

Find a venue right out of a Pinterest post, but need a $10,000 deposit by next week to secure it?

Try on the dress of your dreams, then discover it’s $2,500 more than you have in your checking account?

Want the band of your dreams to play but need to plunk down cash to get them?

If your savings are coming up short, an unsecured loan could be just what you need to keep your dream wedding from being derailed. Here’s some more information about the ins and outs of wedding loans to help you decide if it is the right choice for your big day.

What Is a Wedding Loan?

A wedding loan doesn’t come from a wedding fairy godmother with a wave of her wand—although that would make for a better story. Instead, a wedding loan is simply a personal loan that you use to pay for wedding expenses.

So, what’s a personal loan then? A personal loan is just as the name implies—a loan you take out for (almost) any personal reason at all. You could use a personal loan for everything from renovating your home, to consolidating high-interest credit debt, to paying for a vacation or a wedding.

Personal loans are typically given out as one lump sum. For example, a person could take out a $10,000 personal loan for their wedding. They’d receive this payment upfront and could use the cash immediately.

The lender and the recipient would agree upon a repayment plan as part of the terms of the loan. These specific terms will vary by lender but, typically unsecured personal loans are paid back within one to five years.

A personal loan can be either secured or unsecured. With an unsecured personal loan, a lender won’t require a collateral asset. With a secured loan, the lender could require collateral or could require a co-signer on the loan—like a house or other asset of value.

Most lenders also allow borrowers to pay off the loan early, regardless of the loan term. That means if you happen to get a lot of cash as a wedding gift, you could use it to pay on your loan in part or in full.

Consider reviewing the terms and conditions completely before borrowing any loan, while not all lenders do, some may charge a prepayment penalty.

Variable-rate loans may also help save money on interest in the short-term, but it could rise in the long run. Fixed-rate loans mean the interest will remain the same as when the borrower signed on the dotted line, even if other interest rates shoot up faster than the price of a good DJ on a Saturday in the summer.

Considering a Personal Loan for a Wedding?

Personal loans can be a good option for those who have budgeted to pay for their wedding expenses, but just don’t have the cash on hand to cover immediate deposits or a slew of bills at once.

Maybe your parents committed to helping out with wedding costs and promised to send a cash infusion next month, but the florist whose work looks like a living Instagram photo will go with another couple if you don’t book now.

Or maybe you and your betrothed are putting aside a certain amount each month for wedding expenses, but you don’t want to put the catering deposit on your credit card because all the travel rewards points in the world will not outweigh the interest you’ll be charged.

In other words, if you have a good plan for paying your personal loan back and you just need it to bridge the gap, then a personal loan for your wedding might be perfect for you.

However, if you don’t know how you will pay off your loan but you really want a little extra room in your budget to buy that Vera Wang dress, you might want to think twice before signing on the dotted line for a personal loan.

The last thing you want to do is start your marriage off knee-deep in debt you can’t pay back, even if the pictures look amazing.

Pros and Cons of Wedding Loans

Need a little help weighing your options? Here are a few pros to getting an unsecured personal loan to help pay for your big day.

•   Personal loans are typically fast, easy ways to get some extra cash when you have to pay for deposits or cover expenses quickly for a wedding.

•   Many lenders allow you to apply for a personal loan online, making it easy and efficient to secure funding if you qualify.

•   Funds may be available in as little as one business day, depending on the lender. That way you won’t have to wait around to start putting down deposits and checking things off your wedding to-do list.

•   Personal loan lenders typically charge less interest than credit cards. This could make it a more financially viable option for those looking to pay off their vendors without paying extra in interest.

•   Personal loans are one way that could help build your credit over the long-term, if you pay them back on time, which is an excellent gift to give both you and your spouse on your wedding day. But, like all good things in life, personal loans have many downsides. Here are a few cons to be wary of before signing on the dotted line.

•   Personal loans can tempt people to spend more than they can afford. If you take one out, remember you have to pay it all back—plus interest.

•   Some personal loan lenders have prepayment or origination fees. Make sure to check the fine print before agreeing to anything.

•   It’s always a better bet to save up for anticipated expenses rather than financing them. Try to budget and save first, see if your vendors are willing to work out a payment plan, and think about what you really need versus what you want at your wedding.

•   You might be paying off your party years later, with interest. If you still feel like you need extra cash to fund your big day, check to ensure your personal loan has a lower interest rate than credit cards before taking one out.

How Much Can You Borrow for Your Wedding?

To qualify for a personal loan with a competitive rate, you’ll likely need a good credit score and a well-paying job, among other important financial factors, or potentially a co-borrower who has both of those things. Many lenders consider a good credit score to be anything above 700 , though this may vary depending on the scoring model used by the lender.

You might be able to get a loan if your score is below that, though it’s possible you’ll have to pay more in interest or you might qualify to borrow less money.

Things like how much debt you currently have, including student loans or a mortgage, can also impact how much you can borrow. At SoFi, we offer personal loans up to $100,000.

But unless you’re planning a wedding at the Plaza Hotel in Manhattan complete with champagne towers and children dressed as cherubs, it’s unlikely you’ll need that much.

Getting the Funds You Need for Your Wedding Day

Just like any loan, you need to have all your financial information and documents in order before you apply. Be sure to have things like proof of income, bank statements, information about your other debt, your Social Security number, and your identification ready.

With most online lenders, you can get pre-qualified and then decide whether to move forward with the online application. From there, you typically choose your rate, answer any additional questions, send copies of the necessary documentation, and sign the loan agreement all within a day or two.

Again, while saving up for your wedding is probably preferable to taking on debt before you say “I do,” expenses can arise that you may not expect, so knowing what your options are for personal loans can be helpful.

Don’t forget to do your research and understand everything you should be looking for in a lender so that you don’t get stuck with a loan that’s about as appealing as that ugly set of grey serving platters your Aunt Ina bought you for your wedding shower.

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 .

External Websites: The information and analysis provided through hyperlinks to third-party websites, while believed to be accurate, cannot be guaranteed by SoFi. Links are provided for informational purposes and should not be viewed as an endorsement.

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.

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.

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