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Not counting the reams of time you probably will spend looking for a house, both virtually and IRL, it takes and average of 30 to 60 days to get from an accepted offer on a house to the closing if you’re financing the purchase.

Here’s the scoop on how long it takes to buy a house and get the keys in your hand.

How Long Does It Take to Buy a House In 2024?

Once you’ve homed in on a home you love, the mortgage process — from application to closing — takes an average of 30 to 60 days.

So yes, a life-changing event can happen within a month or two.

But closing times vary. A cash buyer might be able to close on a house within days. An applicant with an iffy credit history and unpredictable income may need 90 days or longer.

Before You Start Looking for Your Next Home

It’s a good idea to get your head in the game before the hunt begins.

Organize Your Finances

If you’re asking yourself “How much of a mortgage can I afford?” you can get an estimate easily.

A home affordability calculator will give you a feel for a home price limit and monthly payments. Getting prequalified will also give you a quick ballpark estimate.

Pulling a down payment together to buy a house in many parts of the country isn’t as hard as many people think. The average down payment on a house is less than 20% (though putting less than 20% down on a conventional loan usually triggers mortgage insurance).

Conventional loans may call for just 3% down for first-time homebuyers; FHA loans, as little as 3.5% down; and VA and USDA loans, nothing down. (With government loans, mortgage insurance or fees come along for the ride.)

Low- and moderate-income borrowers can sometimes get down payment assistance through a state or local agency.

Figure Out Where You Want to Live

You might know exactly what neighborhood, school zone, and vibe you want. Then your search can zero in on that area.

But looking at the cost of living by state can be eye-opening.

And narrowing things down, you might want to check out market trends by city and neighborhood.

Determine Your Must-Haves

Do you want to buy a house that has been completely updated, or will a dowdy abode or fixer-upper do? The cost of any renovations or repairs must be factored in, of course, and may be funded with a home improvement loan.

If only new construction will do, that can mean a tract home, spec home, or custom home.

What size range can you live with? Maybe you need more space, or maybe you’re financially downsizing.

Is a low-maintenance condo or townhouse more your style, or do you need a single-family home with room for a swimming pool or garden?

Five Steps to Buy a House

Ready? This timeline assumes you’re about to start seriously shopping for a house.

Step 1: Get Mortgage Preapproval (Minutes to Days)

Unlike prequalification, mortgage preapproval means one or more lenders have vetted your finances, usually with a hard credit inquiry. Once your offer on a home is accepted, if your chosen lender is one of these, it has a big head start on your final approval.

An online application might take about 20 minutes to complete if you have all of the documentation in hand, including two years of W-2s and/or 1099s, two years of tax returns, recent pay stubs, a list of fixed debts, and two months’ worth of account statements.

Lenders will look at your credit scores and credit history.

They will look at income, debts (including student loans), assets, proof of employment, rental history, divorce, bankruptcy, and gift funds for a down payment.

Depending on the lender, preapproval could be nearly instantaneous or it could take days.

If you’re shopping for a mortgage, know that multiple credit inquiries by lenders are counted as a single inquiry for 14 days and sometimes more, so try to put in your preapproval requests with various lenders within the same week.

What Is a Pre-approval Letter?

A preapproval letter from a lender states that you’ve been tentatively approved to borrow up to a specific amount. It lets sellers know that you are likely to be able to get financing. The letter will have an expiration date of 30 to 90 days.

What Is a Verified Approval Letter?

This is the term used by some lenders for a preapproval letter, to make clear the difference between prequalification and preapproval. A hard credit inquiry will have been performed, and an underwriter will have examined your preapproval application and additional documents.

Step 2: Make an Offer on a House (a Day to a Few Days)

Once you find a house you want to call your own, it might take up to five days to make an offer and come to an agreement with the seller on price and contingencies in the purchase contract. A closing date will be in the purchase agreement.

Usually when you make an offer, you will provide an earnest money deposit to the escrow company, ​​typically 1% to 2% of the purchase price.

Step 3: Secure the Mortgage (30 to 60 Days on Average)

Now you can make a full mortgage application with as many lenders as you wish, and not just lenders that preapproved you.

It’s smart to look at more than rates — one of the different types of mortgage loans might be a better fit than the others.

You’ll need to choose a mortgage term as well. Thirty years is the most common.

Once you apply, you will receive official loan estimates, allowing you to compare mortgage APRs (annual percentage rates) and more. Choose a lender. Check at the top of Page 1 of the loan estimate to see whether your rate is locked, and until when.

Step 4: Prepare for Closing

Appraisal and Title Search

Your lender will order an appraisal of the home. A property valuation that comes back lower than the purchase price could hinder loan approval.

The appraisal may be performed from 14 to 45 days before closing.

A title search of the property also will be ordered, resulting in a preliminary title report.

Underwriting

This is mostly a waiting period for the buyer. Credit reports are ordered, and the application information is verified.

Mortgage underwriting focuses on the three C’s:

•   Capacity (will your income and debt load allow you to make the mortgage payments each month?)

•   Credit

•   Collateral (did the appraisal show that the home price and value are aligned?)

Your mortgage loan officer may come back to you with questions. Once you receive final loan approval, a mortgage contingency can be lifted.

Home Inspection

A home inspection is optional but widely recommended.

Closing Disclosure and Cash to Close

Your lender is required to send you a closing disclosure at least three business days before the closing. It should match your loan estimate or come close.

You’ll need to send a wire transfer for cash to close one to two business days before closing. The closing disclosure will tell you how much money you need to wire. If you don’t wire the money, you’ll need to prepare to take a certified check or cashier’s check to the closing table.

Cash to close is closing costs (unless you chose a no-closing-cost mortgage) plus your down payment minus your earnest money deposit and any seller credits.

An option: Prepare to take a certified check or cashier’s check to the closing table.

Final Walk-Through

Your real estate agent will schedule a final walk-through within 24 hours of closing. This is a chance to be sure the home is in the condition you agreed to under the purchase terms.

Step 5: Close on Your Loan (an Hour or Two)

The lender will send your closing documents to the closing attorney or title company.

You’ll sign a river of documents in person or remotely.

The deed will be recorded with the appropriate county to transfer title to the new owner, you. Then you’ll receive the house keys.

The Takeaway

How long does it take to buy a house? An uncomplicated mortgage and closing process could take about 30 to 60 days from the time your offer is accepted. That’s a quick close on a new beginning.

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 many months does it take to buy a house?

If you are financing your purchase with a home loan, and you have a steady income and good credit, you could get from an accepted offer to the closing table in one to two months. If you have a complex financial profile, or if negotiations with the seller become complicated, expect to add time to the process.

How long does it take to get preapproved for a mortgage?

The evaluation process for a mortgage preapproval can take around 10 days. If your financial picture is clearly documented and in good shape, it could take less time. You’ll need to fill out an application with your chosen lender and agree to a credit check, plus provide information about your income and assets.

How fast can you buy a house?

A cash buyer could purchase a home in a matter of days. If you require a home loan, expect the homebuying process to take one to two months from the point that you have an accepted offer.

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

SOHL-Q324-033

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If you just closed on a home and have yet to see paperwork from your lender about your first mortgage payment, you might be wondering when is the first payment on a mortgage due?

Most mortgage payments are set up from the beginning to be due on the first of the month. For new mortgages, you make the first month’s payment at closing, and you won’t make your first “real” mortgage payment until the end of the next month.

So that you’re prepared, let’s walk through when your first mortgage payment is due, how to make it, and what happens if you miss a mortgage payment. By the end, you’ll know how to make your first mortgage payment and have a solid plan for keeping your mortgage in good standing.

Determining Your First Mortgage Payment Due Date

After you close on your loan, the next part of the mortgage process is receiving a “welcome package” from your new mortgage servicer. It will include instructions from your servicer on paying your first mortgage payment. It will have your loan number, how to contact the servicer, the servicer’s website information, your payment amount, due date, list of fees, payment methods accepted, information on paying off your mortgage, and some other legal disclosures they’re required to send.

As far as the exact due date, when is the first payment on a mortgage due after closing? Lenders require your first mortgage payment within 60 days of closing your loan. Since they’ve already collected prorated interest for the first month at closing, you’ll be making your first payment at the end of the first full month you’re in the home.

For example, if you close on a home April 15, you’ll have paid prorated interest for the month of April at closing. Your first payment will likely be due June 1 so you will make your payment at the end of May. This payment will include the interest you’re being charged for the month of May.

Recommended: How to Get a Home Loan

Preparing for Your First Mortgage Payment

Now that you know when you’ll likely make your first mortgage payment, you have a few things to do to get everything in order. Sometimes, preparing for your first mortgage payment means waiting for the letter from your new mortgage servicer — so keep an eye on your mail. When you do have the information about where your payments need to go, you’ll want to set up automatic payments as soon as you can.

Setting Up Automatic Payments

Most borrowers can set up automatic payments in one of two ways:

•   With your mortgage servicer

•   With your bank

Setting up an automatic payment from your bank can help you centralize your finances and make things easier for you to see and control. An automatic withdrawal pulled from your bank account by the mortgage servicer will do the same thing, but you’ll need to set it up with the mortgage servicer.

Budgeting for Additional Costs

Your home loan payment usually includes an amount for mortgage insurance, property taxes, and homeowners insurance, but you’ll want to make sure you are saving money for other costs that come your way, such as:

•   Homeowners association (HOA) fees

•   Home maintenance and upkeep

•   Utilities

•   Security system

•   Emergency repairs

Recommended: Mortgage Calculator

Consequences of Missing Mortgage Payments

Missing a mortgage payment can have some serious consequences, but before you get to that point, you’ll have a chance to rectify it. If you miss a mortgage payment, you’ll want to call your lender to work out a repayment plan and try to avoid some of the consequences, such as late fees and penalties, a lower credit score, and foreclosure.

Late Fees and Penalties

Mortgages generally have a grace period, usually around 15 days. After 15 days, you’ll be assessed a late fee. How much the late fee is will vary by lender and mortgage amount. You can find the late fee for your mortgage in your loan documents.

In general, you may see a late fee up to 5% of the principal and interest portion of your mortgage payment. For a $2,000 mortgage payment, that could be up to a $100 late fee.

Impact on Credit Score

Missing a mortgage payment will have a negative impact on your credit score when it is reported. Mortgage companies typically wait until the mortgage is 30 days past due to report it to the credit bureaus. The late payment could stay on your credit report for up to seven years.

Payment history accounts for 35% of your credit score. A missed mortgage payment can drop your credit score approximately 50 points, according to analysis of more than one million mortgage loans by Milliman, an actuarial and consulting firm. Four missed payments lowers a score around 100 points.

If you do miss a mortgage payment by accident, most credit scores are able to recover within two years.

Risk of Foreclosure

In 2023, there were 357,062 foreclosure filings made in the United States, which represents a quarter of a percent of all housing units in the U.S. If you know you’re going to have trouble making a payment, contact your lender as soon as possible to see if there are any relief programs available.

If a borrower misses payments, in most cases a lender may start foreclosure proceedings when they haven’t received a payment for 120 days. From there, the amount of time before the lender forecloses on your home depends on state law. States like Hawaii, Louisiana, and New York average more than 2,000 days (more than 5 years!) to complete the foreclosure process. States like Montana, Virginia, and Texas average 123, 152, and 163 days, respectively.

Tips for Staying on Track

If you’re worried about staying on track with your mortgage payment you can try these ideas:

•   Use a budgeting app. There are a whole host of budgeting tools that can help you keep track of your mortgage payment due date (as well as other important financial information).

•   Set automatic payments. As noted above, you can set up your mortgage payment to be paid automatically, from either your bank or the mortgage servicer. You’ll link account information and set a date for payment to be delivered.

•   Utilize calendar reminders. A calendar reminder, either in the analog or digital world, could help you remember to make your mortgage payment if you don’t have automatic payments set up.

•   Put emergency funds on autopilot. Some mortgage servicers may allow you to link more than one payment method. If there’s not enough money for the mortgage payment in one fund, you may be able to pay your mortgage from savings.

•   Be aware of market changes. If you’re struggling to make payments, you may be able to save money by pursuing a refinance with either a different type of mortgage, a lower interest rate, or a different mortgage term.

If you have the urge to pay off your mortgage early or make extra payments to reduce the principal owed (a process called mortgage curtailment), study your mortgage agreement carefully to understand if there are prepayment penalties.

The Takeaway

Your first mortgage payment is typically due at the end of the first full month after you close on your loan. There’s some leg work involved with setting up and making the first mortgage payment, but if you’re able to create a system, you’ll have a good chance of successfully paying your mortgage on time each month.

If you get into trouble or need help with your mortgage payment, contact your mortgage servicer as soon as possible. They may have a plan to help get you back on track with your mortgage payment and keep you in your 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

Can I make my first mortgage payment before the due date?

Yes, lenders accept mortgage payments (including your first mortgage payment) before the due date. It might be helpful to wait until the mortgage servicer’s instructions come in the mail to know exactly where you need to send your mortgage payment.

What happens if I miss my first mortgage payment?

Mortgage payments have built-in grace periods, so if you miss your first mortgage payment by a few days, you’ll likely be fine, but you should make your payment promptly to keep your mortgage current and your credit in good shape. If you can’t find a letter from your mortgage servicer, give the servicer a call and ask if they’ll take payment over the phone.

How long is the grace period for mortgage payments?

The grace period for mortgage payments is typically 15 days.

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Photo credit: iStock/PIKSEL

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.

‡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.

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.

SOHL-Q324-019

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If you’ve been looking for a rental of any kind, you know how tough the hunt can be. Dozens of applicants for each vacancy, stricter credit, income, and referral requirements from landlords, bidding wars. These are, unfortunately, all part of navigating today’s tough rental market.

The culprit is a national housing shortage that has been brewing for more than a decade. After the housing crash of 2008, new construction of homes and rental units slowed dramatically. An uptick in building was later offset by supply chain and other pandemic-related delays. Meanwhile, rising mortgage rates made owning a home less affordable, prompting lots of would-be buyers to stay put in the rental market. The result? During the height of the rental crunch in early 2022, apartment occupancy hit an all-time high of 97.6% and rents jumped an average of 15.2% throughout the country.

Although the rental market has cooled somewhat since then, rents remain high and lower-cost rental units are in especially high demand. About half of people who rent are considered cost-burdened, meaning they spend more on rent than the recommended 30% of income.

If you’re competing in a tight rental market — or just competing for an affordable rental to call home — these four steps can help you anticipate what landlords are looking for and help you present yourself as the ideal tenant.

Tips to Get Approved for a Lease

Step 1: Know Your Number

Determine just how much you can afford for housing costs.

The advertised or asking rent is just the beginning. You’ll also need to take any fees, utilities, maintenance, parking, and renters insurance into account. If it’s been a while since you signed a new lease, you may need to adjust your estimates for these costs upward. Moving to a new area? Whether you’re renting or in the market for a house (and a home loan), check out a cost of living by state breakdown to get a feel for the numbers.

Take into account the possibility that you might find yourself in a bidding war. In the heat of the moment, you may outbid the others but also end up with an apartment you can’t comfortably afford. To avoid this scenario, determine your ideal monthly payment and stick to that number, no matter how tired you are of the apartment hunt.

Step 2: Prepare Your Rental Resume

Apply for a rental the same way you approach applying for a job. You want to make sure you fulfill all of the requirements, and then some.

The first step to getting approved for an apartment is usually filling out an application online. Be sure to do so accurately and thoroughly. When the time comes to see the place, you’ll help make your case if you bring the following:

Copies of Your Credit Reports

Landlords routinely do background and credit checks on applicants they are considering. Offering a copy of a credit report gives them on-the-spot information. If something on your report is confusing, you can attach your own letter of explanation.

Most landlords will look for a good FICO® score (670 to 739) or higher. Find your credit score on a loan or credit card statement or through an online credit score checker. Or get it for free from Experian.

Proof of Employment and Income

Landlords want to know that you can comfortably afford the rent. To prove you can, you could bring copies of your past three to six months of pay stubs, a copy of your most recent tax return, and contact information for your current employer. (This may be more than the landlord is asking for, but it helps build your case.)

Some, but not all, landlords also require employment history information. Having a list of former employers and their contact information on hand can help speed up this process. Even if it’s not required, the list helps paint a more complete picture of why you’re a trustworthy candidate.

References

Be ready to present credit references, which may include character references and asset documentation. Personal references from your boss, a co-worker, or another nonfamily adult who can vouch for you are a good idea. The landlord or agent may not call these people, but having them on your list is a sign of your professionalism and trustworthiness.

Landlords probably also will want the names, locations, and contact information of any previous landlords. A stellar rental history can help put you ahead of the crowd, so you want to make it easy for the agent or landlord to check on you.

If you’ve had trouble making rental payments, it’s best to be honest and offer an explanation.

Documentation for Service or Assistance Animals

According to the Fair Housing Act, a person with a disability may seek a “reasonable accommodation” from a housing provider so that they may have an equal opportunity as a nondisabled person to use a dwelling, even one that otherwise does not allow animals. The disability can be physical or mental.

Service animals, defined as dogs, are not considered pets, and housing providers cannot charge fees or deposits for them.

So-called emotional support animals have ruffled feathers throughout the country. First, applicants with assistance animals must make a request for reasonable accommodation, and not necessarily in writing. If the disability is not observable, they must provide reliable information — typically a letter from a medical provider or therapist — to the housing provider showing that the animal provides assistance.

Beyond that, the U.S. Department of Housing and Urban Development (HUD) does not allow housing providers to seek personal details of a person’s medical history. Importantly, HUD says that online certificates alone are not sufficient to reliably establish that a person has a nonobservable disability or disability-related need for an assistance animal.

So if you have assistance animals, it’s a good idea to bone up on the laws, which can be complicated, and have professional documentation.

Step 3: Show an Interest

It may sound trite, but landlords and rental agents are reassured when they know that someone really wants to live in the property. At a time when demand is high, this can be even more important as landlords become inundated with calls or online requests.

If you’ve visited the property before, have a friend in the same complex or nearby, love the neighborhood, or even appreciate the architecture or amenities, be sure to say so. Landlords want to know you’ll enjoy living there and, in turn, take good care of your new home.

Step 4: Prepare to Pay

Many leases have been lost when an early and promising applicant is ready to rent but doesn’t have the funds available.

Make sure you bring your checkbook or an electronic payment option so you can pay your security deposit, first month’s rent, and whatever else is required immediately. And, of course, make sure you have the funds available, while still leaving room in your budget to also cover moving expenses.

Move-in money can obviously be a challenge to come up with. If it’s several thousand dollars, a personal loan could help.

Did you snag the apartment or house? Once you move in and exhale, undertake a few renter-friendly updates to help you make the space your own.

Recommended: How Home Ownership Can Help Build Generational Wealth

The Takeaway

It’s a challenging time to look for a rental. But preparing thoroughly before you start your hunt and taking steps to show landlords your qualifications and genuine interest can help you stand out in the crowd. In this rental squeeze, however, some house hunters may find that it makes more sense to build equity in their own home than to pay rent.

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 do I impress a potential landlord?

Make sure you fill out the rental application fully. When you tour the apartment, bring along a copy of your credit report, proof of employment and income, and contact information for some character references. Then express genuine interest in the property — comment on the building or neighborhood, for example — to show you’ll be invested in caring for your rental home.

What kind of background check do most landlords do?

A background check from a potential landlord might include a review of your credit history, employment and income history, and even a criminal background check. Some landlords also check for a history of eviction. They may also contact a former landlord or ask you for a character reference from a friend or colleague.

How much money should I have saved before renting an apartment?

You’ll want to have at least three months’ worth of rent saved before you start apartment hunting — the equivalent of your first and last months’ rent plus a security deposit. What’s more important, though, is that you have carefully considered the full cost of renting — including paying for utilities, renter’s insurance, and perhaps expenses such as parking. A good rule of thumb is that your housing expenses should not exceed 30% of your take-home pay.

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Photo credit: iStock/cnythzl

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.

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.

SOHL-Q324-030

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The FHA Streamline Refinance program is a simplified version of a mortgage refinance for borrowers who already have a loan backed by the Federal Housing Administration (FHA). It’s possible for borrowers to refinance without a new property appraisal, credit check, or income verification — but owners do have to be current on their existing FHA mortgage.

The FHA Streamline Refinance does have its limitations. For example, if you need cash out or want to eliminate the mortgage insurance premium, you can’t do it with the FHA Streamline Refinance and you’ll need to find another mortgage type.

We’ll explore exactly what is an FHA Streamline Refinance, how it works, what the requirements are, the process of getting one, and what the benefits are to help you determine if this program is right for you.

Note: SoFi does not offer FHA streamline refinance at this time. However, SoFi does offer FHA loan options.

What Is an FHA Streamline Refinance?

An FHA Streamline Refinance refinances an existing FHA loan into a new FHA loan with limited credit and underwriting requirements for the borrower. It’s faster and sometimes cheaper to obtain than a full refinance, especially since it doesn’t require a new appraisal.

Typically, the main goal is to lower monthly payments by refinancing to a lower interest rate, but if the mortgage term is reduced or the loan type is changed to a fixed-term loan, that could also be considered a “net tangible benefit” of the refinance by the FHA.

There are two types of FHA Streamline Refinance: credit qualifying and non-credit qualifying.

Credit Qualifying

As the name implies, your credit and income are used to qualify for an FHA Streamline Refinance and for the lowest interest rates. An appraisal isn’t needed for this type of refinance.

Non–Credit Qualifying

A non-credit qualifying mortgage doesn’t require the lender to assess your credit or ability to repay the loan, but all borrowers on the original loan must remain on the new loan. Like the credit-qualifying refinance, a non-credit qualifying one doesn’t require an appraisal, but there are other eligibility requirements.

Recommended: FHA Loan Buyer’s Guide

Eligibility Requirements for FHA Streamline Refinance

To qualify for an FHA Streamline Refinance, the borrower must derive a “net tangible benefit” from the refinance, such as a lower interest rate, a shorter loan term, or a switch from an adjustable-rate mortgage to a fixed-rate mortgage. If you’re considering a refinance, you might want to run your numbers through an FHA loan calculator to see if a refinance will save you money.

Other requirements relate to the loan type, occupancy, credit score, and payment history.

Loan Type

The loan being refinanced must be an existing FHA loan. The refinanced loan will remain an FHA loan, which means you’ll still need to pay mortgage insurance. If you’re current on your payments, it could make sense to take a look at other types of mortgage loans beyond FHA.

Occupancy Status

An FHA Streamline Refinance can be used in the following occupancy scenarios:

•   Owner-occupied one- to four-unit properties

•   HUD-approved second homes

•   Investment properties with existing FHA-insured mortgages

Credit Score and Payment History

There is no credit score requirement for the FHA Streamline Refinance under the non-credit qualifying option. However, FHA Streamline Refinance rates can be better for those who use the credit-qualifying option and supply credit qualifications to the lender.

Borrowers do need to have made at least six payments and wait 210 days before applying for a refinance on their FHA loan. Borrowers must also be current on their mortgage payments with no delinquencies.

Recommended: Minimum Down Payment for an FHA Loan

Benefits of an FHA Streamline Refinance

Here are a few of the ways in which a homeowner may benefit from the FHA Streamline Refinance program:

A Lower Interest Rate

For borrowers who bought a home when their credit was bent out of shape or interest rates were high, FHA Streamline Refinance rates could be lower than the rate they currently have.

A Different Loan Type

If you have an adjustable-rate mortgage, the FHA Streamline program can change it to a fixed-rate mortgage and help stabilize your payments.

Remove or Add a Borrower

If you need to remove a borrower from the loan, such as the case with death, divorce, or separation, you may be able to do it with a streamline refinance. This may be done if the borrower can supply supporting documentation, such as a divorce decree.

Pay Off a Loan Faster

By refinancing to a shorter loan term, you’ll likely pay off the loan faster and save yourself a good amount of money.

Avoid an Appraisal

The FHA Streamline Refinance uses the value of the home from the original FHA mortgage, with a maximum loan amount of the existing loan balance. Because these numbers don’t need to be adjusted upwards, no new appraisal is needed.

Reduce Closing Costs

There are costs involved with an FHA Streamline Refinance, but they may be less due to the reduced requirements. For example, you do not need to pay for an appraisal with an FHA Streamline Refinance.

Close Quickly

With reduced documentation and underwriting requirements, and no appraisal required, it’s possible to close on the loan relatively quickly.

FHA Streamline Refinance Process

The FHA Streamline program reduces the documentation and underwriting requirements for the lender, which usually translates into a quicker refinancing process. Here’s what you’re looking at when it comes to documentation, timeline, and costs.

Documentation Needed

Your lender will be able to see your payment history with a credit check, but there are a few more documentation requirements. If you’re applying as a non-credit qualifying borrower, these include:

•   Residency verification, such as a utility bill in the occupant’s name

•   Evidence of payment history for the past 12 months

•   If a secondary residence, approval from jurisdictional FHA Homeownership Center

If you’re applying with a credit-qualifying mortgage for the lower rate, you’ll likely need to provide the typical documentation required by the lender, such as:

•   Credit score and history

•   Proof of income and employment history

•   Bank statements

•   Debt obligations

•   Assets

Lenders use this information to determine if you have enough income to qualify for the loan, what rate you qualify for, and to verify funds to close the loan.

Refinancing Timeline

An FHA Streamline Refinance takes less time because there’s no appraisal required. In a general sense, the process looks something like this:

•   Find FHA-approved lenders. For an FHA Streamline Refinance, lenders must be approved by the FHA as a direct endorsement lender to qualify.

•   Apply. Talk with lenders to see if your situation fits with this type of mortgage. Apply with your top choices, noting the closing costs and interest rates offered by lenders.

•   Submit documentation. Since there are fewer forms to find and submit, you may be able to complete your part of the application faster.

•   Wait for underwriting. Since the loan isn’t contingent upon an appraisal, income, or credit, your loan will be ready to process more quickly than other types of loans. Alas, it’s still a government-backed loan, so you could be waiting 30 days or more.

•   Close on the loan. Once underwriting has approved your loan, you can close and start making your new payment.

Upfront and Closing Costs

When you refinance with an FHA loan, you’ll need to pay an upfront mortgage insurance premium on the new FHA loan. You may be able to get a refund on a part of your mortgage insurance premium that you previously paid.

You also need to pay other closing costs, such as title insurance. Since the loan amount can’t be greater than the existing loan balance, these closing costs cannot be wrapped into the loan. However, you may see lenders offer no-closing-cost loans in exchange for a higher interest rate.

The Takeaway

An FHA Streamline Refinance makes sense in certain situations, but it’s not always the right option. Going through the FHA Streamline process makes sense if you don’t want your credit pulled or you’re looking to save time or money on a refinance. These types of refinances don’t require an appraisal and there are fewer closing costs as a result.

However, you can’t get rid of your monthly mortgage insurance payment and you won’t be able to refinance to a higher loan amount if you need more than $500 cash out. It’s common to see borrowers refinance to conventional mortgages over FHA mortgages to eliminate mortgage insurance and take cash out.

It all comes back to your goals. If you want a mortgage without the mortgage insurance premium or need cash out, you’ll want to look into other types of mortgages. But if you want to keep an FHA mortgage and go through minimal underwriting, then an FHA Streamline may be the right move for you.

FAQ

Can you remove mortgage insurance with an FHA Streamline Refinance?

No, you can’t remove mortgage insurance from an FHA Streamline Refinance. All FHA loans require mortgage insurance, even if you’re replacing one FHA loan with another.

How long does an FHA Streamline Refinance take?

Give it around 30 days. How long it takes to close on an FHA Streamline Refinance depends a lot on your lender, and it can be quicker due to the limited underwriting requirements. When there’s no appraisal, no loan-to-value ratio, and no credit requirement, the loan can be completed faster than when it was originally funded.

Can you get cash out with an FHA Streamline Refinance?

The maximum amount of cash you can take out from an FHA Streamline Refinance is $500. If you need more, you’ll want to look for another mortgage.

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Photo credit: iStock/Jacob Wackerhausen

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.

SOHL-Q324-002

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Homebuyers have a variety of financing options to consider. If you’re a current homeowner, a bridge loan and a home equity line of credit (HELOC) are two possible choices that let you use the equity in your home to finance your next home purchase.

But there are key distinctions in how these funds can be used, as well as pros and cons for each. Let’s take a closer look at how bridge loans and HELOCs compare.

What Is a Bridge Loan?

Bridge loans, sometimes referred to as swing loans, interim financing, or gap financing, are a short-term, lump-sum financing option that’s typically used to purchase a new home before the sale of an existing property.

If you’re figuring out how to buy and sell a house at the same time, coming up with a down payment on the new house when you haven’t yet received payment for your current house can be challenging. This is when a bridge loan could come in handy — by filling the gap in funding so you can secure your new home without having to make a sale-contingent offer or feel pressured to accept a low bid on your current home.

Borrowers typically approach bridge loans in one of two ways: A common scenario involves using a bridge loan to cover just the down payment and closing costs on a new home. Alternatively, borrowers can apply for a larger bridge loan — potentially up to 80 percent of the value of both properties. With this second approach, borrowers pay off the entire mortgage on their current home and apply the remaining funds toward closing on their new home.

When comparing a bridge loan vs. a HELOC, note that both financing options are often secured using an existing home as collateral. An important difference is that bridge loans aren’t meant to be used for long-term financing, as they come with relatively higher interest rates and loan terms between six months and a couple years.

Note: SoFi does not offer bridge loans. However, SoFi does offer home equity loans.

What Is a Home Equity Line of Credit?

A home equity line of credit, or HELOC, is a type of financing that leverages home equity to fund a variety of expenses. Borrowers can typically take out between 75% to 85% of their home equity — the value of their home minus the mortgage balance — with a HELOC.

A HELOC works much like a credit card, providing a revolving line of credit that can be drawn upon as needed. However, a HELOC offers lower interest rates than a credit card since it’s secured by an existing property.

When you consider a HELOC, there are two phases to keep in mind: the draw period and the repayment period. During the draw period, which often spans 10 years, borrowers can access available funds as needed while only having to pay interest on the amount that’s withdrawn.

Once the draw period ends, funds can no longer be withdrawn and the repayment period kicks in. Borrowers will need to make regular payments on the principal, plus interest, until the balance is paid off. On a HELOC with a 10-year draw period, borrowers can expect to have a 20-year repayment period. This extended repayment time frame is a notable distinction between a bridge loan vs. a HELOC.

You may have heard about a home equity loan, which also uses your home as collateral. When comparing a HELOC vs. a home equity loan, some key differences are that with the latter, funds are disbursed immediately as a lump sum and repayment begins right away. If you’re weighing a bridge loan vs. home equity loan, note that home equity loans usually have fixed interest rates and terms ranging from five to 30 years.

Recommended: Home Loan Help Center

Pros and Cons of Each Financing Option

Both bridge loans and HELOCs can provide quick and flexible financing. But each comes with its advantages and drawbacks.

Pros

Here’s a look at the benefits for each financing option.

Bridge Loan:

•   Quick access to funds for time-sensitive transactions

•   Avoids the need to make a sale-contingent offer on a new home

•   Could help buyers put 20% down and avoid private mortgage insurance

•   Faster processing than conventional mortgages

•   Often begin with more affordable, interest-only payments

HELOC:

•   Flexibility to draw on credit line whenever you need it

•   Lower interest rates than bridge loans

•   Interest is only charged on the funds you withdraw

•   Longer repayment period than bridge loans

•   Interest can be claimed as an itemized tax deduction if used for home improvements. (This tax benefit is slated to expire after 2025.)

Cons

Here are some potential disadvantages to consider when comparing a bridge loan vs. a home equity line of credit.

Bridge Loan:

•   Higher interest rate than other second mortgage options

•   Shorter repayment period than a HELOC

•   Often requires borrowers to also use the lender for their new home mortgage

•   Puts home at risk of foreclosure for missed payments

•   Limited borrower protections if sale of old home falls through

HELOC:

•   Typically have variable interest rates that are subject to change over the repayment period

•   Risk of running up balance quickly

•   Potential for large jump in payment amount when moving from the draw to the repayment period

•   Uses a home as collateral like a bridge loan

•   May include prepayment penalties for paying off the balance early

Is a Bridge Loan or HELOC Better for You?

It’s important to consider what you’ll be using financing for and your ability to repay the money you borrow when deciding whether a HELOC vs. bridge loan is a better bet. Situations that require funds over a longer period of time, or at different times, could be a good fit for a HELOC. Home renovations are a popular use for HELOCs, since the costs and timeline may be subject to change as the project unfolds. Funds from a HELOC may be used for other expenses like medical bills, tuition, or making a down payment if the line of credit provides sufficient funds. Note that these expenses are not eligible for a tax deduction.

A bridge loan, by comparison, is ideal for borrowers looking to buy and sell a home at the same time. Since bridge loans often start with interest-only payments, they can be an affordable option if borrowers can sell their old home soon after buying a new one. If there’s a good chance that the original residence won’t be sold for an extended period, it might be more cost-efficient to go with a home equity line of credit vs. a bridge loan.

Standard Qualifications and Requirements

Before you consider borrowing against your home equity and putting your property on the line, look closely at the qualifications and requirements. Both bridge loans and HELOCs require that borrowers have at least 20% equity in their home. Lenders factor in your creditworthiness for either loan, too. For a bridge loan, borrowers typically need a minimum credit score of 700, though some lenders may allow borrowers with lower scores. While it’s possible to qualify for a HELOC with a credit score of 620, this comes at a higher interest rate.

Requirements on how the funds are spent differs between the financing types. A HELOC offers greater flexibility in how the funds are spent, whereas bridge loans may be limited to the purchase of a new home while selling an existing property.

Application Process

Early on in the home-buying process, you’ll want to look into applying for financing. For either a bridge loan or a HELOC, you’ll need to provide documentation of homeownership, proof of income, mortgage statements showing you’ve been making on-time payments, and information on any existing debts. With either form of financing, lenders may require a home appraisal to determine the property’s market value, which is the basis for the loan or line of credit amount.

The application and underwriting processes for a bridge loan and HELOC are usually quicker than conventional mortgages, making them an ideal choice if a homebuyer needs to act fast.

Recommended: Mortgage Prequalification vs. Preapproval

The Takeaway

Both a bridge loan and a HELOC can provide quick access to financing to buy a home. There are pros and cons to each financing type, so it’s important to determine which works best for your financial situation. Remember that both financing options use your current home as collateral, meaning that lenders can foreclose on your house if you fall behind on payments.

SoFi now partners with Spring EQ to offer flexible HELOCs. Our HELOC options allow you to access up to 90% of your home’s value, or $500,000, at competitively lower rates. And the application process is quick and convenient.

Unlock your home’s value with a home equity line of credit brokered by SoFi.

FAQ

Can you pay off bridge loans and HELOCs early?

Yes, both types of financing can be paid off early. Note that some lenders may charge prepayment fees if you pay off a HELOC within the first few years of the repayment period.

What is the average interest rate on a bridge loan?

The interest rates on bridge loans are generally 2% higher than prime mortgage rates.

What happens if you take out a HELOC, but don’t use it?

You may have to pay an inactivity fee if you open a HELOC and don’t use it. Minimal withdrawal requirements are typically outlined in your HELOC contract.

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Photo credit: iStock/MicroStockHub

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.

^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.

SOHL-Q324-007

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