Looking for a relatively affordable property? Let’s hit the town. For many buyers, a townhouse is the sweet spot in real estate. But what is a townhouse? It’s not a detached single-family home, but it isn’t a condo, either. Let’s see how townhomes stack up.
What is a Townhouse?
A townhouse, or townhome, is distinct among the different types of homes. It is defined as a single-family unit that has:
• Two or more floors
• A shared wall with at least one other home
• Ownership that differs from a condo: You own the inside and outside of your unit and the land it sits on, whereas a condo owner owns the interior of the condo
The meaning of the word townhouse can be traced back to 19th century England. The rich and royalty would have a large manor in the country but also a home “in town.” The definition has evolved over the years. A townhome doesn’t need to be a second home, and it doesn’t even need to be in the city. In some parts of the U.S., townhouses with a similar design and facade are also called row houses.
💡 Quick Tip: When house hunting, don’t forget to lock in your home mortgage loan rate so there are no surprises if your offer is accepted.
First-time homebuyers can
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with as little as 3% down.
Questions? Call (888)-541-0398.
Pros and Cons of a Townhouse
Townhouses come with a fair share of benefits, but like any home, it’s not one size fits all. Consider these pros and cons of buying a townhouse.
Pros
• Makes the most of space. As townhomes share a wall or two with neighbors, and are often in densely populated areas, they use space efficiently.
• Affordability. Because of their shared walls and space-saving layout, townhomes are often more affordable than single-family homes in the area.
• Independence, with less maintenance. Townhouses usually have less upkeep than single-family homes. There might be a small yard, and your own roof, to maintain.
• Lower property taxes. A townhome owner may pay less in property taxes than the owner of a standalone home.
• HOA perks. Some townhomes are part of homeowners associations. If amenities like a pool, gym, and maintenance of common areas and possibly your own little yard are a priority, a townhome with an HOA could be a good fit.
• Looser rules. The HOA rules may not be as strict as those for a condo.
Cons
• Limited landscape options. Townhouse lots are small. If you want space for landscaping, it’s unlikely you’ll find much with a townhouse.
• Uncreative exteriors. If the townhome is part of an HOA, the ability to decorate the exterior of the unit could be limited. Townhomes typically look very similar to their neighboring units as well, so standing out could be a no-no.
• Stairs, stairs, and more stairs. Townhomes have an efficient build for spaces where land is at a premium. That means building up, not out. A townhome may have three (or more) floors, meaning climbing stairs repeatedly.
• Less privacy. Townhouses have at least one “party wall,” or wall shared with another property. That could be a problem for buyers who prioritize peace and quiet if the neighbors are loud.
• Less appreciation. As a rule of thumb, townhomes don’t gain as much value as single-family homes do.
• HOA fees. If the community has an HOA, it will charge a monthly or quarterly fee to cover communal perks. The fees usually rise over time, and can be high at a complex full of amenities.
Finding a Townhouse
Finding a townhouse will depend on where a buyer is looking. Most commonly, they’re encountered in densely populated areas where land might be pricey and scarce. The search may be more restricted if a buyer wants to purchase a townhome in an HOA community. One place buyers typically won’t find townhomes is in rural or secluded areas. Land may be more affordable and plentiful, which means properties don’t need to be condensed.
💡 Quick Tip: Generally, the lower your debt-to-income ratio, the better loan terms you’ll be offered. One way to improve your ratio is to increase your income (hello, side hustle!). Another way is to consolidate your debt and lower your monthly debt payments.
Who Should Get a Townhouse?
A townhome might be the right option if the buyer:
• Isn’t interested in much maintenance. Maintaining your unit and your parcel of land will almost always be less intensive than maintaining a detached single-family home and yard. If there are HOA fees, they might include landscaping services.
• Is a first-time buyer. The lower cost and maintenance of a townhouse might be the right fit as a first-time homebuyer learns the ropes of homeownership and looks into homeowner resources.
• Is on a budget. Generally, a townhouse will cost less than a single-family home in the same area. Buyers could live in a desirable area without paying top dollar. (A calculator for mortgage payments helps buyers see the effect of different down payments.)
• Wants to live in an urban or suburban area. Because townhomes are built in areas where space is at a premium and the cost of living is high, a townhouse could be the right fit.
The Takeaway
With less maintenance (and potentially a lower price tag) than a detached single-family home, a townhome can be a great opportunity for buyers. Townhomes qualify for the same kind of mortgages that detached single-family homes do, and they require less exterior maintenance than a detached home. So there’s a lot to love about living in a townhouse.
Looking for an affordable option for a home mortgage loan? SoFi can help: We offer low down payments (as little as 3% - 5%*) with our competitive and flexible home mortgage loans. Plus, applying is extra convenient: It's online, with access to one-on-one help.
SoFi Mortgages: simple, smart, and so affordable.
FAQ
How is a townhouse different from a house?
The biggest difference between a townhouse and a detached single-family house is the shared walls. A townhome may have one or more “party walls” with the properties adjacent to it.
Do townhouses have backyards?
Some townhomes may have a small backyard or patio, but that’s not a requirement for a home to be considered a townhouse.
Can you get a loan to buy a townhouse?
Yes. Similar to purchasing a traditional single-family home, townhouse buyers can use a home loan to purchase the property.
Photo credit: iStock/JARAMA
SoFi Loan Products
SoFi loans are originated by SoFi Bank, N.A., NMLS #696891 (Member FDIC). For additional product-specific legal and licensing information, see SoFi.com/legal. Equal Housing Lender.
SoFi Mortgages
Terms, conditions, and state restrictions apply. Not all products are available in all states. See SoFi.com/eligibility-criteria for more information.
*SoFi requires Private Mortgage Insurance (PMI) for conforming home loans with a loan-to-value (LTV) ratio greater than 80%. As little as 3% down payments are for qualifying first-time homebuyers only. 5% minimum applies to other borrowers. Other loan types may require different fees or insurance (e.g., VA funding fee, FHA Mortgage Insurance Premiums, etc.). Loan requirements may vary depending on your down payment amount, and minimum down payment varies by loan type.
Financial Tips & Strategies: The tips provided on this website are of a general nature and do not take into account your specific objectives, financial situation, and needs. You should always consider their appropriateness given your own circumstances.
Better to buy or rent? The price-to-rent ratio is a reference point that can help gauge affordability in any city — especially for people on the move. More specifically, the price-to-rent ratio can be helpful when looking at a certain area and deciding whether to sink your life savings into a home, or pay a landlord and wait to buy.
Read on to see the home price-to-rent ratio in some of the biggest U.S. cities.
• The price-to-rent ratio is a measure of whether it’s more affordable to rent or buy a home in a particular city.
• It is calculated by dividing the median home price by the annual rent.
• A price-to-rent ratio below 18 suggests that buying is more affordable, while a ratio above 18 indicates renting may be more cost-effective.
• The price-to-rent ratio varies across cities, with some cities having ratios well above 18, in many cases above 25. Others come in at 18 and below.
• Factors such as housing market conditions and local economic and environmental factors may influence the price-to-rent ratio in different cities.
First, What Is the Price-to-Rent Ratio?
The price-to-rent ratio compares the median home price and the median annual rent in a given area. (You’ll remember that the median is the midpoint, where half the numbers are lower and half are higher.) To make sense of a city’s price-to-rent ratio, here’s a general idea of what the number suggests:
• A ratio of 1 to 15 typically indicates that it’s more favorable to buy than rent in a given community.
• A ratio of 16 to 20 indicates that it’s typically better to rent than buy.
• A ratio of 21 or more indicates that it’s much better to rent than buy.
As you can see, the ratios could be useful when considering whether to rent or buy. Investors also often look at the ratios before purchasing a rental property.
The numbers also may be used as indicators of impending housing bubbles. A substantial increase in the ratio could mean that renting is becoming a much more attractive option in that specific housing market.
The ratios may warp after wildfires or other natural disasters, which can cause housing shortages and migration of residents, as well as rent spikes. Research released in 2024 by the University of Georgia and the Brookings Institute demonstrated that a succession of environmental events can drive up local rents as much as 12% over a five-year subsequent period.
If you’re exploring different areas, it can be a good idea to estimate mortgage payments based on median home prices in the place where you hope to live. That way, you can determine if they’re a cost you can reasonably afford to add to your budget on a monthly basis.
Here are 52 popular metropolitan areas and their price-to-rent ratios. As of the third quarter of 2024, the median home sale price in the U.S. was $420,400, the Federal Reserve Bank of St. Louis reported.
Median sale price listed comes from Redfin as of the fourth quarter of 2024. Median rents listed come from the Zumper National Rent Report from January 2025, based on a one-bedroom apartment. Remember, as home prices and rents shift—over time or suddenly—so do the ratios.
1. San Francisco
It’s no secret that San Francisco housing prices are way up there. The median sale price was $1,350,000, and the median rent for a one-bedroom apartment was $3,160 per month (or $37,920 a year). That gives the hilly city a price-to-rent ratio of nearly 36.
2. San Jose, CA
Golden State housing continues its pricey reputation in San Jose. The median sale price here was $1,455,000, and the city had a median one-bedroom rent of $32,640 annually ($2,720 a month), leading to a price-to-rent ratio of 45.
3. Seattle
The Emerald City had a median sale price of $835,000. Meanwhile, the median annual rent for a one-bedroom was $23,400, for a price-to-rent ratio of around 36.
4. Los Angeles
A median sale price of $1,010,000 and a median one-bedroom rent of $28,800 a year ($2,400 a month) shines a Hollywood light on renting, with a rent-to-price ratio of 35.
5. Long Beach, CA
With a median home price of $855,000 and one-bedroom rent averaging $1,850 a month, Long Beach earned a ratio of 39.
6. Honolulu
The ratio in the capital of Hawaii is a steamy 22, with a $570,000 median sale price and a median rent of $26,400 per year.
7. Oakland, CA
Oakland, across the bay from San Francisco, had a median sale price of $802,500 and median rent of $24,000 a year ($2,000 a month). This earned the location a price-to-rent ratio of 33.
8. Austin, Texas
A hotbed for artists, musicians, and techies, Austin had a price-to-rent ratio of nearly 31. This was thanks to a median sale price of $550,000 and median annual rent of $18,000.
9. San Diego
Hop back to Southern California beaches and “America’s Finest City,” where a median sale price of $931,000 and median rent of $28,800 a year led to a ratio of almost 32.
10. New York, N.Y.
The median sale price here was $807,720 and median rent was $51,600 a year ($4,300 a month), which equates to a price-to-rent ratio of roughly 16.
Of course, the city is composed of five boroughs: the Bronx, Brooklyn, Manhattan, Queens, and Staten Island, and it’s probable that most of the sales under $800,000 were not in Manhattan (where the median sale price was $1.2 million) or Brooklyn (where the median was $999,000). Just looking at Manhattan using the same annual average rent figure, the ratio looks more like 23.
11. Boston
With a median sale price of $845,000 and median rent of $34,080 a year, Beantown had a price-to-rent ratio of nearly 25.
12. Portland, OR
The midpoint of buying here of late was $490,000, compared with median rent of $17,400 per year, for a price-to-rent ratio of just over 28.
13. Tucson, AZ
In Tucson, the median sale price of $340,000 and median annual rent of $10,920 came out to a ratio of 31.
14. Denver
The Mile High City logged a renter-leaning ratio of 28, thanks to a median sale price of $586,000 and median annual rent cost of $20,760.
15. Colorado Springs, CO
With a median sale price of $465,000 and annual rent of $14,880, this city at the eastern foot of the Rocky Mountains had a recent price-to-rent ratio of 31.
16. Albuquerque, NM
In the Southwest, Albuquerque heated up to a ratio of almost 31, based on a median home sale price of $350,000 and annual rent of $11,400.
17. Washington, DC
The nation’s capital is another pushpin on the map with a high cost of living. The median sale price of $699,000 compares with median rent of $27,600 annually ($2,300 a month), translating to a ratio of 25.
18. Mesa, AZ
With a median sale price of $463,000 and median annual rent of $14,640, Mesa has a price-to-rent ratio of nearly 32.
19. Las Vegas
Sin City has reached a ratio of almost 31, based on a $444,000 median sale price vs. $14,400 in annual rent.
20. Phoenix
Phoenix’s price-to-rent ratio has revved up to 29, with a median home sale price of $450,000 and $15,360 in rent.
21. Raleigh, NC
North Carolina’s capital, the City of Oaks, logs a ratio of 30. This is based on a $460,000 median home sale price and median annual rent of $15,000.
22. Tulsa, OK
Tulsa had a price-to-rent ratio of 19, with median annual rent of $12,000 and home sale prices at a median of $228,000.
23. Dallas
This sprawling city had a recent median sale price of $410,000 and median annual rent of $17,760, leading to a price-to-rent ratio of 23.
24. Sacramento, CA
This Northern California city had a recent median sale price of $485,000 and median annual rent of $18,120, for a price-to-rent ratio of nearly 27.
25. Fresno, CA
Fresno makes the list with a price-to-rent ratio of 22, based on median home sale prices of $374,750 and median annual rent of $16,680.
26. Oklahoma City
The capital of Oklahoma had one of the lower price-to-rent ratios until recent home price spikes. It logs a ratio of nearly 24 lately, based on a median sale price of $260,000 and median annual rent of $10,920.
27. Arlington, TX
Back to the Lone Star State, this city between Fort Worth and Dallas has a price-to-rent ratio of 24. This is thanks to a median sales price of $320,000 and median annual rent of $13,200.
28. San Antonio
This Texas city southwest of Austin had a median sale price of $251,750 and median annual rent of $12,840, resulting in a price-to-rent ratio of close to 20.
29. El Paso, TX
El Paso traded a low price-to-rent ratio for a higher one when home prices rose. It’s at a 24, based on recent figures of a median sale price of $254,970 and median rent at $10,560 a year.
30. Omaha, NE
With a median sale price of $277,000 and median annual rent of $13,920, Omaha has a lower home price-to-rent ratio than in recent years at 23.
31. Nashville, TN
The first Tennessee city on this list is the Music City, with a rising price-to-rent ratio of 23. Nashville has a median sale price of $455,000 and a median annual rent of $19,680 ($1,640 per month).
32. Virginia Beach, VA
The ratio here has nearly reached 20, based on a median home sale price of $376,000 and median rent of $19,200 per year.
33. Tampa, FL
This major Sunshine State city has a price-to-rent ratio of 23, based on a median home sale price of $450,000 and median annual rent of $19,320.
34. Jacksonville, FL
This east coast Florida city had a recent ratio of 22, based on a median sale price of $312,000 and median rent of $15,040 per year.
35. Charlotte, NC
Charlotte’s price-to-rent ratio of 23 arises from a median home sale price of $400,000 and median annual rent of $17,160.
36. Fort Worth, Texas
Panther City’s price-to-rent ratio has crept up to 22, based on a median home sale price of $345,000 and median rent of $15,720 per year.
37. Houston
Houston, we have a number: It’s a price-rent-ratio of 22. That’s based on a median sale price of $339,370 and median annual rent of $15,600.
38. Louisville, KY
Kentucky’s largest city has a median home sale price of $255,000 and median annual rent of $12,240. That leaves Louisville with a price-to-rent ratio of almost 21.
39. Columbus, OH
The only Ohio city on this list has a price-to-rent ratio of 19, due to a median sale price of $275,700 and median annual rent of $14,520.
40. Atlanta
Heading South, Atlanta has a median sale price of $400,000 and median annual rent of $19,080, for a price-to-rent ratio of 21.
41. Miami
Those looking to put down roots in this vibrant city will find a price-to-rent ratio of 20, based on a median home sale price of $635,000 and median rent of $32,280 annually.
42. Minneapolis
The Mini-Apple is sweeter on renting, with a ratio of 21. This is based on a median sale price of $344,000 and median annual rent of $16,200.
43. New Orleans
Next up is another charming southern city. New Orleans has a price-to-rent ratio of nearly 18, given a median sale price of $335,000 and median rent of $19,200 per year.
44. Kansas City, MO
In this Show-Me State city, a median home value of $275,000 and median annual rent of $13,560 equate to a price-to-rent ratio of 20.
45. Chicago
The Windy City’s almost 15 price-to-rent ratio is based on a $350,000 median home sale price and $23,760 median annual rent.
46. Memphis, TN
Memphis logs a price-to-rent ratio of 13, with a median home sale price of $170,000 and median annual rent of $12,960.
47. Indianapolis
The ratio in this capital city drifted down to 17, thanks to a median home sale price of $243,450 and median annual rent of $14,160.
48. Philadelphia
This major East Coast city had a recent median sale price of $260,000 and median annual rent of $18,600, for a price-to-rent ratio of 14.
49. Baltimore
Charm City had a recent median home sale price of $224,000 and median annual rent of $15,840, resulting in a price-to-rent ratio of 14.
50. Newark, NJ
Newark, anyone? The median sale price here is $510,000, with median rent at $1,750 a month (or $21,000 a year), leading to a ratio of 24.
51. Milwaukee
Milwaukee is hanging on as a city more favorable to homebuyers than renters, thanks to a price-to-rent ratio of 18. This Midwest city had a recent median sale price of $220,000 and median annual rent of $12,360.
52. Detroit
Detroit has seen a consistent rise in home sale prices, though the latest median sale price was a relatively low $97,200, compared with median annual rent of $12,600. This resulted in a price-to-rent ratio that is approaching 8.
If you don’t see your city on the list, rest assured that it’s possible to calculate price-to-rent ratio yourself. To do so, you’ll simply take the median home sale price in your area and divide it by median annual rent.
Here’s an example: Let’s say the median rent in a city is $3,000 a month, and the median sale price is $1 million. You’d divide $1 million by $36,000 ($3,000 per month multiplied by 12, the number of months in the year). The result is a price-to-rent ratio of nearly 28.
The Takeaway
The price-to-rent ratio lends insight into whether a city is more favorable to buyers or renters. Usually in a range of 1 to 21-plus, the ratio is useful to house hunters, renters, and investors who want to get the lay of the land.
No matter what your dream city’s price-to-rent ratio, looking at the listings for homes for rent and for sale will tell you a lot about the market. Who knows, you might even happen on just what you wanted at an accessible price.
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.
Photo credit: iStock/sl-f
Third-Party Brand Mentions: No brands, products, or companies mentioned are affiliated with SoFi, nor do they endorse or sponsor this article. Third-party trademarks referenced herein are property of their respective owners.
Financial Tips & Strategies: The tips provided on this website are of a general nature and do not take into account your specific objectives, financial situation, and needs. You should always consider their appropriateness given your own circumstances.
SoFi 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.
Some mortgage servicers allow borrowers with unforeseen financial troubles to trim or pause mortgage payments short term through a process called mortgage forbearance. So if a homeowner hits a snag and can’t pay, a sudden hardship — such as temporary unemployment or health issues — doesn’t necessarily lead to credit damage or foreclosure.
The goal of forbearance is to give the borrower a chance to become more financially stable. If this sounds like something you need — or if you simply want to read up on forbearance so you’ll be prepared if the unexpected happens — this guide is for you.
Identifying Your Loan Servicer
If you want to ask if mortgage forbearance is an option, you’ll first need to determine your mortgage servicer, which may not be the lender that originally provided the loan. The name of the servicer typically appears on the bill that arrives in the mail or on the website where mortgage payments are made. You could also try looking up your servicer on the MERS® website. Those who think they may have Fannie Mae or Freddie Mac-owned loans can check online as well.
💡 Quick Tip: Have you improved your credit score since you made your home purchase? Home loan refinancing with SoFi could get you a competitive interest rate with lower payments.
First-time homebuyers can
prequalify for a SoFi mortgage loan,
with as little as 3% down.
Questions? Call (888)-541-0398.
What Does Mortgage Forbearance Really Mean and How Does It Work?
During forbearance, interest is not paid but accrues and is later added to the loan balance. All suspended payments also will need to be paid back. If rough seas are rising around you, it doesn’t make much sense to wait to ask for a lifeline. Similarly, if you’re experiencing a hardship, before missing even one mortgage payment, it would be smart to contact your servicer to ask about options, go over the details, and formalize an agreement.
It’s important to ask whether skipped payments are expected to be paid in a lump sum when the forbearance ends, paid in installments, or added to the end of the loan term. Forbearance is often only granted after a financial review to gauge the likelihood that you can resume regular payments at the end of the forbearance period.
Do You Have to Pay Extra Interest for Forbearance?
Typically no. The interest rate and amount of interest follow the loan agreement.
The loan interest might change only if the lender extends the loan term or increases the loan interest rate.
Pros and Cons of Mortgage Forbearance
Pros
Cons
It’s a chance to avoid foreclosure
Often higher monthly payments after forbearance
Usually has no impact on credit
You normally have to prove hardship
Good for short-term hardships
Interest accrues
Missed payments must be repaid
Federally Backed and Private Mortgage Options
Thanks to the CARES Act, both conventional and government-backed mortgages were eligible for forbearance due to Covid-related hardships. But these programs wound down in the fall of 2023. This means forbearance programs are specific to your lender, as they were prior to the pandemic. So whether you have a conventional home loan or government-insured home loan (an FHA, USDA, or VA loan), if you’re experiencing hardship it’s important to contact your loan servicer as soon as possible to discuss options and the exact terms.
Lenders typically ask for documentation to prove the hardship, including current monthly income and expenses. They also will want to know whether your hardship is expected to last six months or less (short term) or 12 months (long term). Depending on the lender, you may need to call to discuss options or might be able to start the forbearance request process online.
Coming Out of Forbearance
When a forbearance period ends, how will the amount that was paused be repaid? The answer depends on the lender and type of loan.
• It’s possible that the sum unpaid during the forbearance period will be due in full once a loan is out of forbearance.
• That is not true with a Fannie Mae, Freddie Mac, FHA, USDA, or VA loan. With these loans, the amount that was suspended will not be required to be paid back in a lump sum.
• Other lenders may extend the loan period, adding the forbearance dollars to the end of the loan.
• Yet other lenders may raise monthly payments once a loan is out of forbearance to make up the amount that wasn’t being paid during the mortgage forbearance period.
Deferred Mortgage Payments and Credit Scores
Even one missed mortgage payment will dent your credit scores, and late payments will stay on your credit history for seven years. Forbearance, on the other hand, usually does not show up on credit reports as negative activity.
Alternatives to Mortgage Forbearance
For those who can’t afford to pay their mortgage, mortgage relief options like these may be available.
Mortgage Loan Modification
If you cannot refinance your loan, loan modification is an option. Loan modification changes the original terms of your mortgage long term or permanently. The point is to make your payments more manageable, usually with a lower interest rate, a longer loan term, or both. If the length of the loan is extended, you’ll probably pay less per month than before but pay more interest over the life of the loan.
When reaching out to your loan servicer to discuss loan modification, it’s wise to ask about any fees for the modification; what the new repayment term, rate, and payments will be; and whether the modification is temporary or permanent. As with forbearance, evidence of financial hardship and a letter will be required.
Mortgage Refinancing
Refinancing a mortgage is altogether different from modifying a home loan. When refinancing a mortgage loan, you’re applying for a brand-new loan that would then be used to pay off outstanding home debt. You might qualify for a lower interest rate or get a longer loan term. Closing costs apply.
If you’re struggling financially, it might be difficult to qualify for refinancing, but it doesn’t hurt to get prequalified, which takes mere minutes. You may find that you’re eligible for a refinance during or after forbearance, according to Fannie Mae. (If you do this, make sure you seek mortgage prequalification vs. preapproval and that you understand the difference.)
Draw on Savings
In an emergency, you may want to consider tapping your emergency fund or retirement account. If you have a Roth IRA, remember that you can withdraw contributions at any time tax- and penalty-free. (If you withdraw the earnings on the account, however, you may be subject to taxes, a 10% penalty, or both.)
You may qualify for a hardship distribution from a 401(k) and permanently withdraw money if your plan allows it. Your employer will likely deduct 20% upfront for taxes. The 10% penalty tax is waived if the hardship withdrawal is for a handful of specific reasons.
Sell Your Home
If the weight of mortgage payments becomes too much, you could sell your house and pay off the mortgage.
If the proceeds would fall short, an option is a short sale. Your lender decides whether or not to OK the sale or whether to work out a plan, like allowing you to make interest-only payments for a set amount of time or extending the loan term.
Declare Bankruptcy
Another option to stave off foreclosure is filing for Chapter 13 bankruptcy. Chapter 13 allows a borrower up to five years to pay missed mortgage payments. So instead of having to make one giant payment, if that’s what is being asked for, a homeowner could break up the payments over 60 months.
If, for example, a homeowner accepted a 12-month forbearance on monthly payments of $2,400, a Chapter 13 plan could allow the $28,800 in arrears to be paid over 60 months. Other debts can also be restructured and possibly discharged under Chapter 13.
💡 Quick Tip: Generally, the lower your debt-to-income ratio, the better loan terms you’ll be offered. One way to improve your ratio is to increase your income (hello, side hustle!). Another way is to consolidate your debt and lower your monthly debt payments.
The Takeaway
Mortgage forbearance allows paused or reduced payments for borrowers experiencing a sudden hardship that is expected to last six months or less. It’s one way to ward off foreclosure. It’s not the only way, however, so it’s worth consider forbearance as well as other options such as a loan modification or mortgage refinance.
SoFi can help you save money when you refinance your mortgage. Plus, we make sure the process is as stress-free and transparent as possible. SoFi offers competitive fixed rates on a traditional mortgage refinance or cash-out refinance.
A new mortgage refinance could be a game changer for your finances.
FAQ
Does forbearance hurt credit?
No, if you abide by all the terms of the agreement. Skipped payments during a forbearance period are typically not reported to the credit bureaus.
Is mortgage forbearance a good idea?
If the financial hardship is short term, forbearance could provide a welcome respite until you get back on your feet. And it sure beats foreclosure.
Does forbearance affect getting a new mortgage?
It depends. For Fannie Mae- and Freddie Mac-backed loans, if you paid everything back in a lump sum after forbearance, you can proceed. If not, you will need to make three consecutive payments under your repayment plan or payment deferral option.
FHA loans have a waiting period that varies by loan type if you’ve missed any payment in forbearance, even if you paid everything back in a lump sum.
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.
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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.
Historically speaking, mortgage rates have remained relatively low since the Great Recession, with some fluctuation at times due to market conditions. As a result, a generation of homebuyers has become accustomed to a low 30-year fixed-rate mortgage.
But with mortgage rates on the rise, it can put a sour taste in the mouths of people trying to join the ranks of homeowners in the country. They may be thinking that they missed an opportunity to buy a home. However, it’s important to look at the history of mortgages and mortgage rates to put the current conditions into context.
• Historical mortgage rates have been relatively low since the Great Recession, encouraging a generation of homebuyers.
• The Federal Housing Administration initiated modern mortgage lending in the U.S. during the 1930s.
• Mortgage rates peaked at 18.63% in October 1981 due to tight monetary policies.
• Post-2007, rates dropped significantly, influenced by the Federal Reserve’s efforts to stimulate the economy.
• Recent trends show a rise in mortgage rates, reaching 7.79% in October 2023 before slightly decreasing.
The History of Mortgage Rates
The modern history of mortgage lending in the U.S. began in the 1930s with the creation of the Federal Housing Administration. From the 1930s through the 1960s, a combination of government policy and demographic changes made owning a home a normal part of American life. During this time, the 30-year fixed-rate mortgage became the standard for home mortgage loans.
When discussing the fluctuation of mortgage rate trends, analysts usually refer to the average 30-year fixed-rate mortgage. Here’s a look at the trend of these mortgage rates since the 1970s.
The 1970s
Throughout the 1970s, mortgage rates rose steadily, moving from the 7% range into the 13% range. This uptick in rates was due, in part, to the Arab oil embargo, which significantly reduced the oil supply and sent the U.S. into a recession with high inflation — known as stagflation.
As a result, Federal Reserve Chairman Paul Volcker made a bold change in monetary policy by the end of the decade, raising the federal funds rate to combat inflation. Though the Federal Reserve doesn’t directly set mortgage rates, its monetary policy decisions can still impact many financial products, including mortgages.
The 1980s
The average 30-year fixed-rate mortgage hit an all-time high in October 1981 when the rates reached 18.63%. The Federal Reserve’s tight monetary policy affected this high borrowing cost and put the economy into a recession. However, inflation was under control by the end of the 1980s, and the economy recovered; mortgage rates moved down to around 10%.
The 1990s and 2000s
Mortgage rates continued a downward trend throughout the 1990s, ending the decade at around 8%. At the same time, the homeownership rate in the U.S. increased, rising from 63.9% in 1994 to 67.1% in early 2000.
Several factors led to a housing crash in the latter part of the 2000s, including a rise in subprime mortgages and risky mortgage-backed securities.
The housing crash led to the Great Recession. To boost the economy, the Federal Reserve cut interest rates to make borrowing money cheaper. Mortgage rates dropped from just below 7% in 2007 to below 5% in 2009.
Mortgage rates steadily decreased throughout most of the 2010s, staying below 5% for the most part. The Federal Reserve enacted a zero-interest-rate policy and a quantitative easing program to prop up the economy during this time following the Great Recession. This helped keep mortgage rates historically low.
The 2020s
The Federal Reserve reduced the federal funds rate to near-zero levels in March 2020, causing a drop in rates of various financial products. The effects of the fallout from the Covid-19 pandemic pushed mortgage rates below previous historic lows. The average 30-year fixed-rate mortgage hit 2.77% in August 2021.
However, with inflation reaching levels not experienced since the early 1980s, the Federal Reserve reversed course. The central bank started to tighten monetary policy in late 2021 and early 2022, which led to a rapid increase in mortgage rates. In May 2022, the average mortgage rate was above 5%. While this was below historical trends, it was the highest rate since 2018. From there, the 30-year fixed rate mortgage crept upward, reaching a high of 7.79% in October 2023 before declining to 7.1% in April 2024.
First-time homebuyers can
prequalify for a SoFi mortgage loan,
with as little as 3% down.
Questions? Call (888)-541-0398.
Why Do Mortgage Rates Change?
As we can see from looking at interest rate fluctuations, major economic events can significantly impact mortgage rates both in the short and long term. As noted above, this has to do primarily with the Federal Reserve.
Federal Reserve actions influence nearly all interest rates, including mortgages through the prime rate, long-term treasury yields, and mortgage-backed securities. The Federal Reserve sets the federal funds benchmark rate, the overnight rate at which banks lend money to each other.
This rate impacts the prime rate, which is the rate banks use to lend money to borrowers with good credit. Most adjustable short-term rate loans and mortgages use the prime rate to set the base interest rates they can offer to borrowers. So, after the Federal Reserve raises or lowers rates, adjustable short-term mortgage loan rates are likely to follow suit.
Longer-term mortgage rates have also risen and fallen alongside economic and political events with movement in long-term treasury bond yields. In the short term, a Federal Reserve interest rate change can affect mortgage markets as money moves between stocks and bonds, affecting mortgage rates. Longer-term mortgage rates are influenced by Fed rate changes but don’t have as direct an effect as short-term rates.
If you have a mortgage with a variable interest rate, known as an adjustable-rate mortgage, changing rates can affect your loan payments. With this type of home loan, you may have started with an interest rate lower than many fixed-rate mortgages. That introductory rate is often locked in for an initial period of several months or years.
After that, your interest rate is subject to change — how high and how often depends on the terms of your loan and interest rate fluctuations. These changes are generally tied to the movement of interest rates, but more specifically, which index your adjustable-rate mortgage is linked to, which can be affected by the Fed’s actions.
However, most adjustable-rate mortgages have annual and lifetime rate caps limiting how high your interest rate and payments can change.
If you took out a fixed-rate mortgage, your initial interest rate is locked in for the entire time you have the home loan, even if it takes you 30 years to pay it off.
If you are in the market to buy a home, it might be tempting to rush and buy when mortgage rates drop a bit, or to put off buying until rates hopefully decrease in the future. However, choosing the perfect time to buy a home based on the ideal rate can be difficult. You’re probably better off letting your need for a home and your personal financial situation drive your decision making. (Do you have a down payment saved up? Is your debt under control?) When it’s time to buy, do your research and choose the best mortgage available for your personal situation.
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.
SoFi Loan Products
SoFi loans are originated by SoFi Bank, N.A., NMLS #696891 (Member FDIC). For additional product-specific legal and licensing information, see SoFi.com/legal. Equal Housing Lender.
SoFi Mortgages
Terms, conditions, and state restrictions apply. Not all products are available in all states. See SoFi.com/eligibility-criteria for more information.
*SoFi requires Private Mortgage Insurance (PMI) for conforming home loans with a loan-to-value (LTV) ratio greater than 80%. As little as 3% down payments are for qualifying first-time homebuyers only. 5% minimum applies to other borrowers. Other loan types may require different fees or insurance (e.g., VA funding fee, FHA Mortgage Insurance Premiums, etc.). Loan requirements may vary depending on your down payment amount, and minimum down payment varies by loan type.
Financial Tips & Strategies: The tips provided on this website are of a general nature and do not take into account your specific objectives, financial situation, and needs. You should always consider their appropriateness given your own circumstances.
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.
Having a list of what you want in your dream house makes house hunting fun and exciting. But to be a smart homebuyer and get the most for your money, it’s important to focus on some of the more mundane, nuts-and-bolts aspects of a house as you tour. Looking for potential flaws that could be pricey to fix will help put your mind at ease. After all, maintenance and repair costs are the top concern of would-be homeowners, according to an April 2024 SoFi survey of 500 people. The concern — expressed by 47% of respondents — even beat out worries over mortgage costs or utility bills.
While home inspections play an important role in making sure you don’t buy a money pit, you can do a bit of detective work yourself. Follow this guidance on what to look for when buying a house.
1. The Exterior
While you’re focusing on where you might put a basketball hoop or admiring the property’s beautiful trees, you’d be wise to take a look at these things to consider when buying a house as well.
Roof Damage
Your roof protects you and your possessions from sun, rain, and snow. And roof damage can quickly turn homeownership dreams into a pricey nightmare. To put a price tag on it, a new roof can run $10,000.
Check for obviously cracked or missing shingles. Look for signs of water damage on the ceilings inside, indicating that the roof isn’t keeping rain out. Later, since the roof is hard to see from the ground, you may want to have your home inspection professional take a closer look. You might also invest in a pro roof evaluation to determine how many years the roof has before it needs to be replaced.
You can also avoid future problems by eyeballing the gutters. Are there telltale depressions, muddy spots, or rust stains outside the house which might indicate gutters are leaking?
Siding Issues
Be on the lookout for cracked or warped siding, or for blisters or bubbles that have formed underneath, which can indicate hidden water damage. Siding’s job is to prevent water from entering the house, so water stains on the inside could also signal siding issues.
Bad Foundation
Obvious cracks in the foundation or exterior walls are a warning sign, but pay attention when you step inside the house as well. Signs a foundation might be faulty include: floors that slope, crack, or sink; cabinets that are pulled away from the wall; interior cracks; and doors that stick.
Yard Problems
Most yard issues can be fixed with a little landscaping muscle, but drainage issues can be more costly to resolve. Look for standing water or soggy, low-lying areas in the yard, signs that the space has drainage problems that can compromise the foundation or cause mosquitoes to invade.
💡 Quick Tip: With SoFi, it takes just minutes to view your rate for a home loan online.
2. The HVAC
You’ll want to find out how the home is heated and cooled, and if possible, learn as much as you can about the annual or monthly cost. Then look for these red flags.
Damaged A/C Unit or Furnace
When touring with your real estate agent, ask the agent to turn on the heating and air conditioning system. Listen for any loud noises. Watch for water around the unit itself, a sign of possible drain line or refrigerant problems.
Broken Thermostat
Locate the thermostat and confirm that it appears to be receiving power. If the heat or air cycles on and off in brief cycles while you are touring the home, there may be a thermostat or power issue.
3. The Plumbing
Problems related to water are one of the most important things to look for when buying a house. Be aware of these issues:
Strong Smells (Good or Bad)
As you walk through a potential home, give it a good sniff. Your nose might know if mold or a damp basement is present. If you notice air fresheners or potpourri, don’t assume the homeowner is just a big fan of floral scents. Scents could be a sign that a plumbing issue, water drainage problem, or basement leak will siphon away a lot of your hard-earned cash. Buying a house out of state? Ask your real estate agent to sniff around for you, but plan on visiting in person once you have narrowed the field.
Look at the ceilings and walls, especially those adjacent to bathrooms, for hints of water seeping in. Do you smell fresh paint? It might be covering up mildew. Ask the seller’s real estate agent if any new color is covering up any old mold or possibly water-damaged walls or ceilings.
Rusty or Corroded Pipes
Poke around the basement as well as under and behind bathroom and kitchen fixtures. Look for rust stains in sink basins, or blue stains under pipes, which may be a sign of corrosion.
Low Water Pressure
Ask the real estate agent if you can run the water in the kitchen and bathrooms, then run the sink and shower simultaneously. You’re doing an informal check for low water pressure. If the water is coming from a well on the property, taste it. While unpleasant flavor or odor in well water isn’t always a sign of problems, you’ll want to be aware of it before buying, and you’ll also want to have well water tested for contaminants by a professional during a home inspection. Most well water issues can be fixed, but it would be important to factor the costs into any offer you might make.
Slow Drainage
While the water is running, check that it is also draining properly.
Particularly in an older home, you’ll want to have the electrical system evaluated as part of the home inspection. Here are some things you can look for before that stage.
Small Electrical Panel
Ask the real estate agent to show you the panel where the electrical service comes into the home. There is usually a number on it to indicate the number of amps the home has. (Ask the agent if you don’t see it.) An older single-family home, especially, may not have adequate service. To power a small home without electric heating, 100 amps could be sufficient. But 200 amps is the standard for newer homes and updated ones. And even that may not be enough power for an electric heating system, depending on the size of the house. If you plan to add electric heat, a home workshop, or do an addition, you’ll probably need 300-amp service. The cost to upgrade the panel can range from $1,300 to $3,000.
While you are at the panel, look for signs of rust or rodents. Are circuit breakers corroded? If you see visible wiring, is it free from cracks or other damage?
Inadequate Outlets
Outlets in the kitchen or bath that are likely to be exposed to water should be ground fault circuit interrupter (GFCI) protected. (Look for “test” and “reset” buttons in the middle of the outlet.) Plugs that sit loosely in an outlet may indicate the outlets are old. Look for outlets with power strips or splitters plugged in, or with many electrical appliances crowded around them — all signs that the home doesn’t have adequate outlets for modern life.
5. The Functionality
Knowing whether a home would need costly upgrades, especially to the kitchen or baths, is important to your overall budget. If you’re in a hot real estate market and are likely to get into a bidding war, nailing down potential extra costs before you get into negotiations will be especially important.
Number of Bedrooms
Make sure the home has adequate sleeping space for your present needs, and don’t forget to think about the future (are kids in the plan?) as well as the occasional guest when you’re buying a house.
Kitchen Conditions
Kitchens are a big-ticket item, so survey the design and functionality of the kitchen, eyeballing the appliances and cabinetry especially. A major renovation, with new appliances, cabinets, and countertops, can run $14,000 to $40,000, according to home-improvement site Angi. To keep kitchen remodeling costs down, evaluate if the bones of a kitchen are good. Is there enough countertop space to do meal prep? Could you repaint or refinish the cabinets rather than rip them out?
Bathroom Basics
One homebuyer’s cute retro tile and toilet is another’s remodeling nightmare. And adding a bathroom or moving plumbing lines can get time-consuming and expensive. So check to see if the home has the right number of baths and think about how much work, if any, they might need to suit your style.
Whether your taste trends to luxurious rainfall showers or you’re happy with fixtures from the local home center, it’s unlikely to be a low-budget endeavor to redo a bathroom that’s dated or worn. The average bath remodel can cost approximately $11,000 before special fixtures or features.
The price tag heads farther north if you are planning to add a bath. Moving plumbing lines around a structure can get quite time-consuming and expensive. You’ll need permits, and ratcheting up the number of baths can also send your property taxes soaring. Home-improvement shows may make bathroom remodels and additions seem like no big deal, but it could actually wind up being a major endeavor.
Stairs
You probably already know whether a relaxed, one-floor ranch or a tall townhouse suits your style. But while you are touring a home, think about the number of stairs and how you might use the space in the house as you live there. Are the washer and dryer two flights down from the bedrooms, where most of the laundry originates? Is the main bedroom a flight below what would be the baby’s room?
Hardwood or Carpet?
You might tour a home that is fully carpeted and picture in your mind’s eye the gleaming hardwood floors you would reveal in a renovation. Don’t assume that hardwood hides under all carpets. Homes built in the 1950s and after may have carpet over plywood. Ask the real estate agent what is underneath the carpeting.
First-time homebuyers can
prequalify for a SoFi mortgage loan,
with as little as 3% down.
Questions? Call (888)-541-0398.
💡 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.
There are as many ideal vistas as there are homebuyers, but as you look at a home’s views, think about the seasons. If trees lose their leaves, will the neighbor’s messy backyard be front and center? Especially in urban areas, think about who owns adjoining properties, what might be built there in the future, and how that could affect the view.
Natural Light
Take note of a home’s windows, and especially whether natural light is abundant in the rooms where you will spend the most time. You might love lots of natural light, but in the summer, it can mean high air-conditioning costs. Take window coverings into consideration in your budget.
Water Access
A water view or water access might be a priority for you. Normally, water views are a good thing — picturesque and calming. But in this era of “crazy weather,” a tranquil bay or babbling creek could soon swamp your home. According to a report by the National Oceanic and Atmospheric Administration, rising sea levels are accelerating instances of flooding.
So before you feel as if you’ve got to have a home that’s near a body of water, do your due diligence. Check the home’s flood factor; also find out if your lender would require flood insurance (which typically costs $700 a year but can go much higher) in addition to homeowners insurance before approving a loan.
You’ll want to listen as well as look when you tour a property. Can you hear the sound of cars on the nearby road? How heavy is the traffic? Is the house near a train track or an airport, which could mean low-flying planes? In an urban setting, who are your neighbors? A bar or concert venue could mean late-night noise.
Essential Questions to Ask When Buying a House
Most real estate agents will offer some basic information about a house right upfront. By law, they are required to disclose the possible presence of lead hazards if a residence was built prior to 1978; some states also require disclosure of asbestos. Ask these questions to dig a little deeper. If there are already multiple offers on a house, you’ll want to choose priorities from this list — asking too many questions could work against you if you decide to throw your hat in the ring.
• How old is the heating and air-conditioning system?
• When was the water heater last replaced?
• How old is the roof?
• If there is a septic system, when was the tank last replaced or inspected?
• What is the water source? Does the home have city water or rely on a well?
• Does the home have any history of flooding or mold?
• Is the seller aware of any materials containing asbestos on the property?
• What comes with the house? (Sellers sometimes remove fixtures, appliances, sheds, or play equipment so don’t rely on things being left behind.)
• Has the owner made any major improvements in the home since the last property tax assessment? (This could result in a tax hike on the next assessment.)
• What do you know about the neighbors?
• Are there any easements on the property? (For example, if power lines cross the property the local electrical supplier may have an easement which allows them to prune or remove trees.)
• Is there a homeowners association? If so, what are the annual fees?
• When touring a co-op or condominium, ask whether there are any special assessments currently in place or being discussed.
Becoming a Homeowner
Whether you’re a first-time homebuyer or a home-buying pro, you’ll want to be careful and comprehensive when buying a house. Keeping your eye out for potential problems can save you from falling in love with the wrong house.
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 are the five most important things to look for in a new home?
Make sure the home’s size, floor plan, and general aesthetic suit your lifestyle and budget. Then consider the amount of work a home might need. (Maintenance and repair costs are the top concern for homebuyers, with 47% of shoppers worried about these expenses according to an April 2024 SoFi survey of 500 adults.) Factor any big-ticket needs such as a bad roof or foundation, or a kitchen or bathroom that require remodeling, into your overall budget.
What should you look for in an initial walk-through of a new home?
Don’t just look at a home: Use all your senses. Listen for dripping water or traffic noises. Sniff the air — does it smell musty or moldy? Feel the floor underneath you. Does it slope or squeak? And listen to your gut as you will likely feel quickly whether a home is right for you.
What are must-haves when buying a new home?
Must-haves are unique to every buyer. For one person, a great view is essential while another may require a certain school district. The important thing is to talk about these early in your home search, and revisit the list as you begin to see properties.
SoFi Loan Products
SoFi loans are originated by SoFi Bank, N.A., NMLS #696891 (Member FDIC). For additional product-specific legal and licensing information, see SoFi.com/legal. Equal Housing Lender.
SoFi Mortgages
Terms, conditions, and state restrictions apply. Not all products are available in all states. See SoFi.com/eligibility-criteria for more information.
*SoFi requires Private Mortgage Insurance (PMI) for conforming home loans with a loan-to-value (LTV) ratio greater than 80%. As little as 3% down payments are for qualifying first-time homebuyers only. 5% minimum applies to other borrowers. Other loan types may require different fees or insurance (e.g., VA funding fee, FHA Mortgage Insurance Premiums, etc.). Loan requirements may vary depending on your down payment amount, and minimum down payment varies by loan type.
Financial Tips & Strategies: The tips provided on this website are of a general nature and do not take into account your specific objectives, financial situation, and needs. You should always consider their appropriateness given your own circumstances.
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.
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.
