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If you’re looking to borrow money quickly and without going through a lengthy application process, flex loans can be an appealing option. A flex loan is a line of credit that is unsecured (meaning no collateral is required). It allows you to withdraw funds as needed up to a predetermined limit. As you pay down the balance, you can continue to borrow from the credit line, similar to a credit card.

While flex loans are usually easier to qualify for than more traditional lending products, they typically come with higher annual percentage rates (APRs) and fees. Here’s what you need to know about flex loans, including how they work, how much you can borrow, and the pros and cons of using a flex loan for fast cash.

What Is a Flex Loan?

Despite the name, a flex loan isn’t actually a loan — it’s an unsecured personal line of credit. Most commonly, you can find flex loans through cash advance companies, though some select credit unions, banks, and online lenders offer them.

Flex loans allow you to withdraw funds from a credit line up to a preapproved limit. You can use the funds in any way you wish. As you pay down the balance, you can continue to borrow from the credit line, similar to a credit card.

Because flex loans typically don’t require a credit check, they can be an attractive option for those who have a poor or limited credit history. But keep in mind: Because lenders assume additional risk by not checking credit, flex loans typically have higher APRs than other lending products, including personal loans, personal lines of credit, and credit cards. You may struggle to make payments if interest and fees continue to accumulate.


💡 Quick Tip: Some personal loan lenders can release your funds as quickly as the same day your loan is approved.

How Do Flex Loans Work?

A flex loan works similar to a credit card in that it’s a revolving line of credit. Once approved, you’re given a certain credit limit and can borrow up to that amount. As the balance is paid down, that money is once again available to be borrowed.

You’ll receive regular statements showing how much you’ve borrowed and the interest owed and typically need to make minimum monthly payments. Like a credit card, you may choose to only pay the minimum, or you can pay more. The more you pay each month, generally the less interest you’ll accrue.

Some flex loan lenders charge fees in addition to interest. This may include a flat fee when you take out the loan, as well as periodic fees, which may be daily, monthly, or each time you draw funds from the loan.

How Much Can You Get With a Flex Loan?

The exact amount you’ll be approved for will depend on the lender, as well as where you live, since state laws regulate credit limit amounts. You may be able to borrow anywhere from $100 to several thousand dollars with a flex loan.

Borrowers often turn to flex loans to cover immediate financial needs, emergencies, or hardships, but you can use the loan funds for almost any reason. However, due to the high APRs, it’s generally a smart idea to draw funds from a flex loan only when necessary.

Recommended: The Problems with Online Payday Loans and Fast Cash Lending

Will a Flex Loan Hurt My Credit?

Getting a flex loan may not require a credit check so applying for one won’t necessarily affect your credit score. But lenders assume extra risk when they don’t do a credit check, so they might charge higher interest to make up for that.

A flex loan may hurt your credit if you don’t manage it responsibly. As with other types of debt, making late payments or missing payments on a flex loan may adversely affect your credit score. It’s a good idea to budget carefully to ensure you’re not borrowing more than you afford to pay back.

Recommended: 11 Types of Personal Loans & Their Differences

Benefits of Flex Loans

Flex loans may be beneficial for some borrowers. Here’s a look at some of the advantages of flex loans.

Application Process

In many cases, you can apply for a flex loan and receive a lending decision within minutes, especially if you apply online.

Access to Funds

You may receive access to your funds on the same day as your flex loan approval. Once approved, you can then make withdrawals from your credit line as needed. Funds are typically directly deposited into your bank account.

Credit Score

Most flex loan lenders won’t subject you to a credit check, making it less burdensome to qualify for a flex loan even if you don’t have good credit.

Requirements

In many cases, flex loans have more lenient requirements compared to other types of loans. In addition to giving the lender your personal details, you may only have to provide proof of employment and income.

Recommended: Typical Personal Loan Requirements Needed for Approval

Flexible Payment Terms

Each month or billing cycle, you can pay the minimum due or more. There are typically no penalties for paying down your debt faster.

Dangers of Flex Loans

Flex loans may be an attractive borrowing option because even those with poor credit can borrow money quickly. However, flex loans can present potential dangers.

Interest Rates

Flex loans typically carry much higher APRs than traditional lending products like personal loans and credit cards. If you can get a flex loan through a credit union, APRs can range from 24% to 28% or higher. If you get one from a cash advance company, the APR on a flex loan can reach triple digits.

Minimum Payments

You have the option to pay only the minimum payments on your flex loan. But if that’s all you pay, fees and interest will continue to grow your debt, making it increasingly harder to pay off the entire balance.

Excessive Debt

It can be tempting to borrow money repeatedly with a flex loan, but doing so can come at a high cost. If you continue to borrow money and don’t have a plan to pay down the amount you owe, a flex loan can lead to a cycle of debt that can be hard to break out of.

When Should You Take Out a Flex Loan?

A flex loan may be worth considering if you need quick access to cash and don’t want to go through a lengthy application process or can’t qualify for more traditional lending options. A flex loan may also be an option for those who want to have a backup source of funds in case of an emergency, like an unexpected car repair or dental bill.

However, because of the high APRs and added fees, you generally only want to consider a flex loan after exhausting other borrowing options, such as personal loans.

When to Apply for a Flex Loan

There may be other ways to get needed cash without paying interest rates as high as flex loans tend to offer. But if you’ve exhausted all other options, even a loan from a pawn shop, and you have a plan to repay the loan at the lowest possible cost to you, it may be an option you could pursue.

Alternatives to Flex Loans

Before applying for a flex loan, you may want to consider the following alternatives.

•   Credit cards: Like flex loans, credit cards are a form of revolving credit you can draw from on a recurring basis. While interest charges for credit cards can be high, they tend to be lower than flex loans. Depending on the card, you may also have an annual fee and other fees based on your use of the account.

•   Personal line of credit: If you have healthy credit, a personal line of credit may be a worthy alternative because of its typically lower interest rates. However, you will be subject to a credit check and the application process may take longer compared to a flex loan.

•   Personal loan with a guarantor: If you’re unable to qualify for an unsecured personal loan due to a poor or limited credit history, you might consider asking a friend or family member to help you get a guarantor loan. A guarantor is legally responsible for the repayment of the loan if the borrower defaults, but has no legal claim to any property the funds were used to purchase.

💡 Quick Tip: Generally, the larger the personal loan, the bigger the risk for the lender — and the higher the interest rate. So one way to lower your interest rate is to try downsizing your loan amount.

The Takeaway

Before taking out any type of loan, you’ll want to consider the benefits versus the costs. If you need cash for an emergency, it can be a good idea to look at all your borrowing options before settling on a flex loan due to the high interest rates and fees associated with these loans. Shopping around is a good way to see what you may qualify for and help you find a lender you feel comfortable working with.

Think twice before turning to high-interest flex loans or credit cards. Consider a SoFi personal loan instead. SoFi offers competitive fixed rates and same-day funding. Checking your rate takes just a minute.

FAQ

What is a flex loan?

A flex loan is a form of revolving credit that allows you to withdraw funds up to a certain credit limit. As you pay down your balance, the funds become available to borrow again.

How much can you get with a flex loan?

Borrowing limits for flex loans will depend on the lender and where you live, since state laws regulate credit limit amounts. You may be able to borrow anywhere from $100 to several thousand dollars with a flex loan.

Will a flex loan hurt my credit?

Applying for a flex loan typically won’t affect your credit because lenders typically don’t do a credit check when you apply for the loan. However, lenders may report your borrowing activity to the major consumer credit bureaus. As a result, any late or missed payments could negatively affect your credit.

Photo credit: iStock/PeopleImages

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.

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 .

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

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

Checking Your Rates: To check the rates and terms you may qualify for, SoFi conducts a soft credit pull that will not affect your credit score. However, if you choose a product and continue your application, we will request your full credit report from one or more consumer reporting agencies, which is considered a hard credit pull and may affect your credit.

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“Mortgagor” is just another word for someone who is borrowing money from a mortgage lender (the “mortgagee”) to purchase real estate. It’s not every day that you see the term “mortgagor” and it doesn’t roll off the tongue easily. You might even think perhaps it’s misspelled. But when it comes to financial matters, half the battle is understanding the jargon. In this case, the good news is that even if you have never heard of a mortgagor, it’s just another word for being the borrower on a home loan.

The Function of a Mortgagor

The mortgage universe can be a bit complex and it’s helpful to understand the basics of mortgages. So let’s take a closer look at the mortgagor’s role. The mortgagor makes monthly payments to the mortgagee as specified in the loan agreement. The terms of a mortgage can vary widely. For example, depending on the applicant’s credit history, the interest rate may be higher or lower than the average.

A mortgagor may choose from different types of mortgage loans. Some loans have a fixed interest rate and a term of 30 years, though many lenders offer loan lengths of 20, 15, or 10 years. A fixed-rate mortgage has an interest rate that remains the same during the life of the loan. A variable-rate mortgage is one in which the interest rate moves up and down with the market.

The bottom line: Mortgagors must pay back the loan in a timely fashion. If not, mortgagees can force foreclosure of the home or other real estate — the collateral for the loan.


💡 Quick Tip: Buying a home shouldn’t be aggravating. SoFi’s online mortgage application is quick and simple, with dedicated Mortgage Loan Officers to guide you through the process.

How a Mortgagor Gets a Mortgage Loan

A mortgagor applies to a mortgagee for a mortgage. Conventional mortgage loans are originated by private lenders like banks, credit unions, and mortgage companies. Certain private lenders also originate FHA, VA, and USDA loans; those loans are insured by the Federal Housing Administration, Department of Veterans Affairs, and U.S. Department of Agriculture. Government-backed loans are often easier to qualify for and may have more lenient terms and lower interest rates.

No matter what kind of mortgage loan you seek, expect to jump through some hoops and produce much documentation to prove you are creditworthy and have the means to pay back what you borrow. A prospective lender will do a hard credit inquiry into your credit scores and credit history. So it’s helpful to understand what makes up your credit scores. Important factors include your credit history, how long you’ve had your lines of credit open, your payment history, and debt-to-income ratio, which is the total amount of your monthly debt payments divided by your gross monthly income. If your debt-to-income ratio is high, that may be a no-go in the eyes of a lender, who may see you as tapped out with no real wiggle room to take on a mortgage.

To purchase a home, buyers often take on a mortgage loan for the price minus any money they put forth as a down payment. While you may be able to get an FHA loan with 3.5% down, or a VA loan with no down payment at all, the median down payment is around 13% of the value of the home.

Contractual Obligations of Mortgagors

A deal is a deal is a legally binding deal. Once the ink dries on that mortgage, you’re locked into your commitment to pay as you said you would. If you veer off course, you’re at risk of losing the home, as there is a lien on the real property as collateral for the loan. At the very least, late or missed payments will cause your credit score to dip, which could be problematic the next time you need to show your credit score, be it for a car loan or maybe even to a potential employer.

Equity of Redemption

If this phrase sounds important, it is. You’ll be thankful for it if you have gotten behind on your mortgage. Equity of redemption, also called right of redemption, will give you a chance to get caught up and keep your home before a foreclosure sale.

When you miss payments, the mortgagee can start the foreclosure process. The lender can take back the house and sell it at auction to pay off the debts. If this process has begun, you may be able to redeem the mortgage using equity of redemption. Understand that you’ll need to come up with the money to pay off the principal, interest, and expenses under equity of redemption. Realistically, if you’re in financial trouble, a funding source to pay off the loan is unlikely.

Some states have a law that gives mortgagors the right to redeem the home for a period of time after the foreclosure sale. With the statutory right of redemption, usually the borrower must pay the bid price, plus interest and fees, to the buyer of the property at the foreclosure sale.

Rights of Mortgagors

While it doesn’t have to be a battle royal, when it comes to mortgagee vs. mortgagor, the mortgagee holds the keys to the kingdom. The lender puts up the money, and if the borrower can’t make the mortgage payments, the lender has the right to take the house. That’s not to say you are without a few good things in your back pocket, like the aforementioned rights of redemption. You can also ask that your mortgage be transferred to a third party, but only if the mortgagee is not in possession of the property.


💡 Quick Tip: Not to be confused with prequalification, preapproval involves a longer application, documentation, and hard credit pulls. Ideally, you want to keep your applications for preapproval to within the same 14- to 45-day period, since many hard credit pulls outside the given time period can adversely affect your credit score, which in turn affects the mortgage terms you’ll be offered.

Mortgagors vs Mortgagees

To lessen any confusion, here’s a quick look at who does what.

The Takeaway

Understanding the lingo can help you be more confident as you embark on your homebuying journey. Do your research, pull together your financial documents, find a home you love and soon you, too, could become a mortgagor.

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.

Photo credit: iStock/fizkes

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

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

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

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

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A real estate contract is one agreement you do not want to sign without reading and understanding fully. Get it right, and you’ll likely have a smooth transaction. Miss something, and you’ll face delays, lost money, or even cancellation of the contract.

What Are Real Estate Purchase Agreements?

When buying a home, you’ll make your offer on a form standardized by your state known as a real estate purchase agreement (also commonly referred to as a real estate purchase contract, a real estate contract, a real estate sales contract, a home purchase contract, or a home contract). This legally binding agreement, in general, says the buyer will pay an agreed-on amount for the purchase of the property, and the seller will convey the title in exchange.

The purchase agreement, or contract, details the terms and conditions of the sale. The fundamentals include the parties in the transaction, a description of the property, the sales price, the closing date, and the date of the title transfer and possession.

Who Prepares the Contract?

The initial offer is most often filled out by the buyer’s real estate agent and sent to the seller for review. Sellers can ask for adjustments to dates, reject or accept contingencies, negotiate the price and repairs, or even reject the offer altogether. The contract is considered a working document until both parties reach an agreement on terms. When signed by both parties, the terms are set and the contract becomes binding.


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

Key Components of a Home Contract

There’s a lot of legal language in a home contract, but the core details are actually quite clear. These are essential details that both buyer and seller need to know so they can complete the transaction in a timely, legal manner.

1. Identity of the Parties

For a legal contract, full identification of the parties in the contract is required, and the parties to the contract must have the capacity to enter into the contract.

2. Property Details

The property must be described with certainty. This is a legal description of the property filed with the county recorder’s office.

3. Details, Rights, and Obligations

Buyers and sellers agree to certain responsibilities and obligations in entering into a real estate contract with each other.

•   Good faith. Parties should act in good faith with each other, meaning neither party should act to destroy or injure the right of the other party to receive the benefits of the contract.

•   Time is of the essence. Parties should understand that deadlines are absolute and must be met. If deadlines need to be adjusted, an addendum with the new dates can be submitted by one party to the other for consideration. A signature validates the change.

•   Legal and tax counsel. All parties should understand the legal and tax ramifications of entering into a contract and may want to consult with appropriate experts.

4. Purchase Price and Financing

Sales price, amount of down payment, and payment method are outlined in the real estate contract. An amount of earnest money is also listed on the contract. Earnest money is a deposit held in escrow by a third party that signals to the seller that the buyer is putting forth a good-faith effort to complete the purchase of the home. Earnest money may be forfeitable to the seller if the buyer does not meet the conditions of the sale. It is also refundable to the buyer under the contingencies outlined in the contract.

5. Contingencies

A real estate sales contract usually includes contingencies, which are terms the buyer or seller sets that must be satisfactorily met for the contract to become binding. One of the most common contingencies is a home inspection. If something on the checklist for a home inspection is not to the buyer’s standards, they are able to cancel the contract and have their escrow money returned to them.

Some other common contingencies are:

•   Financing

•   Sale of the buyer’s home

•   Title review

•   Appraisal

•   Survey

•   Homeowners association document review

When competing against multiple offers in a hot market, buyers have been known to waive some or all contingencies.

6. Closing Date

The closing date is the day the transaction will be finalized. Buyers often wonder how long it takes to close on a house, and the answer can vary widely depending on the property and circumstances of the buyer and seller. If you’re looking for a definitive number, national statistics show an average of 45 days to close.

On the contract, parties will agree to a closing date, identify the title company, and disclose any other terms for the final transfer of the property. At the closing, final signing and transfer of the deed occurs, the transfer of title is recorded, and the buyer often receives the keys to the house (though possession can occur in subsequent days, as per the agreement between the buyer and seller).

7. Possession Date

The possession date is the first day the buyer can occupy the home. Possession can occur immediately after closing, at an earlier date, or at a later date that is agreed on by both parties. It is most often listed as the closing date or the day after closing.

8. What Is Included in the Sale

Buyers can negotiate what is included in the sale of the property. Common items listed are the washer and dryer, refrigerator, and other heavy items that are not easily moved.

9. Closing Costs

Though exact closing costs won’t be listed in the real estate purchase agreement, the contract can be written to name who will pay for closing costs. It’s common, for example, for a buyer to offer an amount over the list price of the property and then ask the seller to help cover the buyer’s closing costs with the overage amount. Wondering how much typical closing costs are? They average 2% to 5% of the loan principal.

10. Addendums

An addendum is an additional document to the real estate purchase agreement that includes more information or buyer requests that were not included in the original contract. It has the power to override the terms of the original contract.


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

Can Purchase Agreements Be Canceled?

Canceling a contract is different for buyers and sellers. Buyers usually have contingency clauses built into the purchase agreements. If certain conditions of the sale are not met, the buyer can back out of the contract and have their earnest money returned. Some common reasons rest on:

•   Financing

•   Sale of their home

•   A satisfactory home inspection

•   An appraisal

•   Title work

It’s common, for example, for a buyer to cancel the real estate contract if the home has serious issues found during a home inspection. Foundation, electrical, pest, mold, or any other issue found during the home inspection will allow the buyer to cancel the contract if an inspection contingency is in place.

Buyers can also walk away from the purchase agreement for any reason, but they risk losing their earnest money or face court action if the reason and timing for breaking the contract do not fall within the contingencies outlined in the contract.

A seller, on the other hand, has fewer options for canceling the purchase agreement. Sellers can cancel the contract if the buyer fails to meet the conditions and deadlines outlined in the contract. Sellers who default on the contract for other reasons may be forced to pay the buyer an amount equal to the earnest money deposit. They could also face a lawsuit from the buyer to enforce the contract.

The Takeaway

A real estate purchase contract can be lengthy but it’s important to read and understand what you are signing, whether you are buying or selling a property, and to keep on top of the deadline imposed by the closing date in the agreement. Being smart about the contract can protect you as a home changes hands.

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.

Photo credit: iStock/fizkes

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

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

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

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

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Looking for a relatively affordable property? Let’s hit the town. For many buyers, a townhouse is the sweet spot in real estate. But what is a townhouse? It’s not a detached single-family home, but it isn’t a condo, either. Let’s see how townhomes stack up.

What is a Townhouse?

A townhouse, or townhome, is distinct among the different types of homes. It is defined as a single-family unit that has:

•   Two or more floors

•   A shared wall with at least one other home

•   Ownership that differs from a condo: You own the inside and outside of your unit and the land it sits on, whereas a condo owner owns the interior of the condo

The meaning of the word townhouse can be traced back to 19th century England. The rich and royalty would have a large manor in the country but also a home “in town.” The definition has evolved over the years. A townhome doesn’t need to be a second home, and it doesn’t even need to be in the city. In some parts of the U.S., townhouses with a similar design and facade are also called row houses.


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

Pros and Cons of a Townhouse

Townhouses come with a fair share of benefits, but like any home, it’s not one size fits all. Consider these pros and cons of buying a townhouse.

Pros

•   Makes the most of space. As townhomes share a wall or two with neighbors, and are often in densely populated areas, they use space efficiently.

•   Affordability. Because of their shared walls and space-saving layout, townhomes are often more affordable than single-family homes in the area.

•   Independence, with less maintenance. Townhouses usually have less upkeep than single-family homes. There might be a small yard, and your own roof, to maintain.

•   Lower property taxes. A townhome owner may pay less in property taxes than the owner of a standalone home.

•   HOA perks. Some townhomes are part of homeowners associations. If amenities like a pool, gym, and maintenance of common areas and possibly your own little yard are a priority, a townhome with an HOA could be a good fit.

•   Looser rules. The HOA rules may not be as strict as those for a condo.

Cons

•   Limited landscape options. Townhouse lots are small. If you want space for landscaping, it’s unlikely you’ll find much with a townhouse.

•   Uncreative exteriors. If the townhome is part of an HOA, the ability to decorate the exterior of the unit could be limited. Townhomes typically look very similar to their neighboring units as well, so standing out could be a no-no.

•   Stairs, stairs, and more stairs. Townhomes have an efficient build for spaces where land is at a premium. That means building up, not out. A townhome may have three (or more) floors, meaning climbing stairs repeatedly.

•   Less privacy. Townhouses have at least one “party wall,” or wall shared with another property. That could be a problem for buyers who prioritize peace and quiet if the neighbors are loud.

•   Less appreciation. As a rule of thumb, townhomes don’t gain as much value as single-family homes do.

•   HOA fees. If the community has an HOA, it will charge a monthly or quarterly fee to cover communal perks. The fees usually rise over time, and can be high at a complex full of amenities.

Finding a Townhouse

Finding a townhouse will depend on where a buyer is looking. Most commonly, they’re encountered in densely populated areas where land might be pricey and scarce. The search may be more restricted if a buyer wants to purchase a townhome in an HOA community. One place buyers typically won’t find townhomes is in rural or secluded areas. Land may be more affordable and plentiful, which means properties don’t need to be condensed.


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

Who Should Get a Townhouse?

A townhome might be the right option if the buyer:

•   Isn’t interested in much maintenance. Maintaining your unit and your parcel of land will almost always be less intensive than maintaining a detached single-family home and yard. If there are HOA fees, they might include landscaping services.

•   Is a first-time buyer. The lower cost and maintenance of a townhouse might be the right fit as a first-time homebuyer learns the ropes of homeownership and looks into homeowner resources.

•   Is an investor or buyer of a second home: Both may see the benefits of a townhouse.

•   Is on a budget. Generally, a townhouse will cost less than a single-family home in the same area. Buyers could live in a desirable area without paying top dollar. (A calculator for mortgage payments helps buyers see the effect of different down payments.)

•   Wants to live in an urban or suburban area. Because townhomes are built in areas where space is at a premium and the cost of living is high, a townhouse could be the right fit.

The Takeaway

With less maintenance (and potentially a lower price tag) than a detached single-family home, a townhome can be a great opportunity for buyers. Townhomes qualify for the same kind of mortgages that detached single-family homes do, and they require less exterior maintenance than a detached home. So there’s a lot to love about living in a townhouse.

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

FAQ

How is a townhouse different from a house?

The biggest difference between a townhouse and a detached single-family house is the shared walls. A townhome may have one or more “party walls” with the properties adjacent to it.

Do townhouses have backyards?

Some townhomes may have a small backyard or patio, but that’s not a requirement for a home to be considered a townhouse.

Can you get a loan to buy a townhouse?

Yes. Similar to purchasing a traditional single-family home, townhouse buyers can use a home loan to purchase the property.

Photo credit: iStock/JARAMA

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

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

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

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

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Open houses, mortgage paperwork, bidding wars: Buying a home can take a lot of effort these days. Some in-the-know prospective buyers, though, may have a special perk: access to properties before they even hit the market.

The practice, known as pocket listings or whisper listings, has become more common in real estate recently, as the market hit full boil during the pandemic.

While this insider access may sound enticing, you may wonder if these listings are legal and have financial implications. Read on to learn the scoop and see whether these listings might help you land your dream home.

What Are Whisper Listings?

Whisper listings are properties that are promoted by a real estate broker to an exclusive group of trusted agents to find a buyer who can pay the desired asking price. In other words, agents utilize their professional networks to sell a property rather than putting it on the market. Prospective buyers outside an agent’s inner circle will likely never know the property was for sale.

A little more detail may help clarify the whisper listings definition:

•   Whisper or pocket listings are not listed on a multiple listing service (MLS) — the databases real estate professionals use to help clients buy and sell property — even though they’re technically for sale. Popular listing websites like Zillow and Realtor.com source many of their listings from MLS feeds.

•   You also won’t find a “For Sale” sign in the front yard of a secret real estate listing.

Overall, whisper listings tend to make up a small percentage of real estate sales, but when focusing on top-tier properties, the numbers can rise significantly. Those who are selling their high-priced homes often don’t want to do open houses or otherwise have a lot of people walking through their property. Estimates run as high as 50% to 75% of homes in the highest-price bracket never hitting the market.


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Are Pocket Listings Legal?

Yes, although there are consumer rights and laws that offer some protection to prospective homebuyers. For example, the Fair Housing Act gives buyers the right to be free from housing discrimination during the sale, financing, or rental of a property.

Because of their exclusivity, whisper listings have been criticized as discriminatory. In fact, the National Association of Realtors® established a clear cooperation policy in 2019 with the goal of reinforcing consumer benefits and competition in the housing market.

The new policy requires Realtors to list any property they are marketing to buyers on association-owned MLSs. New listings must be submitted within one business day of any public marketing, meaning other agents should be aware of and able to see the property the following day.

There are some loopholes in the policy that allow whisper listings to continue in specific circumstances. Namely, Realtors can still take advantage of “office exclusives,” which are listings shielded from the public and marketed to their internal agency network. The agents in those offices can then share the property information with their clients.

Listing agents can also take advantage of the one-business-day grace period to promote the property to a select clientele. The policy is that “within one business day of marketing a property to the public,” which can include yard signs and flyers displayed in windows, “the listing broker must submit the listing to the MLS for cooperation with other MLS participants.” Since business days exclude weekends and holidays, the exclusive group of buyers can get a jump on the competition for putting in an offer.

How to Find Whisper Listings

By definition, pocket listings are about connections and insider knowledge. A useful place to start is by finding a real estate agent with a strong professional network and familiarity with the neighborhood you’re hoping to buy in.

Experienced agents may be more prepared to figure out how to find pocket listings thanks to a larger client base, too. Having handled numerous real estate transactions in the community, they could have insight into when former clients want to put their homes back on the market.

They may also know the prices and terms that prior clients would be willing to part with their homes for. Essentially any property can be treated as a whisper listing if you’re able to make an offer on a house that is attractive to the owners — even if they weren’t considering selling.

Is It a Smart Approach to Home Buying?

Real estate whisper listings may be advantageous for buyers for several reasons.

•   First, there is generally less competition for off-market homes than those listed widely on an MLS, helping buyers purchase a home at or below asking price. This can be especially valuable in a tight or hot housing market.

•   Given the word-of-mouth nature of pocket listings, potential buyers are generally hand-picked by listing agents based on both their qualifications and the type of property they’re looking for. This approach can cut down on the number of showings in the home buying process, which may be important for some buyers due to privacy and time.

Before committing to this strategy, there are some additional benefits and drawbacks to consider.

Pros of Secret Real Estate Listings

A secret real estate listing can offer advantages to sellers and buyers alike.

•   For sellers, a pocket listing affords considerable privacy — both in terms of keeping the sale status under wraps and reducing foot traffic at a property. By focusing on qualified buyers in the listing agent’s network, the sale process could be expedited without the hassle of negotiations and contract contingencies.

•   Sellers may opt for a pocket listing to test out an asking price and gauge interest. If the whisper listing doesn’t secure a full-price offer, sellers can reconsider the price before putting the property on the open market to attract new buyers without any record of a price change. This is helpful since prospective buyers may view a price cut as an opportunity to make an offer under the asking price.

•   The primary benefit for buyers is reduced competition on a property. Since the listing has only been shared with a select group, it’s less likely that a listing will go into the realm of counter offers and bidding wars.

Recommended: Mortgage Prequalification vs. Preapproval

Cons of Secret Real Estate Listings

Now, consider the downsides of pocket listings:

•   Whisper listings are often pursued in the hope of fetching top dollar from buyers. From a buyer’s perspective, the perk of first dibs on a property may come at the expense of an accurate assessment of its value and the ability to negotiate a house price. Putting aside the allure of exclusive access is important to ensure that the property fits your needs and makes financial sense.

•   For sellers, a secret real estate listing limits the potential pool of buyers instead of promoting the property on any of the hundreds of multiple listing services and across major real estate sites. Opening a property to the market can increase your chances of a multiple-offer situation and getting bids over the asking price.

•   While a pocket listing may reduce the hassle of multiple showings, the approach could extend how long it takes to find a buyer for the price you want.

The Takeaway

A whisper listing, also known as a pocket listing, is shared only with an exclusive group of an agent’s inner circles. Secret real estate listings can offer advantages to both sellers and buyers: The seller has privacy and perhaps a better-qualified pool of prospects, while buyers may face less competition. There are also drawbacks, however, as these listings may present pricing and timing challenges.

Here’s something that isn’t a secret: If you’re house hunting and need financing, getting prequalified is a useful first step to show you’re a serious buyer and can afford the property.

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

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

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