Feb
04
2026
Student Loan Forgiveness Tax Bomb, Explained

Do You Have to Pay Taxes on Forgiven Student Loans?

By | Fresh Out of School, Student Loans, student_loan | Comments Off on Do You Have to Pay Taxes on Forgiven Student Loans?

The Internal Revenue Service (IRS) generally requires that you report a forgiven or canceled debt as income for tax purposes. But tax on student loan forgiveness is a different matter.

The American Rescue Plan (ARP) Act specifies that student loan debt forgiven between 2021 and 2025, and incurred for postsecondary education expenses, will not be counted as income, and therefore does not incur a federal tax liability.

This includes federal Direct Loans, Family Federal Education Loans (FFEL), Perkins Loans, and federal consolidation loans. Additionally, nonfederal loans such as state education loans, institutional loans direct from colleges and universities, and even private student loans may also qualify.

However, some states have indicated that they still count canceled student loans as taxable income. Read on for more information about taxes on student loans, including which forgiven student debt is taxable and by whom.

Key Points

•   Because of the American Rescue Plan Act, student loans forgiven between 2021 and 2025 are exempt from federal taxation.

•   Eight states — Arkansas, California, Illinois, Indiana, Minnesota, Mississippi, North Carolina, and Wisconsin — still tax forgiven loans.

•   Use a student loan forgiveness tax calculator to estimate potential state tax liability.

•   Set aside monthly payments to save for potential tax bills on forgiven student loans after 2025.

•   Explore the student loan interest deduction to help reduce federal taxable income.

Types of Student Loan Forgiveness Programs

Federal student debt can typically be canceled through an income-driven repayment plan (IDR) or forgiveness programs. However, as of February 2026, applications for some income-driven repayment plans are on hold due to legal challenges. You can find out more about this situation on the Federal Student Aid (FSA) website.

Here are some common federal forgiveness programs and how typically they work.

Public Service Loan Forgiveness (PSLF)

If you are employed full-time for the government or a nonprofit organization, you may be eligible for Public Service Loan Forgiveness for federal student loans like federal Direct Loans.

After you make 120 qualifying payments under an income-driven repayment plan for an eligible employer, the PSLF program forgives the remaining balance on your federal student loans.

However, because IDR plans are currently not accepting applications, and you must achieve forgiveness by repaying your loans under one of these plans, you will likely need to wait before you can start working toward PSLF. You can get more details about PSLF on the FSA website.

Income-Driven Repayment (IDR) Forgiveness

IDR options generally offer loan forgiveness after borrowers make consistent payments for a certain number of years. However, forgiveness on all but one of the IDR plans is paused as of February 2026.

On an IDR plan, how much you owe each month is based on your monthly discretionary income and family size. These are the types of IDR plans.

•   Income-Based Repayment: With IBR, payments are generally about 10% of a borrower’s discretionary income, and any remaining balance is forgiven after 20 or 25 years. On the IBR plan, forgiveness (after the repayment term has been met) is still proceeding as of February 2026, since this plan was separately enacted by Congress.

•   Pay As You Earn (PAYE): The monthly payment on PAYE is about 10% of a borrower’s discretionary income, and after 20 years of qualifying payments, the outstanding loan balance is forgiven. As of February 2026, forgiveness has been paused for borrowers who were already enrolled in this plan.

•   Income-Contingent Repayment (ICR): The monthly payment amount on ICR is either 20% of a borrower’s discretionary income divided by 12, or the amount they would pay on a repayment plan with a fixed payment over 12 years, whichever is less. After 25 years of repayment, the remaining loan balance is forgiven. As of February 2026, forgiveness has been paused for borrowers who were already enrolled in the plan.

Teacher Loan Forgiveness

With Teacher Loan Forgiveness (TLF), teachers who have been employed full-time for five consecutive years at an eligible school and meet certain other qualifications may be eligible to have up to $17,500 of their federal Direct Subsidized and Unsubsidized Loans and federal Stafford Loans forgiven.

Recommended: Do Student Loans Count as Income?

Which Student Loan Cancellations Are Not Federally Taxed?

When it comes to student loan forgiveness and taxes, under the provisions of the ARP Act, private or federal student debt for postsecondary education that was or is forgiven in the years of 2021 through 2025 will not be federally taxed. This means that these borrowers are not required to report their discharged loan amount as earned income, and the forgiven amount is not taxable.

Beyond the special five-year window of tax exemption provided by the ARP Act, participants in the Public Service Federal Loan program who receive forgiveness don’t have to pay taxes on their canceled loan amount. The PSLF program explicitly states that earned forgiveness through PSLF is not considered taxable income.

Which Student Loan Cancellations Are Federally Taxed?

Borrowers who receive loan cancellation after successfully completing an income-driven loan repayment plan can generally expect to pay taxes. However, those whose debt was or will be discharged in the years 2021 through 2025, will not need to pay federal taxes on their forgiven loans due to the ARP Act.

Forgiven amounts that are taxable are treated as earned income during the fiscal year it was received. Your lender might issue tax Form 1099-C to denote your debt cancellation.

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

Which States Tax Forgiven Student Loans?

Typically, states follow the tax policy of the federal government. But some states have announced that their residents must include their forgiven or canceled student loan amount on their state tax returns.

As of February 2026, the eight states that say certain forgiven loans are taxable are:

•   Arkansas (except for loans forgiven through PSLF)

•   California (except for loans forgiven through PSLF)

•   Illinois (except for loans forgiven through PSLF)

•   Indiana (except for loans forgiven through PSLF, TLF, and certain other programs)

•   Minnesota (except for loans forgiven through PSLF)

•   Mississippi

•   North Carolina

•   Wisconsin (except for loans forgiven through PSLF and TLF).

Additional states tend to conform to federal tax laws, so it’s important to consult a qualified tax professional who is knowledgeable about forgiveness of student loans in your state to confirm the latest information of how much you owe.

How to Prepare for Taxes on Forgiven Student Loans

If you’re anticipating a tax liability after receiving loan forgiveness, there are a few steps you can take to get ready.

Step 1: Calculate Your Potential Tax Bill

The first step when preparing for a student loan forgiveness tax bill is calculating how much you might owe come tax season. This can be influenced by factors including the type of forgiveness you are receiving and the forgiven amount.

To avoid sticker shock, you can use a student loan forgiveness tax calculator, like the Loan Simulator on StudentAid.gov. It lets you see how much of your student loan debt might be forgiven, based on your projected earnings.

Step 2: Choose the Right Plan

Although IDR plans are not currently accepting applications, they are designed to help keep borrowers’ monthly payments to a manageable amount while they’re awaiting loan forgiveness. All of these repayment plans calculate a borrower’s monthly payment based on their discretionary income and family size.

Step 3: Prioritize Saving

If you’re expecting loan forgiveness after 2025, it might be beneficial to start allocating extra cash flow to a dedicated tax savings fund now. Incrementally setting money aside over multiple years can ease the burden of a sudden lump-sum tax bill down the line.

Another way to potentially save some money is to take the student loan interest deduction on your taxes each year, if you qualify. The deduction, which is up to $2,500 annually, can reduce your taxable income.

You’ll need your student loan tax form to make sure you are eligible for the deduction. The form should be sent to you by your loan servicer or lender. You’ll file the form with your taxes.

Recommended: Guide to Student Loan Tax Deductions

What If I Can’t Afford to Pay the Taxes?

If you can’t afford to cover an increased tax bill, contact the IRS to discuss your options. Inquire about payment plans that can help you pay smaller tax payments over a longer period of time. However, be aware that fees and interest may accrue on such plans.

The Takeaway

Thanks to a special law passed by Congress in 2021, post-secondary education loans forgiven from 2021 through 2025 will not count as earned income and will not be federally taxed. That said, state taxes may be due on forgiven loans, depending on where the borrower lives.

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.

FAQ

Is loan repayment considered taxable income?

If your employer offers loan repayment assistance benefits, they would typically be considered taxable income. However under the CARES Act, which was signed into law in 2020, employer assistance loan payments up to $5,250 made each year from 2021 through 2025 are tax-free.

Will refinancing my student loans help me avoid taxes?

Refinancing student loans does not involve taxes. However, the interest you pay on a refinanced student loan may qualify for the student loan interest deduction. If you’re eligible, you may be able to deduct up to $2,500, which could lower your taxable income.

Will student loan forgiveness be taxed after 2025?

The American Rescue Plan Act stipulates that forgiven student loans will not be taxed from 2021 through 2025. Currently, there are no plans to extend that tax relief beyond 2025.

Are state taxes different for forgiven student loans?

While states typically follow the federal tax policy, five states say that certain forgiven loans are taxable. Those five states are: Arkansas (except for loans forgiven through Public Service Loan Forgiveness), Indiana (except for loans forgiven through PSLF, Teacher Loan Forgivenesss, and certain other programs), Mississippi, North Carolina, and Wisconsin (except for loans forgiven through PSLF and TLF).

What steps should I take if I owe taxes on forgiven student loans?

If you owe taxes on forgiven student loans, calculate how much you’ll owe in taxes with the forgiven loan amount factored into your taxable income. Then, once you have the estimate of what you owe, you can start saving up to pay it. One way to do this is to put away the monthly amount you previously paid on your student loans to help offset the amount you owe. So if your student loan payment was $100 a month, deposit that amount monthly into a savings account, and use it to help pay what you owe in taxes.

Photo credit: iStock/fizkes

SoFi Student Loan Refinance
Terms and conditions apply. SoFi Refinance Student Loans are private loans. When you refinance federal loans with a SoFi loan, YOU FORFEIT YOUR ELIGIBILITY FOR ALL FEDERAL LOAN BENEFITS, including all flexible federal repayment and forgiveness options that are or may become available to federal student loan borrowers including, but not limited to: Public Service Loan Forgiveness (PSLF), Income-Based Repayment, Income-Contingent Repayment, extended repayment plans, PAYE or SAVE. Lowest rates reserved for the most creditworthy borrowers. Learn more at SoFi.com/eligibility. SoFi Refinance Student Loans are originated by SoFi Bank, N.A. Member FDIC. NMLS #696891 (www.nmlsconsumeraccess.org).

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.

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

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.

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

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

SOSLR-Q125-020

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Feb
03
2026
Graphic image of a series of $100 bills with a graduation cap on top of them

Do Student Loans Help Build Credit?

By | Financial Topics, Student Loans | Comments Off on Do Student Loans Help Build Credit?

Student loans can play a role in building credit when they’re managed responsibly. Making on-time student loan payments contributes positively to your payment history, a key factor in credit scores.

However, missed payments can be damaging to your credit. Read on to learn about how paying student loans may build credit and tips for managing your loans.

Key Points

•   On-time payments for student loans positively impact your payment history, a key factor in credit scores. Conversely, missed or late payments can harm your credit.

•   Having student loans adds diversity to your credit mix, which can slightly boost your score when combined with other credit types, like credit cards.

•   Federal and private student loans can establish a long credit history, as they often span many years, potentially benefiting your credit score over time.

•   Setting up automatic payment and regular credit report monitoring can help borrowers stay on top of student loan payments and strengthen their credit.

•   Refinancing student loans involves a hard credit inquiry, which may temporarily lower credit scores. However, if refinancing reduces interest rates, it may help a borrower manage debt more effectively which could positively impact their credit.

How Student Loans Appear on Your Credit Report

Your credit report contains information about your credit activity, including payment history and credit account status. It’s different from your credit score, which is a three-digit number that predicts how likely you are to repay a loan.

Student loans appear on your credit report as installment loans. These are loans that are repaid in fixed regular installments over a specific period of time. Your credit report will typically list the type of loans you have, the amounts, and the status of the account and whether or not it is in good standing.

Recommended: The Average Cost of College Tuition

The Impact of On-Time Payments

A borrower’s credit score is calculated using information in their credit report to predict how likely it is that they will pay their bills on time. When it comes to student loans and credit scores, your credit report includes information on your student loans, such as your payment history and whether or not you make payments on time. Late or missed payments can negatively impact your credit score, while consistently making on-time payments may help build your credit.

In fact, on-time payments are one of the key factors that can help build your credit score because they demonstrate that you are a responsible borrower, and that you pose less risk to a lender. Payment history makes up the greatest percentage (35%) of your credit score.

The Effect of Late or Missed Payments

The first day after you miss a student loan payment, your loan becomes delinquent. If you are delinquent on your federal student payment for 90 days or more, your loan servicer will report the delinquency to the national credit bureaus, which could negatively impact your credit.

Most federal loans go into default after 270 days. If you have private student loans they may go into default after 90 to 120 days (this varies by lender).

Once your loan is in default, your lender may hire a collection agency to pursue the debt or they might take you to court. In the case of a federal loan, the government could garnish your wages and withhold your tax refund, among other consequences. And your credit rating can be damaged. A defaulted student loan remains on your credit report for up to seven years.

Student Loans and Credit Mix

Credit mix refers to the different types of accounts a borrower has. For example, in addition to your student loans, your credit mix might also include revolving loans like credit cards, and other installment loans, like an auto loan. When you have a diverse mix of credit, it shows creditors how you manage various types of lending products.

Strategies to Use Student Loans for Credit Building

If you’re working to build your credit, handling your student loans responsibly could help. Here are ways to potentially strengthen your credit profile.

Setting Up Automatic Payments

Payment history represents a large part of your credit score, as noted above, which is why staying on top of student loan payments is so important. To make the process easier, you can set up autopay for your loans to ensure you never miss a payment. As a bonus, you may also get an interest rate discount. Federal student loans offer a 0.25% interest rate discount for setting up autopay, and many private lenders offer autopay discounts as well.

Just log onto your account at StudentAid.gov to find out who the loan servicer for your federal loans is, and set up autopay on their website. For private loans, you can typically set it up through your lender.

Monitoring Your Credit Report Regularly

Lenders typically review your credit report before making the decision to approve you for a loan or credit card. The information in your credit report is one of the factors that helps determine your credit score.

Reviewing your credit report can help you make sure there are no mistakes in it. Things to watch out for include typos and incorrect information, credit cards or loans you never opened, false information about late or missed payments, and information that was not updated about an outstanding debt that was settled.

You are entitled to a free copy of your credit report once a year from the three major credit bureaus: TransUnion®, Equifax®, and Experian®. You are now also able to request your credit information weekly. One easy way to get your report is through AnnualCreditReport.com, which is authorized by the federal government to issue free credit reports.

If you spot errors on your credit report, you can dispute them by filing a report with the credit bureau as well as the company that provided the information.

Potential Risks and Considerations

While student loans may help build credit, there are also possible risks involved. Potential downsides include:

Taking on More Debt Than You Can Handle

To keep your student loans manageable and be able to make payments without overextending yourself, limit your borrowing to just what you need for school. Use your loans to pay only for tuition and other necessary education expenses.

The reason: Taking on too much debt could mean that most of your income ends up going toward debt payments. And you may be more likely to become delinquent on your student loan payments or even fall into default, which will negatively impact your credit.

Long-Term Credit Implications of Missed Payments

Missed student loan payments are not just a right-now problem — they can follow you well into the future. As soon as you miss a federal student loan payment, your loan becomes delinquent, and after 90 days of delinquency, it is reported to the credit bureaus. After 270 days, it goes into default. Private loans can go into default even sooner than that, typically after 90 to 120 days, depending on the lender.

Defaulting on federal student loans can potentially lead to your wages being garnished and your income tax refund being withheld. Defaulting on private or federal student loans can seriously damage your credit and cause your credit score to drop.

A defaulted student loan can remain on your credit report for up to seven years. That can affect your ability to take out a mortgage and get a car loan. The lender could also take legal action against you and/or send the loan to collections.

How Student Loan Refinancing Can Affect Your Credit Score

Student loan refinancing can impact your credit score in both positive and negative ways. When you refinance student loans, you replace your existing loan with a new loan that, ideally, has a lower interest rate and more favorable terms.

Here’s how refinancing might impact your credit score.

Credit Inquiries and Account Changes

To refinance student loans (which is different from student loan consolidation), you may shop around to different lenders for the best rates and terms.

Refinancing involves a hard credit inquiry, which may cause a slight, temporary dip in your score. As long as you keep your loan shopping to a short period, multiple credit inquiries will generally be treated as one, which can help minimize the impact to your credit score.

Additionally, taking out a new refinancing loan may slightly reduce the average age of your credit history. However, this impact is typically minor. On the plus side, a student loan can help improve your credit mix, which also factors into your credit score.

Potential Benefits of Lower Monthly Payments

If your new refinanced loan has a lower interest rate, your monthly payments may be lower, which could save you money on interest and over the life of the loan. Using a student loan refinancing calculator can help you see how much you might save with refinancing.

Besides the savings, a lower student loan payment may make it easier for you to pay your loans on time each month. That could help you build a positive payment history, which is the biggest factor contributing to your credit score.

It’s important to be aware that refinancing federal loans makes them ineligible for federal programs and protections, such as income-driven repayment and student loan deferment. Before you move ahead with refinancing, make sure you won’t need these benefits.

Recommended: Consolidating Credit Cards and Student Loans

Student Loans and Other Credit Score Factors

Besides payment history, student loans can affect your credit in other ways. These are two other important factors.

Length of Credit History

Your credit history — the length of time your credit accounts have been open — makes up 15% of your credit score. A longer credit history is typically beneficial for your credit score because it demonstrates that you’ve been able to responsibly handle credit over time, especially if you’ve been consistently making your payments.

Taking out student loans can help you build your credit history. Since you typically borrow these loans as a young adult, they may be one of your very first credit accounts and even what gets your credit history started. And because repayment terms last for years, these loans will remain on your report over the long term.

Amounts Owed and Utilization

How much total debt you have, including student loan debt, is what’s meant by “amounts owed,” a factor that accounts for 30% of your credit score. A key component of amounts owed is credit utilization — the amount of available revolving credit you’re using.

If you are using a large amount of your available credit, you may be considered a risk to lenders and your credit score may be negatively impacted.

The Takeaway

Student loans can have a positive or negative impact on your credit. Paying your loans on time each month could help strengthen your credit. But late or missed payments could damage your credit, especially if your loan becomes delinquent or goes into default.

Making on-time student loan payments is important for your credit and your financial situation overall. Methods that could make managing student loans easier include setting up automatic payments, regularly monitoring your credit report, and student loan refinancing. Considering the different options may help you decide what makes the most sense for you.

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.

FAQ

When do student loans start affecting my credit score?

Student loans may start affecting your credit score shortly after they are disbursed. The loans appear on your credit report soon after disbursal, even while you’re in school, and they impact factors like length of credit history and credit mix.

The biggest factor in your credit score is your payment history, so making on-time payments when the time comes can positively affect your credit, while missed payments can damage it.

Can paying off student loans early hurt my credit?

Paying off student loans early doesn’t necessarily hurt your credit, but it may impact factors like credit history, credit utilization, and credit mix. However, the positive payment history remains on your report for about 10 years, which could benefit your score.

How long do student loans stay on my credit report?

Student loans will stay on your credit report during the entire repayment term (the length depends on your repayment plan). They will remain there until you pay off the entire loan amount in full or the loan balance is canceled as part of a forgiveness program.

However, information about loan payments and loan status may stay on your credit for up to 10 years after your account closes and you pay off your loan. Adverse information, such as student loan default, typically remains on your report for up to seven years.

Do federal and private student loans affect credit differently?

Most federal student loans do not require a hard inquiry, which can cause a slight, temporary dip in your credit score. Private student loans generally require a hard credit inquiry, which can temporarily cause a slight drop in your credit score. If you’re shopping around for private student loans, applying within a short time frame could help minimize the impact to your credit.

Can student loan deferment or forbearance impact my credit score?

Federal student loan deferment or forbearance generally does not directly impact your credit score, as long as your account is in good standing when you apply for forbearance or deferment, and you maintain your repayment schedule afterward. Private student lenders may or may not allow for deferment or forbearance. Check with your lender or loan servicer to learn more.

About the author

Melissa Brock

Melissa Brock

Melissa Brock is a higher education and personal finance expert with more than a decade of experience writing online content. She spent 12 years in college admission prior to switching to full-time freelance writing and editing. Read full bio.


Photo credit: iStock/designer491

SoFi Student Loan Refinance
Terms and conditions apply. SoFi Refinance Student Loans are private loans. When you refinance federal loans with a SoFi loan, YOU FORFEIT YOUR ELIGIBILITY FOR ALL FEDERAL LOAN BENEFITS, including all flexible federal repayment and forgiveness options that are or may become available to federal student loan borrowers including, but not limited to: Public Service Loan Forgiveness (PSLF), Income-Based Repayment, Income-Contingent Repayment, extended repayment plans, PAYE or SAVE. Lowest rates reserved for the most creditworthy borrowers. Learn more at SoFi.com/eligibility. SoFi Refinance Student Loans are originated by SoFi Bank, N.A. Member FDIC. NMLS #696891 (www.nmlsconsumeraccess.org).

SoFi Private Student Loans
Please borrow responsibly. SoFi Private Student loans are not a substitute for federal loans, grants, and work-study programs. We encourage you to evaluate all your federal student aid options before you consider any private loans, including ours. Read our FAQs.

Terms and conditions apply. SOFI RESERVES THE RIGHT TO MODIFY OR DISCONTINUE PRODUCTS AND BENEFITS AT ANY TIME WITHOUT NOTICE. SoFi Private Student loans are subject to program terms and restrictions, such as completion of a loan application and self-certification form, verification of application information, the student's at least half-time enrollment in a degree program at a SoFi-participating school, and, if applicable, a co-signer. In addition, borrowers must be U.S. citizens or other eligible status, be residing in the U.S., Puerto Rico, U.S. Virgin Islands, or American Samoa, and must meet SoFi’s underwriting requirements, including verification of sufficient income to support your ability to repay. Minimum loan amount is $1,000. See SoFi.com/eligibility for more information. Lowest rates reserved for the most creditworthy borrowers. SoFi reserves the right to modify eligibility criteria at any time. This information is subject to change. This information is current as of 4/22/2025 and is subject to change. SoFi Private Student loans are originated by SoFi Bank, N.A. Member FDIC. NMLS #696891 (www.nmlsconsumeraccess.org).

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.

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

External Websites: The information and analysis provided through hyperlinks to third-party websites, while believed to be accurate, cannot be guaranteed by SoFi. Links are provided for informational purposes and should not be viewed as an endorsement.
Third Party Trademarks: Certified Financial Planner Board of Standards Center for Financial Planning, Inc. owns and licenses the certification marks CFP®, CERTIFIED FINANCIAL PLANNER®

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.

SOSLR-Q126-007

Read more
Feb
02
2026
An older man in a blue shirt reviews papers at a kitchen table, possibly downloading bank statements needed for his mortgage.

How Many Bank Statements Do You Need for a Mortgage?

By | Home Ownership, mortgage | Comments Off on How Many Bank Statements Do You Need for a Mortgage?

When you’re applying for a home loan, your mortgage lender is going to be interested (understandably) in your ability to repay the likely six-figure sum you are borrowing. And that means providing proof of both your income and your existing assets — which may mean sharing some bank statements with the lender.

The number of bank statements you’ll need to provide depends on the lender you choose as well as the type of loan you’re applying for. You typically won’t have to submit more than two months’ worth of statements for most loan types. In some cases, however, you may need to provide six to 12 months’ worth of bank statements. To know for sure how many bank statements you need to submit, the best move is to talk to your loan officer.

  • Key Points
  • •   Most lenders require two to three months of bank statements to verify assets, cash flow, and financial stability during the mortgage application process.
  • •   Bank statements help lenders confirm you have enough funds for the down payment, closing costs, and reserves, if required.
  • •   Lenders review statements for large or unusual deposits, which may need to be explained or documented.
  • •   Statements typically must be complete and unaltered, showing your name, account number, and transaction history.
  • •   Requirements may vary based on loan type, lender guidelines, and borrower profile, with some situations requiring additional documentation.

How to Get Bank Statements

Once you know how many bank statements you need based on your lender’s mortgage requirements, the next question is: how and where do you get them?

Bank statements can usually be downloaded from your bank’s online portal. If you have trouble finding the documents, you can contact your bank’s customer service team.

It’s not unusual to wonder how long to keep bank statements and other financial documents, and banks are accustomed to receiving requests for old statements.

Why Are Bank Statements Needed for Mortgage Applications?

Bank statements are used by mortgage lenders in order to ensure you have the money it will take to fund the upfront costs of the loan, as well as to confirm that you have regular income.

However, lenders may also use other documents to confirm these eligibility requirements, such as tax returns or W-2s. It can be a hassle to pull together all the paperwork for your mortgage application, but documentation is an important part of the lender’s defense against mortgage fraud.

What Underwriters Look for in Bank Statements

Mortgage underwriters may also be looking at your bank statements to ensure the funds you’re using for your down payment or closing costs are “seasoned money.” That is to say, the money has been in your possession for 60 days or more. This is because some lenders have restrictions against gift funds or family loans being used to pay upfront loan costs, such as the down payment on a home.

What Are Bank Statement Loans?

Bank statement loans are mortgages that use bank statements specifically, rather than tax returns, to qualify applicants for a mortgage loan.

If you’re applying for a bank statement mortgage, you will likely need to submit substantially more of those statements — sometimes as much as two years’ worth.

Bank statement loans can make getting a mortgage possible for self-employed borrowers or others whose paperwork might not match the traditional required documentation. However, they can be harder to find, and may come with more stringent credit requirements and higher minimum down payments.

What Other Documents Are Needed for a Mortgage Application?

Of course, the best way to know exactly what documentation is required for your mortgage application is to ask your lender. However, documents that are often required for a mortgage application include the following:

•   W-2 forms

•   Pay stubs

•   Tax returns

•   Bank statements

•   Alimony or child support documentation

•   Retirement and investment account statements

•   Gift letter, if you’re using gift funds

•   Identification documentation

Depending on your specific circumstances, you may also need to provide proof of rental payments, a divorce decree, any bankruptcy or foreclosure records, or other specific documents. Again, your lender will have the full details.

The Takeaway

Depending on the type of loan you’re applying for, you may need to submit only a couple months’ worth of bank statements. If you’re applying for a bank statement loan, you may need to submit up to two years of banking history. Fortunately, bank statements are easy to generate in most banks’ online management portals, so all you’ll have to do is download and submit them.

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

SoFi Mortgages: simple, smart, and so affordable.

FAQ

Does the FHA require two months of bank statements?

Lenders offering Federal Housing Administration (FHA) loans have their own specific requirements as far as how many months of bank statements you’ll need to provide. Some lenders offer FHA loans with just two months’ worth of statements, but you may be asked to submit more if the lender has specific requirements or some other part of your application creates the need (such as a lower credit score, for example).

How many months of bank statements do you need to refinance your mortgage?

Refinancing your mortgage is, in many ways, basically just like getting a mortgage in the first place — which means that you’ll again likely be asked to submit two months’ worth of bank statements. However, as always, specific lenders have different requirements, and if you have a nontraditional application, you may be asked to submit more.

What is a 12-month bank statement mortgage?

Also known as a bank statement loan, these mortgages use bank statements as the primary qualifying factor to approve you for a home loan (as opposed to other traditional documentation like W-2s or tax returns). For these loans, you may need to provide 12 or even 24 months’ worth of bank statements, since they’ll be such an important source of information for the lender.

Photo credit: iStock/brizmaker

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.


*SoFi requires Private Mortgage Insurance (PMI) for conforming home loans with a loan-to-value (LTV) ratio greater than 80%. As little as 3% down payments are for qualifying first-time homebuyers only. 5% minimum applies to other borrowers. Other loan types may require different fees or insurance (e.g., VA funding fee, FHA Mortgage Insurance Premiums, etc.). Loan requirements may vary depending on your down payment amount, and minimum down payment varies by loan type.
Financial Tips & Strategies: The tips provided on this website are of a general nature and do not take into account your specific objectives, financial situation, and needs. You should always consider their appropriateness given your own circumstances.
Third-Party Brand Mentions: No brands, products, or companies mentioned are affiliated with SoFi, nor do they endorse or sponsor this article. Third-party trademarks referenced herein are property of their respective owners.
Checking Your Rates: To check the rates and terms you may qualify for, SoFi conducts a soft credit pull that will not affect your credit score. However, if you choose a product and continue your application, we will request your full credit report from one or more consumer reporting agencies, which is considered a hard credit pull and may affect your credit.

SOHL-Q126-075

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Feb
02
2026

2026 VA Home Loan Limits vs. 2025 VA Home Loan Limits

By | Family Finances, Home Ownership, mortgage | Comments Off on 2026 VA Home Loan Limits vs. 2025 VA Home Loan Limits

Home prices may have flattened out a bit in some markets, but VA loan limits are still getting a bit of a boost in 2026.

For most U.S. counties, lenders’ baseline limit for VA loans (backed by the U.S. Department of Veterans Affairs) is now $832,750, compared to $806,500 in 2025. And loan limits for single-family homes in counties with higher home costs also increased — from a maximum (or “ceiling”) of $1,209,750 in 2025 to $1,249,125 in 2026.

What could higher loan limits mean for you? If you’re a veteran considering a home loan, read on for a breakdown of what you can expect if you purchase a home this year.

Key Points

•   VA home loan limits for 2026 have increased from $806,500 to $832,750, reflecting high home prices.

•   VA loan applicants with full entitlement because they are first-time homebuyers or have paid off previous VA loans do not have to worry about loan limits.

•   The national ceiling for high-cost counties has risen from $1,209,750 to $1,249,125.

•   Higher limits allow more veterans to qualify for larger loans without a down payment, benefiting those in expensive areas.

•   The VA guarantees up to 25% of the loan amount, with limits based on the borrower’s remaining entitlement.

What Is the VA Loan Limit?

To be clear: The VA doesn’t limit how much an eligible veteran, service member, or survivor using a VA loan benefit can borrow to finance a home. There are only limits on how much of the loan amount the VA will guarantee if the borrower is unable to repay the mortgage. And that limit can vary based on the status of the borrower’s VA entitlement.

Most borrowers who apply for a VA loan have something called “full entitlement.” This means that if the borrower defaults, the VA will guarantee — or repay the lender — up to 25% of whatever loan amount the lender approved based on its own criteria. If you’re a first-time homebuyer, or if you’ve paid off a past VA loan, you can expect to have a full entitlement.

But if a borrower has what the VA refers to as a “remaining entitlement” (they have a VA loan they’re still paying back), the VA will limit its guarantee based on the Federal Housing Finance Agency (FHFA) loan limit in the county where the home is being purchased.

Instead of paying the lender up to 25% of the full loan amount if the borrower defaults, the VA will limit its guarantee to up to 25% of the applicable FHFA loan limit minus the amount of the entitlement the borrower already used. Borrowers can still get a VA loan using their remaining entitlement, but they may have to make a down payment to get that loan.

To check your VA entitlement status, you can request a certificate of eligibility (COE) through your lender, online, or by mail.

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

First-time homebuyers can
prequalify for a SoFi mortgage loan,
with as little as 3% down.

Questions? Call (888)-541-0398.

When Do VA Loan Limits Apply?

You may wonder when VA loan limits apply and, more specifically, how annual changes to loan limits are calculated. The VA bases its loan guarantee limits on the conforming loan limits (CLL) the FHFA sets for conventional home mortgage loans that are eligible for purchase by Fannie Mae and Freddie Mac.

By law, the FHFA must adjust these limits annually to reflect changes to home prices in the U.S. Between the third quarter of 2024 and the third quarter of 2025, home prices increased, on average, by 3.26%, based on the FHFA House Price Index. So the 2026 baseline CLL increased by that percentage.

But your county’s loan limit could be considerably higher, depending on average home prices in your area.

These differences are, in part, due to the variability of cost of living by state.

2026 VA Loan Limit Calculator Table

Higher home prices across the U.S. brought the FHFA’s baseline limit (and, therefore, the VA’s baseline limit for 2026) to $832,750 for a single-family home in most counties.

But in counties where 115% of the median home value is higher than the baseline CLL, the limit has been increased by a percentage that reflects those higher prices. There is a ceiling, or cap, however, of 150%.

Here’s what that looks like for a single-family home in 2026 vs. 2025.

VA Loan Limits in 2026 and 2025

Year National Baseline 115% to 149% National Ceiling (150%)
VA Loan Limits 2026 $832,750 $957,662 to $1,240,797 $1,249,125
VA Loan Limits 2025 $806,500 $927,475 to $1,201,685 $1,209,750

If you’re buying in Alaska, Hawaii, Guam, or the U.S. Virgin Islands special statutory provisions dictate the loan limit, which in 2026 is $1,249,125 for a single-family home.

VA Loan Limit Example

Here’s a hypothetical example of how a borrower could be affected by the county loan limit on a VA loan.

Let’s say Joe, a Navy veteran, wants to buy a home in San Diego County, even though he knows the cost of living in California is higher than average. Joe manages to find a $715,000 single-family home and he wants to buy with a VA loan, but he still owes $100,000 on another VA loan.

The 2026 single-family limit in San Diego County is $1,104,000. Since the VA will guarantee up to a quarter of that amount, Joe has a maximum entitlement of $276,000.

$1,104,000 x .25 = $276,000

But Joe has to subtract the amount of his entitlement he’s already used, which leaves him with $176,000.

So, the VA would guarantee up to $176,000 of Joe’s loan.

Since most lenders want at least 25% of a borrower’s loan amount to be covered by the VA entitlement and/or a down payment, Joe might have to make a $2,750 down payment to get a VA loan for this home.

$715,000 x .25 = $178,750

$178,750 – $176,000 = $2,750

How Does My County Loan Limit Affect Me?

Just like Joe in the example above, if you’re using a remaining entitlement, your county loan limit could determine whether you’ll have to make a down payment to buy the home you want.

It doesn’t mean you can’t get the loan. If you have enough to make the down payment required by your lender, you may even qualify for a VA-backed loan that’s more than your county loan limit.

It’s important to note that though the example provided here is for a home purchase, the same entitlement limits apply if you’re considering refinancing your VA loan. In that case, your county limit could affect how much you’ll be asked to pay in closing costs.

💡 Quick Tip: Apply for a VA loan and borrow up to $1.5 million with a fixed- or adjustable-rate mortgage. The flexibility extends to the down payment, too — qualified VA homebuyers don’t even need one!

How to Apply for a VA Home Loan

Most VA loans are “VA-backed” loans, which means they’re issued by approved private lenders. The VA’s guarantee that it will help repay the lender if a borrower defaults is an incentive for lenders to offer these loans with attractive terms.

Still, it can be a good idea to shop around for the loan that best meets your family needs, and compare interest rates, fees, customer service, and any additional benefits various lenders might be offering.

You also may want to compare the terms of your top VA loan offer to what you can get with different types of mortgage loans, including a conventional loan.

Of course, no matter which type of loan you ultimately choose, you’ll still have to qualify for a mortgage with a lender.

There isn’t a requisite minimum credit score for VA loans. Instead, the VA asks lenders to review the borrower’s “entire loan profile,” which could include your credit history, DTI ratio, employment history, and assets. Individual lenders also may have their own approval criteria you should be aware of when you’re ready to apply for a VA loan.

Pros and Cons of VA Loan Limits

The VA loan limit is just one of several factors you may want to consider if you’re thinking about using a VA loan for a home purchase or a mortgage refinance. Like any other mortgage option, VA loans have their pros and cons. Here are a few to keep in mind:

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Pros:

•   Interest rates may be lower with a VA loan than with a conventional loan.

•   You may not need to make a down payment or pay mortgage insurance.

•   Though non-VA jumbo loans may require a higher down payment, this isn’t necessarily true with a VA jumbo loan.

•   If you decide to sell your home, you can allow the buyer to assume (or take over) your existing mortgage.

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Cons:

•   VA purchase loans are only for primary homes; you can’t use the loan to buy a vacation home or to invest in a home that isn’t your main residence.

•   The VA charges a one-time “funding fee” that’s designed to cover foreclosure costs when homebuyers default on a loan. Currently, the fee ranges from 1.25% to 3.3% of the loan.

•   The home you hope to buy must be evaluated by a VA-approved appraiser to ensure it meets the VA’s minimum property standards. If the home you want is too rundown, it may not pass this appraisal.

Recommended: 2026 Home Loan Help Center

The Takeaway

VA loan limits are based on home prices in the U.S., and they’re adjusted annually to reflect price increases.

If you’re a first-homebuyer or you’ve paid off a past VA loan, you shouldn’t have to worry about VA loan limits. But if you want to buy a home and you already have a VA loan, the loan limit for your county could determine whether you’ll have to make a down payment to qualify for the amount you hope to borrow.

SoFi offers VA loans with competitive interest rates, no private mortgage insurance, and down payments as low as 0%. Eligible service members, veterans, and survivors may use the benefit multiple times.

Our Mortgage Loan Officers are ready to guide you through the process step by step.

FAQ

Will VA home loan limits increase in 2026?

VA home loan limits increased significantly in 2026. The baseline limit for VA loans is now $832,750, compared to $806,500 in 2025.

What is the conforming loan limit for 2026?

The national baseline conforming loan limit for 2026 is $832,750, although some counties have higher limits. The VA loan limit for a county is the same as its conforming loan limit.

What is the DTI limit for a VA loan in 2026?

The Department of Veterans Affairs hasn’t set a hard-and-fast limit on the debt-to-income (DTI) ratio it requires for its loans. But generally, lenders allow a 41% maximum for a VA loan.

Photo credit: iStock/Thai Liang Lim

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.
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. †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. ^SoFi VA ARM: At the end of 60 months (5y/1y ARM), the interest rate and monthly payment adjust. At adjustment, the new mortgage rate will be based on the one-year Constant Maturity Treasury (CMT) rate, plus a margin of 2.00% subject to annual and lifetime adjustment caps. Third Party Trademarks: Certified Financial Planner Board of Standards Center for Financial Planning, Inc. owns and licenses the certification marks CFP®, CERTIFIED FINANCIAL PLANNER®
Checking Your Rates: To check the rates and terms you may qualify for, SoFi conducts a soft credit pull that will not affect your credit score. However, if you choose a product and continue your application, we will request your full credit report from one or more consumer reporting agencies, which is considered a hard credit pull and may affect your credit.

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Feb
02
2026
A cheerful woman looks out a window, possibly reflecting on if she should purchase a home with a home equity conversion mortgage.

How to Use a Home Equity Conversion Mortgage (HECM) to Buy a Home

By | Home Ownership, mortgage | Comments Off on How to Use a Home Equity Conversion Mortgage (HECM) to Buy a Home

If you’re 62 years or older and are looking to move, a Home Equity Conversion Mortgage (HECM) for Purchase could help you pay for your new home. An HECM for Purchase is a government-insured reverse mortgage that you can put toward buying a house. With an HECM for Purchase, you won’t have to make mortgage payments as long as you keep up with property taxes and other obligations.

However, this type of reverse mortgage can come with high closing costs and insurance premiums, so it may not be your most affordable option for financing a home. Read on for the full story of the HECM for Purchase program, along with its pros and cons.

Key Points

•   HECM for Purchase is a reverse mortgage program that allows homeowners aged 62 or older to use loan proceeds to buy a new primary residence.

•   Borrowers don’t make monthly mortgage payments while living in the home, though they must still pay property taxes, insurance, and maintenance.

•   The loan combines selling your current home and buying a new one into a single transaction with one set of closing costs.

•   A significant down payment is required, often a large portion of the home’s price, with the reverse mortgage covering the remainder.

•   HECM for Purchase loans are non‑recourse, meaning you or your heirs won’t owe more than the home’s value when the loan is repaid.

What Is an HECM?

An HECM is a type of reverse mortgage — specifically, the kind that is insured by the Federal Housing Administration (FHA). HECMs allow people 62 and older to convert the equity in their home into cash. (The chief HECM vs. reverse mortgage differentiator is the FHA’s involvement in HECMs.)

You’ll need to own your property outright or have a good amount of equity built up to qualify for an HECM. Eligible borrowers can turn that equity into cash and won’t have to pay back the home mortgage loan until they move, sell the home, or die. In those events, the HECM must be paid back in its entirety, along with any interest charges.

Recommended: Reverse Mortgage Pros and Cons

First-time homebuyers can
prequalify for a SoFi mortgage loan,
with as little as 3% down.

Questions? Call (888)-541-0398.

What Is an HECM for Purchase?

An HECM for Purchase is a type of HECM that allows homeowners to borrow against their current residence and pay for a new one in one transaction with one set of closing costs. It’s designed for homeowners who are looking to move into a new primary residence. You can’t use an HECM for Purchase to finance a vacation home or an investment property.

Like other HECMs, an HECM for Purchase does not require repayment during the borrower’s lifetime while they (or their surviving spouse) are living in the house. However, borrowers can pay down the loan’s principal and interest if they choose. They also must meet other payment obligations, including property taxes, homeowners insurance, and maintenance costs.

The HECM for Purchase will become due if the borrower moves or dies. As a non-recourse loan, however, the HECM for Purchase will never charge more than the value of the home it was used to finance.

HECM for Purchase Requirements

There are several requirements you’ll need to meet to qualify for an HECM for Purchase. Here are the main ones.

Age Requirement (62+)

HECM for Purchase loans are exclusively offered to borrowers who are age 62 or older. By contrast, traditional mortgages don’t have an age restriction, apart from the age of majority in your state (typically at least 18).

Income and Credit Qualifications

You’ll also need to meet income and credit requirements to qualify for an HECM for Purchase. While there’s no stated minimum credit score, having debts in delinquency or default could be an obstacle to qualifying.

Lenders also consider your residual income, or the amount of income you have after subtracting certain expenses. You’ll need to show that you have sufficient residual income to keep up with living expenses.

Financial Assessment

A lender will also assess your overall finances to ensure you can meet the financial obligations of the HECM for Purchase loan, which include paying property taxes and homeowners insurance. Plus, you’ll need to make a sufficient down payment on the new property, typically around 50%.

How HECM for Purchase Works

An HECM for Purchase lets you draw on the equity of your current home to finance the purchase of your next home. It combines two transactions — a reverse mortgage and a new mortgage — into one to simplify the home purchase process.

You won’t have to make payments on your HECM for Purchase while you live in your house, but you will have to keep up with payments of property taxes, homeowners insurance, maintenance expenses, and any homeowners association fees.

HECM for Purchase loans are backed by the FHA, so you’ll need to work with a lender that specializes in these loans to get one.

Down Payment Amount

To use an HECM for Purchase, you’ll need to sell your original home and use the proceeds to make a sufficient down payment on your new home. Then you can finance the remaining amount with your HECM loan. The required down payment may range from 45% to 62% of the home’s purchase price, depending on the borrower’s and spouse’s age. If you have money left over after making the down payment, you can receive it as a lump sum or as fixed monthly payments.

Recommended: Getting a Mortgage in Retirement

Pros of HECM for Purchase

There are several benefits to taking out an HECM for Purchase loan.

•   No mortgage payments: With an HECM reverse mortgage for purchase loan, you won’t have to make principal and interest payments while you live in the house and only cover essential charges, like taxes. A conventional mortgage, by contrast, requires monthly repayment.

•   More purchasing power: An HECM for Purchase could increase your purchasing power and bring your goal of buying a new home within reach, especially if you’ve built up a good deal of equity in your current property.

•   Avoid dipping into savings: By using an HECM for Purchase to buy a home rather exhausting your savings, you can avoid draining your retirement funds or other accounts to buy a house.

•   Debt won’t exceed home value: As noted above, an HECM for Purchase is a non-recourse loan, so the debt you or your heirs owe will never exceed the home’s value, even if the property value dips in the future.

Cons of HECM for Purchase

At the same time, an HECM for Purchase loan has some downsides to consider before you borrow.

•   Charges interest, closing costs, and premiums: The HECM for Purchase can come with high closing costs, which include origination fees, title insurance, and appraisal fees. It also charges annual Mortgage Insurance Premiums and accrues interest based on the reverse mortgage interest rate you’re given at the outset of the loan.

•   Requires you to pay property taxes and other expenses: You’ll need to pay property taxes and homeowners insurance to keep the loan in deferred repayment, as well as maintain the property to acceptable standards.

•   Demands that you live in the new home full-time: Your home must be your new primary residence. If you move or sell, you’ll have to pay back the HECM for Purchase loan.

•   Calls for a large down payment: This loan program is reserved for borrowers who can make a large down payment, sometimes 50% or higher, for their new home.

Alternatives to Consider

Before applying for an HECM for Purchase, it’s worth considering alternative financing options, such as:

•   Traditional mortgage: A conventional mortgage typically requires a credit score of at least 620, a down payment (though not as high as 50%), and a debt-to-income ratio below 50% — and sometimes as low as 43%. You’ll also need to have sufficient income to qualify.

•   Home equity loan or home equity line of credit (HELOC): Homeowners can also tap into their equity with a home equity loan or HELOC. You could use this “second mortgage” to finance another home, but be cautious about over-borrowing. A lender can foreclose on your home if you miss payments.

•   Proceeds from home sale: Selling your home is another way to finance the purchase of a new one, especially if you’re downsizing to a more affordable place. In this case, you might have extra money left over to put into savings or invest.

Recommended: The Best Cities for Retirees

The Takeaway

The HECM for Purchase program can simplify the home-buying process for seniors who want to use a reverse mortgage to buy a new house. As long as you keep up with property taxes, homeowners insurance, and other required costs, you won’t have to make any mortgage payments on your HECM while you reside in your new home. At the same time, HECM for Purchase loans come with closing costs and premiums. Consider all your options to determine the best type of financing for your next home purchase.

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

What types of homes qualify for HECM for Purchase?

The following types of homes qualify for the HECM for Purchase program:

•   Single-family homes

•   2- to 4-unit homes where the borrower occupies one unit

•   HUD-approved condo projects

•   Individual condo units that meet FHA single-unit approved requirements

•   Manufactured homes that meet FHA requirements

The property must also meet all of the FHA’s property standards and flood requirements.

How long can I stay in the home with HECM for Purchase?

You can stay in the home you finance with an HECM for Purchase loan indefinitely. The loan will become due when the last borrower (or the borrower’s spouse) moves, sells the home, or passes away.

Are there limits on HECM for Purchase loan amounts?

An HECM for Purchase is limited to the appraised value of the home or the sales price of the new home, whichever is lower. It cannot exceed the HECM FHA mortgage limit, which is $1,249,125 for 2026.

Photo credit: iStock/FG Trade

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.


*SoFi requires Private Mortgage Insurance (PMI) for conforming home loans with a loan-to-value (LTV) ratio greater than 80%. As little as 3% down payments are for qualifying first-time homebuyers only. 5% minimum applies to other borrowers. Other loan types may require different fees or insurance (e.g., VA funding fee, FHA Mortgage Insurance Premiums, etc.). Loan requirements may vary depending on your down payment amount, and minimum down payment varies by loan type.
Financial Tips & Strategies: The tips provided on this website are of a general nature and do not take into account your specific objectives, financial situation, and needs. You should always consider their appropriateness given your own circumstances.
Third-Party Brand Mentions: No brands, products, or companies mentioned are affiliated with SoFi, nor do they endorse or sponsor this article. Third-party trademarks referenced herein are property of their respective owners.

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

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