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If you’re applying for a mortgage, you’ll want to know what credit score mortgage lenders use when they’re looking at your credit. It’s more complex than it sounds.

More than 90% of mortgage lenders use scores generated by FICO® models — but each of the three major credit reporting agencies uses a different version of the FICO software.

How Mortgage Credit Scores Work

When you apply for a mortgage and your credit is pulled, the lender will see scores from credit reporting agencies Experian, Equifax, and Transunion.

Which FICO score do mortgage lenders use? The middle number. If two of the three scores are the same, lenders will use that number.

If you’re applying for a mortgage with another person, the lender typically will look at the middle score of both parties and use the lower of the two. Fannie Mae calls for things to be done differently: Lenders of conventional conforming loans are to average the middle credit scores of all applicants.

Experian uses FICO Score 2, Equifax uses FICO Score 5, and Transunion uses FICO Score 4. If your middle credit score comes from Equifax, then your credit will have been scored on FICO Score 5. If your middle score comes from Transunion, your credit will have been evaluated using FICO Score 4, and so on.

Most mortgage lenders only consider FICO scores, but some also will look at a VantageScore® typically gleaned from one of the two latest scoring models.

Both FICO and VantageScore calculate credit scores in a range between 300 to 850, and both put the most weight on payment history and credit utilization (the amount of credit a cardholder is using compared with the person’s credit limits).

It might be mind-blowing to hear, but you have multiple credit scores.

And the scores you see on a credit card statement or in your credit monitoring app are likely higher than the score your lender will see.

Commonly Used Scoring Model in Mortgage Applications

Why do the three credit reporting agencies each use a different FICO scoring model for mortgages?

FICO designed the different versions specifically for each credit bureau because of the way the credit bureaus store and report information in a credit report. These legacy models have been used for years because until recently they were required by Fannie Mae and Freddie Mac for conventional conforming loans.

Despite each credit bureau using a different scoring model, the scores generated should be the same or similar.

Recommended: What Credit Score Is Needed to Buy a House?

Other Factors Mortgage Lenders Consider to Determine Mortgage Terms

Beyond knowing which credit score is used to buy a house, you may also want to know what other factors mortgage lenders consider when deciding whether or not to offer mortgage preapproval on your way to a loan.

Mortgage lenders also consider the following:

•  Steady income. Stable employment is one of the key indicators of a low-risk borrower who is able to repay the loan.

•  A low amount of debt. Lenders look at how much debt you have relative to your income. This is also called your debt-to-income ratio. If you have too much debt, you may not qualify for a new mortgage.

•  Assets. Though not as important as your income or debt, lenders will also look for high-value assets. This includes cash in your checking and savings accounts, investments, retirement accounts, and other property. Assets help a borrower appear less risky to a lender since the money could be used for a large down payment or to cover monthly expenses.

•  Down payment. Your down payment will affect your loan-to-value ratio, which will also affect your interest rate. With a higher down payment, the risk to the lender decreases, which is why you’ll pay a lower interest rate. This calculator for mortgages can help you find a mortgage amount that may work for your situation.

How Your Credit Score Affects Your Interest Rates

Simply put, a better credit score gives you a better interest rate on most mortgages.

An FHA loan is an outlier: Your rate and mortgage insurance premium will be the same no matter what your FICO score is. FHA loans are especially popular with first-time homebuyers in part because of the lenient credit score requirements.

Your options, terms, and interest rates are often more favorable when you have a good credit score.

Recommended: Stop by the Mortgage Help Center

What Factors Go Into a Credit Score?

Improving your credit score before you apply for a mortgage could pay off. It’s helpful to know what to work on that could help you.

•  Payment history. Paying on time every time may be the single most important thing you can do to improve your credit score. It shows that you’re a reliable borrower.

•  Credit utilization. Using most of the credit available to you shows a lender you may be overleveraged and unable to repay your loans. Keeping your credit utilization under 30% is preferred by many lenders.

•  Recent applications. Applying for a lot of credit in a short amount of time can be seen as risky by a lender. It may be wise to limit credit applications leading up to your mortgage application. However, this is different from shopping for a mortgage, when your application at different lenders within 14 or 45 days, depending on the scoring model used, is only considered one hard pull. (Also, be sure not to open any new lines of credit while your mortgage is being processed.)

•  Derogatory marks. A bankruptcy, delinquent account, judgment, charge-off, or accounts in collections are looked upon negatively. It may be best to take care of any issues on your credit report before applying for a mortgage.

Free credit reports are available from annualcreditreport.com. If you find an error, contact the business that issued the account or the credit reporting agency that issued the report. The Consumer Financial Protection Bureau also will assist with complaints.

What Is a Good Credit Score to Buy a House?

To qualify for the best rates on a conventional mortgage, aim for a score above 740. Higher scores reflect a lower credit risk, which is usually rewarded by lenders with more favorable terms.

Can you buy a house with a bad credit score? Possibly. Someone with a credit score as low as 500 (a “poor” FICO score) may qualify for an FHA loan or, with sufficient residual income, a VA loan.

Minimum Credit Score Required by Mortgage Loan Type

Different mortgage types have different minimum score requirements.

•  FHA: 500 if you can put down 10%. 580 if you want to put down 3.5%.

•  Conventional: 620

•  Jumbo loan: 700

•  USDA: No minimum, but scores above 640 are most successful with lenders

•  VA: No minimum, but it is advisable to have a score above 620

A lower credit score may be offset by compensating factors like a 20% down payment or substantial cash reserves.

The Takeaway

Your credit score is the key to unlocking great rates and terms from the lender of your choice. Knowing which credit score is used for a mortgage is a great first step to getting mortgage terms that can work for you.

If you need a home mortgage loan, getting a mortgage with SoFi could be a great option. SoFi has a range of mortgages with competitive rates, flexible terms, and low down payment options.

A mortgage loan officer can answer your mortgage questions and help you find a loan for your unique situation.

FAQ

What does “A” credit mean?

“A” credit is the grade equivalent of a credit score. It’s also called a credit rating and can be assigned to individuals, businesses, or even governments, though it’s usually reserved for . higher credit scores. Credit ratings can range from AAA to a C or D, with AAA being excellent. Credit with an “A” grade represents a desirable borrower.

Which FICO score do mortgage lenders use?

Of the three FICO credit scores pulled from the three credit bureaus, lenders will home in on the middle number.

Can I get a home loan with bad credit?

There are options for borrowers with poor credit. FHA, for example, backs loans with 10% down when a borrower’s credit score is between 500 and 579. Borrowers with scores of 580 and above are eligible to put 3.5% down on FHA loans.

Disclaimer: Many factors affect your credit scores and the interest rates you may receive. SoFi is not a Credit Repair Organization as defined under federal or state law, including the Credit Repair Organizations Act. SoFi does not provide “credit repair” services or advice or assistance regarding “rebuilding” or “improving” your credit record, credit history, or credit rating. For details, see the FTC’s website .

SoFi 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.

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.

SOHL0322019

A bathroom renovation can add beauty to your home and boost its value. If you have a small bathroom, you’ll want a remodel that makes the most out of the space.

Fortunately, there are lots of interior design tricks to make a tiny bathroom feel like a spa getaway.

But even a small-bathroom remodel can cost big bucks. Here are some tips on how to redo the loo without taking a bath on the investment.

Basics of Remodeling a Small Bathroom

Here are some things to consider when remodeling a small bathroom:

•   Bathtub. Installing a new bathtub typically costs about $7,000, HomeAdvisor says, although the price tag can run the gamut.

•   Sinks. Ditto on price. There’s a vast difference between a porcelain pedestal sink and a unit with a marble countertop.

•   Toilet. There are several types: one-piece, two-piece, in-wall, high-tank, and integrated toilets (with bidet). A two-piece toilet may cost $100 to $300. The labor cost for any toilet ranges from $100 for a simple installation to several hundred for a wall-hung toilet, which must connect to the studs.

•   Tile. Bathroom tiles for the floor and walls come in a wide range of materials, colors, and styles. Classic ceramic subway tiles run about $2 per square foot, while marble tiles cost around $6 to $9 per square foot.

•   Fixtures and hardware. Faucets, shower knobs, lighting, and towel racks can be an inexpensive way to spruce up your bathroom if you stick to mid-priced materials.

•   Storage. Cabinets and shelves add stylish functionality to a small bathroom.

•   Length of the project. A bathroom renovation can take weeks. If you have a second bathroom, great. Otherwise, you may need to seek temporary accommodations or plan a vacation.

•   Labor. Labor costs can eat up the majority of any small-bathroom remodel. The more you can DIY, the more you’ll save.

Average Cost of a Small-Bathroom Remodel

Whether you’re a first-time homebuyer — generally defined as anyone who has not owned a principal residence in the past three years — or an existing homeowner, you might be interested in a low-budget small-bathroom remodel.

What constitutes “small”? A small bathroom typically measures around 40 square feet. A half-bath with only a shower can be 20 square feet or less.

What constitutes low budget? For low-end fixtures with DIY labor, expect to pay about $70 per square foot (vs. $250 per square foot for high-end fixtures installed by a contractor), according to HomeAdvisor.

You probably didn’t ask yourself How much does it cost to remodel a small bathroom? when you were plugging numbers into a home affordability calculator, and in any case, the answer isn’t clear cut.

The average cost of a small-bathroom remodel is $6,500, according to HomeAdvisor, but depending on the quality of materials and need for installation, the cost can range from $1,500 to $15,000.

Professional labor can cost around $50 to $110 an hour. Tile installation and plumbing generally rack up the most work hours.

Recommended: How to Find a Contractor

Is Removing a Tub a Good or Bad Idea?

Bathtubs tend to take up a lot of space. When remodeling a small bathroom, you may be tempted to remove yours and replace it with a walk-in shower.

But most people love a long soak in a hot bath. Whether you’re planning to put your home on the market within a few years or you need to sell your house fast, removing your bathtub may reduce your buyer pool, especially if you only have one in the house.

10 Low-Cost Ways to Remodel a Small Bathroom

If you don’t have the financial means or the DIY know-how to do a gut renovation, there are more affordable ways to transform your bathroom and make it feel like new.

1. Salvage the Bathtub

A small-bathroom remodel with tub replacement can really inflate your costs. For around $300 to $600, you can have an old tub reglazed or refinished and put the savings toward some rubber duckies.

2. Tilt Toward Reasonable and Limited Tile

Tile can be another high-ticket item when it comes to a bathroom remodel. Luckily your bathroom is small. To save money, consider lower-cost porcelain and ceramic tile. You can also create a tile wall accent rather than full-on tile.

You might want to tile either your floor or walls but not both. Peel-and-stick tiles (often vinyl) can be a budget-friendly option for flooring.

3. Refresh With Light Paint Colors

A fresh paint job is a surefire way to revitalize any space, and the cost to paint may be the lowest among ways to transform a room. Light colors will make a small room feel larger.

To create the illusion of more space, match the wall color with the floor tiles and go with white for the ceiling. Light, continuous color from floor to ceiling will help elongate the room.

4. Upgrade the Showerhead

Don’t have the means to totally redo your shower? A high-quality showerhead can add a new and luxurious experience to your bathroom. Rain showerheads start at a few hundred dollars.

5. Replace Light Fixtures

Swapping out old fixtures for new ones can do a lot for an outdated bathroom. Many affordable bathroom light fixtures are available at home improvement stores, or you could consider recessed lighting.

6. Add Shelves and Storage

To lend a sense of height to your small bathroom, try adding an open shelving unit above the toilet for extra storage space. Decorate with photos, candles, and bottles of colorful bath salts.

7. Make Accessories Sing

Perk up your tired bathroom with a new shower curtain, fluffy hand towels, and a plush bath mat. A pop of color against a newly white-tiled wall can make a big splash.

8. Consider Sliding Shower Doors

Shower doors that open on hinges can take up a lot of space in a small bathroom. For around $100 to $300, you could buy a sliding glass door unit. You’ll pay an additional $200 to $300 for installation.

9. Add a Mod Mirror, Mirror on the Wall

A large, long mirror that stretches over the sink area can add the illusion of more space and help brighten the room with reflective light. Home improvement stores offer reasonably priced bathroom mirrors, including ones with cabinets for extra storage.

10. Pedestal Sink vs Vanity?

While a pedestal sink can create a sense of space, it can also come with a higher price tag than a vanity sink because drain pipes and water supply lines have to be obscured. A vanity also provides storage.

Ways to Finance a Small-Bathroom Remodel

When the budget for your small-bathroom remodel exceeds the amount in your piggy bank, there are several financing options.

Credit Cards

Slapping down a credit card is an easy way to finance your small-bathroom renovation. If you have a 0% interest card, it can be a smart way as well, plus you could earn travel or other bonus points.

But if you have a high-interest card, or don’t think you’ll be able to pay off the debt before that 0% jumps to 21%, that could spell trouble. You could end up paying a lot more for your new tub in interest charges, and could hurt your credit if you can’t make a payment.

Personal Loan

A personal loan for a small-bathroom redo can be a good option.

With a home improvement loan, you’ll receive a lump sum from a financial institution and repay it with interest in monthly installments. These loans typically offer same-day funding with no collateral required.

Approval and the rate offered are based on creditworthiness and other personal financial factors.

HELOC

If you own your home and have sufficient home equity, you may be able to qualify for a home equity line of credit (HELOC), using your home as collateral.

A HELOC rate is usually lower than that of a credit card or personal loan. You only make payments on what you spend, and the borrowing limit can be higher than with a credit card or personal loan.

Most HELOCs have a variable rate. There may be minimal withdrawal requirements, plus fees and closing costs. If you default on a HELOC, you risk losing your house.

The Takeaway

A small-bathroom remodel can pack a big punch and raise your home’s value. Focus on a few key upgrades and design elements to make a small bathroom more inviting.

How to finance a bathroom redo? SoFi offers home improvement loans for $5,000 to $100,000. The loans come with a fixed rate, absolutely no fees, and fast funding.

With a HELOC brokered by SoFi, you can access up to 95%, or $500,000, of your home equity to remodel a bathroom or any other area of your home.

FAQ

How can I cheaply renovate a small bathroom?

Doing it yourself will save the most money. Ideas include refreshed paint, an interesting shower curtain and fluffy towels, and new lights, shelves, and new hardware. It’s a good idea to leave plumbing and wiring issues to a pro.

How much is a small-bathroom remodel?

The average cost to remodel a small bathroom is $6,500, according to HomeAdvisor. That said, the price point can vary widely based on your tastes and the extent of the project. And the one constant with any remodeling project is that you will spend more than you planned.

How much does it cost to DIY a small bathroom?

A DIY reno of a 40-square-foot bathroom could cost about $4,000, HGTV notes. Add a 30% overage allowance for a realistic budget of $5,200.

What is the best way to remodel a small bathroom?

Start with a list of must-haves and nice-to-haves. Read up on types of toilets (it’s true, the unsung toilet comes in many varieties), sink fixtures, and lighting. That will help inform your budget and whether you need to hire a contractor.

Photo credit: iStock/Drazen_

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.

SOHL1122006

Buying an investment property to rent out or flip for a profit can be a great way to put extra cash in your pocket, but you may need a mortgage to pull it off.

Because there’s more risk involved for lenders, mortgage rates for “non-owner-occupied” property tend to be higher.

This article will discuss types of investment property loans, typical rates, and more.

Note: SoFi does not offer investment property mortgage rates at this time.

Why You Might Need an Investment Property Mortgage

Purchasing a rental property or buying a fixer-upper could be a rewarding way to invest your money, but if you don’t have the cash to pay out of pocket, you’ll need another way to fund the deal.

For many, that means taking out an investment property loan.

Recommended: How to Shop for a Mortgage

Types of Investment Property Loans

The type of mortgage loan you choose can affect your interest rate and required down payment.

How you plan to use the investment property and the number of units it contains also will affect your loan choices.

Conventional and Government Loans

Experienced investors typically prefer conventional loans when buying two- to four-unit properties. Buildings with four or fewer units are considered residential and eligible for the same loans as a single-family home.

Those with five or more units require a commercial loan, which usually has a higher rate, higher down payment requirement, and shorter term.

FHA and VA loans, government-backed home loans, can be used to buy a two- to four-unit property with a low down payment or none at all, respectively, if you live in one of the units.
Is the sky the limit? Not exactly.

The Federal Housing Finance Agency sets conventional conforming loan limits each year that depend on the number of units (one, two, three, or four) and the cost of the area. Staying under a loan limit means you’ll most likely obtain a lower-cost mortgage.

But jumbo loans, which exceed those limits, have their place. Lenders set their own limits and other criteria.

FHA loan limits for one to four units are set at 65% of the new year’s conforming loan limits. There are no VA loan limits for active-duty military members and veterans who have full VA loan entitlement.

Home Equity Loan or HELOC

If you have enough equity in your primary residence, you may be able to take out a home equity loan or home equity line of credit (HELOC) to fund your investment.

Other Kinds of Financing

Finally, if you’re serious about getting an investment property, you can think about and read up on these options:

•   personal loan

•   cash-out refinance

•   hard money loan

•   owner financing

•   assumable mortgage

Understanding Investment Property Mortgage Rates

It’s no surprise that rising inflation influences mortgage rates and that rates have risen — but they’re even higher for investment properties. Though rental property mortgage rates can vary, they are often at least 0.50% to 1% higher than rates for a primary residence.

Why are investment mortgage rates higher? Lending to an investor is inherently riskier. While someone who purchases a primary residence is likely to prioritize the mortgage payments for that house, an investor often has their own primary residence to prioritize above the investment property, meaning they would likely default on the investment mortgage before their own.

•   If the investment property is a flip but doesn’t sell as quickly as expected, the investor must keep making mortgage payments on the home after investing money to renovate — and may struggle to do so.

•   If the investment property is a rental, a vacancy results in no rental income to put toward the mortgage.

Recommended: Home Loan Help Center

What Determines the Rate?

So what determines investment property mortgage rates? Fannie Mae and Freddie Mac set rules regarding conventional investment property mortgages, including rate increases for single-unit and multiunit properties. Beyond that, mortgage rates for rental properties depend on a few additional factors:

Credit Score

As with any loan, a higher credit score typically results in a lower interest rate for an investment property mortgage.

Recommended: 18 Mortgage Questions for Your Lender

Debt-to-Income Ratio (DTI)

The lower your debt-to-income ratio, the better your chances of loan approval — and at a better rate. To calculate your DTI, add all your monthly debt payments, divide them by your gross monthly income, and multiply the result by 100.

Generally, 43% is the highest DTI you can have and still qualify for a mortgage, but many lenders prefer to see a 36% DTI or lower.

The lender may factor in 75% of your projected rental income when calculating your DTI, which works in your favor.

Cash Reserves

Because you may not immediately make money from an investment property — you typically need time to find renters or to rehab and list — lenders often like to see that you have adequate cash reserves.

Cash reserves refer to liquid (i.e., accessible) money that you have set aside for use in an emergency; in this case, it’s to cover the mortgage until your investment starts showing some ROI.

Though it can vary by lender, having six months’ worth of mortgage payments is often a good start. Having even more could improve your chances of approval and a lower rate.

Loan-to-Value Ratio (LTV) on the Investment Property

As with a traditional mortgage, lenders consider the loan-to-value ratio on the investment property. LTV expresses the ratio between how much money you’re borrowing and the appraised value of the property.

The closer those two numbers are, the higher the LTV ratio (expressed as a percentage) will be. By making a larger down payment and financing less, you can lower the LTV and potentially increase your chance for approval at a lower rate.

Making a Larger Down Payment

On a related note, you might benefit from offering a larger down payment. Although you may get approval with only 15% down, a larger down payment may yield a lower rate.

Not sure where to start? You can use a mortgage calculator to see how different down payment amounts may affect monthly payment and interest paid.

Recommended: How to Buy a Multifamily Property With No Money Down

Getting a Lower Investment Property Mortgage Rate

Now that you know what determines a rental property mortgage rate, let’s see how you can use that info to potentially earn a lower one.

Coming in With a Good Credit Score

Other than an FHA loan, which is more lenient about credit scores, lenders usually require a minimum credit score of 640 for investment property loans; some set the barrier for entry at 680.

Regardless, catapulting your number into the high FICO score range can improve your chances of a lower rate.

Paying Off Debt

A lower DTI ratio may also improve your chances of approval and a lower interest rate. But repaying debt is easier said than done; you may need to wait on an investment property if you’re working toward paying down a lot of credit card debt.

Increasing Your Cash Reserves

Showing a lender that you can cover the mortgage and other expenses like renovations or maintenance increases the odds of approval. The more liquid money you have, the lower your interest rate could be.

The Takeaway

Investment property loans are a good way for investors to purchase real estate for a rental property or a house flip, but the rates tend to be higher than rates for mortgages for a primary residence. A lender may offer a lower rate depending on a credit score, down payment, debt load, and cash reserves.

3 Home Loan Tips

1.    To see a house in person, particularly in a tight or expensive market, you may need to show proof of prequalification to the real estate agent. With SoFi’s online application, it can take just minutes to get prequalified.

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

3.    Thinking of using a mortgage broker? That person will try to help you save money by finding the best loan offers you are eligible for. But if you deal directly with a mortgage lender, you won’t have to pay a mortgage broker’s commission, which is usually based on the mortgage amount.

FAQ

Can I get a mortgage for an investment property?

You can if you qualify, but keep in mind that investment property mortgage rates are typically higher, and lenders may have stricter requirements for approval.

Do investment properties have higher mortgage rates?

In general, yes, because lenders take on more risk when lending to an investor than to a person or family shopping for a primary dwelling.

What’s the minimum down payment for an investment property mortgage?

The minimum down payment for an investment property depends on the type of loan you’re using.
For a conventional loan, you usually need to put down at least 15%. An FHA loan for an owner-occupied one- to four-unit property calls for a down payment as low as 3.5%; a similar VA loan, no down payment.

Photo credit: iStock/Drazen Zigic

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.

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.

SOHL0322002

Some buyers may be, well, buoyed by the thought of living on the water full time. Living in a floating house is unique, and building one may be a more ambitious undertaking than building a houseboat.

What’s the cost of building a floating house? Read on to learn about the expenses, benefits, and considerations associated with these aquatic abodes.

Average Cost of Building a Floating Home

The cost to build a floating house will vary based on the size, features, labor, and materials, but a 1,200-square-foot model starts at over six figures, a Dutch architect and advocate says.

These are not houseboats, which are self-propelled and free to move about. Nor are they usually tiny house tiny, though some are. They’re often twice as big as a houseboat.

An alternative to building a floating home is to buy an existing one. A quick look shows listings ranging from under $100,000 to over $1 million on the West Coast, and a home floating in the Florida sun for a few hundred thousand. Buying or renting a slip will add to the cost.

In comparison, the cost to build a house of 1,200 square feet could be about $165,600, based on $138 per square foot, not including the land.

Factors That Affect the Cost of Building a Floating Home

There are at least two foundational considerations when building a floating home: constructing the platform the home will rest on, and finding a slip at a moorage for rent or purchase.

The cost of building a floating house could ebb and flow depending on who’s doing the building — is this a DIY project or do you need to find contractors? — and the following factors.

The Foundation

Traditionally, floating homes rested on giant logs, but over time logs begin to sag and sink, requiring pressure-filled barrels under them to shore up the whole shebang.

Nowadays, these homes stay afloat using concrete floats. One type of concrete float is filled with foam, which creates buoyancy. The other concrete float is empty, and like a bowl placed upside down in water, the space and pressure keep the home floating.

Size of the House

Generally, the bigger the home, the more expensive the build. And the larger the home, the more floats it will require, further adding to the cost.

Floating homes are limited by the size of the moorage, meaning buyers have to work within specific parameters. That means building up, but only as much as the floats allow.

Design and Materials

The more custom or high-end designs integrated into the home, the more the build could cost. From custom cabinets in the kitchen to nonstandard windows, these add-ons carry a higher price tag.

Alternatively, floating homes can be prefabricated, using a standard design to lower the cost. Similarly, some companies are now using decommissioned shipping containers as building materials, which could cut down on the total cost to build a floating house.

Another cost to keep in mind is the siding material. Float houses are on the water and subject to the elements, which means the exterior materials must be resilient.

Interior Finishes

As with a traditional home, the choice of interior finishes can drive the cost of a floating house up or down. Opting for a prefabricated floating house may lower the spend on the interior.

Other Expenses of a Floating Home

Mooring and Insurance

Floating-home owners pay a monthly moorage fee or a homeowners association fee. The cost will vary by moorage but could be $1,000 a month.

There could be a transfer fee to assume a rental slip. Insurance may be hard to find and expensive. Marinas may require liability coverage.

Utilities

Floating homes are permanently affixed to the moorage and hooked up to local utilities, including water, sewage, and electric or gas.

If a floating house is designed with efficiency in mind, the monthly cost of utilities will likely be similar to traditional homes in the area. But a lack of shade could mean higher bills for cooling.

Some floating homes rely on a plumbing pump to carry sewage out of the home. It could create a higher electric bill.

Furniture

The average cost to furnish a home is $16,000, but since a floating home resides dockside, it’s harder to transport large items to the property. That could mean hiring extra labor or larger delivery fees.

Additionally, floating homeowners may be constrained by the dimensions of a smaller space, meaning custom or specialty furniture that fits in with and into the home.

Financing Your Floating Home

In some states, a floating home is considered personal property, so it cannot be built or purchased with a traditional home mortgage loan. A local bank or credit union may offer a floating home loan with at least 20% down and at a higher rate than a usual home loan. An inspection, at your expense, will likely be required to see if the home is in adequate shape to qualify.

Another option is a personal loan, which provides fast cash but usually has a higher rate than a secured loan.

Options for homeowners who have built sufficient home equity and are dreaming of a floating home include a home equity line of credit (HELOC), home equity loan, and cash-out refinance.

How Long Do Floating Homes Last?

With regular upkeep and maintenance, owners of floating homes can expect their property to last 50 to 60 years before requiring rebuilding or refurbishment.

Pros and Cons of Living on a Floating Home

If you hear the siren call of the floating-house lifestyle, it’s a good idea to weigh the good vs. the not-so-great before taking the plunge.

Pros

Some of the benefits floating-home owners can expect include:

•   Tight-knit community. Dock living means living close to neighbors. A floating community could be a great fit if that’s your thing.

•   Good choice if downsizing: Minimalists, retirees, and others with an affinity for the water may find a floating home a chance to downsize.

•   Doesn’t require an engine. Floating homes are permanently docked, so buyers or builders don’t need to factor in the costs of a motor. Greener still, one DIY floating-home builder crafted a home on a lake in British Columbia that has a pellet stove, solar power, a composting toilet, and an evaporation gray water system.

•   Water views all the time. If you prioritize proximity to nature, you can’t beat living on the water. A cup of coffee or glass of wine is always accompanied by a pretty vista.

•   May be less expensive housing. You may be able to build a floating home for less than a single-family home, especially in some of the hot spots for floating homes.

•   Potential for tax breaks. In some states, floating homes are considered personal property, not “real property.” Those owners will not pay annual property taxes but will pay personal property tax. Also, interest paid on a loan for a floating home as a first or second home can be included in the mortgage interest deduction if you itemize.

Cons

Now the potential downers:

•   Costs go beyond the build: Moorage or HOA fees can range from a few hundred dollars to $1,000 a month. Insurance can be pricey.

•   Limited locations. Floating-home communities are uncommon, meaning vacancies are even less frequent. It could be hard to find a dock community to take a floating home to, or it could mean waiting for a spot.

•   Weather damage. Constant exposure to saltwater or freshwater can take a toll on a floating home. That can translate into more frequent repairs and replacements, adding to the cost of upkeep.

•   Financing challenges. It can be hard to secure financing to construct or buy a floating home.

The Takeaway

Build your own floating home? A few do take on that challenge, which can pay off in terms of cost and self-satisfaction. Others will look into buying a floating house that’s already berthed, as moorage can be a challenge.

Whether you’re interested in building or buying a floating home, a HELOC brokered by SoFi could be the answer.

Access up to 95%, or $500,000, of your home equity, and borrow what you need, when you need it.

Tap your home equity to tether your floating-home vision to reality.

FAQ

Can you live permanently in a floating home?

Yes, floating homes can be permanent residences.

Do you have to pay property tax on a floating home?

Floating-home owners don’t have to pay property taxes in some states or cities. It varies by location.

Where can you get a loan to build a floating home?

Floating homes don’t qualify for traditional mortgages. Options include a floating-home loan from a small pool of lenders, a personal loan, a home equity line of credit, a home equity loan, and a cash-out refinance.

Photo credit: iStock/Roman_Makedonsky

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.

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.

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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Building a home could take an average of nearly eight months, but a contractor- or owner-built house could stretch the timeline beyond a year.

It’s not as simple as buying a plot of land and heading to Home Depot. Construction permits, financing, and even the weather can lengthen your timeline.

Average Time to Build a House

Despite the extra time it takes to build a home from scratch rather than buy an existing home, it’s no surprise that many Americans are opting to build a home.

Why? To customize a home to their tastes, for one thing. And the narrowing gap between the average cost to build a house and the cost of buying an existing home.

The average cost to build a house, including the land, was nearly $450,000 in May 2022, the National Association of Home Builders reported. The median cost to buy an existing home was a bit over $414,000.

So how long does it take to build a house?

According to the U.S. Census Bureau’s latest home building statistics, from 2021, the average time to build a one-unit residential building is 7.6 months. Here’s the breakdown.

This time frame encompasses the entire home building process, from obtaining building permits to picking out the design.

Factors That Affect How Long It Takes to Build a House

As with everything, the devil is in the details, so let’s look at factors that influence how long it takes to build a home.

Type of House

The type of home and design will have a significant impact on the construction timeline.

If you’re buying new construction, it will fall into one of these categories:

•   Tract homes. These go up in a new development. The buyer chooses the design features and lot.

•   Spec homes. With these move-in-ready homes, the buyer still might be able to choose some of the finishings.

•   Custom homes. A builder customizes a house to the buyers’ specifications on their land.

Predesigned home packages likely accelerate the construction timeline, while custom homes are likely to extend it. After all, custom designs require more coordination between architects, engineers, and contractors.

House Size

Naturally larger homes take longer to build than smaller homes.

If you’re planning on a particularly ornate design, make sure you budget extra time (and money) for the project.

Larger properties with complex layouts are also more likely to encounter greater engineering challenges than simpler layouts. It’s also likely that unanticipated issues will arise during the build.

Location

While scenic, remote areas are attractive to many people seeking to build a primary or vacation home, the locale will heavily affect the ease of transporting materials, workers, and equipment.

Rocky terrain will also be more expensive and difficult to excavate and prep for construction. Installing common utilities will be more difficult.

Weather

Unless you’re looking into a modular home vs. a stick-built home, inclement weather can severely delay construction, as many parts of the process cannot be completed in rain or snow.

Your worksite may get flooded due to lack of completed drainage, and building materials may be damaged if not properly protected.

Financing

Homeowners with sufficient equity in their home could apply for a home equity line of credit to fund their new home.

But many people will seek a construction loan. Obtaining a construction loan comes with its own complications.

Expect underwriting to take longer than it does for a typical mortgage, as the lender will want a detailed plan, budget, and schedule for the construction. The lender may also need to approve your builder.

Permits

Construction permits and zoning approval for home building can be significant time drains and are often beyond your control. A good contingency is to find a contractor who is familiar with the local application process.

Materials and Labor

Volatility in material prices and availability made it hard for contractors to plan projects in 2022. As lumber and plywood prices settled down, cement and diesel costs rose. Shortages in cement and concrete products were expected to endure.

The availability of labor slowed construction starts in 2022 and was expected to remain the top challenge for most contractors.

In general, contractors are particularly busy during the spring and summer, so contracting with a builder before those seasons could be a good idea.

The Process of Building a House

Here’s the typical home construction timeline:

•   Buy land and obtain financing

•   Obtain building permits and approvals

•   Excavate the land and prep the foundation

•   Build the framework and install utilities

•   Put in walls, floors, and roof

•   Install fixtures, appliances, and finish the exterior/interior

•   Landscape, pave driveways, and prepare the grounds

•   Get a final inspection from authorities

Shortening the Time It Takes to Build a House

While much of the home building process is outside your control unless you’re actually building the house yourself, there are ways you can mitigate the chance of complications.

Here are a few ways you can shorten the average time it takes to build a house.

Avoid Deviating From the Plan

One of the best ways to avoid lengthening a construction timeline is to ensure that you have building plans finalized well before you break ground, and sticking to them.

Making last-minute changes is anathema to construction timelines.

Communicate

Avoid being the bottleneck when it comes to decision-making. The construction team will likely take their cues from you. So if you’re late answering an email, design query, or request for approval, your contractor will often be unable to proceed without your input.

Reduce Complexity

Keeping things simple will probably lead to a faster build, if that’s a priority. More complex plans clearly lead to lengthier construction times and introduce a greater likelihood that unforeseen problems will arise.

Craft the Contract With Care

The construction contract should contain a deadline for completion and what will happen in the event of a delay.

It’s common for a contract to specify that “substantial completion” must occur by a certain date, and to define that. A clause can express that extensions can be given for unforeseen delays.

When a change is made after a contract is signed, it’s referred to as a “change order.” The change order might specify a deadline extension or new completion date.

Builders who breach the contract may be responsible for damages.

The Takeaway

How long does it take to build a house? It could take seven to 14 months. A construction contract will typically contain a deadline and what will happen if a delay occurs. Allowing for a reasonable schedule can help ensure that your project finishes on time.

3 Home Loan Tips

1. Traditionally, mortgage lenders like to see a 20% down payment. But some lenders, such as SoFi, allow home mortgage loans with as little as 3% down for qualifying first-time homebuyers.
2. 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.
3. When building a house or buying a nontraditional home (such as a houseboat), you likely won’t be able to get a mortgage. One financing option to consider is a personal loan, which can be faster and easier to secure than a construction loan.

FAQ

How long does it take to build a house by yourself?

For the ambitious home builders among us, it takes over 14 months to build a house, on average. The timeline can easily stretch out to two years or longer, depending on your experience and whether or not you choose to employ any assistance.

What causes delays when building a house?

Plenty of factors can delay a build. They include:

•   Owner-caused delays

•   Contractor-caused delays

•   Weather

•   Logistics

•   Obtaining permits and approvals

•   Size and scale of the project

•   Communication

Can I get a loan to build a house?

You can apply for a construction loan or if you already have a home, a home equity line of credit, home equity loan, or cash-out refinance to fund the new home. A personal loan could be used for at least part of the build.

Photo credit: iStock/acilo

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.

This article is not intended to be legal advice. Please consult an attorney for advice.

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

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

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