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If the price of higher education is giving you sticker shock, you’re not alone.

The average cost of tuition for 2023-24 was $26,027 for in-state residents at public colleges, and $27,091 for out-of-state students. At private colleges, the average tuition and fees totaled a whopping $38,768!

Most students end up taking out student loans to cover the cost of college. Over 43 million Americans have federal student loan debt, with an average balance of $37,718 each. Combined, Americans now hold $1.766 trillion in student loan debt!

Paying off your loan may become a burden, especially if you opt for a career in public service, art, or another low-paying field. Your debt may also become unmanageable if you run into unexpected economic difficulties due to medical bills, losing your job, caring for a parent or child, or other challenges.

If more traditional student loan repayment plans aren’t working, you may want to think outside the box. One approach could be crowdfunding student loans. Here are some things to know about this creative way to tackle your debt.

What Is Crowdfunding

Crowdfunding is the process of soliciting small contributions from multiple donors to meet a financial goal. Through online platforms like Kickstarter and GoFundMe, people have turned to crowdfunding to raise money for entrepreneurial ventures, medical crises, disaster victims, classroom supplies, and much more.

You can solicit donations from friends, family, and even complete strangers. By splitting the contributions among a large quantity of people, crowdfunding is a way to meet a big financial goal while not having to rely on finding one major source of funding.

Raising money online makes it easy to share your campaign widely and for people to easily contribute. Increasingly, people have been crowdfunding to pay off their debt, including fundraising for college. That can include textbooks, tuition, studying abroad, or living expenses — or, of course, student loans.


💡 Quick Tip: Enjoy no hidden fees and special member benefits when you refinance student loans with SoFi.

Sites for Crowdfunding Your Student Loan Repayment

There are a number of sites that allow you to set up a crowdfunding campaign so you can pay off your student loans. Before you sign up, you’ll want to make sure that you understand all the rules and fees that you might encounter during the process.

Here are some crowdfunding sites to look into:

GoFundMe: GoFundMe is perhaps the best-known crowdfunding platform out there. Setting up a fundraiser is easy. Once you have a GoFundMe account and set a goal, you’re encouraged to tell your personal story of why you’re raising money and add a photo or video. Then you can share the campaign with your network of family, friends, coworkers, followers on social media, etc. Once your GoFundMe page starts raising money, you can start withdrawing it. While GoFundMe doesn’t charge fees for setting up a page, there are transaction fees (2.9% + $0.30, which includes debit and credit charges).

Rally.org: Rally.org works a lot like GoFundMe. Once you have an account, you can set a goal, tell your story, and then start sharing with friends and family. Like GoFundMe, you can start withdrawing money as soon as people start donating to your fundraiser. There’s one big difference between Rally.org and GoFundMe: the fees. While there’s only transaction fees on GoFundMe fundraisers, Rally.org charges 5% + credit card fees (2.9% + 30 cents) for each donation processed. That 5% can make it harder for you to reach your fundraising goal.

Gift of College: If you’re not looking to launch a full-blown crowdfunding campaign, but you do want to make it easier for friends or family to help you pay off your student loans in the form of gifts at birthdays, holidays, or graduation, you might consider an account with Gift of College. To get started, you set up an account and link your student loan account. Then you can share your profile with friends and family to encourage them to buy you Gift of College gift cards for special occasions. It’s free to set up a Gift of College account, but there is a 5% processing/service fee charged to the gift giver for every gift card they buy (though the fee is capped at $15 per transaction). Gift of College can also be attached to 529 accounts.

Is Crowdfunding for Repaying Student Loans a Good Idea?

There are pros and cons to turning to the crowdfunding model as a way of making a dent in your student loan debt. Let’s start with the positives. If your campaign is successful, it’s an easy way to earn money to pay off your debt, and you don’t have to do much in return. Earning and saving the same amount through a job would likely take much longer, depending on your living expenses.

Similar to a wedding registry, a crowdfunding site also makes it less awkward to ask people in your life for help, compared to just asking for money outright. You probably have lots of loved ones who would like to help you but don’t have an easy way to do it.

Another perk is that obtaining a lump sum and putting it toward your loan principal can greatly reduce the interest that accumulates and the amount you owe over the life of the loan. Finally, crowdfunding often works. There are many examples of successful campaigns out there to inspire you.

There are some downsides to consider. One is that a crowdfunding effort is likely to get you a chunk of money once, rather than a regular stream of funding.

Considering the size of most student loans, and how interest compounds over time, you may not raise enough money to pay off the entire loan. So you’ll still have to figure out a way to consistently make your monthly payments.

Also, how much you may earn is unpredictable — it depends on the strength of your campaign and the size of your network, plus the generosity of donors, so it’s a bit risky to rely on this to stay solvent.

Another con is that depending on the size of the donation, you may need to pay taxes on the money, so you wouldn’t get to keep the entire amount you raise. Finally, even though a specialized crowdfunding site makes it easier, it may still feel uncomfortable to ask people you know for money, especially if they are facing their own debts and financial challenges.

How To Set Up a Crowdfunding Campaign

Pick a crowdfunding platform: First, you need to pick a crowdfunding site to use. Review the terms carefully so you understand how the process works. You’ll want to see if the platform keeps a percentage of funds donated, what processing fees are charged, whether it allows employers or the general public to contribute, and whether the money goes to your lender directly or comes to you in the form of cash.

Set a goal: If your fundraising goal sounds impossibly high, it could prevent some people from donating. Starting with a number that’s ambitious but reasonable may help, even if it means asking for less than your total student loan amount.

Build trust with your funders: You need to spell out what you are going to do with the money. Potential donors likely want to know what, exactly, their gift is supporting. And they probably want to be sure it will actually go toward student loans and not other expenses. Make clear how exactly you will pay off the loan and how you will hold yourself accountable to donors can go a long way toward building trust.

Telling your personal story: People may be more likely to support you if they understand the impact they can have on your life. Telling your unique story can help make their gift about more than just debt. You could describe your past accomplishments and future goals, as well as how the support will help you achieve them. Try putting up photos and a video to help people connect with your goals emotionally.

Leveraging your network: In order to have a successful campaign you’ll need to share with people you know through email and social media. You might want to tie the campaign to a special occasion, such as your birthday or graduation. You can ask your network to share on their channels as well.

Keeping the momentum going: A successful campaign doesn’t end when you launch. Posting updates on your crowdfunding page regularly will keep people interested and remind them to donate could help you reach your goal.

Express gratitude: People are doing you a favor when you donate, so thank them early and often! It will make them feel good about their gifts and perhaps even encourage them to share your campaign or donate more down the line.

Thinking About Student Loan Refinancing

If you can fund your student loan debt in full through crowdfunding, congratulations! But most people can’t depend on this as a long-term strategy and will need to find additional ways to pay off the rest of their balance.

If you’re still struggling with student debt, refinancing your student loans may be another way to make your loans more affordable. You can refinance federal loans, private loans, or a mix of both by taking out a new loan with a private lender like SoFi and using it to pay off your old ones. Note that if you do refinance federal loans with a private lender, you will lose eligibility for federal student loan benefits like deferment and income-driven repayment programs.

You may be able to qualify for a lower interest rate or lower monthly payments, depending on your credit history and income. It could be worth checking what rates you’d qualify for by applying for pre-qualification online. If you refinance with SoFi, membership includes complimentary support from career coaches and protection during periods of unemployment for those who qualify. Plus there are no hidden fees.

The Takeaway

With student debt growing exponentially, it’s worth considering creative solutions. Crowdfunding can be a relatively easy way to make a dent in your student loans without investing a lot of time. But for most people, it won’t be enough to eliminate their debt completely.

Looking to lower your monthly student loan payment? Refinancing may be one way to do it — by extending your loan term, getting a lower interest rate than what you currently have, or both. (Please note that refinancing federal loans makes them ineligible for federal forgiveness and protections. Also, lengthening your loan term may mean paying more in interest over the life of the loan.) SoFi student loan refinancing offers flexible terms that fit your budget.

With SoFi, refinancing is fast, easy, and all online. We offer competitive fixed and variable rates.

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

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

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

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

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.

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

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

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Editor's Note: For the latest developments regarding federal student loan debt repayment, check out our student debt guide.

If you’re struggling to keep up with student loan payments, rest assured you are not alone.

There are many reasons why you may be having difficulty with your loans. Some students may struggle to find a job after graduation or some may not earn as much as they anticipated right out of the gate. For those with federal student loans, forbearance and deferment options exist for these very reasons.

When Student Loan Payments Become Too Much

When monthly student loan payments become insurmountable, the worst thing to do is nothing at all. When a borrower stops paying their student loans, they may go into default. This has the potential to devastate an individual’s credit score.

In default, borrowers could also face relentless collection agencies or could even have their wages garnished. Plus, in most cases, student loans can’t be discharged even if the borrower files for bankruptcy.

There is a temporary exception, however. The Biden administration instituted an “on-ramp” period to protect financially vulnerable borrowers from the consequences of missing payments following the pandemic-era federal payment pause that ended in October. From Oct. 1, 2023 to Sept. 30, 2024, borrowers who miss their student loan payments will not have those missed payments reported to the credit bureaus or referred to collections agencies. Their loans will also not be considered delinquent or in default.

Once the on-ramp period is over, however, the usual repercussions for missing payments will be back in place. Even so, borrowers with federal student loans may have other options for pausing or temporarily reducing their monthly payments if they’ve found themselves in a tough financial spot. Namely, borrowers can apply for either student loan deferment or forbearance from the federal government in order to avoid default.

It can be tough to figure out the difference between these two programs and which is best for your situation. Here’s a breakdown of the differences between student loan deferment and forbearance.


💡 Quick Tip: Ready to refinance your student loan? With SoFi’s no-fee loans, you could save thousands.

What Is The Difference Between Deferment and Forbearance?

Let’s start with the similarities: Both deferment and forbearance allow a borrower to temporarily lower or stop making payments on their federal student loans for a defined period of time, if they qualify. In both cases, the borrower needs to contact their loan servicer, submit a request, and provide the documentation requested by the loan servicer.

The main difference between the two is that, while in deferment, borrowers are not required to pay the interest that accrues if they have a qualifying loan.

Specifically, interest is not owed on Direct Subsidized Loans, Subsidized Federal Stafford Loans, Federal Perkins Loans, and subsidized portions of Direct Consolidation Loans or Federal Family Education Loan Program (FFEL) Consolidation Loans.

Interest payments are still required on Direct Unsubsidized Loans, Unsubsidized Federal Stafford Loans, Direct PLUS Loans, FFEL Plus Loans, and unsubsidized portions of Direct Consolidation Loans and FFEL Consolidation Loans.

With federal student loan forbearance, borrowers are always responsible for paying the interest that accrues, regardless of what kinds of federal loans they have.

You can either pay the interest as it adds up during the forbearance period, or you can have it added to your interest balance at the end.

Who Is Eligible for Deferment?

Deferment is tailored to people who are facing financial difficulties. Loans can be deferred for up to three years.
To qualify, you need to be enrolled in school at least half-time, in the military, in another eligible post-graduate role, or unable to find a full-time job. You may also qualify for a deferment if you’re seeking cancer treatments, are enrolled in an approved rehabilitation program, or are serving in the Peace Corps.

If a borrower is enrolled in an approved graduate program, they may be able to defer their loans for an additional six months after enrollment ends.

Recommended: Examining How Student Loan Deferment Works

Who Is Eligible for Forbearance?

The two types of forbearance are mandatory and general. Mandatory forbearance must be granted if you qualify, while general forbearance is up to your loan servicer to approve you or not.

Mandatory Forbearance

Loan servicers are required to grant mandatory forbearance to qualifying borrowers. Depending on the type of federal student loan, borrowers may be eligible if they are in a medical or dental internship or residency, serving in AmeriCorps or the National Guard, or working as a teacher and performing a teaching service that qualifies for teacher loan forgiveness.

Borrowers may also qualify if their monthly student loan payment is at least 20% of their gross monthly income. Again, this will depend on the type of loan they have. Note: Mandatory forbearance is granted for up to a year at a time. If you’re still facing financial challenges when the forbearance period ends, you can request another, up to a cumulative total of three years.

General Forbearance

With general forbearance, it’s up to the loan servicer to decide whether to grant it and only certain federal student loans are eligible (Direct Loans, FFEL, and Perkins Loans). Like mandatory forbearance, general forbearance can only be granted for 12 months at a time. There is a three-year cumulative limit on general forbearances.

Borrowers can apply for a general forbearance if they’re unable to make loan payments because of financial hardship, medical bills, or changes in their job (such as reduced pay or unemployment). If there are other reasons they’re unable to pay, it’s also possible to make that case to the loan servicer, but the decision will be theirs to make.

Forbearance vs. Deferment for Student Loans: Which Option to Choose?

If your federal student loan type and circumstances allow you to, it’s best to apply for deferment since it allows you to get a break on interest during the deferment period. However, if you’ve already exhausted the maximum time for a deferment or your situation doesn’t fit the narrow eligibility criteria, then it could make sense to apply for a forbearance.

If your ability to afford your loan payments is unlikely to change anytime soon, or if you have private loans and/or federal loans that don’t qualify for a deferment or forbearance program, you may want to consider other solutions, such as an income-driven repayment plan or student loan refinancing.

How Does an Income-Driven Repayment Plan Work?

Another way to potentially reduce your federal student loan payment is to apply for an income-driven repayment plan. The government offers four different income-driven plans—including the newest plan, Saving on a Valuable Education (SAVE)—which cap the borrower’s monthly payments at a small percentage of their discretionary income.

The plan a borrower qualifies for depends on the type of loan they have and when it was borrowed. Depending on the plan, your monthly payment will generally be reduced to 10-20% of your discretionary income (or as low as 5% starting in July 2024 for certain SAVE plan participants). The repayment term is also extended up to 25 years. If you still have a balance once the repayment period is up, the remaining debt is forgiven. However, you may have to pay taxes on the canceled debt.

How Can Student Loan Refinancing Help?

For some borrowers, refinancing student loans can be an option that helps them reduce their monthly payment or lower their interest rate. (Note: You may pay more interest over the life of the loan if you refinance with an extended term.) Refinancing involves taking out a new loan from a private lender and using it to pay off existing federal or private loans, effectively combining multiple loans into one.

The new loan will have a new term and interest rate, which has the potential to help borrowers save on interest or the amount they pay over the life of the loan. Borrowers with a solid credit score and employment history (among other positive financial indicators) are especially likely to be able to qualify for favorable terms.

Keep in mind that if you refinance federal loans, you will no longer qualify for the federal benefits we discussed in this post, including deferment, forbearance, or income-driven repayment programs. Make sure to weigh the pros and cons of refinancing carefully before moving forward.

However, some private lenders do offer temporary relief if you experience financial hardship. Rather than stopgaps that can require you to reapply year after year, refinancing can help you gain a long-term plan for getting your payments under control.

With SoFi, it’s possible to refinance loans without paying any hidden fees or penalties at either a fixed or variable interest rate.

The Takeaway

Deferment and forbearance are both options that allow borrowers to temporarily pause payments on their federal student loans.

Deferment differs from forbearance in that some borrowers may not be required to pay interest that accrues during deferment, depending on the type of loan they have. With forbearance, borrowers are generally required to cover interest that accrues while the loan is in forbearance.

Borrowers who anticipate having trouble making monthly federal student loan payments in the long-term might consider applying for income-driven repayment plans, which ties monthly payments to the borrower’s income level.

Looking to lower your monthly student loan payment? Refinancing may be one way to do it — by extending your loan term, getting a lower interest rate than what you currently have, or both. (Please note that refinancing federal loans makes them ineligible for federal forgiveness and protections. Also, lengthening your loan term may mean paying more in interest over the life of the loan.) SoFi student loan refinancing offers flexible terms that fit your budget.

With SoFi, refinancing is fast, easy, and all online. We offer competitive fixed and variable rates.

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

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.

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The total number of homes for sale hit a record low in August 2023. That means home sellers may get several offers when they put their house on the market.

To help stand out from the pack, some buyers choose to write an offer letter. They may believe an offer letter could help personalize the negotiation and possibly make a connection with the seller. But writing an offer letter comes with potential risks buyers should be aware of.

Thinking about writing an offer letter? Read on to learn how to write an offer letter for a house, what to say in the letter, what to avoid, how long the letter should be, and the risks that may be involved.

What Is a House Offer Letter?

A house offer letter is a personal letter written in hopes of helping to convince the seller to choose the buyer’s offer, especially when there are multiple offers on a house.

Offer letters have become more popular in recent years due to the high number of real estate bidding wars.

In an offer letter, a buyer, whether they’re a millennial homebuyer or any homebuyer, is trying to show the seller why they’re the ideal candidate for the house.

When writing a real estate offer letter, buyers often include certain details to help make a connection with the seller, such as:

•   Introductions. The potential buyer will want to say who they are, of course.

•   Contract details that might help. Buyers may want to briefly note that they’ve been pre-approved for a mortgage, are flexible with the closing date, or can otherwise meet the seller’s needs.

•   Compliments about the house. If there’s a well-tended garden or custom wall finishes, a buyer may want to note how much they like those things.

•   Points of connection. If a buyer noticed something in the house that could help them relate to the seller, like fishing gear in the garage or a piano in the living room, they might mention that they share those hobbies.

•   Explanation about their offer. A buyer could include the reason why they offered what they did for the house, but anyone who does this should be careful. Review it with your agent first to make sure you’re not saying something that might jeopardize the deal.

•   Thank them. Express gratitude to the seller for considering the offer.

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

How Does a House Offer Letter Work?

Since an offer letter is an informal gesture, writing such a letter is optional. Plus offer letters do have drawbacks (more on that below).

If a buyer does write an offer letter, it would typically be sent, along with the formal offer on the house, to the seller’s agent.

Recommended: How to Write a Letter of Explanation for a Mortgage

Is It Worth It to Write a Letter With a House Offer?

A personal letter could help you stand out from others who are bidding on a house, but there’s no guarantee of that. Plus, an offer letter could cause problems. The National Association of Realtors is wary of offer letters because they might run the risk of violating the Fair Housing Act, even unintentionally. The Fair Housing Act seeks to create a level playing field for all people renting or buying a home, getting a mortgage, or seeking housing assistance.

For that reason, your real estate agent may advise against writing an offer letter. Instead, they may suggest that you choose another strategy for making your offer on a house more attractive.

How Long Should a House Offer Letter Be?

If you do decide to write an offer letter, the letter should be short and succinct. One page is plenty. And if your bid isn’t competitive enough to be on the seller’s radar in the first place, the offer letter probably won’t even be read.

What Should Not Be Included in a House Offer Letter

Perhaps even more important than what you write in your offer letter is what you should not include. Stay away from:

•   Overly saccharine statements. Sellers may get overwhelmed by buyers who are too profuse about their love for the property. Be complimentary, but don’t overdo it.

•   Letters that are too long. The seller doesn’t need to know everything you love about the house. Offer letters are more effective when they’re a page or less.

•   Too much personal detail. If you mention your partner or children, be aware that familial status is protected against discrimination under the Fair Housing Act. It’s wise not to share too much.

•   A picture of yourself or your family. This is another red flag. Race and gender, among other things, are protected against discrimination under the Fair Housing Act.

💡 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.

How Do You Write a Strong Offer Letter?

First, make sure your home contracts offer is strong. You want to submit a strong offer before you work on a letter.

Then, when you sit down to write the letter, consider this: If you were having a conversation with your seller about the house, what would you want to tell them? Explain briefly why you love the home, and thank them for considering your offer. Keep the focus of the letter on the house, and avoid giving too many personal details. Use a friendly tone, and be genuine and sincere.

Keep the letter to one page or less.

Recommended: Guide on How to Save Money for a House

Tips for Buying a Home

Rather than an offer letter, you may want to consider one of the following strategies instead:

•   Submit a higher offer. Winning a bidding war often comes down to one factor: price. Offering a higher price for the house is an option to think about. You might also want to add an escalation clause, which can automatically increase your offer above other offers.

•   Offer all cash. That is, if you have the resources to do this. Data from Redfin suggests buyers who offer all-cash are two to four times more likely to be chosen.

•   Waive the financing contingency. Waiving this contingency could potentially increase your odds of winning the contract over other buyers, according to Redfin. Keep in mind, however, that waiving the financing contingency means you forfeit your earnest money if you can’t get financing before the contract deadlines.

And, finally, if you’re a first-time home buyer, you may want to look into first-time homebuyer programs that could be helpful to you in your quest to buy this particular home — or any home.

The Takeaway

Offer letters have become popular in recent years as the real estate market has heated up, but these letters do have drawbacks. They could even run the risk of violating the Fair Housing Act. Discuss it with your real estate agent and weigh the pros and cons carefully before writing an offer letter.

Also, consider other options that might help improve your chances of becoming a homeowner. For instance, you may decide that offering a higher price on the house, getting preapproved for a mortgage, or being flexible about the closing date is a better way to go.

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

How do you write a strong offer on a house?

In addition to making a strong offer on a house, you can write an offer letter. To write a strong offer letter, focus on the property. Tell the seller why you love the home, and thank them for considering your offer. Use a friendly tone, be genuine and sincere, and keep the letter to one page or less.

How to write an offer letter for a house for sale by owner?

In a house that’s for sale by owner, you’re likely dealing directly with the seller. In that case, you can address the seller by name in the letter and tell them why you like the house. Also, if you know there’s something they’re looking for, like a quick transaction, you could indicate that you’re flexible with the closing date. And if you’re preapproved for a mortgage, you could mention that as well.

How do you write a good offer letter?

Be succinct, genuine, and sincere in your offer letter. Focus on the house and why you like it, and avoid giving personal details. Thank the owner for considering your offer.

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Photo credit: iStock/Gorica Poturak

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

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

*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.

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.

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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Rent prices are on the rise. According to the latest data from Rent.com, in August 2023, the national median rent ticked up to $2,052 per month. That has many people wondering, what is rent control, and can it help curb prices?

Rent control is a term used to describe price controls implemented by local governments on apartment units. Rent control limits the amount a property owner can increase rent prices during a certain period of time. It’s also usually accompanied by tenant protections allowing for lease renewals and protecting against unwarranted evictions. Rent control is more common in larger, expensive population centers like New York and San Francisco.

How does rent control work? Read on to find out.

What Is Rent Control?

Rent control is a government regulation that puts a ceiling on the amount of rent that can be charged to a tenant. This means landlords can’t charge the market rate for a rental in rent-controlled jurisdictions. Rent increases may be allowed, but they are limited and regulated by law.

How does rent control work in NYC? In New York, rent control can also refer to the Emergency Tenant Protection Act. This act was first enacted in the demilitarization period following World War II when housing shortages resulted from the large number of soldiers returning home from the war.


💡 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.

How Does Rent Control Work?

Your local government has the final say when it comes to rent control — unless they’re prohibited by law to enact price controls on housing units, as is the case in 33 states.

There’s often a rent board appointed, which is a mix of property owners, tenants, and other community members. The board has a say about rent adjustment amounts and other housing-related issues.

Rent control is usually applied to a specific area or building. For example, in New York, rent stabilization applies to buildings that were built between February 1, 1947 and December 31, 1973. (Pre-war, rent-controlled buildings revert to the newer rent stabilization program once a tenant moves out.)

The maximum price a landlord can charge can be set by the regulating agency. In New York City, rents are subject to the Maximum Base Rent Program, which is a formula for rents based on real estate taxes, utilities, operating and maintenance expenses, and vacancy allowances.

The economics of rent control can create a large demand. Because the supply of rent-controlled apartments is low, most tenants who want an apartment with rent control will wait on a list or enter a lottery system for many months or years.

History of Rent Control

New York City first enacted rent control when housing units were scarce following the end of World War II. It was called the War Emergency Tenant Protection Act and was later replaced by a different rent control method called rent stabilization. Rent stabilization has been in place since 1974 in New York City, and 1979 in San Francisco.

Rent Control vs Rent Stabilization

Discussions of rent control vs. rent stabilization are usually in reference to regulation in New York City.

In New York City, rent control generally applies to buildings constructed before 1947 with tenants in place prior to July 1, 1971. That date is important as it refers to a change in regulation laws where rent control gave way to rent stabilization.

Rent stabilization generally refers to price controls on buildings with six or more units constructed between 1947 and 1974. It can also include buildings removed from rent control that were constructed prior to 1947, as well as some other buildings that enjoy special tax advantages. Rent stabilization does not apply to co-ops or condos vs apartments. Tenants in rent-stabilized apartments have the right to renew their lease.

Today, the terms “rent control” and “rent stabilization” typically refer to the same thing: rent regulation.


💡 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.

Pros and Cons of Rent Control

While rent control can protect tenants from large rent increases, it also means property owners have little incentive to maintain the property or create more housing units for the rent-controlled area. Here are some of the pros and cons of rent control.

Pros:

•   Tenants have some stability in the cost of their housing unit over time

•   Tenants usually also have some eviction protections

Cons

•   Landlords don’t have incentive to re-invest in other apartments or upgrade their current rentals

•   Unit size is not always a match for a family’s size

•   May contribute to housing shortages

Example of Rent Control

Rent control is determined by the local rent board or commission. That includes price increases. For example, if you started renting an apartment for $2,000 last year, and the maximum allowable amount for a yearly rent increase is 7.5%, the most your yearly rent would increase would be $150. That would bring your new rent to $2,150.

How to Find a Rent-Controlled Apartment

If you’re looking for a rent-controlled or rent-stabilized apartment, your city’s rent regulation authority is usually one of the best places to find them.

New York City’s government website has a list of rent-stabilized buildings, as well as guidelines on how to know if an apartment is rent-controlled. It’s even possible to submit the building’s address in an online form to find out if rent is stabilized.

Recommended: 25 Things to Know When Renting Out an Airbnb

States With Rent Control

Only seven states have rent control laws in place. They are:

•   Oregon

•   California

•   New York

•   Maine

•   Maryland

•   Minnesota

•   New Jersey

•   District of Columbia

Thirty-three states have laws that preempt (or prevent) local governments from implementing some form of rent control.

One of the reasons states may outlaw rent control regulation has to do with housing supply. Economists note that while rent control affords price control and some protection for tenants, it also negatively affects the housing supply. That’s because limiting how much a property owner can make discourages housing investment, such as investing in duplexes, as well as housing development in areas where rent control exists.

If a property owner is limited on the money they can make on their unit, they will invest in other areas that do not have these restrictions and where they may even be able to rent out extra rooms. This, in turn, exacerbates housing affordability because there are fewer units with more people to compete for them.

The Takeaway

Rent control has benefits, especially in high-density areas where expansion is limited and long-term tenants need some affordability. However, it does come with downsides, including possibly limiting the housing supply.

In addition, rent-controlled properties can be difficult to come by because there aren’t a lot of them. In this case, or if you’re simply ready to move on from apartment life into something you own, you may want to look into buying a house, including checking out first time homebuyer programs.

Or, if you’re an investor, perhaps you’re thinking of investing in single family rental homes. Either way, whether you want to buy a house to live in, or buy it to rent it out, you can explore your mortgage options. There are many different types of mortgages available, so you’ll have plenty to choose from.

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

Who benefits most from rent control?

Tenants already in place may benefit from living in an apartment where price increases are limited or controlled. Rent-controlled apartments are typically reserved for individuals and families that need affordable housing.

What is an example of rent control?

One example of rent control is this: If you signed a lease on a rent-controlled apartment for $1,700 per month and the maximum allowable rent increase is 3.5%, then the most your landlord could increase your rent would be by $59.50. That would bring your new monthly rent to $1,759.50.

What are the negative effects of rent control?

Economists say rent control creates housing shortages and doesn’t incentivize landlords to maintain or repair their rental units.

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Photo credit: iStock/gorodenkoff

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

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

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.

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.

*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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A VA (Veterans Affairs) home mortgage loan offers qualified people with a military background the opportunity to get financing to buy a home.

Who qualifies for a VA loan? There are several requirements individuals generally need to meet to qualify for a VA loan. These include a history of military service, passing a credit check, and receiving a Certificate of Eligibility. They must also plan on using the home as their primary residence.

What Is the VA Home Loan Program?

If you’re wondering, what is a VA loan?, here’s what you need to know: The VA Home Loan Program aims to increase access to home mortgages to people who have served in the military. The U.S. Department of Veterans Affairs created the program for qualified veterans, active-duty service members, and some surviving spouses.

The VA pays a percentage of the loans, lowering risk for lenders so they can offer better rates and terms.

This program not only assists veterans in achieving their dream of homeownership, but also promotes stability and financial security for those who have served their country. Whether purchasing a first home or doing a mortgage refinance, eligible veterans and their families can take advantage of this opportunity to enjoy affordable and accessible financing.


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

Pros and Cons of a VA Home Mortgage Loan

As is the case with many different types of mortgage loans, VA home mortgage loans have benefits and disadvantages borrowers should be aware of before applying. These include:

Pros

•   No down payment: One of the main advantages of VA loans is that they don’t require a down payment.

•   Lower interest rates: VA loans often have lower interest rates than other types of mortgage loans.

•   No private mortgage insurance (PMI): With conventional loans, if you make a down payment that’s less than 20% of the purchase price of the home, you may have to buy PMI. With a VA loan, there’s no PMI requirement which can help buyers, especially first-time homebuyers, save money.

•   Flexible credit standards: VA loans typically have less stringent credit requirements than other types of loans. Borrowers can even qualify after a foreclosure or bankruptcy under certain conditions.

•   Streamlined refinancing: The VA has a refinancing program called the Interest Rate Reduction Refinance Loan (IRRRL).

•   Lifetime benefit: Veterans can use the program at any time.

Cons

•   Funding fee: VA loans come with a one-time financing charge that helps taxpayers cover the costs of the loan program. The amount of the fee depends on the size of the down payment, the type of military service performed, and other factors. Certain veterans, including those who are disabled, do not have to pay the fee.

•   Limited to primary residences: VA loans can only be used to buy a first home or primary residence, they can’t be used to buy a second home or investment property.

•   Potential seller limitations: Not all sellers or agents understand the VA loan program or want to work with VA loan borrowers. This may make negotiations harder and limit which houses can be purchased.

•   Additional property requirements: There are special criteria that properties must meet to ensure they are physically sound, clean, and secure.

•   VA loan limits: There are lending limits that determine the maximum loan amount the VA will guarantee. These may differ depending on the state and county.

Recommended: Cost of Living By State

What Are the Eligibility Requirements for VA Home Loan Programs?

Who qualifies for a VA home loan? The Department of Veterans Affairs sets the eligibility requirements for VA home loan applicants. Generally, to qualify for a mortgage in this case, borrowers must meet prerequisites such as proving their military service history, receiving a Certificate of Eligibility, and passing a credit check. Eligibility requirements are different depending on the type of service performed.


💡 Quick Tip: A VA loan can make home-buying simple for qualified borrowers. Because the VA guarantees a portion of the loan, you could skip a down payment. Plus, you could qualify for lower interest rates, enjoy lower closing costs, and even bypass mortgage insurance.†

Minimum Active-Duty Service Requirements

The VA loan eligibility requirements differ depending on the type of military service performed, as follows.

Service Members

Active-duty service members are eligible for the VA loan program, but may have different requirements than veterans. Service members must have served for at least 90 days continuously in order to meet the minimum active-duty service requirement.

Veterans

Veterans will meet the minimum active-duty service requirement if they served for one of the following:

•   At least 24 continuous months

•   The full period (at least 90 days) of active duty

•   At least 90 days if discharged for a hardship, or a reduction in force

•   Less than 90 days if discharged for a service-connected disability

National Guard Members

National Guard members must have served on active duty for a minimum of 90 days straight

Reserve Members

Generally, reserve members are required to have served on active duty for a minimum of 90 days straight during wartime. Or they may qualify if they have served for more than six years.

How to Request a Certificate of Eligibility (COE)

There are several steps you’ll need to take to get a Certificate of Eligibility. Here’s how to do it.

1.    First, check your eligibility with the VA. Your military service record will need to show that you served for a certain amount of time as indicated above.

2.   Next, provide other documents and information, including your Social Security number, proof of service such as dates of service and discharge papers, and a marriage and death certificate for surviving spouses.

3.   Apply for a certificate on the VA’s eBenefits online portal. You can also request a COE through a VA-approved lender.

Recommended: Home Loan Help Center

What If You Don’t Meet the Minimum Service Requirements?

There are alternative mortgage loan programs you can apply for if you don’t meet the minimum service requirements for a VA loan. These options include:

•   Federal Housing Administration (FHA) loans. These may have more lenient credit score criteria than VA loans and could be a good choice for first time homebuyers.

•   Conventional loans provided by private lenders, such as banks, credit unions, and online lenders. You may need a higher credit score to qualify for these loans.

•   State and city homebuyer aid programs and grants that provide support for down payments, closing costs, and other types of support.

You may also want to consider strengthening your credit score and saving up money for a downpayment in order to qualify for a loan in the future.

The Takeaway

The VA loan program is designed to help eligible veterans, active-duty service members, and surviving spouses qualify for a home loan. Key benefits of the program include no down payment required, low interest rates, and flexible credit requirements.

If you’re looking to take out a mortgage to buy a home or to refinance your current mortgage, there are other loan options you can consider as well.

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

Who are eligible borrowers on a VA loan?

Eligible borrowers on a VA loan include veterans, active-duty service members, and some surviving spouses. Eligibility depends on length of service performed and the type of home being purchased, among other factors.

What is the major criteria for a VA mortgage?

The major criteria for a VA loan is the individual’s type and duration of military service and their creditworthiness. Also, the applicant needs to show that they have enough income to meet the monthly mortgage payments.

How long do you have to serve in the military to get VA benefits?

Service duration requirements for VA benefits depend on the type of service, but generally one must have served for at least 90 days in a row. For certain situations such as service during wartime, the 90-day requirement may be reduced to as little as 30 days of consecutive military service to be eligible for VA benefits.

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Photo credit: iStock/CatLane

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.

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.

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.

^†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.

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