SoFi

Private airport lounges offer a comfortable refuge from crowded waiting areas by your flight’s gate. They’re a place to recharge (yourself and your devices), have a glass of wine, and sample upscale prepared foods that are a major improvement over that bag of chips from the vending machine.

These facilities are typically only accessible via a pricey plane ticket or membership. Here, you can learn ways to enjoy luxury airport lounges, for a fee or possibly even for free, including by accessing credit card rewards.

How Do Airport Lounges Work?

There are several types of airport lounges, and they vary from basic to luxurious. The no-frills lounges simply have snacks and drinks, while the most lavish ones will feature such complimentary perks as a full buffet, table-service restaurant, open bar, and even showers. The seats are typically way more comfortable than what you find in the standard waiting area, and you may have your choice of reading materials and streaming shows.

Not only can this help fill the time before your flight, but it can save money on food in the airport or onboard your flight, which can be one way families can afford to travel.

If you are traveling with pets, you may find a lounge that allows you to hang out with little Bailey in less crowded conditions than the main terminal. This can be more comfortable for you and your furbaby.

There are a few main types of lounges:

•   The original airport lounges are those run by the airlines, and several major carriers still offer lounges at the airports they use as hubs. In the U.S., American, Delta, and United offer large lounge networks, while Alaska Airlines has a much smaller network. Some foreign carriers also offer lounges at major international gateways, such as New York’s JFK and Los Angeles.

•   Another type of airport lounge is the contract lounge. These are third-party facilities that are open to those who have membership with an affiliated network. These lounges are also used for business and first-class passengers of airlines that don’t have their own branded lounge. In the U.S., the most common lounge network is Priority Pass Select, which offers members access to over 1,700 “airport experiences” around the world. There are numerous travel rewards credit cards that offer a Priority Pass Select membership.

•   You’ll also see lounges that are branded with the name of a credit card issuer, for use by its premium cardholders. The American Express Centurion lounges are the largest credit card lounge network. Capital One and Chase are also in the process of constructing their own branded lounge network. These lounges tend to be the most luxurious.

•   Finally, there are USO lounges that are available to U.S. Armed Forces active duty, Reserve, and Guard service members, as well as their families.

How to Access Airport Lounges for Free

With most lounge networks, the easiest way to gain entry is to purchase a membership or a day pass. However, there are some ways to access airport lounges without forking over cash.

Open a Premium Travel Rewards Credit Card

There are several travel credit cards that offer the perk of airport lounge access. For example:

•   The American Express Platinum Card offers lounge membership with the Delta SkyClubs, Plaza Premium, Priority Pass, American Express Centurion lounges, and others.

•   The Chase Sapphire Reserve offers Priority Pass and Chase Sapphire Lounge memberships.

•   The premium airline credit cards from American, Delta, and United each offer membership to their branded lounges.

When you’re deciding about which credit card rewards are most valuable to you, consider whether luxury airport lounge access is an important factor.

Recommended: How Does Credit Card Travel Insurance Work?

Trade in Miles or Use Credits

Another way to enter fancy lounges for free is to redeem airline miles for a membership (you might also be able to redeem credit card miles vs. cash back to gain access). For example, you can redeem 85,000 United miles for a United Club membership, rather than paying the $650 annual fee. Since you are receiving less than one cent in value per mile redeemed, this is considered a poor use of your miles, but no judgment. If it works for you, go for it!

Fly in Business Class or First Class

When you have a ticket in business class, first class, or international first class, most airlines will give you a pass to an airport lounge. It could be a lounge branded by that airline, especially in their main hubs. But if you are traveling from a city with little service on that airline, you’ll likely get a pass to a contract lounge.

Befriend a Business or First Class Passenger

One of the great things about flying in business or first class is that you will often receive a lounge pass that includes guest access. So if you are flying in economy class but have a friend or colleague with a business class ticket, he or she may be able to “guest” you into the lounge either for free or at a reduced rate.

Claim Free Access for Active Military

If you’re an active duty member of the U.S. military, then you may have free access to some lounges. For example, both United and American offer free access to active duty military personnel and their families. However, they may require that you be in uniform and traveling on orders.

Recommended: Do You Need a Credit Card to Rent a Car?

Access Airport Lounges for a Fee

If you’re unable to access an airport lounge for free, you might consider paying for it. Here are some ways to do just that:

Buying an Airport Lounge Pass

Airport lounge memberships are available for sale, either through an airline that brands the lounge, or through a network such as Priority Pass Select. Memberships generally start at a few hundred a year, but discounts are available for those with elite status in the airline’s frequent flier program. If you’re saving up for a few upcoming flights, you might also consider stashing away the price of a lounge pass where you keep a travel fund.

Buy a Day Pass

Many lounges (but not all) offer day passes that can typically cost $25 to $80 per person. Some online platforms and apps may sell discounted access to certain airport lounges. Depending on your situation — how much time you have to fill before your flight, whether you’re hungry or thirsty, whether you need a quiet place to work — this might be a good buy.

Upgrade Your Ticket

If you are on an international flight and are seated in business or first class, then you’ll already have access to the lounges. But rather than pay full price for these tickets, you may be able to book a less pricey class of service and then buy up to business class at check in, perhaps for just a few hundred dollars. Doing so will also result in a pass to the airport lounge.

Recommended: Understanding Purchase Interest Charges on Credit Cards

The Takeaway

When you have to spend time in an airport waiting for your flight, the lounge can be a comfortable place to do it, with comfortable seating, free food and drinks, and other amenities that can make killing time feel luxurious. While it can be expensive to buy membership to a lounge, you may be able to access a luxury airport lounge for free, especially if you have the right credit card. Or you might be able to buy your way in for a modest fee by purchasing a day pass or trying another smart-traveler tactic.

Whether you're looking to build credit, apply for a new credit card, or save money with the cards you have, it's important to understand the options that are best for you. Learn more about credit cards by exploring this credit card guide.

FAQ

Is it worth it to pay for airport lounge access?

If you’re taking a short trip and you want to arrive at the airport as close to departure as possible, then there’s no reason to pay for airport lounge access. But if you have a long layover in the middle of a trip or a long flight ahead, then lounge access can be worth paying for. Also, under certain circumstances, such as needing to finish a work deliverable before your flight, a luxury airport lounge can be a much more comfortable place to work.

Which airport lounges are the best?

International first class lounges, where available, are often the most luxurious. The American Express Centurion lounges are also known to feature gourmet food and drinks. Some Priority Pass Select lounges have well-regarded food options, while others are pretty basic. Domestic airline lounges can be pretty spartan.

Which credit card is best for airport lounge access?

The decision of which credit card is best for airport lounge access will depend on personal preference but two options are well-known. The American Express Platinum Card offers access to Delta SkyClubs, Priority Pass Select, and American Express Centurion lounges. The Sapphire Reserve Card offers a Priority Pass Select membership that also includes credits at select airport restaurants, as well as access to its own branded lounges.

---

Photo credit: iStock/andresr

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 content is provided for informational and educational purposes only and should not be construed as financial advice.


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

SOCC-Q125-044

Read more

If you need expensive dental work, you’re likely wondering how to pay for it. After getting a quote from your dentist and learning how little your insurance will cover, you may be thinking, I must be missing a way to afford this.

There’s good news and bad news when it comes to how to finance expensive dental work. Bad news first: Despite insurance, dental work can cost a lot out-of-pocket. The good news: While there’s probably not an easy solution to covering the whole bill, there are many tricks you can use to make your dollar stretch farther (and possibly even get a tax break while you’re at it).
Here, learn smart strategies about how to pay for dental work. Altogether, these ideas can add up to quite a discount off your dentist’s quote.

10 Ways to Pay for Dental Work

Many people cover their dental work by combining several of the strategies below. It’s tough to avoid paying out-of-pocket entirely, but you can often get a hefty discount off the original quote. Here, how to pay for dental work:

1. Dental Insurance

You should know that there’s a difference between a dental office that takes your insurance and a dental office that is in-network. A dentist may take your insurance even though they are out-of-network.
When a dentist says that they take your insurance, that likely means that they will file an insurance claim for you. But if your insurance doesn’t cover a procedure or service, the price will generally be set at your dentist’s discretion — and you’ll typically be responsible for paying the costs out-of-pocket.

Generally, using an out-of-network dentist means your insurance will cover less so you’ll pay more. Being in-network, on the other hand, usually means that your insurance company has prenegotiated the fees with the dentist, and they generally can’t charge more than that. So you’ll usually pay less with an in-network dentist.

Recommended: Does Cosigning Build Credit?

2. Medical Insurance

Dental work isn’t typically covered by medical insurance, but certain procedures may be covered if they’re deemed medically necessary. For instance, some kinds of oral surgery potentially can be billed as a medical procedure. Before you move forward with any dental work, it’s a smart idea to talk to your medical insurance company to find out what may be covered. This could help you afford a major dental bill.

Recommended: Guarantor vs. Cosigner: What Are the Differences?

3. Payment Plans

Paying a bill on a weekly or monthly basis can be much more manageable than paying it in a lump sum. That’s why many dental offices offer payment plans for procedures not covered by insurance.
Payment plans can be offered directly through your dentist’s office, or by third-party services like CareCredit. Ask about the specific terms of any payment plan offered. For example:

•   What procedures qualify for a payment plan?

•   Will they charge interest? And if so, how much?

•   Are other fees involved?

•   Do they have to check your credit first? If so, will it be a hard or soft inquiry?

Asking these questions beforehand can help keep you from getting blindsided by unexpected costs.

4. Flexible Spending Account

A Flexible Spending Account (FSA) is a special savings account offered through some employer benefit plans. FSAs allow employees to pay for certain out-of-pocket medical and dental costs with tax-free money.

The typical taxpayer saves about 30% in federal, state, Social Security, Medicare, and Unemployment taxes. That translates to a 30% discount off all eligible medical and dental expenses, which could be an idea for how to pay for expensive dental work.

FSA rules cap the amount of money that can be placed in the account each year ($3,300 for 2025 per the Internal Revenue Service, or IRS) and also dictate which types of expenses are FSA-eligible. Most routine dental work and orthodontia qualify: cleanings, X-rays, fillings, crowns, extractions, implants, and Invisalign.

FSAs can’t be used for any procedure that is considered cosmetic, including teeth whitening and veneers. But in some instances, if a typically cosmetic procedure is deemed medically necessary — as with some veneers — you may be able to use your FSA. Talk to your dental insurance company for more information.

One drawback of FSAs is that any funds that are unused at the end of the plan year are forfeited — so make sure you don’t leave any money on the table. In the plus column, because FSAs are funded with pretax dollars, they reduce your taxable income, which is always nice.

5. Health Savings Account

A Health Savings Account (HSA) is similar to an FSA in several ways:

•   Both are funded with pretax dollars

•   Both are used to cover health care expenses

•   Both can be established through your employer, and funded with payroll deductions

But there are also key differences between an FSA and HSA:

•   HSAs must be used with a High Deductible Health Plan (HDHP)

•   The 2025 HSA funding cap is $4,300 for individuals, $8,550 for families

•   HSA funds roll over from year to year

•   You can set up an HSA through some health insurance companies and banks, making them a good option for the self-employed

If you don’t have access to an FSA — and you are currently covered by a high-deductible health plan — you can open an HSA at any time.

6. Negotiate With Your Dentist

The cost of dental work can actually be negotiable, depending on your dentist and your situation. First, have your dentist walk you through the treatment plan. Ask lots of questions, including:

•   Are all the procedures they’re suggesting equally urgent? Can some be postponed?

•   Can you get a discount by paying cash or the entire cost upfront? Some dentists give a percentage off for this.

•   If you don’t have insurance, ask if you can score an uninsured rate.

Some dentists will be flexible, and the worst that can happen is they say no. Another thing you can do is to have an honest conversation with your dentist about your financial situation. If your budget has no breathing room, see if they are open to giving you a discount or if they are willing to push out your bill for a few months.

If the planned dental work is important but not super urgent, you may be able to schedule your appointments so they straddle two plan years. For example, if your plan year is January-December, you might schedule half the appointments for December, and half for the following January. That way, you can take advantage of two annual benefit maximums for insurance and two years’ worth of FSA or HSA funds.

7. Get Work Done at a Dental School

Having work done at a well-regarded dental school may be an option to make expensive dental work more affordable. Search online to see if you live within easy distance of a dental school that offers discounted services. Some schools may provide lower-cost exams and procedures as a way of training their students and giving them real-world experience, under the supervision of skilled, highly trained dentists. The cost can be up to 50% lower than what you might find elsewhere.

If you have access to this and want to go this route, it can be wise to carefully check online reviews to hear how others’ experiences went and feel confident in your decision.

Recommended: Applying for a Loan With a Cosigner

8. Credit Card

In some circumstances, a credit card can be a suitable payment option for dental bills. If you have a card that offers rewards or cash back, it can also provide some benefits in return.

You might also consider looking for a medical credit card. These cards are issued by banks, credit unions, and other lenders and can only be used for health care and within a specific provider network.

Some medical credit cards defer interest for a period of time after your health care charges are incurred — much like 0%-interest cards. No interest is charged so long as those charges are paid off in full before the interest-free period expires. Late payments or balances that have not been fully paid before the deferment period ends can incur interest charges. Make sure you read the fine print and are comfortable with the fees involved before signing up for one of these cards.

Speaking of 0%-interest cards, they’re another option to finance expensive dental work. By law, these interest-free promotional financing offers must last at least six months. But the most competitive offers go well beyond this to offer 0% introductory APR financing for 18 months or longer.

Before you commit to a new card, it’s a good idea to shop around for the best terms and make sure dental work meets the requirements for any rewards. Credit card debt can be a significant financial issue, so it’s wise to know the exact benefits and downsides of this kind of card. You might want to consider getting a personal loan or borrowing from family instead.

9. Personal Loan

Because of this flexibility, many people use personal loans to pay for out-of-pocket medical expenses or to consolidate high-interest debts through a debt consolidation loan

Using a personal loan to finance dental work might be a better option than a credit card. The lower the interest rate, the lower your monthly payment. And personal loans tend to have lower interest rates than credit cards. As of December 2024, credit cards have an average interest rate of more than 20%, but online lenders may offer significantly lower personal loan interest rates (even less than half that percentage) to qualified borrowers.

By using a personal loan calculator, you can compare this option to, say, using a credit card or dipping into your savings.

How much you can borrow is also flexible, and getting approved for a personal loan can be done entirely online. In short, a dental loan might be a good option to cover additional dental needs, from basic fillings to more complex, high-cost procedures.

10. Emergency Fund

Tapping your emergency fund won’t offer a discount on your dental bill, but it can provide a way to pay it. One of the cornerstones of good financial management is to build an emergency fund, typically holding three to six months’ worth of living expenses. The typical scenarios for withdrawing funds from your emergency savings account include paying bills if you lose your income or taking care of an unexpected large medical, dental, or car repair bill. So if you receive a major dental bill and need cash, your emergency fund could be an answer.

Remember, emergency funds aren’t built in a day. Setting up automatic payments into this account from your checking can be a smart move; it’s fine if it’s a small sum like $25 per paycheck to start. And don’t forget to keep the money in a high-yield savings account so it can grow until you need to use it.

The Takeaway

When it comes to how to pay for expensive dental work, there is no one perfect solution. But there are a number of resources and tricks you can call upon to stretch your dollar. Discuss your options with your dentist to find out what discounts and payment plans they may offer. Avail yourself of an FSA or HSA to pay with pretax dollars, if possible, or pay your bill with a 0% interest credit card, rewards card, or medical credit card, among other tactics.

Another option is to finance your dental work with a personal loan.

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

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

FAQ

What can I use as financial assistance for dental work?

To finance expensive dental work, you may have to employ a few different tricks. First, if you have an FSA or HSA, paying your bills with pretax funds will net you an effective 30% discount. You can also schedule work to straddle two plan years so that your dental insurance and FSA/HSA cover twice the annual amount. If you’re uninsured, explain your financial situation to your dentist to see if they’ll offer a discount. And consider taking out an unsecured personal loan.

Can I use a personal loan as financial assistance for dental work?

Yes, a personal loan can be a great option for covering expensive dental work, compared to high-interest revolving credit. Shop around for the best rate and terms, and read the fine print to make sure you fully understand the fees involved for any option you are considering.

Is it hard to get financial assistance for dental work?

It will take some work on your part, but financial assistance is available for low-income patients through dental schools, clinical trials, United Way, Medicare, and Medicaid. Find out what kind of assistance you may be eligible for on the U.S. Department Health & Human Services website at HHS.gov.

---

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.

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 .

*Awards or rankings from NerdWallet are not indicative of future success or results. This award and its ratings are independently determined and awarded by their respective publications.

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 content is provided for informational and educational purposes only and should not be construed as financial advice.

Third Party Trademarks: Certified Financial Planner Board of Standards Inc. (CFP Board) owns the certification marks CFP®, CERTIFIED FINANCIAL PLANNER®, CFP® (with plaque design), and CFP® (with flame design) in the U.S., which it awards to individuals who successfully complete CFP Board's initial and ongoing certification requirements.


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.

SOPL-Q424-063

Read more

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

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

What Is a Jumbo Loan?

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

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

Jumbo Loans vs Conforming Loans

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

Jumbo Loan Limits

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

•  $726,200 for a single-family home

•  $929,850 for a two-unit property

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

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

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

•  $1,089,300 for one unit

•  $1,394,775 for two units

•  $1,685,850 for three units

•  $2,095,200 for four units

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

Recommended: The Cost of Living By State

Qualifying for a Jumbo Loan

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

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

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

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

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

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

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

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

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

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

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

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

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

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

Jumbo Loan Rates

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

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

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

Pros and Cons of Jumbo Loans

Benefits

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

Drawbacks

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

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

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

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

How to Qualify for a Jumbo Loan

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

Is a Jumbo Loan Right for You?

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

What About Refinancing a Jumbo Loan?

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

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

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

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

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

Jumbo Loan Limits by State

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

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

Source: Federal Housing Finance Agency

The Takeaway

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

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

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

FAQ

What are jumbo loan requirements?

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

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

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

---

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

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

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


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


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

SOHL0423002

Read more

Getting mortgage preapproval can give you an edge in the home-buying process, especially when the housing market is tight. A mortgage preapproval from a lender lets sellers know that you have tentatively been approved for a specific loan type and amount. Not only does this show that you’re a serious home shopper, it also helps give you a good sense of your budget as you go house-hunting.

Here, you’ll learn the ins and outs of how to get preapproved for a home loan, including:

•   What is mortgage preapproval?

•   How do mortgage preapproval and prequalification compare?

•   What are the pros and cons of mortgage preapproval?

•   How can you improve your chances of getting preapproved for a mortgage loan?

•   What can you do if you aren’t preapproved for a mortgage?

What Is Mortgage Preapproval?

Mortgage preapproval involves a thorough review of your credit and financial history. If you look like a good candidate for a mortgage, a lender will issue a letter stating that you qualify for a loan of a certain loan amount and at a certain interest rate. The letter is an offer, but not a commitment, to lend you a specific amount. It’s good for up to 90 days, depending on the lender.

You’ll want to shop for homes within the price range of your preapproved mortgage. Armed with your preapproval for a home loan, you can show sellers that you are a serious buyer with the means to purchase a property. In the eyes of the seller, preapproval can often push you ahead of other potential buyers who have not yet been approved for a mortgage and make it easier to compete when there are multiple offers on a house.

Once you find a house that you want to buy, you can make an offer immediately based on the loan amount for which you are preapproved. And if the seller accepts, it will be time to finalize your mortgage application. At this point, a loan underwriter will review your application and conduct other due diligence measures, such as having the house appraised to make sure it is valued at the price it’s selling for. If all goes well, the lender will issue another letter called a commitment letter, which officially seals the deal on your loan, and you can schedule a closing date.

When Should I Get Preapproved for a Home Loan?

Preapproval typically lasts for 90 days, at most, so you want to seek it when you are actively in the market for a new home. Maybe you’ve done some initial online research into available properties. Hopefully, you’ve also had a good look at your finances and thought about how much you have available to spend on a down payment as well as what amount of monthly mortgage payments you can afford long-term. It takes around 10 days after you submit a request to be preapproved, so factor that timing into your house search as well.

Mortgage Preapproval vs. Prequalification

If you are house hunting, you will likely hear two different terms regarding early mortgage moves: prequalification vs. preapproval. Prequalification is a simple, less involved view of your financial qualifications for a mortgage. Preapproval for a home loan is a more in-depth review of your finances and an indicator that your loan application will likely move forward smoothly. Each has its advantages, and its moment.

Mortgage Prequalification

Getting prequalified for a home loan involves a review of a few financial details — usually self-reported — such as income, assets, and debt. The lender will then estimate how much of a mortgage you can afford.

Pros of Mortgage Prequalification

•   It’s fast. The process can often be done in minutes, by phone or online.

•   You’ll zero in on house prices. Prequalifying for a home loan quickly gives you an idea of what your monthly payment might be and how much house you can afford.

•   You can shop around. You can prequalify with multiple lenders to see what types of terms and interest rates they offer.

•   It’s easy on your credit score. Prequalification will not affect your credit score because it only requires a “soft inquiry” into your credit record.

Cons of Mortgage Prequalification

•   It’s no guarantee. Because it is an unverified, high-level look at your finances, prequalification doesn’t ensure that you will actually qualify for a mortgage.

•   It won’t help you bargain. Being prequalified won’t help you negotiate a lower price with a seller or compete against other bidders in a competitive market.

Mortgage Preapproval

Requesting a mortgage preapproval is a more complicated process than getting prequalified. You’ll have to fill out an application with your chosen lender and agree to a credit check. The credit check will be a “hard pull” which will ding your credit score by a few points. You’ll also provide information about your income and assets. The evaluation process can take 10 days or more. Again, preapproval doesn’t mean it’s a done deal that you’ll get the loan, but it is a solid indication of your financial situation and ability to purchase a home.

There are a number of advantages to getting preapproval for a home loan, especially if you’re shopping in a fast-moving market.

Pros of Mortgage Preapproval:

•   It gives you an edge. Sellers will see that you are a serious buyer and have assurance that your financing won’t fall through and sink the deal.

•   It helps you get loan shopping done. When you’ve found your dream house, you don’t want to delay putting in an offer because you have to spend time getting your documents together and pursuing a loan. Going through the preapproval process helps you take care of these details before you’re in a fast-moving market.

Cons of Mortgage Preapproval:

•   A mortgage preapproval expires. How long does a mortgage preapproval last? As noted above, the letter is only good for a certain period of time, usually 90 days, so you’ll want to make sure you’re seriously ready to start shopping once you have your mortgage preapproval in hand.

•   The application is time-consuming. You’ll need to provide a lot of documentation to get a mortgage preapproval and agree to a hard credit inquiry, which can drag down your credit score, though usually only by a bit.

•   Nothing is guaranteed. Even though your home loan preapproval letter likely has details on your loan amount and type, it is only tentative approval — you still can’t be 100% sure that you will get the loan.

Here are the basic comparison points of prequalification vs. preapproval:

The Difference Between Prequalification and Preapproval

	Prequalification	Preapproval
Process	•   Simple process that takes only a few minutes online or by phone.	•   You’ll fill out a thorough application and provide documents. The process can take 10 days or more.
Required materials	•   High-level financial details you provide; sometimes a “soft” credit check which won’t impact your rating.	•   Full application and supporting financial documents, as well as a “hard pull” credit check that will ding your rating.
Benefits	•   Can give you an idea of what you can afford as you start the process. •   Lets you compare lenders and rates.	•   Tentatively approves you for a loan amount and type. •   Can provide leverage when you’re ready to get serious about buying.
Drawbacks	•   Won’t give you an advantage in negotiations or a bidding war. •   It’s no guarantee you’ll get a mortgage.	•   Preapproval is good for 90 days so your home-finding timeline may be affected. •   Does not guarantee you’ll get the loan.

Steps to Get Preapproved for a Home Loan

Getting preapproved for a home loan will take some time, so it’s good to get the process started before you are ready to make an offer on a home. Here are some important steps along the way.

Check Your Credit Score

If you’ve established a credit history, a first step before applying for a mortgage is to check your credit reports, which are a history of your credit compiled from sources like banks, credit card companies, collection agencies, and the government.

The information is collected by the three main credit reporting bureaus: TransUnion®, Equifax®, and Experian®. You’ll want to make sure that the information on your credit reports is correct. Ordering the reports is free once a year through AnnualCreditReport.com .

If you find any mistakes in your credit report, contact the credit reporting agencies immediately to let them know. You don’t want any incorrect information weighing down your credit score, putting your chances for preapproval at risk.

The free credit reports provided by the nationwide credit reporting agencies do not include your credit score, a number typically between 300 and 850. You can purchase your score directly from the credit reporting agencies, or from FICO®. Your credit card company also may provide your credit score for free, or you could try a money tracker app that updates your credit score weekly and tracks your spending at no cost.

Calculate Your Potential Mortgage

To help with the prequalification and preapproval process, use the mortgage calculator below to see what your estimated monthly mortgage would be based on down payment, interest rate, and loan terms.

Gather Documentation

Your credit score is only one of many factors a potential lender will consider when deciding on your mortgage qualification. So collect the many other documents you will need to paint a full picture of your financial life. Ask the lender what is needed, specifically. The list will likely include:

•   Recent pay stubs

•   Recent bank and investment account statements

•   Two years of tax returns and/or W2s, possibly more if you are self-employed

•   Verification of alimony or child support payments received and the court documents spelling out the terms of the payments

•   Social Security award letter, if you derive income from Social Security

•   Certificate of Eligibility from the VA, if you are applying for a VA loan

•   Gift letter documenting any money you are receiving from family or other sources toward a down payment

Receive Your Mortgage Preapproval Letter

Your first instinct when you receive preapproval will likely be to jump for joy. Next, take a moment to ask the lender if they made any assumptions about your finances in order to issue the letter, or if they flagged anything that could lead to you being denied a mortgage later on, or that could increase your costs. Doing this could help you head off future problems that might scuttle a deal.

Upping Your Odds of Mortgage Preapproval

There are a number of steps you can take to increase your chances of preapproval or to increase the amount your lender may approve you for.

Build Your Credit

When you apply for any type of loan, lenders want to see that you have a history of properly managing your debt before offering you credit themselves.

You can build your credit history by opening and using a credit card and paying your bills on time. Or you could consider having regular payments, such as your rent, tracked and added to your credit score.

Recommended: What Credit Score Is Needed to Buy a House?

Stay on Top of Debt

Your ability to pay your bills on time has a big impact on your credit score. If your budget allows, you should aim to make payments in full.

If you have any debts that are dragging down your credit score — for example, debts that are in collection — it’s smart to work on paying them off first, as this could help build your score.

“Really look at your budget and work your way backwards,” explains Brian Walsh, CFP® at SoFi, on planning for a home mortgage.

Recommended: Fixed-Rate vs. Adjustable-Rate Mortgages

Watch Your Debt-to-Income Ratio

Your debt-to-income ratio is your monthly debt payments divided by your monthly gross income. If you have $1,000 a month in debt payments and make $5,000 a month, your debt-to-income (DTI) ratio is $1,000 divided by $5,000, or 20%.

Mortgage lenders typically like to see a DTI ratio of 36% or less. Some may qualify borrowers with a higher DTI, up to 43%. Lenders may assume that borrowers with a high DTI ratio will have a harder time making their mortgage payments.

If you’re seeking preapproval for a mortgage, it may be beneficial to keep the ratio in check by avoiding large purchases. For example, you may want to hold off on buying a new car until you’ve been preapproved.

Prove Consistent Income

Your lender will want to know that you have enough money coming in each month to cover a potential mortgage payment, so the lender will likely want proof of consistent income for at least two years (that means pay stubs, W-2s, etc.).

For some potential borrowers, such as freelancers, this may be a tricky process since they may have income from various sources. Keep all pay stubs, tax returns, and other proof of income, and be prepared to show those to your lender.

What Happens If Your Mortgage Preapproval is Rejected?

Rejection hurts. But if you aren’t preapproved or you aren’t approved for a large enough mortgage to buy the house you want, you also aren’t powerless. You can ask the lender why it said “no.” This will give you an idea about what you might need to work on in order to secure the mortgage you want.

Then you may want to work on the factors that your lender saw as a sticking point to preapproval. You can continue to work to build your credit score, lower your DTI ratio, or save for a higher down payment.

If you’re able to pay more upfront, you will typically lower your monthly mortgage payments. Once you’ve worked to make yourself a better candidate for a mortgage, you can apply for preapproval again.

Dream Home Quiz

The Takeaway

In a competitive market, having a mortgage preapproval letter in hand may give a house hunter an edge. After all, the letter states that the would-be buyer tentatively qualifies for a home loan of a certain amount.

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

SoFi Mortgages: simple, smart, and so affordable.

FAQ

What happens during the preapproval process?

During the mortgage preapproval process you’ll provide lots of background information on your finances. A potential lender will also check your credit score. If the lender feels you’re a suitable candidate for a loan, you’ll receive a letter that you can show a seller to better your chances when making an offer on a home.

Do preapprovals hurt your credit score?

The lender will do a “hard pull” to obtain your credit score prior to a preapproval. This may cause your rating to drop by a few points, but it should rebound quickly if you pay your bills on time.

How far in advance should I get preapproved for a mortgage?

Get preapproved for a mortgage when you have a sense of the housing costs where you are shopping for a home, and you are ready to start looking in earnest.

Which is better preapproval or prequalification?

Prequalification and preapproval each have a place in the homebuying process. Prequalification is helpful when you are trying to get a sense of what you can afford and which lender might offer the best terms. It’s time for preapproval when you are serious about searching for a home and have researched possible lenders.

Is it OK to get multiple preapprovals?

You only need one preapproval, but it is fine to get a few if you want to see what loan amounts and rates you might qualify for. Make all applications within a 45-day window — the time frame during which multiple lenders can check your credit without each check having an additional impact on your score.

---

*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.

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

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

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

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 .


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


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

SOHL0623018

Read more

Closing costs average 3% to 6% of your mortgage loan principal. So even if you’ve saved for a down payment on a new place, you are likely going to have to dig somewhat deeper to afford to seal the deal. How deep, you ask? For buyers, closing costs can add up to a significant sum.

Whether you are a first-time homebuyer or a seasoned property purchaser, it’s wise to know what to expect, in terms of both money and process, when it’s time to gather at the closing table. Payments will be due from both the buyer and the seller.

Get ready to delve into this important home-buying topic and learn:

•   What are closing costs?

•   How much are closing costs on a house?

•   Who pays closing costs?

•   How much are closing costs for the buyer and the seller?

•   How can you lower closing costs?

What Are Closing Costs?

Closing costs are the fees needed to pay the professionals and businesses involved in securing a new home. These range from fees charged by appraisers, real estate agents, and title companies, to lender and home warranty fees.

Here are some key points to know:

•   When you apply for a mortgage loan, each lender must provide a loan estimate within three business days. This will give you information such as closing costs, interest rate, and monthly payment. Review those closing costs carefully.

•   Your closing costs will depend on the sale price of the home, the fees the chosen lender charges, the type of loan and property, and your credit score.

•   Closing costs are traditionally divided between the buyer and seller, so you won’t necessarily be on the hook for the whole bill. That said, the exact division between buyer and seller will depend on your individual circumstances and can even be a point of negotiation when you make an offer on a house.

How Much Are Closing Costs?

As noted above, average closing costs on a house typically range from 3% to 6% of the mortgage principal. Let’s say you take out a $300,000 mortgage loan to buy a house with an agreed-upon sale price of $350,000. Your closing costs could be between $9,000 and $18,000, or 3% and 6%.

Be aware that a “no closing cost mortgage” often means a higher rate and a lot more interest paid over the life of the loan. The lender will pay for many of the initial closing costs and fees but charge a higher interest rate.

Good news if you are buying a HUD home: HUD will pay some of the closing costs as well as the real estate commission fee usually paid by the seller.

Recommended: First-Time Homebuyer Guide

Calculate Closing Costs

The tool below is a home affordability calculator, and it’s a great way to also see what the potential closing costs and additional monthly costs would be based on how much home you can afford.

Who Pays Closing Costs?

Typically, closing costs are paid by both the buyer and the seller. Each has their own responsibilities to uphold.

Some fees are specific to the purchase and are payable by the buyer. These include title search, prepaid interest on the mortgage loan, and more.

Other costs are the seller’s responsibility: paying the real estate agent and so forth. Read on to learn more about who pays for what when closing on a home sale.

How Much Are Closing Costs for a Buyer?

Typically, the buyer pays the following closing costs:

•   Abstract and recording fees: These fees relate to summarizing the title search (more on that below) and then filing deeds and documentation with the local department of public records. You may find that abstract fees can cost anywhere from $200 to $1,000, and recording fees in the range of $125.

•   Application fee: Your lender may charge you to process your application for a home mortgage loan. This could cost up to $500.

•   Appraisal and survey fees: It is easy to be wooed by pristine wood floors and dining room walls covered in vintage wallpaper, but surface good looks will only get you so far. You and your lender want to make sure that your potential new home is actually worth the purchase price. This means paying professionals to delve more deeply and provide a current market value. These home appraisal and survey fees are typically due at closing. This is usually in the $300 to $400 range, but could be considerably higher, depending on the home, its location, and other factors.

•   Attorney costs: Working with a real estate attorney to review and vet documents may be an hourly rate (typically $150 to $400 per hour) or a project fee ($500 to $2,000). The specifics will vary depending on the individual professional you use, your location, and how complex your purchase is.

•   Credit reporting, underwriting, and origination fees: The lender may charge anywhere from $10 to $100 per applicant to check their credit score; underwriting fees (often in the $400 to $900 range) may also be added to closing costs. Origination fees can be about 1% of your loan’s value and cover the costs of the lender creating your loan documents.

•   Flood certification fee: The lender may require a flood certification, which states the flood zone status of the property. This could cost anywhere from $20 to $300, depending on your state.

•   Home inspection fee: This will likely cost between $300 and $500, but it could go higher. This is paid by the buyer, who is commissioning the work to learn about the home’s condition. In some cases, it may be paid at the time of service vs. at closing.

•   Homeowners insurance: Your lender may require you to take out homeowners insurance. The first payment may be due at closing. The exact amount will depend on your home value and other specifics of your policy.

•   Home warranty: A home warranty is optional and can be purchased to protect against major mechanical problems. A warranty plan may be offered by the seller as part of the deal, or a buyer can purchase one from a private company. Your lender, however, will not require a home warranty.

•   Mortgage points: Each mortgage point you choose to buy costs 1% of your mortgage amount and typically lowers your mortgage rate by 0.25% per point. That point money you are paying upfront is due at closing. All the mortgage fees will be spelled out in the mortgage note at the closing.

•   Prepaid interest: Some interest on your mortgage is probably going to accrue between your closing date and when the first payment is due on your loan. That will vary with your principal and interest rate, but will be due at closing.

•   Private mortgage insurance: Often lenders require PMI if you make a down payment that is less than 20% of the purchase price. Putting less money down can make a buyer look less reliable when it comes to repaying debt in the eyes of lenders. They require this premium to protect themselves. This is usually a fee that you pay monthly, but the first year’s premium can also be paid at the time of closing. Expect a full year to cost between .5% and 2% of the original loan amount.

•   Title search and title insurance fees: When a title search is done to see if there are any other claims on the property in question, the buyer typically pays the fee, which is usually in the $75 to $200 range. The lender often requires title insurance as a protection. This is likely a one-time fee that costs between 0.5% and 1% of the sale price. If your house costs $400,000, the title insurance could be between $2,000 and $4,000.

As you see, some of these fees will vary greatly depending on your specific situation, but they do add up. You’ll want to be sure to estimate how much closing costs are for a buyer and then budget for them before you head to your closing.

Recommended: How Long Does It Take to Close on a House

How Much Are Closing Costs for a Seller?

You may also wonder what closing costs are if you are selling your home. Here are some of the fees you are likely liable for at closing:

•   Real estate agent commission: Typically, the seller pays the agent a percentage of the sale price of the home at closing, often out of the proceeds from the sale. The commission is likely to be in the 5% to 6% range, and may be equally split between the buyer’s and seller’s agents.

•   Homeowners association fees: If the home being sold is in a location with a homeowners association (HOA), any unpaid fees must be taken care of by the seller at closing. The actual cost will depend upon the home being sold and the HOA’s charges.

•   Property taxes: The seller must keep these fees current at closing and not leave the buyer with any unpaid charges. These charges will vary depending on the property and location.

•   Title fees: The seller will probably pay for the costs associated with transferring the title for the property.

It’s important for sellers to anticipate these costs in order to know just how much they will walk away with after selling a home.

How to Reduce Closing Costs

Closing costs can certainly add up. Here are some ways to potentially lower your costs.

•   Shop around. Compare lenders not just on the basis of interest rates but also the fees they charge. Not every mortgage lender will charge, say, an application, rate lock, loan processing, and underwriting fee. See where you can get a competitive rate and avoid excess fees.

•   Schedule your closing for the end of the month. This can lower your prepaid interest charges.

•   Seek help from your seller. You might be able to get the seller to pay some of your closing costs if they are motivated to push the deal through. For instance, if the property had sat for a while, they might be open to covering some fees to nudge the deal along.

•   Transfer some costs into your mortgage payments. You may be able to roll some costs into the mortgage loan. But beware: You’ll be raising your principal and interest payments, and might even get stuck with a higher interest rate. Proceed with caution.

Other Costs of Buying a Home

In addition to your down payment and closing costs, you also need to make sure that you can afford the full monthly costs of your new home. That means figuring out not only your monthly mortgage payment but all the ancillary costs that go along with it.

Understanding and preparing for these costs can help ensure that you are in sound financial shape for your first few years of homeownership:

Principal and interest. Your principal and interest payment is the amount that you are paying on your home loan. This can be estimated by plugging your sales price, down payment, and interest rate into a mortgage calculator. This number is likely to be the biggest monthly expense of homeownership.

Insurance. Your homeowners insurance cost should be factored into your monthly ownership expenses. Your insurance agent can provide you with details on what this policy will cover.

Property taxes. Property tax rates vary throughout the country. The rates are typically set by the local taxing authorities and may include county and city taxes. It’s important to factor in these costs as you think about your ongoing home-related expenses.

Private mortgage insurance. As mentioned, PMI may be required with a down payment of less than 20%. PMI is usually required until you have at least 20% equity in your home based on your original loan terms.

Homeowners association fees. If you live in a condo or planned community, you may also be responsible for a monthly homeowners association fee for upkeep in the common areas in your community.

Of course, these are just some of the things to budget for after buying a home. Your needs will depend on whether you are moving a long distance, whether you have owned a home before, and other factors. It’s a lot to think about, but it’s an exciting time.

The Takeaway

Before buyers can close the door to their new home behind them and exhale, they must be able to afford their down payment, qualify for a mortgage loan, and pay the closing costs — usually 3% to 6% of the loan amount. A home loan hunter may want to compare estimated closing costs in addition to rates when choosing a lender. It can be a wise way to keep expenses down.

SoFi Mortgage Loans offer competitive rates and a simple online application process. What’s more, qualifying first-time homebuyers can put as little as 3% down.

Looking for a home loan? View your rate in just minutes.

FAQ

How can I estimate closing costs?

Typically, closing costs will cost between 3% and 6% of your home loan’s amount.

When do I pay closing costs?

Your closing costs are typically paid at your closing. That is when you take ownership of the property and when your home mortgage officially begins.

---

*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.

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

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

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


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.

SOHL0623022

Read more