What Is the Maximum VA Loan Limit?

Loans backed by the U.S. Department of Veterans Affairs (VA) have several benefits for U.S. veterans, service members, and surviving spouses, including competitive interest rates and no down payment requirement. And as of 2020, there are no VA loan limits if you’re borrowing for the first time. If you’ve already purchased a home with a VA loan, you may be subject to the same loan limits as conventional mortgages, which range from $806,500 to $1,209,750 for single-family homes, depending on your county.

If you’ve been wondering what the VA loan limit is, here’s a closer look at how VA loan limits work and when they come into play.

Key Points

•   First-time borrowers with full entitlement have no VA loan limits, allowing borrowing any amount without a down payment.

•   The VA guarantees 25% of loans over $144,000, providing security for lenders.

•   Lenders may still have limits to the amount they are willing to lend to a borrower based on the applicant’s credit score and other factors.

•   For borrowers without full entitlement, VA loan limits range from $806,500 to $1,209,750, varying by county.

•   These limits apply if borrowers have an active VA loan, still own a home from a paid-off VA loan, or refinanced a VA loan.

What Are VA Home Loan Limits?

VA home loan limits refer to the maximum VA loan the Department of Veterans Affairs will guarantee. The guarantee from the VA means that it will pay a certain amount to your VA loan lender if you default on your loan.

If you have full entitlement, meaning you don’t have any other active VA loans, the VA will guarantee 25% of your home loan if it’s over $144,000. If your loan is less than $144,000, the VA will guarantee $36,000.

If you don’t have full entitlement, the VA will lower its guarantee amount by subtracting the amount of entitlement you’ve already used. In this case, you may have to make a down payment on the home that you buy with your VA loan.

What Are VA Loan Limits if You Have Full Entitlement?

So, what is the maximum VA loan limit if you have full entitlement? Since 2020, there has been no limit. You can take out as big a loan as you can qualify for with no down payment requirements. Your borrowing power will only be limited by the lender’s underwriting criteria, which includes thresholds for credit, income, and debt-to-income ratio.

The elimination of VA loan limits for borrowers with full entitlement gives many people more homebuying power without having to worry about a down payment or turn to a jumbo loan, which can have a stricter approval process.

You likely have full entitlement if you’re a first-time homebuyer. Alternatively, you may qualify if you borrowed a VA loan in the past but already paid it off in full after selling your property or having a foreclosure or short sale on your property.

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When Do VA Loan Limits Apply?

VA loan limits apply if you don’t have full entitlement. Here are some circumstances where you wouldn’t have full entitlement to this type of mortgage loan:

•   You already have a VA loan and are still paying it back.

•   You paid off a VA loan in full but still own the home you used it for.

•   You refinanced your VA loan into a non-VA loan and still own the home.

•   You had a short sale, deed in lieu of foreclosure, or foreclosure on a previous VA loan and didn’t pay the loan back in full.

If any of these scenarios apply, your VA loan limits would match the conforming home loan limits for your county. However, you may be able to borrow more than your county loan limit with a VA loan if you’re able to make a down payment.

VA Loan Limits by County

If you don’t have full entitlement, your VA loan limits often fall at $806,500. However, they can go up to $1,209,750 in areas with a high These limits are the same as the Federal Housing Finance Agency’s conforming loan limits and can be found on the U.S. Federal Housing website. The limits are adjusted each year and are higher for two-, three-, and four-unit homes.

If you need a bigger mortgage, you might consider a jumbo loan. High-income earners that make $250,000 to $500,000 per year tend to be the most suitable candidates for jumbo loans.

VA Loan Limits Example

If you don’t have full entitlement, VA loan limits will apply. To give an example, let’s say you’re looking to purchase a home in one of the more affordable places in the U.S. that has a loan limit of $806,500.

With full entitlement, the VA would guarantee up to 25% of that amount, or $201,625. If you’re already using $30,000 of your entitlement, the VA would subtract that amount and offer a guarantee of $171,625. Depending on the lender, you may be permitted to borrow a loan up to four times that amount, or $686,500. Borrowing a larger loan may be a possibility, but you’d have to make a down payment and pay closing costs.

If you are curious about how a VA loan stacks up against a conventional mortgage, you can go through the mortgage preapproval process to see what conventional loan amount and terms you might qualify for. You can also explore down payment assistance programs that could help you with a down payment if you don’t apply for the VA loan.

What VA Loan Limits Mean for You

If you’re buying your first home or have already paid off a previous VA loan in full, VA loan limits probably won’t affect you at all. Borrowers with full entitlement can take out a VA loan of any size without a down payment, as long as they can meet a lender’s financial criteria. You could potentially buy a high-cost home with a loan that exceeds traditional mortgage limits, as long as the monthly payments fall within your budget.

If you have an active VA loan or another reason why you don’t have full entitlement, VA loan limits will restrict how much you can borrow without making a down payment. Your limits will fall between $806,500 and $1,209,750, depending on your county. These limits are adjusted annually and may increase from year to year.

Understanding your VA loan limits is important because it impacts your homebuying power, as well as your down payment options. A major benefit of VA loans is their 0% down payment requirement, so make sure you’re clear on where your entitlement stands and any VA loan limits that apply based on your history of borrowing and the county where you want to purchase a home. Remember, too, that entitlement is not the same as eligibility. Your first step toward a VA loan is to obtain a Certificate of Eligibility from the VA.

The Takeaway

VA loan limits may be a non-issue if you’re borrowing for the first time. Instead of worrying about loan restrictions, you can turn your focus to determining your home-buying budget, finding a home, and choosing a lender. If you don’t have full entitlement, a VA lender can help you determine how much you can borrow and whether you might need to make a down payment.

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

Is there a maximum loan amount for VA loans?

There’s no maximum loan amount for VA loans for homebuyers with full entitlement who don’t have an active VA loan at the time of borrowing. However, lenders may limit how much you can borrow based on your credit, income, debt-to-income ratio, and other aspects of your finances.

Can I buy a million dollar home with a VA loan?

You can buy a million dollar home with a VA loan if you have full entitlement and strong enough finances to meet a lender’s approval. Borrowers without full entitlement will be subject to loan limits, which vary by county and range from $806,500 to $1,209,750.

How much do I need to make to buy a $400K house with a VA loan?

You would need a minimum income of roughly $115,000 and minimal other debts to be able to afford a $400,000 house with a VA loan. This assumes you have full entitlement and do not make any down payment. This estimate aligns with the 28/36 rule, which recommends spending no more than 28% of your gross monthly income on your mortgage payments and no more than 36% on your mortgage plus other debt payments. Don’t forget to take the cost of living into account as you crunch the numbers.

What is the jumbo limit for a VA loan?

There’s no jumbo limit for a VA loan if you have full entitlement — you can borrow as much as you need, subject to lender approval. In fact, the VA removed loan limits for borrowers with full entitlement in part to help them avoid jumbo loans, which can have high down payment requirements and strict standards for loan approval.

Can I have two VA loans at the same time?

You can have two VA loans at the same time, but you won’t have full entitlement. That means the VA will guarantee a lower amount of your loan (or nothing at all). In some cases, you may be required to make a down payment on your second VA loan.

How much income do I need for a $300K mortgage?

The income you’ll need for a $300k mortgage depends on several factors, including your average monthly expenses, down payment amount, interest rate, and repayment term. A general rule is to keep your mortgage payment below 28% of your gross monthly income (and your mortgage plus other debts below 36%).


Photo credit: iStock/Prostock-Studio

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


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



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

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


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


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

Veterans, Service members, and members of the National Guard or Reserve may be eligible for a loan guaranteed by the U.S. Department of Veterans Affairs. VA loans are subject to unique terms and conditions established by VA and SoFi. Ask your SoFi loan officer for details about eligibility, documentation, and other requirements. VA loans typically require a one-time funding fee except as may be exempted by VA guidelines. The fee may be financed or paid at closing. The amount of the fee depends on the type of loan, the total amount of the loan, and, depending on loan type, prior use of VA eligibility and down payment amount. The VA funding fee is typically non-refundable. SoFi is not affiliated with any government agency.
Checking Your Rates: To check the rates and terms you may qualify for, SoFi conducts a soft credit pull that will not affect your credit score. However, if you choose a product and continue your application, we will request your full credit report from one or more consumer reporting agencies, which is considered a hard credit pull and may affect your credit.

Third Party Trademarks: Certified Financial Planner Board of Standards Center for Financial Planning, Inc. owns and licenses the certification marks CFP®, CERTIFIED FINANCIAL PLANNER®

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How Long Does a Preapproval for a Mortgage Take?

Mortgage preapproval could take a couple days or up to a couple weeks depending on the lender and the effort required to verify the necessary financial information. Though mortgage preapproval isn’t a requirement, getting preapproved can help determine your home-buying budget and having a preapproval letter in hand demonstrates to sellers that you’re a serious buyer.

Here’s a closer look at how mortgage preapproval works, including how long preapproval lasts and steps to potentially speed up the process.

Key Points

•   Obtaining a mortgage preapproval typically takes around 10 days, but can vary.

•   Preapproval helps set a home-buying budget and indicates a potential interest rate.

•   Preapproval demonstrates financial readiness to sellers, making you a more reliable buyer.

•   Prequalification is quicker and less rigorous, offering a preliminary estimate.

•   Factors affecting preapproval include credit score, debt-to-income ratio, down payment, and employment status.

What Is a Mortgage Preapproval?

A mortgage preapproval is a letter or statement from a mortgage lender that indicates that you are conditionally approved to borrow up to a certain amount for a home purchase. It generally includes the type of mortgage loan you would likely qualify for and the interest rate you’d get if you ultimately apply for a mortgage.

Whether you’re buying your first home or in a competitive market, having mortgage preapproval gives some assurance to sellers that your financial ducks are in a row to buy a home. Maybe you aren’t buying in one of the best affordable places in the U.S. — in that case, it can be especially helpful to have preapproval as a guide to what you can actually afford. For many buyers, it can be advantageous to get preapproved before you start looking at properties so you’re prepared to make an offer.

You need to submit an application to get mortgage preapproval. This usually entails a hard credit check and submitting documentation related to income, assets, and debts.

How Long Does It Take to Get Preapproved?

The sooner you get preapproved, the sooner you can get serious about house-hunting. So how long does it take for mortgage preapproval?

After you submit your application, the mortgage preapproval process can take around 10 days to complete. Lenders will review the financial documentation submitted with your application, run a hard credit check, and potentially verify your employment.

Gathering the necessary financial information and completing the application itself can take some initial legwork. Before applying, you might also spend time browsing lenders to compare options and find mortgage terms that best fit your needs, so it’s worth factoring these steps into your timeline.

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How Long Does a Mortgage Preapproval Last?

When a lender issues a mortgage preapproval letter, it’ll include the period of time the preapproval is good for. Typically, mortgage preapproval lasts for 60 to 90 days, though it’s possible that lenders could impose a shorter time limit.

Mortgage preapprovals expire because interest rates and a borrower’s financial situation are subject to change over time. Employment status or savings levels can change with the ups and downs of the job market and cost of living in the U.S. Getting your preapproval renewed may require less work than the initial application, but it may involve another credit check and resubmitting financial documents. Keep in mind that significant financial changes could impact how much you qualify for.

Is Preapproval the Same as Prequalification?

You may hear the terms preapproval and prequalification used interchangeably. While both can give you an idea of how much house you can afford, there are key differences between the two. Here’s a quick look at mortgage prequalification vs. preapproval:

Mortgage prequalification involves a high-level review of your finances to get an estimate of how much you might be able to borrow, and at what interest rate. Unlike mortgage preapproval, prequalification doesn’t include a hard credit check and you won’t be required to submit financial documents like tax returns.Typically, you’ll need to just provide the lender with details on your income, employment, monthly debts, and anticipated down payment.

Getting prequalified is a quicker process than preapproval, since your information doesn’t require the same level of verification by the lender. Thus, prequalification is less of a guarantee that you’ll qualify for financing, but it can be used to inform your home-buying budget.

How Long Does Mortgage Approval Take After Preapproval?

Suppose you’re preapproved and have your offer on a house accepted. How long will it take to get approved for a mortgage to get to the closing table? Mortgage approval can take anywhere from 30 to 60 days, though lenders often aim to time the approval with your closing date in the contract.

Even if you’re preapproved, you’ll need to complete a home loan application with your chosen lender. You’ll finalize your choice of the type of home loan and your mortgage term.

Once your materials are submitted, the lender has several steps to complete. They’ll order a title search and an appraisal to determine whether the offer price matches the property value. This is also when the underwriting process occurs, which involves verifying your financial information and qualifications as a borrower. Though it’s optional, a home inspection would be completed at this stage, too.

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Factors Affecting Mortgage Preapproval

Lenders consider a variety of financial information before issuing mortgage preapproval. Here are several of the key factors for getting preapproved.

•   Credit score: Lenders use your credit score to assess your risk as a borrower. Credit score requirements vary by lender and mortgage type. If you qualify as a first-time homebuyer, for instance, you could be approved for an FHA loan with a credit score of 500.

•   Debt-to-income (DTI) ratio: How much home you can afford is determined in part by your DTI ratio, which is calculated by dividing your monthly debt payments by your gross monthly income. A DTI ratio of 36% or lower is considered good, though it may be possible to get preapproved with a higher DTI ratio.

•   Down payment: Having enough money to cover a down payment and closing costs is another important factor. Certain government-backed loans have no down payment, while jumbo loans require 10% down. Closing costs can range from 2% to 5% of your mortgage principal.

•   Employment: Your income and employment history are considered when a lender assesses your ability to repay the loan.

How to Speed Up the Preapproval Process

The mortgage preapproval process can vary by lender. When comparing mortgage options from different lenders, you can also look into the expected timeline for preapproval.

Having all the necessary documents prepared could help speed up the process. The lender will likely require that you submit the following materials and information:

•   Proof of identity: A valid driver’s license, passport, or other government-issued ID.

•   Proof of income and employment: Pay stubs, tax returns, and bank statements if self-employed.

•   Proof of assets: Bank statements, investment account statements, and gift letters from family, if applicable.

•   Debt and expenses: Documentation of student loans, auto loans, and any other recurring debt or monthly expenses.

The Takeaway

How long does preapproval for a mortgage take? It can require anywhere from a couple days to a couple weeks, so it’s smart to plan for around 10 business days. However, having all the necessary personal and financial information ready can help speed up the preapproval process. Once preapproved, you’ll have a good idea of how much house you can afford, which can inform your house hunt.

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 quickly can you get preapproved for a mortgage?

Some borrowers get preapproved for a mortgage in as little as a couple days, though the process doesn’t always move this quickly. It may take some time for lenders to verify your financial information and issue a preapproval letter.

How long does preapproval usually take?

The typical timeline for mortgage preapproval is around 10 days. However, delays can occur due to missing documents or delays in verification by an employer.

Do mortgage preapprovals hurt your credit score?

Mortgage preapproval involves a hard credit check which stays on your credit report for up to two years. This could put a temporary ding in your credit score — usually less than five points — for up to a year.

Is a preapproval a final approval?

Mortgage preapproval is not a guarantee for final approval on a mortgage. Borrowers still need to submit a mortgage application after having an offer accepted on a property.

Can you be denied after preapproval?

Yes, you can be denied after being preapproved for a mortgage due to changes in employment or personal finances. Borrowers can also be denied because of issues with the property itself or an appraisal that comes in below the purchase price.


Photo credit: iStock/Photography and Illustrator

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


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



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

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


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.

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.
Third Party Trademarks: Certified Financial Planner Board of Standards Center for Financial Planning, Inc. owns and licenses the certification marks CFP®, CERTIFIED FINANCIAL PLANNER®

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

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

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

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What Is a Preapproval for a Mortgage?

As its name implies, a mortgage preapproval is a lender’s way of telling you that it has prospectively approved you for a home loan up to a certain estimated amount. Having preapproval can be a big boon in a competitive housing market. It signals to sellers and real estate professionals that you’re serious about buying a home — and that a lender is, at least provisionally, willing to back you up.

But in the world of home shopping, there’s a lot of lingo to learn — for starters, there’s a difference between preapproval and prequalification. Below, find all the details you need to stay in the know and be ready to go when you find your dream house.

Key Points

•   Mortgage preapproval is a lender’s estimate of your loan eligibility, based on verified financial details.

•   Prequalification offers a less rigorous financial assessment than preapproval.

•   A lender examines credit score, income, and your debt-to-income ratio before preapproval.

•   Documentation and a hard credit check are required for preapproval.

•   A preapproval letter is valid for up to 60 or 90 days, depending on the lender.

What Is a Mortgage Preapproval Letter?

While the mortgage preapproval itself is the process by which a prospective lender estimates how much of a home loan you might be approved for — which we’ll get into in more detail below — the mortgage preapproval letter is the result of that process, and potentially an important aid in acquiring the keys to your new home.

A mortgage preapproval letter is the document that the lender offers you showing that you’ve been preapproved for a home loan up to a certain amount. Getting this letter can help you understand which homes are within your budget while you’re shopping — and also serve as a proof point for sellers that you’re not “just looking.”

Your preapproval letter will vary depending on the lender you choose, but will include the lender’s name and the amount up to which you’ve been preapproved. It’s also important to bear in mind that a preapproval is only valid for a certain period — usually up to 60 or 90 days after the mortgage preapproval process. That window gives you time to shop around, but not so much time that you can dawdle.

Recommended: First-Time Homebuyer Guide

Why Would You Want a Mortgage Preapproval?

Seeking out preapproval for a mortgage is not as simple as entering your name, email address and Social Security number into an online application. (If you’re prompted to enter a few numbers and promised a response in just seconds or minutes, that’s a prequalification, not a preapproval — and it doesn’t carry the weight a preapproval does.)

Although a preapproval does not guarantee a loan, it is a stronger statement than a prequalification. That’s because, to be preapproved, prospective borrowers must have some of their basic financial details, like income and credit score, verified. A preapproval involves a hard credit check rather than a soft one, which means it’s a better vote of confidence from the lender.

Let’s take a look at which specific factors play into your being preapproved (or not).

Mortgage Preapproval Factors

The factors your home loan lender will consider to preapprove you for a mortgage are similar to the ones they’ll look at to actually approve you for the loan. The difference is how in-depth the verification process goes.

Factors include:

•   Credit score and history (as verified by a hard credit pull)

•   Income and employment stability (as verified by recent W-2s, paystubs, and tax returns)

Lenders may also consider factors such as your debt-to-income (DTI) ratio, which displays the money you owe in loan payments each month as a percentage of your monthly income, helping lenders understand your ability to make payments on whatever type of mortgage loan you may choose.

Is a Mortgage Preapproval the Same as Prequalification?

No. A mortgage preapproval holds more weight than a prequalification, precisely because it requires a hard credit pull and some level of verification (whereas a prequalification may be based on a soft credit check and is therefore a weaker estimate of your actual ability to afford to buy your first home or afford your jumbo mortgage, or anything in between.

Mortgage Prequalification vs. Preapproval

Getting prequalified can still be a helpful stop on the homebuying journey — especially if you’re still early on the path. It can be especially useful for those who qualify as a first-time homebuyer and haven’t taken out a home loan before or recently.

A prequalification letter can help you understand a very general estimate of how much of a mortgage loan you might qualify for, which can help you determine what types of homes might be within your budget. It’s a good way of seeing how your mortgage payments would fit in with your overall cost of living. However, once you’re getting serious about shopping, a preapproval letter will make it easier to move forward with speed and flexibility.

What Do You Need to Get a Mortgage Preapproval?

Every lender’s process for getting preapproved for a mortgage is a little different, but usually you will need to provide your basic demographic information (such as your name, current address, and Social Security number) as well as providing documentation to the lender to verify your income and other stats, as described above.

How to Get Preapproved for a Mortgage

The good news is, these days, plenty of lenders make it not just possible, but easy to complete all the steps for your preapproval online. You may be able to upload the necessary documentation into their web portal — or, if you’d rather work with hard copies, fax, mail, or bring them into a brick-and-mortar branch (unless you’re working with an online-only lender).

How Long Does It Take to Get Preapproved?

While a mortgage prequalification can take just a few seconds or minutes, a mortgage preapproval can take a bit longer — after all, the lender has to actually verify the information you’ve offered. Again, each lender works a little differently, but in most cases, if preapproved, you should get your mortgage preapproval letter within 10 business days of applying.

What Happens After Mortgage Preapproval?

Once your mortgage preapproval goes through, you’ll have your mortgage preapproval letter in hand and be able to shop with confidence. Your preapproval letter can also be used to help you stick out from the crowd in a competitive market: You’ll already have a leg up on shoppers who haven’t gone through the preapproval process, who will be starting from scratch (whereas your mortgage application will already be partially ready to go).

Does the Preapproval Expire?

The point of a mortgage preapproval letter is to offer sellers and real estate agents information about your financial standing — and your financial standing can actually change pretty quickly.

That’s why mortgage preapproval letters usually expire within 60 or 90 days. This gives you a window for house shopping, but not indefinite time — so it’s a good idea to save your preapproval application for the moment when you’re really ready to go through with a purchase if you find the right home.

How Far in Advance Should You Get Preapproved for a Mortgage?

Since a preapproval does have an expiration date, it’s best not to start the preapproval process for a mortgage too far in advance. At the same time, if you’re already seriously home-shopping, not having a preapproval letter could hinder you if you find a home you want to move forward with.

Thus, the best time to get preapproved is when you feel that, if you found the right house tomorrow, you’d be ready to go ahead and make an offer. You should also be ready to spend the next 60 to 90 days, depending on your preapproval window, shopping with some level of seriousness. Another tip: If you think you might need help making a down payment, you should look into down payment assistance programs well before you seek preapproval.

Does Getting Preapproved Commit You to Anything?

A preapproval does not constitute a commitment — on either side of the table. So while you’re not committed to going forward with the mortgage, neither is your lender formally committed to loaning you the money.

Does a Preapproval Hurt Your Credit Score?

A mortgage preapproval does usually involve a hard credit pull, which can temporarily ding your score by a few points. However, in most cases, this type of credit score impact falls off relatively quickly and shouldn’t drop your score too much.

Recommended: Best Affordable Places to Live in the U.S.

Does Preapproval Mean You Get the Mortgage?

While a mortgage preapproval is definitely a vote of confidence from your lender, it doesn’t automatically mean you’ll get the mortgage. When you’re ready to formally apply, you’ll go through a more in-depth underwriting process that may require further verification of the factors used to determine your eligibility — so while a preapproval letter is a great estimate, it’s not a guarantee.

The Takeaway

A mortgage preapproval letter can help you show sellers that you’re motivated and ready to go — as well as giving you some pretty solid insight into how much house you can truly afford.

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

SoFi Mortgages: simple, smart, and so affordable.

FAQ

Does preapproval mean you are approved for a house?

A mortgage preapproval letter is just that — a preapproval. It is not the same as having an approved loan offer. It will, however, list an estimated figure that shows how much a lender may be willing to qualify you for, which is helpful as you shop for a home.

Does preapproval guarantee a loan?

A mortgage preapproval letter is a giant step toward getting approved for a loan, but it is not a guarantee. If your financial standing changes between the time you get preapproved and the time you put in your formal application, you may not be qualified for the same loan amount — or, in extreme cases, you may not qualify at all.

Can you be denied a loan after preapproval?

Yes, it’s possible to be denied a home loan, even after going through the preapproval process with that same lender. That’s because your personal financial situation or market conditions might change substantially between the time you got preapproved and the time you’re applying for the loan itself — though generally, if nothing catastrophic happens (like a job loss or serious credit score dip), this is an unlikely situation.

How much house can I afford if I make $70,000 a year?

Affording a house is about more than just how much money you make each year. It also matters how much debt you currently carry, what interest rates you qualify for, and how much you can set aside for a down payment. That said, one rule of thumb is that the cost of your home should not exceed three times your income. On a salary of $70,000, that would be $210,000. This is only one way to estimate your budget, however, and it assumes that you don’t have a lot of other debts.

Can I afford a $300K house on a $60K salary?

Your ability to afford a certain house depends on more than your salary alone. However, as a general rule, if you earn $60K a year, you may be able to afford to spend around $180,000 on a house, maybe a bit more if you have little or no other debts or can make a large down payment. However, depending on where you want to live, current interest rates, and how much debt you’re carrying, that figure could change significantly.


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


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What Determines a Stock Price?

Although investor sentiment plays into a stock’s price in the form of demand vs. supply, there are numerous factors that influence investor outlook. These include a company’s fundamentals, its performance history, as well as economic or geopolitical news that may impact not only that company but an entire sector.

These elements in turn can influence whether investors believe a stock will go up or down.

For investors interested in buying stock, it’s important to understand the various ingredients that can determine stock price, even though what influences a stock’s price per share can change at a moment’s notice.

Key Points

  • Investor sentiment, as expressed through supply and demand, is the main driver of a stock’s price.
  • Depending on what’s going on in the news, in the markets, as well as larger economic trends, investors may be bullish or bearish on a company or sector.
  • Thus, investor behavior determines stock price, based on a host of external factors, including company fundamentals.
  • In order to invest in stocks, investors must understand the key factors that determine stock price — which can vary from company to company, sector to sector.
  • Owing to market complexity, as well as ever-changing investor sentiment, there is no way to predict price movements with 100% accuracy.

7 Factors That Determine Stock Price

Beyond the basic principles of supply and demand, there are other factors that contribute to changes in stock prices. Those include investor behavior, the news cycle, company fundamentals, and more.

1. Investor Behavior

A current stock price is based on investors’ beliefs about the future success of a company. Hypothetically, if investors have reason to believe that a company will be successful in the future, they may invest in the company, causing the price of shares to increase. This is an important aspect of stock trading basics.

Similarly, if the outlook for a company is negative, investors may sell off the shares they own, causing the price to decrease.

Basically, if a few million people think that Company X is going to be successful in the near future, and that shares of Company X will see price appreciation that could lead them to buy the stock, increasing demand, which could drive up the price per share.

Emotions such as fear, panic, anxiety, greed, and hope can have a significant impact on investor behavior. This is the basis of the field of behavioral finance and understanding investor sentiment.[1] There are many different ways investors try to predict the future success of companies.

2. Company News and Data

Stock price predictions can be made based on reading stock charts and making calculations, as well as looking at news stories, fundamental analysis like reading over company earnings and reports, and other information.

News about changes in management, production, company or industry scandals, and other stories can influence investors’ view of a company, and cause share prices to change quickly.

3. World Events

Beyond news and outlooks specifically related to companies, global factors can also influence investor behavior. For instance, a presidential election, a pandemic, political unrest, or signs of a recession can create panic in the market, influencing investors to sell off stock shares in order to avoid losses, or put their money into safer investments.

Usually there is some up or down price movement in stock prices, and some stocks are more volatile than others. It’s rare for prices to completely remain static. It’s also rare for prices to drastically increase or decrease suddenly, but this is what happens during a market crash.

A market crash can happen when many investors begin to sell, creating a snowball effect where more and more investors pull their money out of the stock market. At that point, the market could plummet, resulting in losses that wouldn’t have occurred if people hadn’t sold.

4. Stock Buybacks

Another factor that can affect stock price is company buybacks of stocks. Companies will sometimes buy back their own stock from investors, thereby reducing the supply of shares available to the public. They do this in an attempt to increase stock prices.

If companies issue more shares of stock, they are increasing the supply, which can cause the price to decrease.

5. Primary and Secondary Markets

When some companies first start selling stock to the public, they hold an IPO, or initial public offering. At the time of the IPO, an initial share price is set and investors can begin to buy the stock at that price, which is considered a primary market.

After the IPO ends, the stock gets listed on stock exchanges (or secondary markets) and the price starts to fluctuate as shares get bought and sold — and supply and demand begin to play a role in share price.

When companies don’t have an IPO, their shares get bought and sold privately, in which case share price is determined between the buyer and seller.

6. Stock Valuation

The valuation of a stock is made by looking at the company’s past and projected earnings, large trades made by institutional investors, overall market trends of the S&P 500, and ratios and calculations made by analysts.

Four ratios and calculations that are used to determine the valuation of a stock are price-to-earnings (P/E) ratio, price-to-book (P/B ratio), price-to-earnings-to-growth (PEG) ratio, and dividend yield. These calculations can help investors figure out whether a stock is currently undervalued or overvalued.

7. Bid and Ask Price

A share price ultimately gets determined through the bid, ask, and sale price on stock exchanges. The bid price is the maximum amount an investor will pay for shares of a stock, while the ask price is the lowest price a seller will accept. When the two prices match up, a sale is made, and that price sets the new price per share of the stock. Ultimately it gets down to what someone is willing to pay and if a stock owner is willing to sell to them at that price.

What someone is willing to pay or sell for is determined by psychological and market factors, as discussed. If a buyer thinks the stock is undervalued at the asking price, they will buy, and vice versa. Generally the difference between the bid and ask price isn’t very large, but if a stock’s trading volume isn’t particularly large, it can be.

Companies that are a similar size or have a similar valuation can have very different share prices because the number of shares each company issues can differ greatly.

Because of different company market caps and numbers of liquid shares, the share price doesn’t reveal much about the actual value of the company, and one can’t use share prices to compare companies. However, the share price does reflect what investors currently think the stock of a company is worth.

How to Handle Changes in Stock Price

Attempting to time the market is extremely challenging because there’s no way to reliably predict market movements. For example, an investor could sell at what they think is the peak of the market, only to watch the price continue to rise.

Historically, the stock market has continued to rise over the long term, despite plenty of ups and downs along the way. Although past trends are never a guarantee of future outcomes, it’s likely that investors with a longer time horizon, who are willing to hold onto their stocks throughout up and down cycles, may eventually see positive returns.

That said, market volatility can provide opportunities to invest when the stock market is down, or sell at higher prices, especially if they were already considering buying or selling a stock.

The Takeaway

Ultimately, supply and demand drive stock prices — which is informed by market conditions, world events, and investor behavior, among other influences. Although there is no way to look into the future to predict share prices, investors tend to look at past performance, charts, and market trends to attempt to predict price movements. In general, it’s best not to try and time the market, but to focus on building a solid long-term portfolio that will grow over time.

Ready to invest in your goals? It’s easy to get started when you open an investment account with SoFi Invest. You can invest in stocks, exchange-traded funds (ETFs), mutual funds, alternative funds, and more. SoFi doesn’t charge commissions, but other fees apply (full fee disclosure here).


Invest with as little as $5 with a SoFi Active Investing account.

FAQ

What are three things that determine a stock’s price?

Broadly speaking, the three main factors that drive a stock’s price are economic/market conditions, company performance, and investor sentiment. These three factors are interdependent, with one influencing the other.

Who or what controls the price of a stock?

There isn’t one sole entity that influences the price of a stock, and owing to the interplay of factors in the stock market, there is no single source of control over a stock’s price.

What makes the price of a stock go up?

There is no way to predict whether a stock’s price will rise or fall, but generally speaking investor demand is what ultimately drives up the price of a given company. But there are numerous factors that play into investor demand.

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

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

Investing in an Initial Public Offering (IPO) involves substantial risk, including the risk of loss. Further, there are a variety of risk factors to consider when investing in an IPO, including but not limited to, unproven management, significant debt, and lack of operating history. For a comprehensive discussion of these risks please refer to SoFi Securities’ IPO Risk Disclosure Statement. This should not be considered a recommendation to participate in IPOs and investors should carefully read the offering prospectus to determine whether an offering is consistent with their investment objectives, risk tolerance, and financial situation. New offerings generally have high demand and there are a limited number of shares available for distribution to participants. Many customers may not be allocated shares and share allocations may be significantly smaller than the shares requested in the customer’s initial offer (Indication of Interest). For more information on the allocation process please visit IPO Allocation Procedures.

Disclaimer: The projections or other information regarding the likelihood of various investment outcomes are hypothetical in nature, do not reflect actual investment results, and are not guarantees of future results.
Financial Tips & Strategies: The tips provided on this website are of a general nature and do not take into account your specific objectives, financial situation, and needs. You should always consider their appropriateness given your own circumstances.

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What Is an Accredited Investor?

An accredited investor must meet specific financial criteria, and have the necessary experience to be accredited. Some investments are limited to only accredited investors.

There are two major categories of accredited investors: individuals and legal entities, which can include trusts, limited liability companies, and businesses.

Businesses like banks, investment broker-dealers, insurance companies, and pension or retirement plans are common examples of accredited investors.

Further, some private investment firms may follow legal guidelines that allow only the participation of accredited investors: i.e., those who meet certain net worth or income criteria as determined by the Securities and Exchange Commission.

Key Points

  • Owing to the complexity and risk some investments carry, they’re only available to accredited investors, not ordinary retail investors.
  • An accredited investor must meet specific financial criteria in order to invest in certain products.
  • Generally, an accredited investor must have $200,000 in income ($300,000 if married), or $1 million in net worth, excluding their primary residence.
  • Accredited investors may be individuals, but can also be trusts, institutions, and other entities.
  • The accredited investor designation protects main street investors from undue risk, and allows some companies to skirt SEC rules.

The Accredited Investor, Defined

Many private placement investment firms — some of which may take on a high level of risk, use complicated investment products and strategies — require investors to be accredited in order to circumvent the SEC’s legal requirements.

“One reason these offerings are limited to accredited investors is to ensure that all participating investors are financially sophisticated and able to fend for themselves or sustain the risk of loss, thus rendering unnecessary the protections that come from a registered offering,” according to the SEC’s Office of Investor Education and Advocacy.

When an investment is sold to the public, it is under the regulatory authority of the SEC. (For example, a mutual fund sold to retail investors falls under the purview of the SEC.) This includes certain disclosures and extensive reporting requirements to the SEC.

Accredited Investors vs. Retail Investors

Retail investors are generally individuals who invest their own money, often for retirement, but sometimes to buy stocks online. Retail investors have to meet some basic requirements when opening an investment account, but not the stringent criteria that apply to accredited investors.

Why Companies Choose Accredited Investors

Why might an investment firm choose to limit themselves to accredited investors? For one, adhering to the SEC regulations can be an expensive and labor-intensive process. In the eyes of the law, accredited investors are more sophisticated, or may have the means to take on the risk that such investment opportunities produce.

Who Qualifies as an Accredited Investor?

For individuals to qualify as accredited investors, they must prove that they have the means necessary to take the risk involved in certain investments. This can be done in one of a few ways:

  • First, the individual must have earned income that exceeded $200,000 (or $300,000 if married) in each of the prior two years, and reasonably expects the same for the current year.[1]
  • Or they must have a net worth over $1 million, either alone or with a spouse or spousal equivalent. That does not include the value of their primary residence.[1]

Other Types of Accredited Investors

On Aug. 26, 2020, the SEC updated the qualification criteria. Individuals who have Series 7, Series 65, or Series 82 licenses in good standing can now be considered accredited investors.[2]

The SEC said this was done to allow those with knowledge and expertise to invest in private investment markets even if they do not yet meet the financial qualifications.

General partners, directors, and executives with a private fund also qualify as accredited investors.

With the recent expansion of the qualification parameters, “knowledgeable employees” of the investment fund also now qualify as accredited investors.

Get up to $1,000 in stock when you fund a new Active Invest account.*

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*Customer must fund their Active Invest account with at least $50 within 30 days of opening the account. Probability of customer receiving $1,000 is 0.026%. See full terms and conditions.

How a Trust Can Be an Accredited Investor

For a trust to qualify as an accredited investor, assets must total more than $5 million, and the trust cannot have been formed specifically to purchase the investment.

The trust must also be directed by a “sophisticated” person — someone who the investment company reasonably believes has the requisite experience and ability to understand the risks associated with the investment.

As of the most recent changes, LLCs with assets of over $5 million may also qualify.

Alternatively, an entity can qualify as an accredited investor when all of the equity owners are individually accredited investors.

Because this reporting is not channeled through the SEC, investment companies typically collect the information necessary to confirm that a person is an accredited investor, or may require that potential customers sign off that they are accredited investors.

The Net Worth Requirement

One of the qualifications for being an accredited investor is to have a net worth of $1 million. How do you calculate your net worth?

Generally, individual net worth is calculated by taking a person’s assets and subtracting liabilities. Assets are things of value that a person owns, and liabilities are debts owed.

For example, imagine a person has the following assets: a primary residence, a checking account, a 401(k) retirement account, and a car.

They also have a mortgage loan and two student loans — those are their liabilities.

To determine their net worth, the individual would first total the value of the assets and then the liabilities, and subtract the value of the latter from the former.

That said, the SEC has a few specific rules about what is counted in a net worth calculation:

  • As mentioned, a primary residence is not to be included in the person’s net worth calculation.
  • A mortgage on a primary residence is also not to count in the net worth calculation, unless the value of the mortgage is greater than the value of the home.
  • If the mortgage is “under water,” then the amount of the loan that exceeds the fair market value of the home should be included.
  • When considering other real estate holdings with a spouse or spouse equivalent, it is not necessary that they be held under both names. For example, a property held by just one of the two parties would count.

How Can Non-Accredited Investors Invest?

You don’t need to be an accredited investor to begin building wealth for the future. There are plenty of opportunities for investors of every level to get involved and earn returns in the stock exchange.

It’s important to understand that all investments carry some amount of risk. It’s always a good idea for investors to familiarize themselves with the risks involved with their desired investments.

To start, investors can open an account at a brokerage or with an online trading platform to buy and sell securities like stocks and exchange-traded funds (ETFs).

New investors will want to be mindful of investing fees, as those will reduce any potential investment returns. This includes account fees, trading commissions, and the fees built into the funds themselves, called expense ratios.

The Takeaway

An accredited investor — a person or an entity — is qualified to invest in certain private investments like a hedge fund or a venture capital fund. Individuals must meet a high financial bar or have industry expertise to be accredited.

The rules for accredited investors can be seen as both protections for those investing, as well as advantageous for private investment firms.

Ready to invest in your goals? It’s easy to get started when you open an investment account with SoFi Invest. You can invest in stocks, exchange-traded funds (ETFs), mutual funds, alternative funds, and more. SoFi doesn’t charge commissions, but other fees apply (full fee disclosure here).


Invest with as little as $5 with a SoFi Active Investing account.

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

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

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

Mutual Funds (MFs): Investors should carefully consider the information contained in the prospectus, which contains the Fund’s investment objectives, risks, charges, expenses, and other relevant information. You may obtain a prospectus from the Fund company’s website or clicking the prospectus link on the fund's respective page at sofi.com. You may also contact customer service at: 1.855.456.7634. Please read the prospectus carefully prior to investing.Mutual Funds must be bought and sold at NAV (Net Asset Value); unless otherwise noted in the prospectus, trades are only done once per day after the markets close. Investment returns are subject to risk, include the risk of loss. Shares may be worth more or less their original value when redeemed. The diversification of a mutual fund will not protect against loss. A mutual fund may not achieve its stated investment objective. Rebalancing and other activities within the fund may be subject to tax consequences.

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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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