What Is a Financial Coach?

A financial coach works with clients to help them better manage their money and to develop healthy, long-lasting, finance-related habits.

If you need help getting your finances organized or setting up a plan to effectively work towards your financial goals, you might benefit from the help of a financial coach. These professionals can help clients pay off debt, create an emergency savings fund, stabilize their finances, and develop an overall financial plan.

Unlike financial advisors, financial coaches generally spend more time helping their clients understand the fundamentals of finances, rather than recommending investments and managing their investment portfolios.

Read on to learn more about financial coaches, what they do, how much they cost, and how to find one.

Key Points

•   Financial coaches help clients set and achieve financial goals, often focusing on budgeting, debt management, and saving.

•   Coaches provide accountability and emotional support to improve financial habits.

•   Financial coaches do not provide investment management or legal advice.

•   The cost for hiring a financial coach typically ranges from $100 to $300 per hour.

•   You can find a coach through professional organizations or personal referrals.

What Does a Financial Coach Do?

According to the Consumer Financial Protection Bureau, a financial coach is a trained professional who collaborates with and guides their clients to reach their financial goals, including:

•   Better money management skills

•   Improved savings, debt levels, and credit

•   More financial confidence

Financial coaches typically individualize their approach based on the needs of each client, with the goal of helping them make progress in the area of their financial life that they identify as most important. For example, a financial coach might help you reach your financial goals by teaching you how to build savings, avoid overspending, or pay down debt.

Financial coaches also often assist their clients with the behavioral and emotional components of managing money. A coach can help you uncover what drives your financial decisions, so you can create a healthier attitude that leads to better money habits.

Coaches often work with their clients over the period of several weeks to several months and may meet weekly or biweekly to provide advice and check on progress. The full coaching process may include:

•   Building awareness around spending habits (usually by tracking daily, weekly, and monthly spending)

•   Defining the client’s financial goals

•   Developing a budget and a financial plan to achieve those goals

Accountability is also typically built into the process. So rather than managing a person’s finances, a financial coach gives clients the tools to help make informed and responsible financial decisions.

What a financial coach can’t do: offer investment recommendations or help clients manage their investment portfolios. While coaches can provide basic advice on the concept of investing, they are not licensed to provide financial advice like financial advisors are, and therefore cannot provide specific product recommendations.

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with a limited-time APY boost.*


*Earn up to 4.30% Annual Percentage Yield (APY) on SoFi Savings with a 0.70% APY Boost (added to the 3.60% APY as of 11/12/25) for up to 6 months. Open a new SoFi Checking & Savings account and enroll in SoFi Plus by 1/31/26. Rates variable, subject to change. Terms apply here. SoFi Bank, N.A. Member FDIC.

How Much Does a Financial Coach Cost?

Coaching rates typically run between $100 to $300 an hour. But because of the wide range of fees charged by coaches, it’s a good idea to ask about costs upfront.

Unlike financial advisors, who typically charge their fees based on a percentage of the assets under management, financial coaches generally work on a fee-only basis. Some may charge a flat fee based on how long you plan to work together (such as three or six months), while others might charge per session.

How do I Find a Financial Coach?

While there is no required coursework or license, and there are no certifications to become a financial coach, there are training programs run by the Association for Financial Counseling and Planning Education (AFCPE).

You can begin looking for financial coaches in your area at AFCPE.org. It’s also a good idea to ask for personal referrals from friends and family, as well as other financial professionals you know or work with (such as an accountant or financial advisor).

Before selecting a coach, it can help to consider specifically what you are looking for in a financial mentor. This can involve thinking about your own financial strengths and weaknesses, and what your goals are. Are you, for example, struggling to save enough money for a down payment on a house? Or, do your credit card balances keep going up? Identifying your needs can help you suss out the best coach for your situation.

Once you’ve gathered a list of financial coaches, you may want to reach out to each candidate to get a sense of their personality, methods, and coaching style.

Some questions to consider asking:

•   How long have you been a coach?

•   What’s your business specialty?

•   How long do you typically work with clients?

•   What’s your plan to help me reach my goals?

•   What is your availability?

•   What are your fees?



💡 Quick Tip: If you’re faced with debt and wondering which kind to pay off first, it can be smart to prioritize high-interest debt first. For many people, this means their credit card debt; rates have recently been climbing into the double-digit range, so try to eliminate that ASAP.

The Takeaway

Maybe you’ve tried to make a budget but just can’t stick to it. Or perhaps you’ve run up so much debt between credit cards and loans that you don’t know the best way to pay it off. A financial coach can help you structure your budget, build a financial plan, and hold you accountable throughout the process.

Financial coaches also help clients understand and work through deep-seated emotions around money that may be preventing them from being “good with money,” building up savings, and reaching their financial goals.

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


Better banking is here with SoFi, NerdWallet’s 2024 winner for Best Checking Account Overall.* Enjoy 3.60% APY on SoFi Checking and Savings with eligible direct deposit.

FAQ

What Exactly Does a Financial Coach Do?

A financial coach helps you set and achieve financial goals by providing personalized guidance and support. They assist with budgeting, debt management, setting goals, saving, and investing. Coaches often work one-on-one, offering accountability and motivation to help you make informed financial decisions and improve your overall financial health.

What Is the Average Cost of a Financial Coach?

The average cost of a financial coach ranges from $100 to $300 per hour, depending on the coach’s experience and the services offered. Some coaches offer package deals or flat rates, which can be more cost-effective. Shop around and compare prices to find a coach that fits your budget.

What Is a Financial Coach Not Allowed to Do?

A financial coach is not allowed to manage your investments, provide legal advice, or act as a fiduciary. They cannot make financial transactions on your behalf or offer specific investment recommendations. Their role is to provide guidance and support, not to handle your money directly.

What is the Difference Between a Financial Coach and a Financial Advisor?

A financial coach focuses on behavior and mindset, helping you set and achieve personal financial goals through accountability and support. A financial advisor, on the other hand, provides professional advice on investments, retirement planning, and wealth management. Advisors often manage your investments and offer more technical financial planning services.


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

Annual percentage yield (APY) is variable and subject to change at any time. Rates are current as of 11/12/25. There is no minimum balance requirement. Fees may reduce earnings. Additional rates and information can be found at https://www.sofi.com/legal/banking-rate-sheet

Eligible Direct Deposit means a recurring deposit of regular income to an account holder’s SoFi Checking or Savings account, including payroll, pension, or government benefit payments (e.g., Social Security), made by the account holder’s employer, payroll or benefits provider or government agency (“Eligible Direct Deposit”) via the Automated Clearing House (“ACH”) Network every 31 calendar days.

Although we do our best to recognize all Eligible Direct Deposits, a small number of employers, payroll providers, benefits providers, or government agencies do not designate payments as direct deposit. To ensure you're earning the APY for account holders with Eligible Direct Deposit, we encourage you to check your APY Details page the day after your Eligible Direct Deposit posts to your SoFi account. If your APY is not showing as the APY for account holders with Eligible Direct Deposit, contact us at 855-456-7634 with the details of your Eligible Direct Deposit. As long as SoFi Bank can validate those details, you will start earning the APY for account holders with Eligible Direct Deposit from the date you contact SoFi for the next 31 calendar days. You will also be eligible for the APY for account holders with Eligible Direct Deposit on future Eligible Direct Deposits, as long as SoFi Bank can validate them.

Deposits that are not from an employer, payroll, or benefits provider or government agency, including but not limited to check deposits, peer-to-peer transfers (e.g., transfers from PayPal, Venmo, Wise, etc.), merchant transactions (e.g., transactions from PayPal, Stripe, Square, etc.), and bank ACH funds transfers and wire transfers from external accounts, or are non-recurring in nature (e.g., IRS tax refunds), do not constitute Eligible Direct Deposit activity. There is no minimum Eligible Direct Deposit amount required to qualify for the stated interest rate. SoFi Bank shall, in its sole discretion, assess each account holder's Eligible Direct Deposit activity to determine the applicability of rates and may request additional documentation for verification of eligibility.

See additional details at https://www.sofi.com/legal/banking-rate-sheet.

*Awards or rankings from NerdWallet are not indicative of future success or results. This award and its ratings are independently determined and awarded by their respective publications.

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

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25 Things to Know When Renting Out an Airbnb

25 Things to Know When Renting Out an Airbnb

Renting out part, or all, of your home on a rental platform can be a lucrative sideline. Just keep in mind that it can take an investment of time, effort, and money to create and maintain a welcoming space for guests. And the plan could potentially backfire if you side-step some key legal and insurance steps.

To help ensure your venture is a success, here are some things you may want to consider before you start renting on Airbnb or a similar site.

Key Points

•   Understand local rental laws and regulations to avoid legal issues, as they vary by location.

•   Check lease agreements for subletting restrictions and obtain landlord consent if necessary.

•   Consider all expenses, including amenities and cleaning, to accurately assess potential profits.

•   Entice guests with detailed descriptions and high-quality photos, highlighting unique features.

•   Ensure you have adequate coverage through Airbnb’s host liability insurance and your own homeowners/renters insurance policy.

1. Understanding Local Rental Laws

Before listing your home on a home-sharing site, it’s a good idea to research and make sure you fully understand local laws regarding renting out your home.

Laws that govern home shares vary around the country. In some cities, for instance, it’s illegal to rent a home as an Airbnb unless it’s your primary residence. In others, hosts can only rent out a portion of their home, and must be present during the guests’ stay. Laws about short-term rentals are also constantly changing.

If you own a condo or belong to a HOA, there may be other legal hoops to jump through, since you will likely need to get permission before opening your doors.

2. Checking With Your Landlord (if You’re Renting)

Looking to rent out a room in your home you rent? It can be wise to first carefully read through your own rental agreement.

Leases and agreements can contain language barring renters from subletting the home outright or without the express consent of the landlord. If you’re unsure even after reading the fine print, you may want to have a conversation about it with your landlord.


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3. Talking to Your Neighbors

While neighbors can’t tell you what you can and can’t do on your own property, they can make things difficult for you.

Prior to renting out your home, you may want to do the neighborly thing and pop in or give them a call to let them know what you are planning and do your best to ease any of their concerns. Who knows — they might even end up keeping an eye on the property for you while you’re away.

4. Being Prepared to Pay Taxes

Sure, renting your home on Airbnb may bring in a nice source of passive income. Like all income, however, this may be subject to state and federal taxes.

According to the IRS, third-party settlement organizations (like Airbnb and other vacation rental host sites) are required to issue a Form 1099-K when the amount of total transaction payments exceeds $2,500 in tax year 2025 and $600 in tax year 2026 and beyond.

5. Considering All the Expenses Involved in Renting

While it may be more fun to think about the extra income that could result from your home rental, it can also be important to think about all the expenses involved.

For example, you may have to purchase items to get the space ready, along with any amenities you will offer guests (like toiletries or coffee), and cleaning supplies (or, pay for a cleaning service), and more.

You may want to make a list of all your potential expenses and consider how it will affect your potential profits.


💡 Quick Tip: If you’re creating a budget, try the 50/30/20 budget rule. Allocate 50% of your after-tax income to the “needs” of life, like living expenses and debt. Spend 30% on wants, and then save the remaining 20% towards saving for your long-term goals.

6. Finding a House Manager if You’d Rather Not do all the Work

Does managing your listing, bookings, and maintaining your rental property sound like a lot? You might consider hiring a manager to do it for you.

There are a number of property management companies around the country. that specialize in managing short-term home rentals.

These agencies will handle everything from writing (or boosting the exposure of) your listing to communicating with guests to cleaning and taking care of repairs. Some charge a commission (i.e., a percentage of bookings), while others charge a flat monthly service fee.

7. Making Space for Guests

Prior to accepting your first guests, it’s a good idea to make sure you have room for them — and that typically means more than just a clean, freshly made bed.

You may also want to offer some empty drawers so that guests can unpack their clothing, and possibly also a free shelf in the bathroom for their toiletries.

8. Putting Away Valuables

While it’s nice to think that everyone is trustworthy, that may not always be the case. It can be a good idea to safely stow away any valuables when you are opening your home to people you don’t know.

You can do this by getting a heavy-duty safe. Or, you might want to lock off one room of the home as an “owner’s closet” that guests cannot access.

9. Checking With Your Insurance Company

Airbnb offers its hosts its own liability insurance. Though this covers a wide array of potential issues, including bodily injury to guests and any damage to the property, it may not cover everything. Plus, different home rental platforms may offer different levels of insurance coverage.

It can be a good idea to also check in with your own homeowners or renters insurance to see what type of coverage these policies offer.

10. Writing a Detailed Description

Ready to list? When it’s time to write a description of your home, it’s a good idea to make your listing as detailed as possible, and even include the flaws of your home. A home need not be perfect to list on Airbnb. However, the company suggests that honesty is the best policy.

It can be a good idea to tell guests exactly what they’ll find when they arrive, as well as highlight your home’s special features, such as the location or unique amenities of your space. For more ways to make your listing stand out, you may want to check out Airbnb’s “writing tips.”

11. Taking High Quality Photos

Before taking photos of your space, you may want to spend some time arranging everything as if you were getting ready to welcome your first guest. This can help showcase your space to its best advantage, and also help set your guests’ expectations before they book.

It’s also a good idea to shoot in landscape format (photos in search results are typically displayed in landscape, so vertical photos won’t showcase your space as well), shoot in the middle of the day when there is plenty of light, and to highlight any unique features or amenities.

12. Creating an Information Binder

It can be helpful to make a packet of information for your guests which includes key information, such as the Wi-Fi password, your contact number, and house rules (such as check-out time and anything that guests need to take care of before they leave).

You may also want to include instructions on how to work on anything quirky, such as the television or coffee maker, as well as local entertainment and restaurant options.

13. Offering A Few Extra Amenities

There are millions of listings on Airbnb. If you’re hoping that your rental will make financial freedom a reality, you’ll want it to stand out from the crowd.

Throwing in some extras can help encourage guests to choose your home over others. Are you near a popular beach? You may want to consider keeping some beach chairs and sand toys stored in the garage for guests to use.

Simple add-ons, like the use of your bicycles or a parking tag, may not cost you much (or anything) to offer, yet significantly increase the popularity of your listing — along with your earnings.

💡 Quick Tip: Bank fees eat away at your hard-earned money. To protect your cash, open a checking account with no account fees online — and earn up to 0.50% APY, too.

14. Making a Decision about Pets or No Pets

Before you list your property it’s a good idea to decide if you want your home to be a space for pets or not.

This is a personal decision, but you may want to consider whether or not your space is well-suited for pets (a light suede couch, for example, might not last very long). If you do decide to make your home pet-friendly, you could add in an additional fee for cleaning.

15. Learning How to Price a Property Right

You may think your home looks and feels like a million bucks, but that doesn’t mean travelers will pay a premium.

To understand how to price an Airbnb listing correctly, it’s a good idea to comb through comparable listings in your area to get a sense of what other people are charging.

You can also use a free online calculator like airDNA. You just need to input all your data, including home size, if it’s pet-friendly, location, etc., to get a recommended price for your listing.

Recommended: 33 Ways to Make Income From Home

16. Deciding How You Want to “Screen” Guests

It is against Airbnb’s nondiscrimination policy to decline a booking based on “race, color, ethnicity, national origin, religion, sexual orientation, gender identity, or marital status” or impose different standards for specific guests.

What hosts can screen for are people who may not be a good fit for their property by being as descriptive as possible in their listing. If your home is not a good fit for children, you may want to make that clear in your listing.

Do you want to limit the noise after specific hours to respect neighbors? You may want to be specific about that in your listing so you bring in the type of customer you are hoping to attract.

17. Learning About Enhanced Cleaning Standards

Airbnb, along with many other rental platforms, require hosts to use an enhanced five-step cleaning process between guests.

The protocol includes special measures, such as using disinfectants approved by your local regulatory agencies for use against Covid-19 on all high-touch surfaces (and letting them stand for the amount of time specified on the label) and washing all dishes and laundry at the highest heat setting possible.

18. Thinking About Turnover Time

Before you rent all or part of your home on a rental platform you will want to think about not only when you want to rent your home out, but also how long it will take you to get it properly cleaned (using the five-step protocol) and ready for the next guests.

Will you need 24 hours between guests or can you get the home ready in just a couple of hours? This will determine exactly what dates you are able to accept guests, as well as what check-in time you want to put in your listing.

19. Testing Your Rental With Friends

When you’re getting close to listing your space, you may want to try testing out the system with a few friends.

Inviting people you know and trust to rent your space (free of charge or for a low fee) won’t do much to get that extra income stream flowing, but it can help you work out the kinks, as well as garner you some (hopefully positive!) reviews.

Friends can also tell you honestly what you might do differently or change to improve the rental experience. This way, you’ll feel confident once people you don’t know arrive.

20. Being Ready for Bookings Right Away

With millions of users all over the world, it may be a good idea to go into listing your property believing you’ll receive guests right away.

While this may not happen, it’s better to be prepared for visitors, then wait to see how your listing performs before readying your space for guests.

21. Looking At Your Reviews

After guests depart they may leave you a review of their stay. It’s a good idea to not only look at the reviews but to take them to heart. Reviews can make or break Airbnb rentals.

While it can be tough to digest criticism of your home, if guests complain about something that can be easily fixed, it can be in your best interest to fix it.

Reading positive reviews can be a good way to see your rental from an outsider’s perspective and make changes to improve your listing.

22. Accepting the Fact You Can’t Please Everyone

Sometimes, people are just difficult, or nitpicky, or just aren’t the right match for your listing and will leave a nasty review that feels unwarranted.

If you see a review that falls into that camp, it can be wise to just forget it and move on. This can often be a better approach than starting a fight in the comment section, which may only end up making you look bad to potential future guests.

23. Working Toward Superhost Status

Becoming an Airbnb superhost can increase your earnings by giving your more visibility and letting guests know that they can expect the best when staying with you.

Superhosts are featured in search results and get a Superhost badge on their profiles and listings to help them stand out. After each year as a Superhost, they’ll get a $100 travel coupon.

To become a Superhost, hosts must complete at least 10 stays in the past year (or 100 nights over at least three completed stays), have a 4.8 or higher average overall rating, respond to 90% of new messages within 24 hours, and cancel bookings less than 1% of the time.

Recommended: Money Management Guide

24. Deciding If Airbnb Is the Only Platform for You

After deciding to list on Airbnb, it’s then time to decide if that’s enough. There are, after all, a number of other home rental platforms to choose from, including Vrbo, Booking.com, and Flipkey. It’s up to you how many different listings you’re willing to maintain.

25. Keeping Your Calendar Up to Date

Once you list your home on Airbnb (or any other rental platform), it can be wise to keep your rental calendar as up-to-date as possible. This way, guests don’t accidentally book a stay when you have your in-laws visiting or when you otherwise want to use your own space.

If a date looks to be free to a potential guest but you forgot to mark it as unavailable, it can become a frustrating experience for both parties.

The Takeaway

If you have an extra room, or your home is vacant for several months out of the year, you may be tempted to list it on a home rental site.

But before you start posting photos on Airbnb, there are several things you may want to think through — from legal and insurance issues to the time and expense involved in getting (and keeping) your space ready for guests.

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


Better banking is here with SoFi, NerdWallet’s 2024 winner for Best Checking Account Overall.* Enjoy 3.60% APY on SoFi Checking and Savings with eligible direct deposit.

FAQ

What should you know before renting your home on Airbnb?

Before renting your home on Airbnb, it’s important to understand local laws and regulations, as some areas have restrictions on short-term rentals. It’s also a good idea to check your homeowner’s insurance to ensure it covers Airbnb rentals, and carefully read Airbnb’s host liability coverage. Finally, you’ll want to familiarize yourself with Airbnb’s host policies and prepare your home for guests by ensuring it’s clean, safe, and well-stocked with essentials.

Do I Need Permission to List My House on Airbnb?

Yes, you may need permission to list your house on Airbnb. Check your local laws and regulations, as some cities and neighborhoods have restrictions on short-term rentals. If you rent rather than own your home, you’ll want to review your lease agreement, as it may prohibit subletting or short-term rentals. Additionally, consult your homeowner’s association (HOA) if applicable, as they might have specific rules. Always ensure you have the necessary permits and approvals to avoid legal issues and fines.

Is Renting out an Airbnb Worth It?

Renting out an Airbnb can be worth it if you manage it effectively. It can provide a steady income stream, especially in high-demand areas. However, it requires significant effort, including maintaining the property, managing bookings, and dealing with guest issues. It also comes with costs, such as cleaning, utilities, and potential wear and tear. You’ll want to weigh the benefits against the time and financial investment. If you enjoy hosting and are willing to put in the work, however, it can be a rewarding venture.


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

Annual percentage yield (APY) is variable and subject to change at any time. Rates are current as of 11/12/25. There is no minimum balance requirement. Fees may reduce earnings. Additional rates and information can be found at https://www.sofi.com/legal/banking-rate-sheet

Eligible Direct Deposit means a recurring deposit of regular income to an account holder’s SoFi Checking or Savings account, including payroll, pension, or government benefit payments (e.g., Social Security), made by the account holder’s employer, payroll or benefits provider or government agency (“Eligible Direct Deposit”) via the Automated Clearing House (“ACH”) Network every 31 calendar days.

Although we do our best to recognize all Eligible Direct Deposits, a small number of employers, payroll providers, benefits providers, or government agencies do not designate payments as direct deposit. To ensure you're earning the APY for account holders with Eligible Direct Deposit, we encourage you to check your APY Details page the day after your Eligible Direct Deposit posts to your SoFi account. If your APY is not showing as the APY for account holders with Eligible Direct Deposit, contact us at 855-456-7634 with the details of your Eligible Direct Deposit. As long as SoFi Bank can validate those details, you will start earning the APY for account holders with Eligible Direct Deposit from the date you contact SoFi for the next 31 calendar days. You will also be eligible for the APY for account holders with Eligible Direct Deposit on future Eligible Direct Deposits, as long as SoFi Bank can validate them.

Deposits that are not from an employer, payroll, or benefits provider or government agency, including but not limited to check deposits, peer-to-peer transfers (e.g., transfers from PayPal, Venmo, Wise, etc.), merchant transactions (e.g., transactions from PayPal, Stripe, Square, etc.), and bank ACH funds transfers and wire transfers from external accounts, or are non-recurring in nature (e.g., IRS tax refunds), do not constitute Eligible Direct Deposit activity. There is no minimum Eligible Direct Deposit amount required to qualify for the stated interest rate. SoFi Bank shall, in its sole discretion, assess each account holder's Eligible Direct Deposit activity to determine the applicability of rates and may request additional documentation for verification of eligibility.

See additional details at https://www.sofi.com/legal/banking-rate-sheet.

*Awards or rankings from NerdWallet are not indicative of future success or results. This award and its ratings are independently determined and awarded by their respective publications.

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.

We do not charge any account, service or maintenance fees for SoFi Checking and Savings. We do charge a transaction fee to process each outgoing wire transfer. SoFi does not charge a fee for incoming wire transfers, however the sending bank may charge a fee. Our fee policy is subject to change at any time. See the SoFi Bank Fee Sheet for details at sofi.com/legal/banking-fees/.
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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How Often Are FHA Loans Denied in Underwriting?

FHA loans, which are backed by the Federal Housing Administration, are popular with first-time homebuyers for their more flexible qualifications and lower down payment requirements. Though FHA loans are more accessible, there’s still potential for mortgage denial during the underwriting process.

Here’s a look at how often FHA loans are denied in underwriting, plus some of the leading reasons for mortgage denial — plus strategies to improve your chances of loan approval.

Key Points

•   FHA loans typically have a higher denial rate than conventional loans.

•   Common denial reasons include credit score issues, high debt-to-income ratio, and property appraisal challenges.

•   FHA loans require a minimum 3.5% down payment for credit scores of 580 or above. Lower scores require a larger down payment.

•   The median credit score for FHA loans is 673, indicating a “good” credit profile.

•   Reapplying for an FHA loan is possible after addressing initial denial reasons.

Understanding FHA Loan Underwriting

When you apply for an FHA loan to finance the purchase of a home, the lender will evaluate your ability to repay the loan to decide whether to approve or deny the application. This is known as the mortgage underwriting process, which involves reviewing a borrower’s financial information, such as credit history, income, debts, and the mortgage amount.

Getting preapproved for a home loan is an initial step in the FHA loan process that can give prospective homebuyers an indication of how much they can potentially borrow with the loan. After receiving preapproval, buyers get a letter from the lender that they can include when making an offer on a home.

If an offer is accepted, buyers can apply for an FHA loan, prompting another review of a borrower’s credit, employment, income, debts, and assets by the underwriter to reach a final decision: conditionally approved, suspended, or denied. This process may take a few days or more than a week to complete.

Common FHA Loan Denial Statistics

How common is it to have a mortgage loan denied in underwriting? In short, it depends on the type of mortgage loan. Below are some key statistics to keep in mind as you prepare to apply for an FHA loan.

Denial Rates Compared to Conventional Loans

When comparing FHA vs. conventional mortgages, the latter have a lower rate of denial. In 2023, the most recent year for which full data is available, 7.9% of conventional home loan applications were denied, which is the lowest among all types of home loans.

Meanwhile, applications for FHA loans, which accounted for 17% of mortgages in 2023, had a 13.6% denial rate for applications to purchase a home in the same year. The denial rate for FHA refinance loans was 41.7% for 2023.

Trends in FHA Loan Approvals

In 2023, 86.7% of applicants were approved for FHA loans. To better understand how you compare to typical borrowers, here are some key trends on FHA loan approvals. The median credit score was 673 for borrowers taking out FHA loans in 2023. And the median loan amount was $294,000 for FHA mortgages approved in 2023.

Keep in mind that getting approved for an FHA loan depends on multiple factors, including economic conditions and individual lender practices — not just a borrower’s qualifications.

Recommended: A Guide to FHA Loans

Top Reasons FHA Loans Get Denied in Underwriting

Here are a few of the main reasons for having an FHA mortgage loan denied in underwriting.

Credit Score Issues

Lenders look at a borrower’s credit history to help determine their ability to repay debt. Having a high credit utilization, a history of late payments, or recent bankruptcies could lead to an FHA loan getting denied.

The credit score needed to buy a house varies by loan type, with FHA loans being more lenient. Borrowers with credit scores of at least 500 could qualify for an FHA loan. However, a credit score below 580 requires a 10% down payment versus a 3.5% down payment for borrowers who can hit the 580 number.

If you meet the credit score requirements for an FHA loan, it’s important to ensure you stay on top of monthly payments and avoid opening new lines of credit to maintain your credit score.

Debt-to-Income Ratio Problems

When applying for an FHA loan, lenders also consider your existing debt. Having a debt-to-income (DTI) ratio over 50% could be a problem for getting approved. Note that lenders typically prefer a DTI ratio of 43% or less when applying for home mortgage loans. To assess your DTI, add up all your monthly debts and divide by your gross monthly income; multiply the result by 100.

Lenders evaluate your DTI ratio when you apply for mortgage preapproval. But a change in your DTI could arise between then and the underwriting process if there are issues with any cosigned debt or you take on new debt.

Recommended: Why Your Debt-to-Income Ratio Matters

Property Appraisal Challenges

Unless you’re a cash buyer, an appraisal is a necessary step to determine the home’s value. So it’s important to understand how FHA appraisals work. Underwriters could deny an FHA loan application if the appraised value falls short of the purchase price. This can be remedied if the seller agrees to lower the price or the buyer can make up the difference in cash.

FHA appraisals also assess whether a home meets the minimum health and safety standards set by the U.S. Department of Housing and Urban Development (HUD). If any health and safety hazards are identified, such as a broken HVAC system or leaky roof, these could result in an FHA loan being denied unless it’s resolved before closing.

How to Improve Your Chances of FHA Loan Approval

Borrowers can plan ahead to improve their chances of getting approved for an FHA loan.

Having enough money saved for a down payment and closing costs prior to applying is key, as lenders typically ask for two or more months of bank statements. As noted above, the minimum down payment on FHA loans depends on your credit score. Borrowers with credit scores of 580 or above can put just 3.5% down, while those with credit scores between 500 and 579 need to put 10% down.

Paying off debt to improve your credit and DTI ratio is another strategy to consider, especially if your credit score is hovering near 580.

When it comes time to submit the mortgage application, taking the time to review all your information for accuracy can help reduce the likelihood of getting denied due to an error.

What to Do If Your FHA Loan Is Denied

Having your FHA loan denied in underwriting can be unwelcome news, but it’s not the end of the road for buying a home. First, you can talk to your lender to determine if there were any application errors and what other options are available. Adding a cosigner to your mortgage could help secure approval, though this would mean finding someone who agrees to be financially responsible if you are unable to make loan payments.

There are also other types of mortgage loans to consider. Homebuyers who meet income limits and are buying in areas designated as eligible by the United States Department of Agriculture could qualify for a USDA loan, a type of mortgage with no down payment requirement. Alternatively, VA loans, which are available to eligible veterans, active-duty military, reservists, and surviving spouses, have no minimum credit score or down payment requirements. (Note: SoFi does not offer USDA loans at this time, but we do offer FHA and VA loans.)

Working with the Right Lender for FHA Loans

As a first-time homebuyer, you likely have questions. For instance, “which mortgage products do you recommend?” and “should I be worried about underwriting?.” Working with the right lender for FHA loans can help answer questions and address concerns to streamline the homebuying process.

Many banks and mortgage companies offer FHA loans, and HUD maintains a database of FHA-approved lenders. Comparing offers from multiple lenders is recommended to find more favorable loan terms.

The Takeaway

How often are FHA loans denied in underwriting? In 2023, just under 14% of FHA loans were denied, which is a higher rate than conventional home loans. Some of the main reasons for FHA loan denial stem from a borrower’s credit history, their debt-to-income ratio, and the appraisal. An FHA loan can be a good solution for many borrowers, however.

SoFi offers a wide range of FHA loan options that are easier to qualify for and may have a lower interest rate than a conventional mortgage. You can down as little as 3.5%. Plus, the Biden-Harris Administration has reduced monthly mortgage insurance premiums for new homebuyers to help offset higher interest rates.

Another perk: FHA loans are assumable mortgages!

FAQ

What is the current denial rate for FHA loans in underwriting?

The denial rate for FHA loans in underwriting was 13.6% in 2023. This is nearly double the denial rate for conventional mortgages for the same year.

What minimum credit score is needed to avoid FHA loan denial?

Having a credit score of 500 meets the minimum requirements and can help avoid FHA loan denial. Note that borrowers with a credit score of 580 or more can make a 3.5% down payment instead of 10%.

Can I reapply for an FHA loan after being denied?

Yes, you can reapply, but it’s important to understand the reasons for mortgage denial and address those issues before submitting a second FHA loan application.

How long should I wait to apply again after an FHA loan denial?

How long you should wait depends on your reason for FHA loan denial, as there isn’t a mandatory waiting period for reapplying. For example, it may take several months for your credit score to improve before you can then reapply.

Are certain property types more likely to cause FHA loan denials?

Certain property types, such as manufactured homes and condos, have stricter requirements, making them more likely to cause FHA loan denials.


Photo credit: iStock/Milan Markovic

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.

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.

¹FHA loans are subject to unique terms and conditions established by FHA and SoFi. Ask your SoFi loan officer for details about eligibility, documentation, and other requirements. FHA loans require an Upfront Mortgage Insurance Premium (UFMIP), which may be financed or paid at closing, in addition to monthly Mortgage Insurance Premiums (MIP). Maximum loan amounts vary by county. The minimum FHA mortgage down payment is 3.5% for those who qualify financially for a primary purchase. SoFi is not affiliated with any government agency.
Veterans, Service members, and members of the National Guard or Reserve may be eligible for a loan guaranteed by the U.S. Department of Veterans Affairs. VA loans are subject to unique terms and conditions established by VA and SoFi. Ask your SoFi loan officer for details about eligibility, documentation, and other requirements. VA loans typically require a one-time funding fee except as may be exempted by VA guidelines. The fee may be financed or paid at closing. The amount of the fee depends on the type of loan, the total amount of the loan, and, depending on loan type, prior use of VA eligibility and down payment amount. The VA funding fee is typically non-refundable. SoFi is not affiliated with any government agency.
Checking Your Rates: To check the rates and terms you may qualify for, SoFi conducts a soft credit pull that will not affect your credit score. However, if you choose a product and continue your application, we will request your full credit report from one or more consumer reporting agencies, which is considered a hard credit pull and may affect your credit.

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How Much Do Smart Homes Cost in 2025?

The cost of turning your house into a “smart home” could range from about $100 to $4,500 or more, depending on what type of upgrades you might be considering.

According to 2025 data from the home improvement site Angi.com, the typical cost of a smart home ranges from $204 to $1,653. But several factors could affect how much you end up paying, including the size of your home and whether you DIY the install or hire a professional to take charge.

As you’re thinking about how to upgrade your home to a smart home, read on for a look at what it might cost, whether the return on investment could be worth the price, and how you might choose to pay for those cool new devices.

Key Points

•   The cost of upgrading to a smart home in 2025 ranges from $100 to more than $4,000, depending on what is included in the project.

•   Smart security systems, a popular choice, can cost from $300 to $5,000.

•   Smart thermostats cost from $70 to $280, and a fully automated HVAC system can range from $800 to $2,000.

•   Additional expenses include monthly subscription fees from $10 to $60 and potential Wi-Fi upgrades.

•   Premium smart home setups offer advanced features and support. Homeowners can finance systems with a home equity line of credit (HELOC), among other options.

Understanding Smart Home Technology in 2025

Way back in 1962, the animated TV show The Jetsons and other sci-fi classics gave viewers an aspirational look at what life might be like 100 years in the future — when a home filled with computerized gadgets would make life so much easier for moms, dads, the kids, and even the family dog.

Who knew, even as you watched those old shows as reruns decades later, that so much of what they predicted would come true? OK, maybe we don’t have flying cars yet. But in 2025, smart home technology, or home automation, is a reality … and getting smarter all the time.

You can see who’s at your door from 1,000 miles away. Or program your robot vacuum to clean your floors when and where you want. You can use your smartphone, tablet, laptop, or a smart home assistant like Google or Alexa to turn lights on and off, turn the thermostat up or down, open and close the blinds, and more. Many of today’s devices can be operated separately or linked together to act as a cohesive network. And besides the obvious convenience, smart tech can also help reduce some costs and your carbon footprint.

Recommended: 4 Ways to Upgrade Your Home

Smart Home Cost Breakdown by Category

The cost of turning your house into a smart home will depend on which devices you choose to install or upgrade, and how connected you want those various devices to be. If you install one or two gadgets yourself — like a new smart thermostat or a doorbell camera — you can probably keep the cost to a minimum. But if you have a professional come in and connect your whole home, the price could be much higher.
Here’s a breakdown of what a few of the more popular smart devices could run you:

Smart Home Cost: Security Systems

Because they can allow you to better monitor your property when you’re away, home safety systems are among the most popular automated setups offered. And there’s a wide range of options available. You can choose between a wired or wireless (Bluetooth or Wi-Fi) system, for example, or between a professionally installed and monitored system and one that you set up and monitor yourself using your phone. Depending on your choice, and how elaborate the setup of sensors and cameras is, you could spend anywhere from $300 to $5,000 or more on installation, with an additional charge for external monitoring for some systems.

Smart Home Cost: Automated Lighting and Electrical

We’ve come a long way since clapping to turn a lamp on and off was considered high-tech. Today’s smart lighting can be controlled remotely or set up to go on and off automatically, so you can keep your home safer and use your electricity more efficiently. You also may be able to adjust the brightness and color of your lights. Fully outfitting your home with smart lighting could cost from $1,000 to $5,000. Or you can start out a little smaller and buy smart bulbs (about $15 each or less) that wirelessly connect to your home’s hub (think Alexa or Google Nest) or your smartphone.

Smart Home Cost: HVAC and Climate Control

A smart thermostat offers another way to control your home environment from afar and potentially lower your power bills. You can program it to turn on or turn up the air conditioner or heater before you get home so the temp is just the way you like it. Or you can make adjustments any time remotely using your smartphone. Some smart thermostats also can “learn” your temperature preferences and automatically create a heating and cooling schedule based on your habits. The price of a smart thermostat can range from about $70 to $280. A fully automated HVAC system, on the other hand, could cost from $800 to $2,000 or more.

Recommended: What Does an HVAC Replacement Cost?

Entry-Level vs. Premium Smart Home Setups

There are smart home options to fit just about any budget. But when you compare entry-level vs. premium smart home setups, you’ll likely find differences in performance, design, functionality, and support.
Professional installation, customization, and the brand you buy can all factor into the price you’ll ultimately pay to transition to a smart home. (Of course, you could also buy a new home that’s already outfitted with a state-of-the-art smart system.)

If your budget is a factor, you may want to start small, with a few essentials that you can install yourself. You might have to invest quite a bit more (thousands of dollars vs. hundreds) to get a top-tier whole-house system that seamlessly integrates all the electronics inside and outside your home.

Hidden Costs of Smart Home Implementation

When you’re budgeting for any smart home upgrade, it can be a good idea to prepare for extra costs, including:

Subscription Costs

Some smart devices come with monthly fees that can add to your overall cost. If you want 24/7 security system monitoring, for example, you could pay $30 to $60 or more each month for that service. (Some self-monitored video doorbells also require a subscription — especially if you want to customize your setup.) Your smart home system may also charge a monthly subscription ($10 to $50 or more, depending on the level of service) to cover ongoing maintenance, software and equipment updates, and general support.

Stronger Wi-Fi Requirements

If your smart home system requires a stronger signal than you currently have, you may have to get an upgrade and pay more each month to your wireless company.

Repairs and Replacements

If your smart appliance (refrigerator, dishwasher, microwave, etc.) breaks down, the cost of repairing or replacing it will likely be higher than what you’d pay for basic appliances. And you may not be able to take certain larger appliances or your security system with you if you move.

Packages vs. Individual Pieces

Depending on how big you think you might want to go with your smart home tech, you may want to compare the cost of buying a comprehensive system of integrated smart components vs. buying one device at a time. You might be able to save some money by purchasing a package that includes professional installation, service, and other features. (If you’re considering a renovation or remodel, it may make sense to include the costs of a smart home upgrade in your budget.)

Financing Your Smart Home Upgrade

While some smart home devices can be relatively low in cost, others may require a more significant investment. So besides researching the various costs, it can also make sense to consider how you might pay for any smart tech improvements.

If you have some equity built up in your home, you may want to look into the pros and cons of using a home equity loan vs. a home equity line of credit (HELOC) to help finance your project. Both allow those who qualify to borrow a large sum of money at a relatively low interest rate and with lower fees than a mortgage refinance. But each works a bit differently.

•   A home equity loan is disbursed in a lump sum that you’ll begin repaying immediately, with interest, usually at a fixed rate. This might be a good solution if outfitting your home with smart technology is part of a larger renovation project that you undertake with a contractor who can give you a bid for the total costs to remodel or renovate a home in advance, so you know, roughly, what your total spend will be.

•   A HELOC is a revolving line of credit that works more like a credit card. You can take out money as you need it, up to your approved limit, during the draw period, which typically lasts 10 years. Usually, you’ll be required to make interest-only payments on the amount you borrow during that time. When the draw period ends, you’ll enter the repayment period, which is usually 20 years; and at that time, you must begin repaying the principal balance with interest, usually at a variable rate. A HELOC could be a good solution if you aren’t sure exactly how large a project you’re taking on and what it might cost — if it’s a few rolling renovations vs. a big remodel, for example.

It might be tempting to go to the lender that provided your home mortgage loan for financing, but it’s always a good idea to look around and check rates with several lenders before making a commitment.

If you don’t have enough equity in your home, or if you prefer not to use your home as collateral, another possibility might be an unsecured home improvement loan. With this type of personal loan, the funding may be faster (there’s no appraisal required), and your home isn’t on the line if you fall behind on your payments. As for a fixed interest rate for easier budgeting.

Any of these borrowing options can be used to cover the costs of upgrading to a smart home, so it’s really about finding the right fit for your needs.

ROI of Smart Home Investments

Is a smart home worth the cost? Even if your focus is primarily on comfort and convenience when you invest in smart home technology, you’ll likely notice other benefits as well.

You can use devices that control your home’s temperature, appliances, and lights, for example, to help you reduce your monthly energy bills. And installing a security system may help you reduce your insurance costs.

Adding smart home components or a whole system can also help you increase or maintain the value of your home. Is a smart home worth it? According to Forbes.com, most sellers of smart homes realize a 50% return on their investment. And because buyers are increasingly looking for smart home features, the right upgrades also may help you sell your home faster.

The Takeaway

Technology that can make your home life simpler, safer, and more comfortable is no longer a fantasy. Upgrading your home to a smart home isn’t even really considered a luxury anymore.
How much is a smart home? These days, there are devices and packages designed to fit just about any budget, from individual components that may cost less than $100, to whole-home systems that can run into the thousands. If you’re spending big on smart tech or wrapping smart home technology into a larger renovation, a home equity line of credit could help you cover the bills.

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

Unlock your home’s value with a home equity line of credit from SoFi, brokered through Spring EQ.

FAQ

What’s the average cost of a basic smart home setup in 2025?

The typical cost of a smart home can range from about $200 to $2,000 or more. But several factors can affect how much you end up paying, including the size of the upgrade and whether you DIY the job or hire a professional to take charge.

Which smart home features offer the best return on investment?

Smart thermostats, lighting, and security systems are currently in high demand and generally offer the best return on investment.

Can I finance smart home upgrades through SoFi?

Absolutely. SoFi offers several financing options for homeowners who want to upgrade their tech, including a home equity loan, a home equity line of credit (HELOC), and an unsecured home improvement loan.

How much should I budget for ongoing smart home maintenance and subscriptions?

Depending on the type of system you plan to purchase, it may make sense to budget at least $50 a month for maintenance and subscriptions.

Are there tax incentives or rebates available for energy-efficient smart home implementations?

Tax laws that apply to energy-efficient upgrades are complicated and can change from year to year. Keep your receipts (documenting your costs is key), and talk to your tax preparer about potential tax breaks, but don’t count on them when you’re planning your project.


Photo credit: iStock/Srdjanns74

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.

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.

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.


Non affiliation: SoFi isn’t affiliated with any of the companies highlighted in this article.

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What Is the Worst Day to Close on a House?

As you sort through the many details that go into buying a home, have you wondered if there’s a best or worst day to schedule the closing? The answer is yes: Choosing the right date and/or day of the week to finalize your home purchase could help lower your stress — and potentially save you some money.

Read on for a look at how carefully timing your closing could have benefits for you as a homebuyer.

Key Points

•   The closing date affects interest costs and the length of time before the buyer’s first mortgage payment.

•   Closing early in the month provides more time before the first mortgage payment is due.

•   Closing at the end of the month reduces prepaid interest but accelerates the first payment.

•   Avoid Fridays and holidays to minimize the risk of delays and issues.

•   Consider lease agreements and HOA fees when selecting a closing date.

Who Chooses the Closing Date?

Generally, buyers suggest a tentative closing date when they make an offer on a home, but there may be some negotiations before this important day is finalized on the purchase contract. It’s also not unusual for the established closing date to be moved if the buyers or the sellers request a change.

It can be hard to predict how long it will take to close on a house. It may take the buyers longer than expected to get the home they hope to purchase inspected, for example, or to pull together all the necessary paperwork for their approval. Or the sellers may ask to modify the date to accommodate the purchase of their next home. The day also has to work for the mortgage lender, the title company, any cosigners, and others involved in the transaction.

Still, as the buyer, you can expect to have a say as to when you’ll head to the closing table. So it can make sense to be prepared to propose a day that works best for your needs.

Worst Day to Close on a House

Because the logistics can get complicated when you’re trying to find a closing date that works for everyone, you may want to focus first on avoiding what might be the worst day to close on a house. And surprisingly, that could be a Friday.

It might be tempting to schedule your closing for the end of the week — especially if there’s a holiday weekend coming up — so you can take advantage of those days off to move into your new home. But it can be a risk. If there’s a delay such as missing paperwork or a complication during the final walk-through, you may have to push the closing to the following Monday or even later in order to resolve the trouble and get back on track.

Mondays can also be problematic. Even if everything is in order for your closing, the professionals you’re dealing with may be swamped with a backlog of issues left over from the week before. Your experience may be more pleasant if you pick a day that’s not as busy.

If you can manage it, a Tuesday, Wednesday, or Thursday may be a better choice. Closing midweek can give you more time to overcome any last-minute hiccups and still get the transaction finalized without having to shift it to the next week.

Recommended: When Is the Best Time to Buy a House?

Best Day to Close on a House

The best day to close on a house for the buyer is the one that’s the right fit for your schedule as a busy employee, parent, etc. — and it must work for everyone else who plans to participate. You’ll also want to be sure to give yourself plenty of time to accomplish all the steps in the home-buying process, from getting an appraisal and inspection to arranging for homeowner’s insurance and planning and packing for your move.

Your financial needs can also play a significant role in choosing the right closing day. And getting that right can be more about finding the best day of the month to close than the best day of the week.

If you want the maximum breathing room between your closing and your first mortgage payment, for example, you may want to pick a day that’s early in the month. A buyer’s first mortgage payment is usually due on the first day of the month after a 30-day period following the closing. So if your closing is on, say, Sept. 3, you’d have nearly two months before your first payment was due on Nov. 1. But if you closed on Sept. 28, you’d only have about a month before the first mortgage payment was due, also on Nov. 1.

If you’re trying to save money on closing costs, however, you might want to avoid the start of the month. As the buyer, you can expect your lender to add any interest that will accrue between your closing date and the end of the month to your closing costs. With a date that’s later in the month, your first mortgage payment will come sooner, but you could substantially reduce the amount of interest you’ll have to prepay at your closing. Some lenders will roll closing costs into your home loan, but you will still pay them, perhaps by paying a higher interest rate on the loan.

You could also decide to compromise and shoot for a closing date in the middle of the month. With this option, you’ll pay less interest than if you’d closed at the start of the month and you’ll still have a month and a half before your first mortgage payment is due.

Recommended: VA Loan Closing Costs

Other Things to Consider When Choosing a Closing Date

Along with the money you could save on prepaid accrued interest by scheduling your closing toward the end of the month, here are a few other financial factors to consider:

Do You Have an Existing Lease?

If you’re a first-time homebuyer and you’re currently renting, you may want to time your closing so that you can avoid making another rent payment before you move into your new home. For example, if your rent is due on the first day of the month, your best closing date may be at the end of the month prior. (This could also allow you to reduce the amount of prepaid interest due at closing.)

Is the Home in an HOA?

Buyers often overlook the cost of Homeowners Association (HOA) fees when they prepare for a closing — but it’s possible those fees could rise or fall depending on the date you close. The difference in what you’ll pay might not be enough to make you want to change your closing date, but it’s worth checking out ahead of time.

Are You Asking for Seller Concessions?

Are you dealing with eager home sellers? You might be able to ask for some seller concessions as part of your home purchase. If the sellers agree to pay some or all of your closing costs, for instance, that amount could include the accrued interest the lender will charge. If that’s the case, you could close at the start of the month and enjoy a longer period of time before you must make your first mortgage payment without having to make a larger interest payment at closing. (Just be sure to check that the accrued interest will be included in the costs covered by the sellers.)

The Takeaway

So many decisions go into buying a home, it might not even occur to you to put some thought into choosing the best closing date. But picking the best day to close on a house as a buyer can have several benefits — including providing opportunities to save some money at a time when that can be so important.

The closing date is negotiable, and of course you’ll want to be open to finding a day that works for all involved. But as a buyer, you’ll have a chance to propose the best closing date for you when you make an offer on a home. So why not check your calendar, run the numbers, consult with your real estate agent and mortgage lender, and come prepared with a day in mind?

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

SoFi Mortgages: simple, smart, and so affordable.

FAQ

Does the buyer or seller choose the closing date?

Both buyers and sellers may have some input into the closing date, but typically, the buyer first proposes a closing date on the purchase contract when making an offer on a home.

Is it better to close on a house at the beginning or end of the month?

There are several factors that may go into deciding the best timing for a closing. For example, If the buyer wants to pay less toward accrued interest, a closing date at the end of the month is generally better. But if the buyer wants to maximize the time between the closing and the first mortgage payment, closing at the start of the month may be the better choice.

Does it matter if I close on my house before a holiday?

You may want to avoid scheduling your closing right before a holiday weekend. The professionals who are working on your closing may be busier at this time of year, and if an issue comes up that can’t be resolved quickly, the closing might have to be delayed until after the holiday.

How does the closing date affect the first mortgage payment?

A buyer’s first mortgage payment is typically due on the first day of the month after a 30-day period following the closing.

Is there an optimal day of the week to close on a house?

Tuesdays, Wednesdays, and Thursdays are generally considered to be the best days of the week for a closing. If something goes wrong and the closing is early in the week, it’s more likely there will be time to fix the problem and get things back on track before the weekend.


Photo credit: iStock/gorodenkoff

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