What Is Time in Force? Definition and Examples

What Is Time in Force? Definition and Examples


Editor's Note: Options are not suitable for all investors. Options involve risks, including substantial risk of loss and the possibility an investor may lose the entire amount invested in a short period of time. Please see the Characteristics and Risks of Standardized Options.

Time in force (TIF) is a stock investing term referring to the length for which a trading order is good. Although casual or buy-and-hold investors may not use time-in-force stock limits, they’re an important tool for active traders.

Understanding different time-in-force options may help you close out positions more efficiently.

Key Points

•   “Time in force” is a stock investing term that defines how long a trading order remains active before expiring.

•   Different types of TIF orders include day order, on-open order (OOO), market on close order (MOC), and good ’til canceled order (GTC).

•   Understanding these orders helps active traders manage trade executions and avoid unintended trades.

•   Casual or long-term investors typically do not use TIF orders.

What Does Time in Force Mean?

Time in force is a directive, set by a trader, that defines how long a trade will remain open (or “in force”) before expiring. Options traders and other active traders can set an appropriate end date for their trades to help prevent unintended executions.

Without an end date, an order could be filled at an unfavorable time or price, particularly in markets that move fast. This is especially true for investors employing day-trading strategies and taking advantage of volatile market conditions with rapidly changing prices.

Basics of Time in Force

Before you place a time-in-force stock order, you’ll want to make sure that you understand exactly how they work. As with options trading terminology, it’s important to understand the language used to describe time-in-force orders.

Recommended: A Guide to Trading Options

Types of Time in Force Orders

Time in force is not a specific kind of stock market order. Instead, the phrase refers to the collection of order types that set how long a trade order is valid — or “in force” — in order to pursue potential investment opportunities. If you are considering a buy-to-open (purchasing a new position) or buy-to-close order (closing an existing position), you can also specify the time in force for either of them.

There are several kinds of time-in-force orders, although not every broker or dealer supports them.

1. Day Order

Of the different time-in-force orders used in options trading and other types of trading, day orders are the most common. With a day order, your trade remains open until the end of the trading day. This may happen if the order’s pricing conditions were not met (such as the price on a limit order). If your order has not been executed at the close of the day’s markets, it will expire.

With many brokers, including online brokerage firms, day orders represent the default option. Thus, this is the time in force order with which most people are likely familiar.

2. On-Open Order

Depending on the types of order that your broker or dealer offers, there can be two different types of options for trades executed at market open: MOO and LOO.

A MOO is an order filled when the market opens, at the prevailing opening price. With a LOO order, you can set a limit price for the highest price you’ll pay or the lowest price at which you’ll sell. If the market opens within the constraints of your limit order, it will be executed. Otherwise, your broker will cancel the LOO order.

3. Market on Close Order

A market-on-close (MOC) order requests the sale or purchase of a security at the final closing price of the trading day. These orders may help you avoid intraday trading volatility or simplify trade execution without having to closely monitor the market for fluctuations.

If your brokerage offers MOCs, they may have a cutoff time by which you need to enter in any MOC orders.

Recommended: Buy to Open vs. Buy to Close

4. What Is Good ‘Til Canceled (GTC)?

As its name suggests, a good-til-canceled (GTC) order is a type of time-in-force order that remains in force until you proactively cancel the order or it is filled. Depending on the type of trading or options trading strategy you’re employing, a GTC order may be worth considering if you’re waiting for the underlying stock price to move. Many brokerages will restrict the number of days a GTC order can remain open, often to 90 days.

The maximum potential gain for these orders is the difference between the limit price and the original purchase price, so long as the stock moves in your favor and the trade executes. If the stock fails to reach your target and continues to decline, you may face missed opportunities for smaller gains or risk holding a depreciating asset, leading to unrealized losses.

5. What Is Fill or Kill (FOK)?

FOK orders ensure that trades are executed in full and immediately. If that cannot happen, the order is canceled completely. This helps traders avoid partial fills, which may result in executing orders at differing prices, or with additional transaction fees.

Examples of Time in Force

You currently own shares of a stock that announced earnings last night, and you’re considering liquidating (or selling) your position. You’re not sure how the market will react to the earnings news, so you place a LOO order for more than you paid per share. If the stock opens at this number or higher, your trade will execute. If not, your broker will cancel it.

If the stock’s shares have been rising all day, but you anticipate that it may open at a lower price, you might use a MOC order to try to sell at the end-of-day price.

The maximum potential gain from a market-on-close order depends on how much the stock’s closing price exceeds your original purchase price. For instance, if you bought shares of a stock that closes at an increase in price, your maximum potential gain would be the difference in the price per share (before fees and taxes).

The maximum potential loss can occur if the market moves against your position. In the case of a long position, your loss would be the difference between the original price paid and the lower closing price if the price drops below your purchase price. For a short position, your loss would be the difference between the sale price and the higher closing price, if the closing price rises above the price at which you sold. This loss could be unlimited.

If you prefer to sell the stock when it hits a specific price in the future, you might choose to set a good-til-canceled order as part of your strategy. With a GTC order, you can specify a limit price, ensuring that your trade will only execute if the stock reaches or exceeds that price. Although GTC orders remain active until they are executed or canceled, most brokers set a maximum duration (around 90 days) before an order will expire if it isn’t filled.

This strategy may help investors take advantage of favorable price movements while maintaining flexibility. However, it also carries the risk of missing your target price due to market volatility or unexpected conditions.

Time in Force Day Order vs On-Close Order

Day orders and an on-close order are similar, but they have some important differences. A day order is one that is good for the entire trading day, up to and including close. If you’re placing an order in the middle of the trading day and do not need it to execute at a specific time, this is the type of order you’d use.

Alternatively, an on-close order (either market on close or limit on close) is only good at the close of the trading day. The intent of an on-close order is to execute at the final trading price of the day. If you place an on-close order in the middle of the trading day, it will not execute until the end of the trading day, regardless of its intraday price.

Using Time in Force Orders

How you use the different time-in-force orders will depend on how you buy and sell stocks or execute your options trading strategy. Most buy-and-hold investors won’t use time-in-force orders at all, but if you’re using a more complex strategy, such as buying to cover, you may want to have more control over how and at what price your order is executed.

The Takeaway

Time-in-force orders can be a part of day traders’ execution of specific strategies. It determines how long a trade will remain open before being canceled. It is uncommon for long-term investors to use time-in-force orders.

Investors who are ready to try their hand at options trading despite the risks involved, might consider checking out SoFi’s options trading platform offered through SoFi Securities, LLC. The platform’s user-friendly design allows investors to buy put and call options through the mobile app or web platform, and get important metrics like breakeven percentage, maximum profit/loss, and more with the click of a button.

Plus, SoFi offers educational resources — including a step-by-step in-app guide — to help you learn more about options trading. Trading options involves high-risk strategies, and should be undertaken by experienced investors. Currently, investors can not sell options on SoFi Active Invest®.

Explore SoFi’s user-friendly options trading platform.

FAQ

What happens if my order isn’t executed before it expires?

If your order expires without being executed, it means that the price conditions you set were not met during your chosen specified time period. You will need to place a new order if you still want to trade.

How do I decide which Time-in-Force option to use?

Your choice depends on your trading strategy. For instance:

•   Day orders are for keeping your trade active during the current trading day.

•   GTC orders allow you to execute trades that happen at a specific price level, and orders can stay open for days or weeks.

•   MOC orders are designed for executing trades at the end-of-day closing price.

Are Time-in-Force orders only for active traders?

Active traders frequently use time-in-force orders to manage trades in dynamic markets. While less frequent, these orders can also play a role in long-term investors’ strategies, particularly if they want more control over trade execution timing and price conditions.

Can I change the Time-in-Force setting after placing an order?

No. Once you’ve submitted an order, the time-in-force setting cannot be modified. If you want to adjust the duration, you’ll need to cancel the original order and create a new one with the updated time-in-force option.


Photo credit: iStock/Tatomm

SoFi Invest®

INVESTMENTS ARE NOT FDIC INSURED • ARE NOT BANK GUARANTEED • MAY LOSE VALUE

SoFi Invest encompasses two distinct companies, with various products and services offered to investors as described below: Individual customer accounts may be subject to the terms applicable to one or more of these platforms.
1) Automated Investing and advisory services are provided by SoFi Wealth LLC, an SEC-registered investment adviser (“SoFi Wealth“). Brokerage services are provided to SoFi Wealth LLC by SoFi Securities LLC.
2) Active Investing and brokerage services are provided by SoFi Securities LLC, Member FINRA (www.finra.org)/SIPC(www.sipc.org). Clearing and custody of all securities are provided by APEX Clearing Corporation.
For additional disclosures related to the SoFi Invest platforms described above please visit SoFi.com/legal.
Neither the Investment Advisor Representatives of SoFi Wealth, nor the Registered Representatives of SoFi Securities are compensated for the sale of any product or service sold through any SoFi Invest platform.

Options involve risks, including substantial risk of loss and the possibility an investor may lose the entire amount invested in a short period of time. Before an investor begins trading options they should familiarize themselves with the Characteristics and Risks of Standardized Options . Tax considerations with options transactions are unique, investors should consult with their tax advisor to understand the impact to their taxes.
Disclaimer: The projections or other information regarding the likelihood of various investment outcomes are hypothetical in nature, do not reflect actual investment results, and are not guarantees of future results.
Financial Tips & Strategies: The tips provided on this website are of a general nature and do not take into account your specific objectives, financial situation, and needs. You should always consider their appropriateness given your own circumstances.

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Investing in Movies and the Film Industry

Investors who are film buffs have a number of avenues for investing in movies and the film industry, including buying stock in entertainment companies, crowdfunding individual movie projects, and more. It’s important to keep in mind that while Hollywood is seemingly all glitz and glamour, many films are financial failures, which can hurt an investor’s bottom line.

Investing in film is considered a type of alternative investment — similar to real estate, commodities, collectibles, and such — because these investments fall outside the realm of traditional stock and bond markets. Film investments, like other alts, can offer some portfolio diversification, but also come with specific risk factors.

Note that SoFi does not currently offer film-related investments, but offers alternative funds that provide access to commodities, real estate, hedge funds, venture capital, and more.

Key Points

•   Investing in the film industry can be done through stocks, crowdfunding, film funds, and other options.

•   Investing in film is a type of alternative investment strategy. Alts typically offer low correlation with traditional stock and bond markets, and can be risky.

•   Unique risks include box office volatility, production delays, cost overruns, distribution issues, and legal disputes.

•   Potential rewards include industry growth, portfolio diversification, and owning a passion investment.

•   Due diligence is crucial for assessing project success and mitigating risks.

•   Tax incentives for film production vary by state, and may benefit production companies and studios.

Ways to Invest in Movies

There are a few primary methods for investing in movies and the entertainment industry, including buying stocks or equity in production companies, investing via crowdfunding platforms to support specific projects, or investing in film funds that help budding filmmakers gain traction in the industry.

While investing in stocks of public film companies, or companies that produce equipment or technology relating to film production, would fall under the umbrella of traditional investing, crowdfunding and film funds would generally be considered alternative investments.

Recommended: Alt Investment Guide

Alternative Investments

As noted, alternative investments fall outside traditional markets. Alts include tangible assets like commodities, real estate, art and antiques, as well as other collectibles (e.g. books, toys, comics) and many other types of investments.

While they’re generally high risk, alts can offer potential upsides: e.g., higher returns compared to stocks and bonds, and sometimes the opportunity to earn passive income. That said, alternative strategies are typically illiquid, not well regulated, and lack transparency.

For investors interested in a wider range of opportunities — or seeking diversification — understanding the definition of alternative assets can offer some options.

Alternative investments,
now for the rest of us.

Start trading funds that include commodities, private credit, real estate, venture capital, and more.


Film Production Companies

Perhaps the easiest way for many investors to make an initial investment in the movie industry is to buy stocks of film production companies, or those that support the industry. This allows investors to directly own a piece of the companies that are producing movies and TV shows, and more.

Many, if not most large studios are publicly traded. And it may be possible to invest in private companies, although those types of investments require accredited investors.

Further, investors could also consider investing in larger companies that own movie production studios or capabilities — think companies like Disney or Amazon, which are active in the entertainment industry but also have other arms that drive revenue.

It’s also possible to invest in movie theater chains, which can also help investors gain exposure to the industry.

Note, of course, that investing in stocks of any type carries with it numerous risks, and that investing in the entertainment industry, specifically, can have its own risks.

Crowdfunding Platforms

Another relatively low-key way for investors to gain exposure to the filmmaking industry is via one of the crowdfunding platforms, which can allow you to invest in specific film projects. For instance, if there’s a movie you really want to see produced, the producers might solicit investment on a crowdfunding platform to generate the capital to get it made. And investors could, in that hypothetical scenario, invest in the project.

Crowdfunding platforms can be very niche, too, aiming to fund films or projects within specific genres. There are multitudes of crowdfunding platforms out there, each with its own terms. Investors should carefully vet the platform, as well as the project they might invest in, to assess factors such as:

•   How long your money might be locked up

•   Repayment terms

•   Percentage of profits

•   Fees

•   Legal or contractual restrictions

Investors should be aware that crowdfunding projects are typically very risky, and that there’s a good chance you will see little return for your money, if you see any at all. Unless your investment is seeding the next hit film franchise, it’s unlikely that these types of investments will generate a notable rate of return.

Recommended: What Is Portfolio Diversification?

Film Funds and Slates

Another potential avenue for investing in the film industry is through film funds or slate financing.

Slate financing is relatively common in the industry, and involves a studio co-partnering with a third-party entity to get investors to finance multiple films at once — a “slate” of projects. It’s effective for studios, and potentially for investors, as a method of risk diversification, and may help the studio to potentially lower production costs.

But slate financing is typically done through a third-party or private equity fund, which raises money from investors. Investors in that fund are then entitled to a portion of the returns generated by the movies that are produced, assuming there is any cash to divvy up.

In some ways, it’s a type of pooled investment strategy, but the stakes are much higher, retail investors may not qualify for slate investments, and there are more mechanics and risks at play when it comes to private equity and hedge funds.

LIke crowdfunding, there are platforms out there that allow investors to invest in film slates — an internet search will likely lead you to several of them.

💡 Quick Tip: Before opening an investment account, know your investment objectives, time horizon, and risk tolerance. These fundamentals will help keep your strategy on track and with the aim of meeting your goals.

Evaluating Potential Movie Investments

As discussed, investing in movies or film projects is different from investing in other sectors, like technology or consumer goods. There are a lot of variables in the mix, and each project is different. Unless investors are buying stocks in film studios, production companies, or other firms involved in the movie industry, there are many factors to evaluate before putting up your money.

When investing in individual film projects, it’s important to do some due diligence and research who is involved. For instance, if you’re thinking of investing in a film project helmed by a certain producer or director, it can be a good idea to consider their past productions, their reputation, and their track record at the box office. Also, if you know what talent or actors are involved, that can help, too. There’s also the writing and script to consider.

Further, does the film have broad appeal? Or could it be too niche to appeal to a broad market, and potentially limit its earnings? Assessing the pros and cons, as well as getting to know industry insiders and experts, can help investors expand their knowledge of this industry.

And remember, just because a film may lack A-list talent or a superstar director doesn’t mean it won’t be successful. There have been numerous small-budget films with no-name actors that have become profitable. But those are very few and far between.

Recommended: A Closer Look at ETFs vs Mutual Funds

Risks and Rewards of Film Investing

As noted, while a film always has a chance of becoming a box office hit — or later in its life cycle, a cult favorite that earns a lot of money through post-box-office sales — there are some significant risks involved in investing in movies. If you plan on investing in studio stocks, the usual stock market risks apply, plus the risks associated with the filmmaking industry specifically.

Risks of Investing in the Film Industry

But when it comes to investing in films, some of the individual risks that may be unique to the industry include box office sales (ticket sales can fall short of projections), production delays and cost overruns, distribution issues, and even risks related to legal or contractual disputes.

Similar to other kinds of alternatives, there are liquidity risks, the potential for volatility, and industry and legal issues that can impact profitability.

Rewards of Investing in the Film Industry

Of course, for some people investing in film can be rewarding. People love movies, and in the last 10 years the industry has seen growth on the heels of big-budget blockbusters and streaming services that produce original movies.

Films also don’t necessarily correlate to the stock market, which means they may serve as a method for diversifying a portfolio. Finally, they may be a sort of passion-investment for some investors, who want a chance to capture some of the magic of Hollywood in their portfolios.

Tax Incentives and Other Considerations

Taxes play a big role in film production, both for the project and for investors who may see a profit from their investments.

Utilizing Tax Breaks

One factor that can help support a film’s revenue strategy is when producers take advantage of tax incentives. Many states in the U.S. offer tax breaks for films in the form of tax credits and rebates and other types of tax credits.

There are numerous rules and restrictions that a film project must adhere to in order to qualify for these tax breaks. Investors who want to commit to a specific project may want to investigate the production’s tax strategy.

How Profits Might Be Taxed

Unlike investing in traditional securities, which typically fall under capital gains tax or ordinary income tax rules, per the IRS, the returns from different types of alts can receive different tax treatment.

This may be the case, even when investing in these alts via a mutual fund or exchange-traded fund (ETF).

When investing in alts, it’s wise to involve a professional to help address the tax-planning side of the equation.

The Takeaway

Investing in movies and the film industry can offer a way for investors to add diversification to their portfolios. There are numerous ways to invest in the film industry, and that includes buying stocks related to studios or production companies, using crowdfunding platforms to support specific film projects, and more. Investors would do well, however, to consider the specific risks involved with filmmaking and the entertainment industry, which may differ from other industries and sectors.

Ready to expand your portfolio's growth potential? Alternative investments, traditionally available to high-net-worth individuals, are accessible to everyday investors on SoFi's easy-to-use platform. Investments in commodities, real estate, venture capital, and more are now within reach. Alternative investments can be high risk, so it's important to consider your portfolio goals and risk tolerance to determine if they're right for you.

Invest in alts to take your portfolio beyond stocks and bonds.

FAQ

Can I invest in Hollywood movies as an individual?

Yes, it’s possible to invest in the film industry and even specific film projects as an individual. There are crowdfunding platforms that may allow investors to do so, and for private equity investors, slate investing opportunities offered through similar platforms that can allow investors exposure to specific projects.

What’s the average return on investment for movies?

It’s difficult to zero in on an average return on investment for movies, as it would depend on the specific type of investment (stocks versus investing in a specific project, for example), and myriad other factors such as where and when a film was released, and more.

Are there tax benefits to invest in films?

There may be tax benefits and credits associated with film productions, which vary from state to state, and typically benefit production companies and studios, not individual investors.


Photo credit: iStock/Massonstock

SoFi Invest®

INVESTMENTS ARE NOT FDIC INSURED • ARE NOT BANK GUARANTEED • MAY LOSE VALUE

SoFi Invest encompasses two distinct companies, with various products and services offered to investors as described below: Individual customer accounts may be subject to the terms applicable to one or more of these platforms.
1) Automated Investing and advisory services are provided by SoFi Wealth LLC, an SEC-registered investment adviser (“SoFi Wealth“). Brokerage services are provided to SoFi Wealth LLC by SoFi Securities LLC.
2) Active Investing and brokerage services are provided by SoFi Securities LLC, Member FINRA (www.finra.org)/SIPC(www.sipc.org). Clearing and custody of all securities are provided by APEX Clearing Corporation.
For additional disclosures related to the SoFi Invest platforms described above please visit SoFi.com/legal.
Neither the Investment Advisor Representatives of SoFi Wealth, nor the Registered Representatives of SoFi Securities are compensated for the sale of any product or service sold through any SoFi Invest platform.


An investor should consider the investment objectives, risks, charges, and expenses of the Fund carefully before investing. This and other important information are contained in the Fund’s prospectus. For a current prospectus, please click the Prospectus link on the Fund’s respective page. The prospectus should be read carefully prior to investing.
Alternative investments, including funds that invest in alternative investments, are risky and may not be suitable for all investors. Alternative investments often employ leveraging and other speculative practices that increase an investor's risk of loss to include complete loss of investment, often charge high fees, and can be highly illiquid and volatile. Alternative investments may lack diversification, involve complex tax structures and have delays in reporting important tax information. Registered and unregistered alternative investments are not subject to the same regulatory requirements as mutual funds.
Please note that Interval Funds are illiquid instruments, hence the ability to trade on your timeline may be restricted. Investors should review the fee schedule for Interval Funds via the prospectus.



Investment Risk: Diversification can help reduce some investment risk. It cannot guarantee profit, or fully protect in a down market.

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.

Exchange Traded Funds (ETFs): Investors should carefully consider the information contained in the prospectus, which contains the Fund’s investment objectives, risks, charges, expenses, and other relevant information. You may obtain a prospectus from the Fund company’s website or by email customer service at https://sofi.app.link/investchat. Please read the prospectus carefully prior to investing.
Shares of ETFs must be bought and sold at market price, which can vary significantly from the Fund’s net asset value (NAV). Investment returns are subject to market volatility and shares may be worth more or less their original value when redeemed. The diversification of an ETF will not protect against loss. An ETF may not achieve its stated investment objective. Rebalancing and other activities within the fund may be subject to tax consequences.

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.

Disclaimer: The projections or other information regarding the likelihood of various investment outcomes are hypothetical in nature, do not reflect actual investment results, and are not guarantees of future results.

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What Are Mortgagors, What Do They Do, and How Do They Differ From Mortgagees?

What Are Mortgagors, What Do They Do, and How Do They Differ From Mortgagees?

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

The Function of a Mortgagor

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

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

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


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

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

Questions? Call (888)-541-0398.


How a Mortgagor Gets a Mortgage Loan

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

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

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

Contractual Obligations of Mortgagors

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

Equity of Redemption

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

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

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

Rights of Mortgagors

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


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

Mortgagors vs Mortgagees

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

Mortgagor

Mortgagee

Makes monthly payments Receives payments
Meet all terms of the mortgage Sets loan terms, including length of loan, payment due dates, and interest rate, and communicates them clearly
When the loan is paid in full, gets the deed Can seize property if mortgagor stops paying

The Takeaway

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

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


SoFi Mortgages: simple, smart, and so affordable.


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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.


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


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

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

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What Is a Jumbo Loan & When Should You Get One?

A jumbo loan is a home mortgage loan that exceeds maximum dollar limits set by the Federal Housing Finance Agency (FHFA). Loans that fall within the limit are called conforming loans. Loans that exceed them are jumbo loans.

Jumbo mortgages may be needed by buyers in areas where housing is expensive, and they’re also popular among lovers of high-end homes, investors, and vacation home seekers.

What Is a Jumbo Loan?

To understand jumbo home loans, it first helps to understand the function of Freddie Mac and Fannie Mae. Neither government-sponsored enterprise actually creates mortgages; they purchase them from lenders and repackage them into mortgage-backed securities for investors, giving lenders needed liquidity.

Each year the FHFA sets a maximum value for loans that Freddie and Fannie will buy from lenders — the so-called conforming loans.

Jumbo Loans vs Conforming Loans

Because jumbo home loans don’t meet Freddie and Fannie’s criteria for acquisition, they are referred to as nonconforming loans. Nonconforming, or jumbo, loans usually have stricter requirements because they carry a higher risk for the lender.

Jumbo Loan Limits

So how large does a loan have to be to be considered jumbo? In most counties, the conforming loan limits for 2023 are:

•  $726,200 for a single-family home

•  $929,850 for a two-unit property

•  $1,123,900 for a three-unit property

•  $1,396,800 for a four-unit property

The limit is higher in pricey areas. For 2023, the conforming loan limits in those areas are:

•  $1,089,300 for one unit

•  $1,394,775 for two units

•  $1,685,850 for three units

•  $2,095,200 for four units

Given rising home values in many cities, a jumbo loan may be necessary to buy a home. Teton County, Wyoming, for instance, has an average home value of $1,624,087 and a conforming loan limit of $1,089,300.

Recommended: The Cost of Living By State

Qualifying for a Jumbo Loan

Approval for a jumbo mortgage loan depends on factors such as your income, debt, savings, credit history, employment status, and the property you intend to buy. The standards can be tougher for jumbo loans than conforming loans.

The lender may be underwriting the loan manually, meaning it’s likely to require much more detailed financial documentation — especially since standards grew more stringent after the 2007 housing market implosion and during the pandemic.

Lenders generally set their own terms for a jumbo mortgage, and the landscape for loan requirements is always changing, but here are a few examples of potential heightened requirements for jumbo loans.

•  Your debt-to-income (DTI) ratio. This ratio compares your total monthly debt payments and your gross monthly income. The figure helps lenders understand how much disposable income you have and whether they can feel confident you’ll be able to afford adding a new loan to the mix.

To qualify for most mortgages, you need a DTI ratio no higher than 43%. In certain loan scenarios, lenders sometimes want to see an even lower DTI ratio for a jumbo loan, or they may counter with less favorable loan terms for a higher DTI.

•  Your credit score. This number, which ranges from 300 to 850, helps lenders get a snapshot of your credit history. The score is based on your payment history, the percentage of available credit you’re using, how often you open and close accounts such as credit cards, and the average age of your accounts.

To qualify for a jumbo loan, some lenders require a minimum score of 700 to 740 for a primary home, or up to 760 for other property types. Keep in mind that a lower score doesn’t mean you won’t be able to get a jumbo loan. The decision depends on the lender and other factors, such as the loan program requirements, your debt, down payment amount, and reserves.

•  Down payment. Conforming mortgages generally require a 20% down payment if you want to avoid paying private mortgage insurance (PMI), which helps protect the lender from the risk of default.

Historically, some lenders required even higher down payments for jumbo mortgages, but that’s not necessarily the case anymore. Typically, you’ll need to put at least 20% down, although there are exceptions.

A VA loan can be used for jumbo loans. The Department of Veterans Affairs will insure the part of the loan that falls under conforming loan limits. The down payment requirement is based on the portion of the jumbo loan that’s above the conforming loan limit. The loan is available from some lenders with nothing down and no PMI. VA loans have a one-time “funding fee,” though, a percentage of the amount being borrowed.

•  Your savings. Jumbo loan programs often require mortgage reserves, housing costs borrowers can cover with their savings. The number of months of PITI house payments (principal, interest, taxes, insurance), plus any PMI or homeowner association fees, needed in reserves after loan closing depends on many factors. For a jumbo loan, some lenders may require reserves of three to 24 months of housing payments.

You don’t necessarily need to have all the money in cash. Part of mortgage reserves can take the form of a 401(k), stock portfolios, mutual funds, money market accounts, and simplified employee pension accounts.

Also, depending on the loan program, a lender may be comfortable with lower cash reserves if you have a high credit score, low DTI ratio, a high down payment, or some combination of these things.

•  Documentation. Lenders want a complete financial picture for any potential borrower, and jumbo loan seekers are no exception. Most lenders operate under the “ability to repay” rule, which means they must make a reasonable, good-faith determination of the consumer’s ability to repay the loan according to their terms. Applicants should expect lenders to vet their creditworthiness, income, and assets.

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

Questions? Call (888)-541-0398.


Jumbo Loan Rates

You might assume that interest rates for jumbo loans are higher than for conforming loans since the lender is putting more money on the line.

But jumbo mortgage rates fluctuate with market conditions. Jumbo mortgage rates can be similar to those of other mortgages, but sometimes they are lower.

Because the absolute dollar figure of the loan is higher than a conforming loan, it is reasonable to expect closing costs to be higher. Some closing costs are fixed, such as a loan processing fee, but others, such as title insurance, are tiered based on the purchase price or loan amount.

Pros and Cons of Jumbo Loans

Benefits

Because a jumbo loan is for an amount greater than a conforming loan, it gives you more options for ownership of homes that are otherwise cost-prohibitive. You can use a jumbo loan to purchase all kinds of residences, from your main home to a vacation getaway to an investment property.

Drawbacks

Due to their more stringent requirements, jumbo loans may be more accessible for borrowers with higher incomes, strong credit scores, modest DTI ratios, and plentiful reserves.

However, don’t assume that jumbo loans are just for the rich. Lenders offer these loans to borrowers with a wide variety of income levels and credit scores.

Lender requirements vary, so if you’re seeking a jumbo loan, you may want to shop around to see what terms and interest rates are available.

The most important factor, as with any loan, is that you are confident in your ability to make the mortgage payments in full and on time in the long term.

How to Qualify for a Jumbo Loan

To qualify for a jumbo loan, borrowers need to meet certain jumbo loan requirements. You’ll likely need to show a prospective lender two years of tax returns, pay stubs, and statements for bank and possibly investment accounts. The lender may require an appraisal of the property to ensure they are only lending what the home is worth.

Is a Jumbo Loan Right for You?

You’ll need to come up with a large down payment on a property that merits a jumbo loan, and some of your closing costs will be higher than for a conventional loan. But depending on where you wish to buy, the cost of the property, and the amount you wish to borrow, a jumbo loan may be your only choice for a home mortgage loan. It’s a particularly attractive option if you have good credit, a low DTI, and a robust savings account. And sometimes jumbo home loans actually have lower interest rates than other loans.

What About Refinancing a Jumbo Loan?

After you’ve gone through the mortgage and homebuying process, it could be helpful to have information about refinancing. Some borrowers choose to refinance in order to secure a lower interest rate or more preferable loan terms.

This could be worth considering if your personal situation or mortgage interest rates have improved.

Refinancing a jumbo mortgage to a lower rate could result in substantial savings. Since the initial sum is so large, even a change of just 1 percentage point could be impactful.

Refinancing could also result in improved loan terms. For example, if you have an adjustable-rate mortgage and worry about fluctuating rates, you could refinance the loan to a fixed-rate home loan.

Recommended: Guide to Buying, Selling, and Updating Your Home

Jumbo Loan Limits by State

The conforming loan limits set by the Federal Housing Finance Agency can vary based on the county where you are buying a home.

In most areas of the country, the conforming loan limit for a one-unit property increased to $726,200 in 2023 (the amount rises for multiunit properties). The chart below shows exceptions to the $726,200 limit by state and county.

State

County

2023 limit for a single unit

Alaska All $1,089,300
California Los Angeles County, San Benito, Santa Clara, Alameda, Contra Costa, Marin, Orange, San Francisco, San Mateo, Santa Cruz $1,089,300
California Napa $1,017,750
California Monterey $915,400
California San Diego $977,500
California Santa Barbara $805,000
California San Luis Obisbo $911,950
California Sonoma $861,350
California Ventura $948,750
California Yolo $763,600
Colorado Eagle $1,075,250
Colorado Garfield $948,750
Colorado Pitkin $948,750
Colorado San Miguel $862,500
Colorado Boulder $856,750
Florida Monroe $874,000
Guam All $1,089,300
Hawaii All $1,089,300
Idaho Teton $1,089,300
Maryland Calvert, Charles, Frederick, Montgomery, Prince George’s County $1,089,300
Massachusetts Dukes, Nantucket $1,089,300
Massachusetts Essex, Middlesex, Norfolk, Plymouth, Suffolk $828,000
New Hampshire Rockingham, Strafford $828,000
New Jersey Bergen, Essex, Hudson, Hunterdon, Middlesex, Monmouth, Morris, Ocean, Passaic, Somerset, Sussex, Union $1,089,300
New York Bronx, Kings, Nassau, New York, Putnam, Queens, Richmond, Rockland, Suffolk, Westchester $1,089,300
New York Dutchess, Orange $726,525
Pennsylvania Pike $1,089,300
Utah Summit, Wasatch $1,089,300
Utah Box Elder, Davis, Morgan, Weber $744,050
Virgin Islands All $1,089,300
Virginia Arlington, Clarke, Culpeper, Fairfax, Fauguier, Loudon, Madison, Prince William, Rappahannock, Spotsylvania, Stafford, Warren, Alexandria, Fairfax City, Falls Church City, Fredericksburg City, Manassas City, Manassas Park City $1,089,300
Washington King, Pierce, Snohomish $977,500
Washington D.C. District of Columbia $1,089,300
West Virginia Jefferson County $1,089,300
Wyoming Teton $1,089,300

Source: Federal Housing Finance Agency

The Takeaway

What’s the skinny on jumbo loans? They’re essential for buyers of more costly properties because they exceed government limits for conforming loans. Luxury-home buyers and house hunters in expensive counties may turn to these loans, but they’ll have to clear the higher hurdles involved.

If you’re interested in refinancing a jumbo mortgage at competitive rates, consider SoFi. You can prequalify online and put as little as 10% down.

With SoFi, you can see your new rate in just minutes.

FAQ

What are jumbo loan requirements?

Jumbo loans typically require a credit score of at least 700, a low DTI, and a down payment of at least 20%, although there are always exceptions.

What is the difference between a jumbo loan and a regular loan?

A jumbo loan is a home mortgage loan that exceeds maximum dollar limits set by the Federal Housing Finance Agency. Jumbo loans are typically used by buyers in regions with higher-priced housing but are also popular among luxury homebuyers and investors.



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.


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

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

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

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What's the Difference Between a Hard and Soft Credit Check?

What’s the Difference Between a Hard and Soft Credit Check?

The main difference between a soft vs. hard credit check is that each hard check can knock a few points off your credit score, whereas soft checks don’t affect your score. Both hard and soft checks pull the same financial data but for different purposes. Hard checks are typically done when you apply for a loan or credit card; soft checks are conducted for most other purposes, such as pre-screening for credit card offers.

It’s important for consumers to understand this difference because too many hard checks — also known as hard pulls and hard inquiries — can significantly lower your credit score. This in turn can hurt your chances of getting the best offers on credit cards and loans. Keep reading to learn more about credit checks and how to prevent unnecessary hard checks of your credit file.

What Is a Soft Credit Inquiry?

A soft inquiry is when a person or company accesses your credit as part of a background check. They will be able to look at:

•   The number and type of all your credit accounts

•   Credit card balances

•   Loan balances

•   Payment history for revolving credit (credit cards and home equity lines of credit)

•   Payment history for installment loans (auto loans, mortgages, student loans, and personal loans)

•   Accounts gone to collections

•   Tax liens and other public records

Soft inquiries are not used during loan or credit card applications, and do not require the consumer’s permission or involvement. Reasons for a soft check can include:

•   Employment pre-screening

•   Rental applications

•   Insurance evaluations

•   Pre-screening for financial offers by mail

•   Loan prequalification

•   Checking your own credit file

•   When you’re shopping personal loan interest rates or credit cards

Soft credit checks do not affect your credit score, no matter how often they take place. Some soft checks appear on your credit report, but not all — you may never find out they took place.

When they are listed, you might see language like “inquiries that do not affect your credit rating,” along with the name of the requester and the date of the inquiry. Only the consumer can see soft inquiries on their report; creditors cannot.

Recommended: Does Applying for Credit Cards Hurt Your Credit Score?

What Is a Hard Credit Inquiry?

A hard credit inquiry typically takes place when you apply for credit, such as loans or credit cards, and give permission for the lender or creditor to pull your credit file. As with a soft credit pull, the lender will look at the financial information listed above.

Each hard pull may lower your credit score — but typically by less than five points, according to FICO® Score. All hard inquiries appear on your credit report. While they stay there for about two years, they stop affecting your credit score after 12 months.

Not all loans require a hard credit inquiry — but consider that a red flag. Some small local lenders may offer short-term, high-interest, unsecured personal loans. Borrowers must show proof of income via a recent paycheck, but no credit check is required. The risks of these “payday loans” are so great that many states have outlawed them.

Avoiding Hard Credit Inquiries

Consumers should carefully consider if they really need new credit before applying for an account that requires a hard credit check.

For example, department stores and some chains like to entice you to apply for their store credit card by offering a generous discount on your purchase as you’re checking out. In that situation, ask yourself if it’s worth a credit score hit (albeit a small one).

Another way to minimize hard inquiries is to ask which type of credit check a company intends to run. If, for example, a cable company usually requires a hard credit inquiry to open an account, you might ask if a hard pull can be avoided. Other situations where there may be some flexibility include:

•   Rental applications

•   Leasing a car

•   New utility accounts

•   Requesting a higher credit limit on an existing account

Disputing Inaccurate Hard Inquiries

A good financial rule of thumb is to review your credit reports every year to check for common credit report errors and signs of identity theft. You can access your credit reports from the three consumer credit bureaus (Equifax, Experian, and TransUnion) for free at AnnualCreditReport.com.

To check for inaccurate hard inquiries, look for a section on your credit report with any of these labels:

•   Credit inquiries

•   Hard inquiries

•   Regular inquiries

•   Requests viewed by others

You can dispute hard inquiries and remove them from your credit reports under certain circumstances: if you didn’t apply for a new credit account, you didn’t give permission for the inquiry, or the inquiry was added by mistake.

That said, under federal law, certain organizations with a “specific, legitimate purpose” can access your credit file without written permission. They include:

•   Government agencies, usually in the context of licensing or benefits applications

•   Collection agencies

•   Insurance companies, when certain restrictions are met

•   Entities that have a court order, as in child support hearings

Even so, if you didn’t give permission for a hard credit pull, it’s worth filing a dispute to request that the credit check be removed from your report.

Consumers may dispute hard inquiries online through AnnualCreditReport.com, or by writing to the individual credit reporting agencies.

Hard Credit Checks and Your Credit Scores

As mentioned, hard inquiries appear on your credit report, and each hard pull may lower your credit score by five points or less. Here we’ll go into a bit more detail.

Why Hard Inquiries Matter

Multiple hard inquiries within a short time frame can do significant damage to your credit score. It could potentially be enough to move you from the Good credit range down to the merely Fair. Someone in a Fair credit range can pay substantially more over a lifetime in interest and fees than someone with a Good score or higher.

How Many Points Will a Hard Inquiry Cost You?

As noted above, each hard pull can lower your credit score by less than five points. One or two hard inquiries per year may not matter, especially if you’re not planning on applying for a loan.

If you’re rate shopping for a particular type of loan, such as a mortgage or auto loan, keep in mind that multiple hard credit checks within a specific period (often several weeks) for the same purpose are usually counted as one inquiry by credit scoring companies. However, this is not the case with hard pulls for credit card applications.

How Long Do Inquiries Stay On Your Credit?

Hard inquiries stay on your credit report for two years. While they’re on your credit report, they are visible to anyone who checks your credit. But their impact on your credit score typically lasts less than 12 months.

Soft inquiries may remain on your credit report for one or two years, but only you can see them.

Awarded Best Online Personal Loan by NerdWallet.
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The Takeaway

Soft credit inquiries do not affect a credit score, while hard credit inquiries may cost you a few points. In both cases, individuals or businesses pull information from your credit reports. Checking your own credit report counts as a soft pull, as do most other situations where the consumer hasn’t given written permission. Hard pulls are typically done only when you’re applying for a loan or new credit account.

Many lenders allow you to “prequalify” for a loan without running a hard credit check. This allows you to shop rates without risking any impact to your credit.

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

SoFi’s Personal Loan was named NerdWallet’s 2024 winner for Best Personal Loan overall.


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 .

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

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

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

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