SoFi

If you’re dreaming of a home of your own, pulling together a down payment is probably on your financial to-do list. That sum can seem hard to wrangle, but take heart: First-time homebuyers with good credit have an edge. They often can put just 3% down, and they have access to a host of down payment assistance programs. What’s more, there are other ways to gather cash for your property purchase.

In this guide, you’ll learn more about down payments and how to afford one for your first home.

What Is a Down Payment?

Simply put, a down payment is a sum of money, often a percentage of the purchase price, that a buyer pays upfront when purchasing a home or a car.

When talking about buying a home, many people believe that 20% in cash is required, but that’s not the case. Twenty percent is the figure needed to avoid paying PMI, or private mortgage insurance, but there are mortgages available with 3% or even 0% down payments in some situations.


💡 Quick Tip: When house hunting, don’t forget to lock in your home mortgage loan rate so there are no surprises if your offer is accepted.

How to Afford a Down Payment on Your First Home

There are many ways to afford a down payment on your first home. Below, you’ll learn some ways to save up and find low down payment options as well.

But first, consider some general ways to raise cash:

•   Start a side hustle to bring in more income. That could mean driving a rideshare, selling your ceramics on Etsy, walking dogs, or any number of other pursuits. This is a popular strategy: In an April 2024 SoFi survey of 500 would-be homeowners, 41% of people said they had taken on more work or started a side hustle to increase their income.

•   Sell your stuff. If you have gently used items, such as clothing, housewares, electronics, and jewelry, you might get cash by selling them.

•   Automate your finances. Have some money direct-deposited into savings with every paycheck. That can build your down payment, and the money doesn’t go into your checking account, where you might be tempted to spend it.

•   Make a better budget. If you’re not saving at all or as much as you’d like, evaluate your earnings, spending, and saving to optimize that. The 50/30/20 budget rule is one popular budgeting method.

Smart Ways to Save Up for a Down Payment

Here’s the lowdown on how to afford a down payment on a house. Read on before you go shopping for a mortgage.

1. Get a Low Down Payment Conventional Mortgages

Conventional loans, the most common type of mortgage, are offered by private mortgage lenders, such as banks, credit unions, and mortgage companies. If you can find one with a low down payment requirement, that can take some of the pressure off of accumulating a large down payment. Getting prequalified or preapproved by a lender can help you determine your home-buying budget (in SoFi’s survey, more than one in four homebuyers based their budget off a lender’s assessment).

Some points to note:

•   Many lenders allow a down payment of 3% for a fixed-rate conventional conforming loan.

•   To qualify, borrowers usually will need to have a credit score of at least 620 and a debt-to-income ratio of 46% or less, though you might get approved with a DTI of 50%. Income limits may apply.

•   Putting 20% down, however, will allow a borrower to avoid private mortgage insurance (PMI) on a conventional loan.

2. Focus on Government-Backed Loans

If you are a low- to moderate-income borrower or have a lower credit score, you might want to pursue a government-backed loan, like an FHA, VA, or USDA mortgage. These also can have lower down payment requirements.

•   An FHA loan requires as little as 3.5% down on one- to four-unit owner-occupied properties as long as the borrower occupies the building for at least one year. To qualify for 3.5% down, your credit score must be 580 or higher. Someone with a credit score between 500 and 579 may qualify to put 10% down.

•   A VA loan, for veterans, active-duty military personnel, National Guard and Selected Reserve members, and some surviving spouses, requires no down payment. Borrowers can buy a property with up to four units, as long as the borrower occupies the property throughout the ownership. There is no stated minimum credit score, but generally speaking, lenders require a minimum credit score in the low- to mid-600s to qualify.

•   A USDA loan, for properties in eligible rural and suburban areas, also requires no down payment. Lenders typically want to see a credit score of at least 640, and household income can’t exceed 115% of the area’s median household income.

USDA and VA loans typically come with lower interest rates than conventional or FHA loans, but a USDA loan requires a guarantee fee, a VA loan requires a funding fee, and an FHA loan, upfront and annual mortgage insurance premiums (MIP). It pays to understand PMI vs. MIP to gain more insight onto the total costs of your loan.


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

3. Down Payment Gifts

“Hey, Mom and Dad (or Great-Aunt Beth), I’d love it if you gave me a large cash infusion to help me buy a house.” It just rolls off the tongue, right? But in fact, one or more loved ones may be willing to pitch in toward your down payment or closing costs. In fact, almost one in four homebuyers (24%) in SoFi’s April 2024 survey had sought financial assistance from family or friends to buy a home.

Some details to know:

•   Under conventional loan guidelines, gift money for a principal or second home is allowed from someone related by blood, marriage, adoption, or legal guardianship, or from a domestic partner or fiance. There’s no limit to the gift, but conventional loans may require borrowers to come up with a portion of the down payment.

•   FHA guidelines allow gift money from relatives, an employer, a close friend, a charitable organization, or a government agency that provides homeownership assistance.

•   With USDA or VA loans, the only people who cannot provide gift funds are those who would benefit from the sale, such as the seller, lender, real estate agent, or developer. A mortgage gift letter signed by donor and recipient will be required, verifying that the down payment funds are not expected to be repaid. A lender may also want to track the gift money.

•   There are also gifts of equity, when a seller gives part of the home’s equity to the buyer to fund all or part of the down payment on principal or second homes. For FHA loans, only equity gifts from family members are acceptable. A signed gift letter will be required.

4. Crowdfunding a Down Payment

Crowdfunding to help buy a house? It’s possible with sites like GoFundMe, Feather the Nest, HomeFundIt, and even Honeyfund (which is set up as a crowdfunder for honeymoons). A couple of details to consider, because fees are often involved when you use these platforms:

•   GoFundMe charges 2.9% plus 30 cents per gift.

•   Feather the Nest isn’t associated with a mortgage lender, so donation seekers can decide where to go for a loan. It charges a fee of 5% for every contribution.

•   HomeFundIt charges no fees, but you must pre-qualify and then use CMG Financial for your home purchase. The site shows a money match toward closing costs for first-time buyers.

•   For Honeyfund, U.S. residents receiving U.S. dollars via PayPal are charged 3.5% plus 59 cents per transaction.

5. Retirement Account Withdrawals or Loans

It might be a good idea to explore all options for getting cash before tapping your 401(k) savings account.

As you probably know, taking money out of your 401k before age 59 ½, or before you turn 55 and have left or lost your job, is met with a 10% early withdrawal penalty and income tax on the amount. So withdrawing money early from this tax-deferred account has a painful cost and impairs long-term growth.

Here are other options if you want to tap retirement savings:

•   Borrowing from a 401k may be possible. Your employer’s plan might let you borrow money from your 401k and pay it back to your account over time, with interest, within five years, in most cases. You don’t have to pay taxes and penalties when you take a 401k loan, but if you leave your current job, you might have to repay the loan in full fairly quickly. If you can’t repay the loan for any reason, you’ll owe taxes and a 10% penalty if you’re under 59 ½.

•   A traditional IRA allows first-time homebuyers to take an early withdrawal up to $10,000 (the lifetime limit) to use as a down payment (or to help build a home) without having to pay the 10% early withdrawal penalty. They still will have to pay regular income tax on the withdrawal.

•   With a Roth IRA, if you take a distribution of its earnings before age 59 ½ and before the account is less than 5 years old, the withdrawal may be subject to taxes and penalties. You may be able to avoid penalties but not taxes if you use the withdrawal (up to a $10,000 lifetime maximum) to pay for a first-time home purchase.

If you’re under age 59 ½ and your Roth IRA has been open for five years or more, a withdrawal of earnings will not be subject to taxes if you use the withdrawal to pay for a first-time home purchase.

Recommended: First-Time Homebuyers Guide

First-Time Homebuyer Assistance Programs

Here’s another way to help make your home-buying dreams come true: State, county, and city governments and nonprofit organizations offer down payment assistance programs to help get first-time homebuyers into homes. (By the way, the definition of who qualifies as a first-time homebuyer is more expansive than it may seem.)

Down payment assistance may come in the form of grants or second mortgage loans with various repayment or loan forgiveness provisions.

HUD steers buyers to state and local programs, and the National Council of State Housing Agencies has a state-by-state list of housing finance agencies; each offers a wealth of information designed to boost housing affordability and accessibility.

First-Time Homebuyer Tips

As you save for your down payment, follow this advice to get ready to become a property owner:

•   Figure out how much house you can afford with a home affordability calculator. You want to budget appropriately. SoFi’s survey showed that 37% of prospective homebuyers used a home affordability calculator to help set their budget.

•   Don’t forget to account for closing costs, which are typically 3% to 6% of your loan amount.

Check your credit score and credit report. Building your credit and eliminating any errors on your report can help you qualify for favorable rates.

Recommended: Most Affordable Places to Live in the US

The Takeaway

How to afford a down payment on your first house? Saving is, of course, part of the equation. But you may not need to accrue that 20% of the purchase price that so many people aim for. There can be mortgages available with as little as 3% or even 0% down. Also, first-time homebuyers may benefit from assistance programs, down payment gifts, and other forms of funding.

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 much should I save for a down payment on my first house?

While many people aim for a 20% down payment to avoid paying PMI, there are mortgages available to qualified buyers with as little as 3% or even 0% down.

Can I borrow money for a down payment on a house?

You might be able to find a personal loan to use for a down payment, or you could see if a relative or significant other has funds to lend you. Check with your lender to see if this source of cash is acceptable, though.

What credit score do I need to buy a house with no money down?

You’ll typically need a credit score of at least 640 for the 0% USDA loan program. VA loans with no money down (and low down payment FHA and conforming loans) usually require a minimum credit score of 580 to 620.

---

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

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

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

^†Veterans, Service members, and members of the National Guard or Reserve may be eligible for a loan guaranteed by the U.S. Department of Veterans Affairs. VA loans are subject to unique terms and conditions established by VA and SoFi. Ask your SoFi loan officer for details about eligibility, documentation, and other requirements. VA loans typically require a one-time funding fee except as may be exempted by VA guidelines. The fee may be financed or paid at closing. The amount of the fee depends on the type of loan, the total amount of the loan, and, depending on loan type, prior use of VA eligibility and down payment amount. The VA funding fee is typically non-refundable. SoFi is not affiliated with any government agency.
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.

‡Up to $9,500 cash back: HomeStory Rewards is offered by HomeStory Real Estate Services, a licensed real estate broker. HomeStory Real Estate Services is not affiliated with SoFi Bank, N.A. (SoFi). SoFi is not responsible for the program provided by HomeStory Real Estate Services. Obtaining a mortgage from SoFi is optional and not required to participate in the program offered by HomeStory Real Estate Services. The borrower may arrange for financing with any lender. Rebate amount based on home sale price, see table for details.

Qualifying for the reward requires using a real estate agent that participates in HomeStory’s broker to broker agreement to complete the real estate buy and/or sell transaction. You retain the right to negotiate buyer and or seller representation agreements. Upon successful close of the transaction, the Real Estate Agent pays a fee to HomeStory Real Estate Services. All Agents have been independently vetted by HomeStory to meet performance expectations required to participate in the program. If you are currently working with a REALTOR®, please disregard this notice. It is not our intention to solicit the offerings of other REALTORS®. A reward is not available where prohibited by state law, including Alaska, Iowa, Louisiana and Missouri. A reduced agent commission may be available for sellers in lieu of the reward in Mississippi, New Jersey, Oklahoma, and Oregon and should be discussed with the agent upon enrollment. No reward will be available for buyers in Mississippi, Oklahoma, and Oregon. A commission credit may be available for buyers in lieu of the reward in New Jersey and must be discussed with the agent upon enrollment and included in a Buyer Agency Agreement with Rebate Provision. Rewards in Kansas and Tennessee are required to be delivered by gift card.

HomeStory will issue the reward using the payment option you select and will be sent to the client enrolled in the program within 45 days of HomeStory Real Estate Services receipt of settlement statements and any other documentation reasonably required to calculate the applicable reward amount. Real estate agent fees and commissions still apply. Short sale transactions do not qualify for the reward. Depending on state regulations highlighted above, reward amount is based on sale price of the home purchased and/or sold and cannot exceed $9,500 per buy or sell transaction. Employer-sponsored relocations may preclude participation in the reward program offering. SoFi is not responsible for the reward.

SoFi Bank, N.A. (NMLS #696891) does not perform any activity that is or could be construed as unlicensed real estate activity, and SoFi is not licensed as a real estate broker. Agents of SoFi are not authorized to perform real estate activity.

If your property is currently listed with a REALTOR®, please disregard this notice. It is not our intention to solicit the offerings of other REALTORS®.

Reward is valid for 18 months from date of enrollment. After 18 months, you must re-enroll to be eligible for a reward.

SoFi loans subject to credit approval. Offer subject to change or cancellation without notice.

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

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Buying a house is a major step, and planning to purchase a home can be a lot of fun. You get to figure out where you’d hang your favorite artwork, plant a vegetable garden, put the PlayStation — and maybe contemplate taking on some DIY projects yourself.

But there’s another, more nuts-and-bolts aspect to your pursuit of the American Dream: how to budget for a house. Most people in the U.S. are homeowners, with the latest Census data revealing that 65.6% had attained this status in the second quarter of 2024. So that’s a good indicator that buying your own home is within reach.

Doing so will likely require you to be smart about your finances, both as you save and then take on the responsibility of owning a home. To help you be successful in this pursuit, read on for the intel you need, such as:

•   How do I know how much house I can afford?

•   What are the costs/fees to consider?

•   What will my ongoing costs be?

•   How can I budget for a house?

Up-front Expenses

First, consider how much you would have to fork over if you find that perfect center-hall Colonial or loft-style condo. Once an offer on a new home is accepted, there are certain costs the buyer needs to pay right off the bat and, in most cases, out of their own pocket. These are called up-front expenses. Here are a few to prepare for as you consider how to budget for a house:

Down Payment

You may have heard of the traditional 20% down payment guideline, which helps you avoid paying private mortgage insurance (PMI) on applicable loan programs. Additionally, a higher down payment can sometimes result in better mortgage loan terms (such as a lower interest rate) which may translate into lower monthly mortgage payments.

Yep, it’s a lot of money to try to save, but if you can swing it, in the long run, applying a 20% down payment will likely save you from paying thousands of dollars in additional mortgage interest over the life of the loan. Can’t pull together that big a chunk of change? Look into your options for a mortgage lender with lower or no down payment. Some options:

•   The minimum down payment for a first-time homebuyer on a conventional loan can be as low as 3%. You may also need a certain credit score of, say, 620, to qualify for this kind of mortgage.

•   An FHA government loan that is open to everyone typically requires a down payment of at least 3.5%.

•   Veteran VA loans or government USDA loans may allow eligible borrowers to finance up to 100% of their home’s cost. In other words, no down payment is required.

It’s worth noting that, regardless of the size of your down payment, buying may still significantly reduce your overall monthly expenses, compared to your current rent and real-estate market conditions.

3% to 5% Closing Costs

You can likely expect to pay an estimated 3% to 5% of your home price for closing costs, and should save accordingly. For example, if you buy a home that costs $300,000, you may be required to pay between $9,000 and $15,000 in closing costs.

Worth noting: Some costs are fixed and not tied to the price. In these cases, the percentage can be higher for the lower range and lower for the higher purchase price range.

What exactly comprises closing costs? This can be bank charges like origination fees and any points you may have purchased to buy down your interest rate. There are also costs like the appraisal fee, a title search, and others.

Keep in mind that there are alternatives to paying the closing costs out-of-pocket, such as requesting a seller credit, requesting a lender credit, or tapping an applicable down payment assistance program. These can help you minimize this expense.

Moving Costs

Don’t forget when budgeting for buying a house that you will need funds to actually move in. Unless you’re lucky enough to have a generous pal with a van, you are probably going to have to hire a moving company when it’s time to get settled in your new home. The average cost of moving the contents of a three-bedroom home 1,000 miles is $4,800 according to research by U.S. News & World Report.

These costs can vary widely, of course. If you are moving with just a bedroom’s worth of furniture versus a whole house, your price tag will be lower. It’s wise to comparison-shop for moving companies and factor this expense into your own budgeting for a home move.

If you are moving for work reasons, check with your company to see if it offers a relocation package to help cover some or all of the moving costs.

New Furniture and Appliances

Your new house may not have the same dimensions and style of your old house. That could mean that you need to buy new furniture and appliances. When budgeting for buying a house, you might want to talk to friends or relatives who have moved recently and inquire about unexpected expenses as well. For example, it’s not uncommon when you move to have to purchase such items as new locks, shower rods, and window treatments. These can add up quickly.

You might want to start a savings account for these types of purchases — some of them may be unexpected and costlier than you imagined.

Recommended: First-Time Homebuyer Guide

Ongoing Expenses

Now that you’ve figured out the details related to the actual purchase, consider the expenses that will accrue once you are a homeowner. This is a very important step when budgeting for buying a house. These recurring charges are a vital part of the calculations of how much home you can afford.

Monthly Charges

First, consider how much you’ll be spending every month on your monthly mortgage payment and related costs. PITIA (principal, interest, property taxes, homeowners insurance, and other assessments) is an acronym describing all the components of a mortgage payment. Here’s how it breaks down:

•   P: The principal is the “meat” of the monthly payment amount — paying down the principal will reduce the loan balance.

•   I: Interest is what you are charged for borrowing the money.

•   T: Taxes refer to your property taxes.

•   I: This “I” refers to insurance. This includes both your homeowners and mortgage insurance, if applicable.

•   A: The other assessments refer to things that may be applicable to the home you purchase such as homeowners association dues, flood or earthquake insurance, and more.

HOA Dues

HOA stands for homeowners association. These dues usually apply to a condo, co-op, or property owned in a planned community.

The charge is usually monthly (but it could also be charged quarterly or annually), and it typically goes to maintaining the community (landscaping, garbage collection, repairs, and upgrades).

Before purchasing a property with HOA dues, it can be important to ask the Homeowners Association for a complete HOA questionnaire. With this in hand, you can view how healthy the association is, whether there is any outstanding litigation due to structural or other issues, etc. These could mean increased costs down the road.

Maintenance and Lawn Care

Your budgeting probably won’t stop once you’ve moved and settled into your new home. Expenses will likely continue to knock on your door — landscaping, roof repair, and water heater replacement are just a few items that might require ongoing financial consideration.

You may want to budget for 1% to 4% of the cost of your home in maintenance each year to pay for these expenses. However, deferred maintenance costs may require more funding, depending on the age, quality of construction, where you live, and more.

Pest Control, Security, Utilities

The cost of electricity, gas, water, and internet services differ from market to market. This is also true with pest control, and services that help ensure your home is secure and safe. You could find yourself paying more (or even less) for these services in your new home.

How Much House Can You Afford Quiz

Planning Ahead

So now that you understand the costs associated with homeownership, whether they are one-time or ongoing, you can get to work on how to budget for a house.

Ideally, you want to cover the homebuying costs and then be able to afford your monthly carrying costs without racking up debt. The standard advice is that your monthly housing expenses should account for up to 28% of your monthly pre-tax income. Given how expensive some housing markets can be, it’s not uncommon to find people spending more than that right now.

Here, some advice on figuring out what you can afford.

Target Mortgage Costs

Do your research on the different types of mortgage loan programs. Determine what your price range is given the current interest rates. Find the programs that may best suit you, so you’ll feel confident you can bid and afford a home once you have your down payment saved. Don’t forget to factor in those other PITIA expenses mentioned above as you think about your own monthly income and cash outflow when you’re a homeowner.

Build a Budget

Once you have these costs calculated, you can then start budgeting for buying a house. You’ll want to accumulate your down payment, while taking care of current bills and other financial obligations, of course.

•   Create a line item budget. You’ll want to note how much money you have coming in and how much goes out toward your needs (housing, food, medical expenses, debt repayment). Then you’ll see what’s left for your wants (think travel, dining out, clothes, entertainment) and start saving it, whether for your future home or retirement.

   Don’t skimp, though, on establishing an emergency fund. In a pinch, these funds can keep you from using your credit card and running up even more debt.

•   Assess where you can save more. To ramp up your savings for your house, look for ways to economize. Could you drop a subscription or two to streaming channels, or perhaps eat out less often?

   Also see what you can do to avoid high-interest credit card debt, which can take a bite out of anyone’s budget. You might want to take advantage of a zero-interest balance transfer credit card offer, or investigate whether a lower-interest personal loan could help you pay off your debt and save money.

•   Use automatic transfers. Help yourself hit your savings goals by automating payday transfers from checking to savings. That way, you won’t see the cash in your account and be tempted to spend more.

•   Bring in more moolah. If the numbers aren’t adding up to bring your homebuying plans within reach fast enough, consider using windfalls (a tax refund, a bonus at work, a birthday gift of cash from a relative) to plump up your savings. Also think about ways to bring in more income, whether by asking for a raise or pursuing a side hustle.

The Takeaway

Budgeting for buying a house requires thinking about both short-term costs, such as a down payment, closing costs, and moving expenses, as well as long-term costs such as homeowner’s insurance and maintenance expenses. It’s wise to look at both before you pursue a mortgage preapproval or make an offer on a home.

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 much money should you save before buying a house?

If possible, you should save enough money for a down payment on a house in the price range you’re thinking about. But you don’t need to make a 20% down payment — many homebuyers put down less, and some government programs will allow you to buy with no down payment at all. You’ll also want to have closing costs on hand (3% to 6% of the home’s price). And it’s wise to always have an emergency fund in case of an unexpected setback.

How much do I need to earn to afford a house?

How much you need to earn to afford a house depends on the housing market you’re looking in and the area’s overall cost of living. The national average salary is $63,795 and at that salary you may be able to afford a home priced at $180,000. Use a home affordability calculator to explore the numbers for your specific situation.

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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.

^¹FHA loans are subject to unique terms and conditions established by FHA and SoFi. Ask your SoFi loan officer for details about eligibility, documentation, and other requirements. FHA loans require an Upfront Mortgage Insurance Premium (UFMIP), which may be financed or paid at closing, in addition to monthly Mortgage Insurance Premiums (MIP). Maximum loan amounts vary by county. The minimum FHA mortgage down payment is 3.5% for those who qualify financially for a primary purchase. SoFi is not affiliated with any government agency.
^†Veterans, Service members, and members of the National Guard or Reserve may be eligible for a loan guaranteed by the U.S. Department of Veterans Affairs. VA loans are subject to unique terms and conditions established by VA and SoFi. Ask your SoFi loan officer for details about eligibility, documentation, and other requirements. VA loans typically require a one-time funding fee except as may be exempted by VA guidelines. The fee may be financed or paid at closing. The amount of the fee depends on the type of loan, the total amount of the loan, and, depending on loan type, prior use of VA eligibility and down payment amount. The VA funding fee is typically non-refundable. SoFi is not affiliated with any government agency.
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.

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.

‡Up to $9,500 cash back: HomeStory Rewards is offered by HomeStory Real Estate Services, a licensed real estate broker. HomeStory Real Estate Services is not affiliated with SoFi Bank, N.A. (SoFi). SoFi is not responsible for the program provided by HomeStory Real Estate Services. Obtaining a mortgage from SoFi is optional and not required to participate in the program offered by HomeStory Real Estate Services. The borrower may arrange for financing with any lender. Rebate amount based on home sale price, see table for details.

Qualifying for the reward requires using a real estate agent that participates in HomeStory’s broker to broker agreement to complete the real estate buy and/or sell transaction. You retain the right to negotiate buyer and or seller representation agreements. Upon successful close of the transaction, the Real Estate Agent pays a fee to HomeStory Real Estate Services. All Agents have been independently vetted by HomeStory to meet performance expectations required to participate in the program. If you are currently working with a REALTOR®, please disregard this notice. It is not our intention to solicit the offerings of other REALTORS®. A reward is not available where prohibited by state law, including Alaska, Iowa, Louisiana and Missouri. A reduced agent commission may be available for sellers in lieu of the reward in Mississippi, New Jersey, Oklahoma, and Oregon and should be discussed with the agent upon enrollment. No reward will be available for buyers in Mississippi, Oklahoma, and Oregon. A commission credit may be available for buyers in lieu of the reward in New Jersey and must be discussed with the agent upon enrollment and included in a Buyer Agency Agreement with Rebate Provision. Rewards in Kansas and Tennessee are required to be delivered by gift card.

HomeStory will issue the reward using the payment option you select and will be sent to the client enrolled in the program within 45 days of HomeStory Real Estate Services receipt of settlement statements and any other documentation reasonably required to calculate the applicable reward amount. Real estate agent fees and commissions still apply. Short sale transactions do not qualify for the reward. Depending on state regulations highlighted above, reward amount is based on sale price of the home purchased and/or sold and cannot exceed $9,500 per buy or sell transaction. Employer-sponsored relocations may preclude participation in the reward program offering. SoFi is not responsible for the reward.

SoFi Bank, N.A. (NMLS #696891) does not perform any activity that is or could be construed as unlicensed real estate activity, and SoFi is not licensed as a real estate broker. Agents of SoFi are not authorized to perform real estate activity.

If your property is currently listed with a REALTOR®, please disregard this notice. It is not our intention to solicit the offerings of other REALTORS®.

Reward is valid for 18 months from date of enrollment. After 18 months, you must re-enroll to be eligible for a reward.

SoFi loans subject to credit approval. Offer subject to change or cancellation without notice.

The trademarks, logos and names of other companies, products and services are the property of their respective owners.

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There is no waiting period for borrowers who want to refinance an FHA loan and switch to a conventional loan. But that doesn’t mean it’s automatically a good idea. When you refinance a mortgage, you want to benefit — maybe enjoy lower monthly payments, or perhaps save money on interest over the loan term.

To decide whether or not to refinance, it first helps to understand the difference between an FHA loan and a conventional mortgage. An FHA loan is a home loan backed by the Federal Housing Administration. The FHA doesn’t directly loan to borrowers; instead, it insures loans for lenders to alleviate some of the risk the lender takes on when lending money. Borrowers can usually meet FHA loan requirements with a lower credit score, and can provide a lower down payment than would be necessary with some conventional loans. For this reason, FHA loans are popular with first-time homebuyers.

A conventional loan, on the other hand, is a home mortgage loan not backed by the federal government. Borrowers with less-than-stellar credit ratings or minimal down payments aren’t always able to get a conventional loan. Or if they do, a conventional loan might have a higher interest rate than an FHA loan.

You don’t have to wait to make the switch from FHA loan to conventional. But why would you want to refinance, should you do it, and what are the pros and cons? Let’s have a look at these questions.

💡 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.

Can You Refinance an FHA Loan to a Conventional Loan?

Yes, you can refinance an FHA loan to a conventional loan. However, a lender won’t just approve you for a refinance immediately. If you currently have an FHA loan, you must qualify to refinance to a conventional loan.

Why Should You Refinance From an FHA to a Conventional Loan?

One reason you might refinance from an FHA to a conventional loan is that FHA loans require you to pay a mortgage insurance premium (MIP). First, there is a required upfront mortgage insurance premium that you make when you purchase your home. You also pay an additional mortgage insurance premium on top of your mortgage payments each month. The ongoing annual MIP of 0.45% to 1.05% is divided by 12 and added to your monthly mortgage payment.

FHA borrowers must pay MIP for either 11 years or throughout the loan term, depending on the amount you put down. Getting rid of MIP is one of the top reasons to refinance to a conventional loan.

You may also find that you can get a lower interest rate by refinancing to a conventional loan. If that’s the case, a refinance could save you thousands of dollars over your home mortgage loan term.

It’s also possible that you can increase or lower your mortgage payment with a refinance. If you find it difficult to make your monthly payments, a refinance may help you lower them. But note that a lower payment often comes with a longer loan term. On the other hand, you may decide you can pay off your mortgage faster, and so you refinance to decrease your loan term from 20 to 15 years, saving time and money.

Ultimately, you want a refinance to benefit you, so learn more from lenders and use an FHA loan mortgage calculator.

Recommended: How Do Low-income Home Loans Work

Requirements to Refinance From an FHA Loan to Conventional

You must qualify for a refinance through your credit score and debt-to-income ratio (DTI):

•   Credit score: Many lenders look for at least a 620 credit score for a conventional mortgage refinance.

•   DTI: Your DTI refers to the amount of debt you have relative to your income. There are no hard-and-fast requirements for DTI, but many lenders like to see a DTI of at least 43%. You can calculate your DTI by dividing your monthly debt payments by your gross income and converting that figure into a percentage.

Once you think you have your ducks in a row with your credit score and DTI, you must fill out applications with several lenders. Consider checking out the same type of interest rate and loan term so you can compare apples to apples among several lenders.

Get ready to submit your documents to prove your income and assets — pay stubs, tax returns, bank statements, proof of investments — to show underwriters that you indeed have those assets at your disposal.

Not sure you’ll qualify? A lender can walk you through all the requirements and help you determine whether a refinance to a conventional loan makes sense for you.


💡 Quick Tip: You can use money you get with a cash-out refi for any purpose, including home renovations, consolidating other high-interest debts, funding a child’s education, or buying another property.

Pros of Refinancing From an FHA to Conventional Loan

Refinancing from an FHA to a conventional loan has some definite benefits. Let’s look at a few reasons:

•   Get a lower interest rate: Many lenders require a minimum 580 credit score (or 500 with a larger down payment). You may qualify for a lower interest rate if your credit score has increased from the 500s.

•   Get rid of MIP: As noted above, lenders charge MIP to compensate for an FHA loan’s lower credit and down payment requirements. Getting rid of MIP will save you money.

•   Save on interest: Qualifying for a lower interest rate could save you thousands of dollars over your loan term.

Cons of Refinancing From an FHA to Conventional Loan

There are downsides of refinancing from an FHA to a conventional loan.

•   Tougher qualifications: You must meet stiffer requirements to qualify for a conventional loan than an FHA loan. Again, there are no hard-and-fast rules governing qualifications, but so your best bet is to talk to lenders about your situation.

•   Private mortgage insurance (PMI): You may not be off the hook for mortgage insurance. If you don’t have at least 20% equity in your home, you must pay PMI, which automatically cancels once you reach 22% equity. Consider how much you’d pay in MIP vs. PMI over time before you refinance your home.

•   Closing costs: Refinancing requires you to pay closing costs, typically between 2% and 5% of the full loan amount.

Recommended: The Cost of Living By State

Alternatives to Refinancing Your FHA Loan to a Conventional Loan

Instead of a conventional loan, you can choose to refinance your existing FHA loan to another FHA loan using a few options:

•   FHA streamline refinance: A streamline refinance allows for limited documentation and underwriting. In order to obtain a streamline refinance, you may not be delinquent on your current loan, and refinancing must confer a net tangible benefit, meaning it must save you money. Some lenders offer “no cost refinances” by charging a higher interest rate in lieu of closing costs.

•   FHA simple refinance: A simple refinance replaces your existing FHA loan, just like a streamline refinance. You get a new fixed- or adjustable-rate loan faster than when you received your original loan. A fixed-rate loan stays the same throughout a loan term, while an adjustable-rate loan interest rate changes over the loan term. One difference between the simple and streamline refinance is that the simple version typically requires a credit check and an appraisal of your home.

•   FHA cash-out refinance: A cash-out refinance allows you to refinance with a larger loan amount and take the difference out in a lump sum. A cash-out refi could make sense if you need cash for a home project, education, or other reasons. The amount you can take out depends on how much your home is worth.

•   FHA 203(k) refinance: How do FHA loans 203k work? An FHA 203(k) refinance allows you to roll any home improvement or renovations you want to make into your home loan. You can choose from a limited 203(k) refinance or a standard 203(k) refinance. The standard doesn’t have a ceiling on the amount you can spend, while the limited refinance supplies up to $35,000.

You may face time and payment restrictions when replacing an existing FHA with an FHA refinance. For example, an FHA streamline refinance requires you to have an FHA loan for at least 210 days and make on-time mortgage payments for six months.

The Takeaway

You don’t have to wait to refinance from an FHA to a conventional loan. Still, it’s essential to consider all the ramifications of refinancing — especially the costs and savings. You may have qualified as a first-time homebuyer for your original FHA loan. The process looks different when you refinance. If you plan to refinance to a conventional loan, check your credit report, debt-to-income ratio (DTI), and other factors, and talk through what you need to present to a lender to get a conventional loan. Ultimately, you want to ensure that you will benefit from a switch before you make your move.

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

Can you refinance an FHA loan within 6 months?

Yes, you can refinance from an FHA loan to a conventional loan within six months. However, you would first want to consider whether doing so would save you money.

How long do you have to wait to refi a conventional loan?

In most situations, you can refinance a conventional loan immediately. However, you might have to wait six months before refinancing with the same lender. Check with your lender for more information about how long you’ll have to wait for a conventional loan refinance.

Can you have an FHA loan and a conventional loan at the same time?

You might find it difficult to qualify for a conventional loan with an FHA loan because FHA loans typically go to borrowers who have less financial stability. Lenders will want to ensure that you can make payments on both your first and second home before they approve you for a conventional loan. Talk to your lender for more information about your options.

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Photo credit: iStock/jhorrocks

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.

^¹FHA loans are subject to unique terms and conditions established by FHA and SoFi. Ask your SoFi loan officer for details about eligibility, documentation, and other requirements. FHA loans require an Upfront Mortgage Insurance Premium (UFMIP), which may be financed or paid at closing, in addition to monthly Mortgage Insurance Premiums (MIP). Maximum loan amounts vary by county. The minimum FHA mortgage down payment is 3.5% for those who qualify financially for a primary purchase. SoFi is not affiliated with any government agency.

*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.

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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Most people in the market for a new dwelling will buy an existing home that more or less fits their needs. But new homes don’t come with the problems that old homes might, from lead paint to a kitchen crying out for remodeling. And building a house may seem attractive because you can construct it to fit your specifications, from the number of bathrooms to building an outdoor kitchen.

If you’re ready to build your own house, here are the steps to take.

10 Steps to Building Your Own Home

Condo. Townhouse. Single-family home. Modular or manufactured home. Cabin or even houseboat. A house hunter has all of those types of homes to choose from. If you’re building a home, you’ll have a lot of choices to make as well, starting with where your home will be located. Here are the steps to building your own home:

1. Find a Location

The first thing you’ll need to do is find a site that’s zoned for a residential property. Look into local building regulations to see how much of the site you are allowed to build on and how far from property lines the building must be set back. Check ordinances that might limit size or height. Is there a homeowners association (HOA)? Scour the rules.

It’s generally suggested that you not spend more than 20% of your total budget on the building site. When you purchase the land, you will acquire a property deed, which will also act as the house deed.

2. Obtain Permits

Before a shovelful of earth is turned, the local building department must OK the plans and provide permits for the whole shebang: grading, zoning, construction, electrical work, plumbing, and more. When the permits are in hand, construction can start.

On a related note, at various points during construction, the home will need to be inspected for code compliance. If you are using a loan for new construction, your lender may also send an inspector to keep track of construction status before releasing payments from a construction loan.

3. Prep the Site and Your Finances

Site Prep

Before you start building, you’ll need to prepare the building site. You’ll want to be sure that soil conditions are stable. You may want to engage a civil engineer to give the site a look. A site surveyor can stake the property boundaries. Then you’ll need to clear brush and debris at least to 25 feet around the planned perimeter of the house.

Size and Cost

The cost of building a house averaged $313,884 in 2022, according to HomeAdvisor, the directory of service pros, but a typical range is from around $137,000 to $582,000. Obviously location, materials, and level of detail affect the bottom line.

But size is the biggie. The larger the build, the more labor and material costs you should expect. The average new home in the country has about 2,200 square feet at $150 per square foot, HomeAdvisor notes.

After the peak of the pandemic, there were months-long delays to receive materials, from appliances to garage doors, and construction costs increased. Oil prices significantly increased transportation expenses. Rising inflation left its mark, but prices leveled off in 2023. All of which is to say, cost numbers are a moving target.

Finance Options

When you build a home, you may need a loan that covers the purchase of land, buying materials, and hiring labor. In this case, you may want to look into a construction loan. Unlike mortgage loans, construction loans are not secured by an existing home, so approval might be tricky and take a bit longer.

The money is paid to your builder in installments. You’ll often only pay interest on the portion of the loan that has been withdrawn. After the typical 12 to 18 months of a construction-only loan, the usual route is to take out a mortgage and pay off the construction loan.

Other financing options are a home equity loan, if you already own a home.

A personal loan of up to $100,000 can pay for part of the construction (or maybe all, for a modest build).

If you’re buying the land, Federal Housing Administration (FHA) one-time close loans cover the lot purchase, construction, and permanent mortgage. But the loans can be hard to find and are tougher to qualify for than traditional FHA loans.

Check out these additional resources for homeowners.

Choosing Materials

Only an experienced and highly organized person may want to act as their own general contractor for a new house build. Most people will put the job in a contractor’s hands, and add 20% to 30% for the cost of materials and labor.

General contractors already have priced and sourced many of the materials when making a bid. They usually have relationships with wholesale distributors, lumberyards, and retailers.

That said, you may have some skills that you could apply to cut costs. For example, you could look into how much it costs to paint a house and determine if painting the home’s interior could help you save.

Building a Work Team

If you choose to fly solo, you’ll be on the hook for finding subcontractors yourself.

A general contractor will hire all of the team members needed to complete the project and charge 20% to 30% of the overall cost of the home. However, they also typically have regular relationships with subcontractors, who may charge them less than they would a person who hires them on a one-off basis.

As a result, you may not end up saving much or any money by finding subcontractors yourself.

4. Pour the Foundation

Once the building site is cleared, construction can begin, starting with the foundation. Some houses are built on level slabs of concrete that are poured on the ground, leaving space in which to run utilities, like plumbing and electrical.

A home with a full basement requires that a hole is dug and that footings and foundation walls are formed and poured. The concrete will need time to cure, and no construction will take place until it has set properly.

5. Set Up Plumbing

Once the concrete has set, crews install drains, water taps, the sewer system, and any plumbing going into the first-floor slab or basement floor, and then backfill dirt into the gap around the foundation wall.

6. Assemble the Frame, Walls, and Roof

With the foundation complete, framing carpenters will build out the shell of the house, including floors, walls, and the roof. Windows and exterior doors are installed, and the house is wrapped in a plastic sheathing that protects the interior from outside moisture while allowing water vapor from inside the home to escape.

7. Install Insulation, Complete Electric and Plumbing Installs

Now plumbers can install water supply lines and pipes to carry water through the floors and walls. Bathtubs and showers may be added at this time.

Electricians will wire the house for outlets, light fixtures, and major appliances. Ductwork and HVAC systems can be installed.

8. Hang Drywall and Install Interior Fixtures and Trim

With plumbing and electrical complete, the house can be insulated and drywall can be hung. A primary coat of paint goes on, and the house will start to look relatively finished.

Light fixtures and outlets can be installed, as can bathroom and kitchen fixtures, like sinks and toilets. Interior doors, baseboards, door casings, windowsills, cabinets, built-ins, and decorative trim go in. The final coat of paint is applied.

9. Install Exterior Fixtures

Crews begin exterior finishes like brick, stone, stucco or siding. Some builders pour the driveway when the foundation is completed, but many opt to do so toward home completion, along with walkways and patios.

10. Install the Flooring

Wood, ceramic tile, or vinyl floors and/or carpet can be installed at this point.

Recommended: First-Time Homebuyer Guide

Is It Cheaper to Buy or Build a New House?

There are so many variables that it’s hard to say.

The median sales price for new construction in April 2024 was $433,500, according to FRED, or Federal Reserve Economic Data. Can you beat that price with a DIY build? Maybe, if you act as the general contractor and choose cheaper materials.

Keep in mind that HomeAdvisor’s average of $313,884 to build a house does not include the land.

Ultimately, the price of your dream home hinges on location, the cost of labor and materials, and your taste.

3 Home Loan Tips

1.   Since lenders will do what’s called a hard pull on an applicant’s credit, and too many hard pulls in a short period can affect your application, it’s a good idea to know what interest rate a lender will offer you before applying for a personal loan. Viewing your rate with SoFi involves only a soft pull on your credit — and takes one minute.

2.   Before agreeing to take out a personal loan from a lender, you should know if there are origination, prepayment, or other kinds of fees.

3.   Traditionally, mortgage lenders like to see a 20% down payment. But some lenders allow home mortgage loans with as little as 3% down for qualifying first-time homebuyers.

The Takeaway

Building your own home will allow you maximum flexibility in terms of your choices of everything from floorplan to finishes. But it is a complex process and you’ll want to take it step by step, with careful consideration of your budget and how you plan to finance what you build.

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 long can you expect to live in a self-built home?

If a home is well built and maintained properly, you can expect it to last a lifetime.

How long will it take to build a home?

The average time it takes to build a home from start to finish is 9.4 months for a contractor build and 12 for an owner build, according to data collected by the U.S. Census Bureau.

Is it dangerous to build a home yourself?

If the question means completely DIY — clearing a lot, pouring a foundation, framing, installing electrical, and so on — the answer is “it sure could be.”

Are there safe financing options for self-build projects?

DIY builders and remodelers may use a construction loan, personal loan, home equity loan, or FHA one-time close loan. If you do use a construction-only loan, shop for a mortgage that makes sense once you stand there admiring the finished product.

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Photo credit: iStock/Giselleflissak

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.

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.
^¹FHA loans are subject to unique terms and conditions established by FHA and SoFi. Ask your SoFi loan officer for details about eligibility, documentation, and other requirements. FHA loans require an Upfront Mortgage Insurance Premium (UFMIP), which may be financed or paid at closing, in addition to monthly Mortgage Insurance Premiums (MIP). Maximum loan amounts vary by county. The minimum FHA mortgage down payment is 3.5% for those who qualify financially for a primary purchase. SoFi is not affiliated with any government agency.
^²SoFi Bank, N.A. NMLS #696891 (Member FDIC), offers loans directly or we may assist you in obtaining a loan from SpringEQ, a state licensed lender, NMLS #1464945.
All loan terms, fees, and rates may vary based upon your individual financial and personal circumstances and state.
You should consider and discuss with your loan officer whether a Cash Out Refinance, Home Equity Loan or a Home Equity Line of Credit is appropriate. Please note that the SoFi member discount does not apply to Home Equity Loans or Lines of Credit not originated by SoFi Bank. Terms and conditions will apply. Before you apply, please note that not all products are offered in all states, and all loans are subject to eligibility restrictions and limitations, including requirements related to loan applicant’s credit, income, property, and a minimum loan amount. Lowest rates are reserved for the most creditworthy borrowers. Products, rates, benefits, terms, and conditions are subject to change without notice. Learn more at SoFi.com/eligibility-criteria. Information current as of 06/27/24.
In the event SoFi serves as broker to Spring EQ for your loan, SoFi will be paid a fee.

‡Up to $9,500 cash back: HomeStory Rewards is offered by HomeStory Real Estate Services, a licensed real estate broker. HomeStory Real Estate Services is not affiliated with SoFi Bank, N.A. (SoFi). SoFi is not responsible for the program provided by HomeStory Real Estate Services. Obtaining a mortgage from SoFi is optional and not required to participate in the program offered by HomeStory Real Estate Services. The borrower may arrange for financing with any lender. Rebate amount based on home sale price, see table for details.

Qualifying for the reward requires using a real estate agent that participates in HomeStory’s broker to broker agreement to complete the real estate buy and/or sell transaction. You retain the right to negotiate buyer and or seller representation agreements. Upon successful close of the transaction, the Real Estate Agent pays a fee to HomeStory Real Estate Services. All Agents have been independently vetted by HomeStory to meet performance expectations required to participate in the program. If you are currently working with a REALTOR®, please disregard this notice. It is not our intention to solicit the offerings of other REALTORS®. A reward is not available where prohibited by state law, including Alaska, Iowa, Louisiana and Missouri. A reduced agent commission may be available for sellers in lieu of the reward in Mississippi, New Jersey, Oklahoma, and Oregon and should be discussed with the agent upon enrollment. No reward will be available for buyers in Mississippi, Oklahoma, and Oregon. A commission credit may be available for buyers in lieu of the reward in New Jersey and must be discussed with the agent upon enrollment and included in a Buyer Agency Agreement with Rebate Provision. Rewards in Kansas and Tennessee are required to be delivered by gift card.

HomeStory will issue the reward using the payment option you select and will be sent to the client enrolled in the program within 45 days of HomeStory Real Estate Services receipt of settlement statements and any other documentation reasonably required to calculate the applicable reward amount. Real estate agent fees and commissions still apply. Short sale transactions do not qualify for the reward. Depending on state regulations highlighted above, reward amount is based on sale price of the home purchased and/or sold and cannot exceed $9,500 per buy or sell transaction. Employer-sponsored relocations may preclude participation in the reward program offering. SoFi is not responsible for the reward.

SoFi Bank, N.A. (NMLS #696891) does not perform any activity that is or could be construed as unlicensed real estate activity, and SoFi is not licensed as a real estate broker. Agents of SoFi are not authorized to perform real estate activity.

If your property is currently listed with a REALTOR®, please disregard this notice. It is not our intention to solicit the offerings of other REALTORS®.

Reward is valid for 18 months from date of enrollment. After 18 months, you must re-enroll to be eligible for a reward.

SoFi loans subject to credit approval. Offer subject to change or cancellation without notice.

The trademarks, logos and names of other companies, products and services are the property of their respective owners.

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If you’re a qualifying veteran, active military service member, or surviving spouse, a VA loan can be an incredible boon on your homeownership journey: It unlocks the opportunity to buy a house with zero down payment required, limited closing costs, competitively low interest rates, and no private mortgage insurance (PMI). What’s more, those who are eligible can take advantage of this benefit as many times as they like. There’s no limit to how many times you can use a VA home loan.

Here’s a closer look at this special and valuable option available to U.S. veterans and their families.

What Is a VA Loan?

Before we dive into how many times can you use a VA loan, let’s start with defining what a VA loan is in the first place.

VA loans are a type of mortgage that are offered by private banks, but backed by the U.S. Department of Veterans Affairs (VA). Because this type of loan is less risky for lenders, banks are able to offer much more favorable terms, including the ability to buy a home without making a down payment.

That means VA loans lower the barrier to entry for all buyers, but especially for first-time homebuyers, who usually find that saving up enough money for a down payment is one of the biggest challenges when it comes to breaking into property ownership. Even better, the cost of your mortgage won’t be inflated by PMI, which most lenders and mortgage programs require whenever a buyer puts less than 20% down. (You will most likely pay a one-time funding fee; more on that later.) There are other special advantages of a VA loan, so if you are considering one, take the time to learn all the ins and outs of how a VA loan works.

Recommended: The Cost of Living by State

How Many Times Can You Take Out a VA Loan?

It almost sounds too good to be true, but it’s not: You can take out a VA loan as many times as you like — as long as you’re eligible for one and you still have remaining entitlement, which we’ll get to in a moment.

In order to apply for a VA loan, you’ll need to first acquire a Certificate of Eligibility, or COE, from the VA. Specific requirements vary depending on which branch of the military you served in, when you served, and a few other factors. (Full details are available directly from the VA.)

How Many VA Loans Can You Have?

There’s no specific limit on how many VA loans you can take out. Some veterans have taken out two, three, or even eight or more! These are typically sequential loans. You wouldn’t be able to use a VA loan to purchase a second home or vacation home, as VA loans are for primary residences (the one exception to this rule is active-duty members who have received a permanent change of service, or PCS, which we will discuss below).

There is one important factor that can, in some instances, limit an eligible veteran or service member’s ability to take out a new VA loan: entitlement.

💡 Quick Tip: To see a house in person, particularly in a tight or expensive market, you may need to show the real estate agent proof that you’re preapproved for a mortgage. SoFi’s online application makes the process simple.

What Is a VA Loan Entitlement?

As noted above, VA home mortgage loans are backed by the VA. Essentially, the VA promises to pay the bank a certain dollar amount if the borrower — that’s you, the veteran — defaults on the mortgage. That dollar amount is known as your entitlement.

The entitlement is the amount the VA guarantees your lender they’ll receive if you stop paying your loan. Basic entitlement is $36,000, but these days, that’s a very small fraction of most home loans — which is why the VA also offers bonus entitlement, which guarantees the lender the VA will repay 25% of a loan amount over $144,000 if you default.

Full Entitlement

If this is your first time using a VA loan, or if you paid off a previous VA loan in full and then sold the house, you have full entitlement — though the total amount of money you can borrow will still be limited by factors that typically determine whether you will qualify for a mortgage, such as your credit history, income, and assets.

Reduced Entitlement

If you already have an active VA loan, paid off a VA loan for a home you still own, refinanced the VA loan you took out on a home you still own, or had a foreclosure and didn’t pay back the VA in full, you may have reduced entitlement.

Reduced entitlement limits the amount the VA will guarantee to your lender in the event that you default. The limit is the conforming loan limit in your area, minus whatever amount of entitlement you’ve already used. If you have reduced entitlement, you may be required to make a down payment.

Calculators are available online to help you determine how much entitlement you have left, but essentially, the equation is this: your maximum entitlement (one quarter of your county’s conforming loan limit) minus the entitlement you’ve used (one quarter of the VA loan you’ve already taken out) equals your remaining entitlement. Here’s the formula:

Conforming loan limit ÷ 4 = maximum entitlement

Existing loan amount ÷ 4 = entitlement you’ve used

Maximum entitlement – entitlement you’ve used = remaining entitlement

Recommended: How Government-Backed Mortgages Work

When You Might Have More Than One VA Loan at a Time

All of this begs the question: Why would you have more than one loan at a time, anyway? One home, one loan, right?

Well, if you’re an active-duty military member, you might receive permanent change of service (PCS) orders, which would require you to move to a new duty station — and therefore find new housing. Under those circumstances, you might have two active VA loans at one time.

Pros and Cons of Taking Out a Second VA Loan

If you’re taking out a second VA loan to fund a home purchase, there are both drawbacks and benefits to consider.

Pros:

•   If your remaining entitlement is high enough, you may still be able to avoid making a down payment

•   You will still benefit from other VA benefits, including competitive low interest rates and easier qualification standards

Cons:

•   If you don’t have enough remaining entitlement, you may still be required to put a down payment on the home — though possibly less of one than you would have otherwise

How to Take Out a Second VA Loan

To take out a second VA loan, you must get approved for the loan by a qualified VA lender. The first step is to determine how much remaining entitlement you have, as this will illuminate how much house you can afford to purchase — and how large of a down payment you’ll be required to make, if any. (Remember, your new home loan must be for a primary residence, so you can’t take out a second VA loan to fund a vacation home or investment property.)

💡 Quick Tip: Backed by the Federal Housing Administration (FHA), FHA loans provide those with a fair credit score the opportunity to buy a home. They’re a great option for first-time homebuyers.

Tips on Taking Out a Second VA Loan

Your lender will give you step-by-step instructions on how to apply for a second VA loan, including which documents and identification you’ll need to supply to prove your income, credit history, and more. Keep in mind that your remaining entitlement will determine how much money you’ll need to put down at closing. If you explore the second VA loan and aren’t sure it is right for your situation, consult a home loan help center to learn about more options.

The Takeaway

How many times can you use a VA home loan? While there’s no limit to how many VA loans you can take out in one lifetime, entitlement does limit how much the VA backs those loans for lenders involved — and could limit your ability to qualify for a no-down-payment VA loan.

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

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

FAQ

Is there a limit on how many times you can use a VA loan?

No — you can use your VA loan benefit as many times as you would like in your lifetime. However, your entitlement, or the amount of money that the VA pledges to back the loan for the lender, can be reduced if you’ve already taken out a VA loan.

Can a VA loan be used multiple times?

Yes — you can use your VA loan benefit multiple times. Your amount of entitlement can change the qualification process, however. If you have reduced entitlement, you may be required to make a down payment on the new loan.

How soon after using a VA loan can you use it again?

While there’s no specific time limit, VA loans can only be used for primary residences, and your entitlement will likely be reduced if you’re still living in the home you purchased with your original VA loan.

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Photo credit: iStock/LumiNola

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^†Veterans, Service members, and members of the National Guard or Reserve may be eligible for a loan guaranteed by the U.S. Department of Veterans Affairs. VA loans are subject to unique terms and conditions established by VA and SoFi. Ask your SoFi loan officer for details about eligibility, documentation, and other requirements. VA loans typically require a one-time funding fee except as may be exempted by VA guidelines. The fee may be financed or paid at closing. The amount of the fee depends on the type of loan, the total amount of the loan, and, depending on loan type, prior use of VA eligibility and down payment amount. The VA funding fee is typically non-refundable. SoFi is not affiliated with any government agency.
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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