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Before signing your closing documents and walking away with the keys to your new home, it’s important to reexamine the final details of the mortgage. Your lender is required to provide this information ahead of closing in the form of a mortgage closing disclosure.

Paperwork fatigue aside, the closing disclosure deserves careful review, as it outlines the mortgage terms and conditions you’re agreeing to.

What Is a Closing Disclosure?

You may have weighed the different mortgage types and then homed in on one that suited you best.

Maybe you got mortgage pre-approval before zeroing in on a property you couldn’t live without (for a while, at least). Now the deal is almost buttoned up.

Here comes the closing disclosure, a five-page form from your lender outlining the mortgage terms, including the loan principal, interest rate, and estimated monthly payment. It also lays out how much money is owed for closing costs and the down payment.

Lenders are required by federal law to provide the mortgage closing disclosure at least three business days ahead of the closing date.

Recommended: Understanding Mortgage Basics

Why the Closing Disclosure Is Important

The mortgage closing disclosure contains all the final terms of your home loan, like how much you pay each month and over the life of the loan. Other conditions, such as your ability to refinance or pay off the loan early, are detailed here, too.

These specifics can have a significant impact on your personal finances. Just one percentage point difference in the interest rate can cost you thousands in the long run.

When you receive the closing disclosure from your lender, this is a final chance to review the fine print and compare everything with the loan estimate, the three-page document with the loan amount, interest rate, and other key information provided by your lender after you applied for a mortgage.

You may have obtained multiple loan estimates when shopping for a mortgage, but you’ll only get a closing disclosure from the lender you chose to finance with.

Recommended: 18 Mortgage Questions for Your Lender

What’s in the Closing Disclosure?

Visual learners, rejoice: The Consumer Financial Protection Bureau maintains a sample closing disclosure with an accompanying checklist and tips on how to read a closing disclosure.

Here’s a breakdown of the components in the closing disclosure.

Loan Terms

The terms include the loan amount, interest rate, and the monthly principal and interest you’ll pay. This section notes if the loan has a prepayment penalty for paying off the mortgage early (a rarity these days) or a balloon payment, a one-time fee due at the end of the loan (ditto).

The closing disclosure will note with a “yes” or “no” whether the amount for any of these items can increase after closing.

Projected Payments

This section shows the factors used for the payment calculation, including the principal and interest, any mortgage insurance, and estimated escrow to pay property taxes, homeowners insurance, and any flood insurance. These add up to estimated total monthly payment for the mortgage.

If you don’t use an escrow account, the bottom of this section will show the monthly costs for property taxes, homeowners insurance, and homeowners association dues, if applicable.

Checking these numbers against the original loan estimate from your lender is good practice.

Costs at Closing

Top of mind for many borrowers is the amount of cash needed to close. Usually, you can expect closing costs to be 2 to 5% of the home purchase price.

This section identifies the “cash to close,” which represents the closing costs plus the down payment owed by the borrower.

Loan Costs

Flipping to Page 2, this section provides a summary of expenses associated with taking out the loan. The costs consist of the origination fee, application fee, underwriting fee, and mortgage points if you’ve chosen to purchase any.

Additional costs are categorized under “services borrower did not shop for” and “services borrower did shop for.” The former includes services arranged by the lender, like the appraisal fee, while the latter refers to services the borrower had a choice in procuring, such as the title search and pest inspection fee.

Other Costs

There are other costs that may be due at signing, such as taxes and government fees, prepaids, escrow payments, and HOA fees.

Ensure that each amount is accurate and correctly entered as either borrow-paid or seller-paid.

Calculating Cash to Close

The table in this section shows a side-by-side comparison between the loan estimate and final dollar amount needed to close.

The calculation will account for any deposits paid by the borrower and seller credits negotiated as part of the deal.

Summaries of Transactions

This section provides a detailed look at what the borrower and seller are paying at closing. Costs prepaid by the seller, such as property taxes and HOA fees, may be adjusted to show what portion is owed by the borrower.

Loan Disclosures

Your mortgage comes with conditions, which are outlined on Page 4 of the closing disclosure. You’ll see which apply based on the box that’s checked for each.

Loan Calculations

On the final page, there are loan calculations showing the total amount you’ll pay over the life of the loan, as well as the finance charge, amount financed, annual percentage rate, and total interest percentage.

If you’re just looking into home loans, a mortgage calculator can estimate your monthly payments and total interest paid over the loan term.

Other Disclosures

The lender must disclose other characteristics of the mortgage, if applicable. They include the appraisal, contract details, liability after foreclosure, ability to refinance, and tax deductions.

Contact Information

Refer to this section if you need to contact the lender, brokers, or settlement agent involved with your mortgage.

Confirm Receipt

Signing the mortgage closing disclosure indicates that you received the form, not that you agree to the terms and accept the loan.

What Is the Three-Day Waiting Period?

As of 2015, the Consumer Financial Protection Bureau’s “Know Before You Owe” mortgage rule requires lenders to provide the mortgage closing disclosure at least three business days before closing.

This aims to give borrowers plenty of time to review the final loan terms, ask their lender any clarifying questions, and prevent unexpected costs at closing.

There are a few scenarios that could change the closing disclosure timeline. Your lender must provide another closing disclosure, thus granting three more days, if one of the following issues occurs:

•  A change in the loan APR (one-eighth of a percentage point or more for a fixed-rate loan or one-quarter of a percentage point for an adjustable-rate mortgage)

•  Addition of a prepayment penalty

•  A change in the loan product

How to Check Your Closing Disclosure

All five pages of the closing disclosure contain key information for the borrower to review. It may be helpful to go line by line with your loan estimate in hand to compare the final terms against what the lender previously provided.

Here are a few important items to pay attention to:

•  Review your name and the property information

•  Check that the loan description and amount match the loan estimate

•  Make sure that the interest rate is unchanged if you locked it

•  Ensure you understand all the fees and any changes to them

What Can and Can’t Change on the Closing Disclosure

There are some costs that can’t be changed on the closing disclosure, while others may increase by a certain percentage or by any amount.

Unless there’s a change in circumstances on the loan, changes can’t be made to the following:

•  Transfer taxes

•  Fees paid to the lender for a required service

•  Fees paid for a required service that the borrower wasn’t allowed to shop separately for

Recording fees and costs for required services from a lender’s written list of providers may not increase by more than 10%.

There are other costs that can change by any amount at any time, including:

•  Prepaid interest, property insurance premiums, or initial escrow deposits

•  Fees for required services by the lender that the borrower shopped separately for

•  Fees for optional third-party services

•  Note that your interest rate can fluctuate if it’s not locked or due to changes on your mortgage application.

What to Do if There’s an Error on the Closing Disclosure

It’s important to notify your lender or settlement agent of any errors on the closing disclosure.

Redoing the closing disclosure could delay the closing and affect your interest rate if your mortgage rate lock expires.

The Takeaway

The mortgage closing disclosure gives a detailed overview of your loan terms and closing costs. If you’re uncertain of any information, reach out to your lender to go over the closing disclosure.

For information about the home buying process, check out SoFi’s mortgage help center.

If you’re looking for a home mortgage loan, consider getting a mortgage with SoFi. Rates are competitive, and mortgage loan officers are available to help you along the way.

Find your rate in minutes

FAQ

Does a closing disclosure mean I’m approved?

The loan is approved before you receive the closing disclosure, but a significant change to your credit, income, or debt before closing could affect your approval.

Can you waive the three-day closing disclosure?

You can waive the three-day closing disclosure in the case of a personal financial emergency, such as losing the home if the mortgage doesn’t close in time.

How long after the closing disclosure do you close?

You can close three business days at the earliest after receiving the closing disclosure. Errors on the closing disclosure could delay the process.

Can you be denied after the closing disclosure?

Yes. A dramatic change in your personal finances could cause a lender to reject your mortgage. It’s a good idea to try to avoid changing jobs or taking on new debt near the end zone.

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Photo credit: iStock/Khosrork

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.

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.

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.

SOHL0222018

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When looking for a property to buy, you might consider a single-family detached home, a townhouse, a condo, a co-op apartment, or something else.

Let’s look at the pros and cons of buying a townhouse vs. a condo.

What Is a Townhouse?

At first glance, a townhouse might look like a detached multifloor home, but a closer look will show that it’s attached to at least one similar unit.

Townhouses are often found in urban areas where space is at a premium. They often come with a front or back yard. Owners own the inside and outside of their unit and the land it sits on.

The townhome community may have a homeowners association and maintenance fees.

Benefits of Buying a Townhouse

There are at least three upsides to purchasing a townhouse.

Owner Rights

Because people who buy a townhouse own the land it’s on, they have more freedom in how to use the yard. A yard or patio can open possibilities for a grilling spot or dog or child play area.

They also have at least some freedom of choice about the appearance of the inside and outside of the structure.

Price

In communities with high home prices, townhouses may be an affordable alternative for first-time homebuyers.

House hunters from millennial homebuyers to empty-nesters may also find a townhouse a sweet spot between a condo and a traditional detached home with yard.

Plus, because lots tend to be smaller than ones with detached homes on them, property taxes are usually lower as well.

Low Maintenance

Smaller yards mean less yardwork, ideal for busy people and those who are downsizing their home and responsibilities.

The townhouse complex may be gated and have security, and some have pools, gyms, and other shared recreational spaces whose maintenance is covered by homeowner fees.

Disadvantages of Buying a Townhouse

When you think of townhouse living, keep in mind the close quarters with neighbors and possible HOA fees and rules.

HOA

Townhouse communities are less likely to have an HOA than condominiums are, but if they do, the resident-led board will collect ongoing fees to cover common areas and any community perks such as a pool. The HOA will also enforce community rules.

Lack of Privacy

Because of the shared walls, a townhouse provides less privacy than a detached home (although more than many condo buildings, where you may have a unit above and below yours. Townhouse living may therefore create some challenges for families with young children.

What Is an Apartment?

An apartment is a room or set of rooms within a building. In major cities, some people refer to buying a condo or co-op shares as buying an apartment.

Condo owners own everything within their unit and have an interest in the common elements. “Buying a co-op apartment” really means holding shares in the housing cooperative that owns the property.

Then there are people and companies that buy a multifamily property like an apartment building and rent out the units. An owner could decide to live in one of the units and serve as an on-site landlord.

Benefits of Living in an Apartment

Let’s look at some benefits of buying a condo.

Low Maintenance

You won’t typically need to make many repairs, mow the grass, or paint. That’s covered by the monthly or quarterly fees you’ll pay.

Low Utilities

First, condos tend to be smaller than single-family homes, which can reduce the cost of heating and cooling the space, and take less electricity to keep it well lit.

HOA

If the building has an HOA, the association will take care of property maintenance and enforcement of rules.

Disadvantages of Living in an Apartment

Apartment life can come with disadvantages, too. Here are a few.

Parking

You may or may not have a parking space set aside for you, and street parking isn’t always a given in busy locales. Even if you have a parking spot, if people come to visit, they may not easily find anywhere to park.

Noisy or Nosy Neighbors

If you appreciate quiet calmness, you may not find all you’d like in condo living. Neighbors are nearby and they may appreciate louder and more frequent interactions than you’d prefer. If you’re in a crowded city, surrounding events can contribute to the jostling and noise.

Limited Space

If you’re used to living in a house, you could find a more compact apartment to be challenging as you try to fit in your belongings. Plus, it isn’t unusual not to have yard space or a patio, which further limits the amount of space you have to use and enjoy.

Differences Between a Townhouse and an Apartment

When comparing apartment or condo vs. townhouse, keep in mind these differences.

Townhouse	Apartment/Condo
Single-family unit that shares one or more walls with another home	Room or rooms within a building
May have a small yard or patio	If an HOA is in place, it will collect fees to cover most maintenance.
Gives owner some control over how to change the exterior and use yard	Typically comes with lower utility bills than a traditional home
Can be more affordable than traditional detached homes in markets with high prices	May not come with convenient parking
If there’s an HOA, fees are usually lower because owners are responsible for much of their own upkeep	Means you may have noisy or nosy neighbors
May not provide as much privacy as desired	Often has less space than some other types of homes
Thanks to the land ownership, financing is similar to a traditional mortgage	It can be harder to finance a condo than a townhouse

3 Home Loan Tips

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

2.    Your parents or grandparents probably got mortgages for 30 years. But these days, you can get them for 20, 15, or 10 years — and pay less interest over the life of the loan.

3.    Generally, the lower your debt-to-income ratio, the better loan terms you’ll be offered. One way to improve your ratio is to increase your income (hello, side hustle!). Another way is to consolidate your debt and lower your monthly debt payments.

FAQ

Do townhomes appreciate as much as houses?

In general, townhomes do not appreciate as quickly as single-family detached homes, thanks to the amount of land that comes with traditional stand-alone homes.

Are townhouses a bad investment?

In some circumstances, a townhouse may be a good investment. The price, current market conditions, and location are factors.

Are fees higher for a townhouse or condo?

Condo HOA dues are typically a lot higher than townhouse fees (if the townhouse community even has an HOA). Condo communities usually have many more amenities to maintain.

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Photo credit: iStock/Auseklis

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.

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.

SOHL0222009

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Can a person on disability buy a house? Yes, if that aspiring homeowner’s income, debt, and credit qualify them for the house they want to buy. Lenders look at those factors for all applicants.

Income can come from Social Security Disability Insurance (SSDI), Supplemental Security Income (SSI), long-term disability from an employer or insurer, or veterans disability compensation.

Let’s take a look at housing rights, how to qualify to buy a house on disability, and home loans that make sense.

Legal Protections for People With Disabilities

The Fair Housing Act prohibits housing discrimination when people are buying or renting a home, applying for a mortgage, or finding housing assistance. That shields people with disabilities, among many others.

Mortgage lenders are not to:

•   Approve or deny loans based on an applicant’s disability

•   Refuse to provide a mortgage or information about a mortgage to a person with a disability

•   Create different terms, rates, or fees for a disabled person

•   Appraise a property differently for a disabled person

•   Modify homeowners insurance for a person with a disability

•   Discriminate in a home loan modification

Section 504 of the Rehabilitation Act of 1973 and the Americans with Disabilities Act (ADA) also stipulate that people with disabilities should not be excluded from federal housing programs offering financial assistance and do require accommodation in the construction and modification of public and commercial spaces.

How to Buy a Home on Disability

If you receive disability pay and want to buy a house, you might start by seeking prequalification and preapproval for a mortgage.

Prequalifying is quick and provides a ballpark figure of how much of a mortgage you can afford.

This mortgage calculator can also give you an idea.

Preapproval begins with a mortgage loan application, which can be made for many different types of mortgage loans. A lender will look at your credit scores, income, debt, and assets.

If you’re preapproved for a mortgage, the lender will issue a letter with a maximum amount you can likely borrow. Buying a home under this amount gives your loan a good chance of closing because it’s based on hard credit inquiries and documentation you provided.

You may have a chance to buy a house from a family member. If so, a gift of equity is a wonderful one: The relative sells the home to you for less than full market value.

Credit Scores

Your credit scores and history are a big part of qualifying for a mortgage. Your median credit score of three represents your risk to the lender. A higher credit score means you pay your bills on time and are less likely to default.

Lenders often offer the most favorable interest rates to borrowers with credit scores above 740, but a government home loan like an FHA loan is available to people with credit scores as low as 500.

If you have past medical bills or an imperfect credit history as a result of your disability, you can focus on factors that affect your credit score and make improvements as needed. Making on-time payments and paying down debt can go a long way toward helping your credit.

Income Requirements

Income and debts help determine home affordability.

Your disability income counts as long as there is no expiration date on your benefits in the next three years (or you have a guaranteed job waiting with the same pay once you’ve recovered, as can be the case with a maternity leave).

General guidelines suggest looking for a home with a monthly payment that is around 28% of your gross monthly income, or three to five times your yearly income.

See also: How Much House Can I Afford Based on My Income?

Debt Requirements

Your debt also plays a large factor when your lender determines how much you’re able to borrow.

Lenders will look at your debt-to-income ratio, which is your debt payments each month relative to your monthly income. This number is recommended by lenders to be 43% or less, though the exact ratio will depend on the mortgage loan you’re applying for.

Generally, the lower the number, the better your chances of being approved for the mortgage you want.

To find your DTI ratio, add up your monthly bills (not including groceries, utilities, cellphone bill, car insurance, or health insurance) and divide that sum by your monthly gross income. Then turn it into a percentage.

Sometimes qualifying for a mortgage with your own income isn’t enough. There are assistance programs worth looking into.

Financial Assistance in Your State

One of the first places you can look for homeownership assistance is your individual state. Once you click on your state, you’ll see a link for “homeownership assistance” or “homebuying programs.” From there, you’ll be directed to programs in your area that offer down payment assistance and other help.

Are you a first-time homebuyer, meaning you haven’t owned a principal residence in the past three years? If so, you may qualify for more housing perks than others.

Another reference is the National Council of State Housing Agencies, which has a state-by-state list of housing finance agencies, which cater to low- and middle-income households.

Recommended: Short-Term vs Long-Term Disability Insurance

Home Loan Programs for People With Disabilities

There may be a specialized program to fit your needs. Take a look at some of these options.

Section 8 Housing Choice Voucher Homeownership Program

Most know the Section 8 housing program as providing rental assistance for the elderly, very low-income families, and people with disabilities. But did you know that low-income families may be able to use the vouchers to buy a home and assist with mortgage payments?

The conditions are up to the public housing agencies in your area. Contact information for each state can be found on HUD’s website.

General qualifications may include:

•   Be eligible for the Housing Choice Voucher program

•   Be a first-time homebuyer

•   Family cannot pay more than 40% of monthly income for housing expenses and utilities

•   Must meet minimum income standard

•   Full-time employment

•   Applicant cannot have defaulted on a previous mortgage

•   Complete homeownership counseling sessions

VA Loans

Whether you receive Veterans Affairs disability compensation or not, if you’re a veteran, VA home loans make a lot of sense. There’s no down payment and no minimum credit score requirement (although many lenders require a FICO® score of at least 580 to 620). Most borrowers pay a one-time funding fee.

Disabled Veteran Housing Assistance

Veterans who have service-related or aging-related disabilities may be able to qualify for grants through the VA. Three types of grants can be used to modify a home for your needs.

•   Specially Adapted Housing or a Special Housing Adaptation grant. This grant allows disabled veterans to buy, build, or modify a home to help them live independently.

•   Temporary Residence Adaptation grant. If you’re living with a family member or in another temporary living situation, you may be able to qualify for grant money to modify the home to meet your needs.

•   Home Improvements and Structural Alterations grant. This grant allows you to make structural or medically necessary improvements to your home. Veterans may not need to have a service-connected disability to qualify.

FHA Loans

Credit scores of at least 500 are required for an FHA loan. If your credit score is between 500 and 579, you’ll need a 10% down payment. A score above 580 earns the privilege of putting as little as 3.5% down.

Conventional Loans

If you have good credit and a decent down payment, a conventional loan may be a more inexpensive option than an FHA loan.

A Fannie Mae “family opportunity mortgage” can also make sense for a parent who wants to buy a home for an adult disabled child and retain owner-occupant status, even if the parent won’t be living in the home.

A Fannie Mae HomeReady® Mortgage is ideal for low-income borrowers who may need down payment assistance. It allows for a down payment as low as 3% to come from various sources, such as grants, gifts, and “Community Seconds” second mortgages. Borrowers must have a FICO score of at least 620, but a credit score above 680 gets the best pricing.

USDA Loans

The U.S. Department of Agriculture (USDA) has nothing-down options to buy a home through its Rural Development office. Low- and moderate-income buyers in rural areas may apply for a USDA loan through approved lenders. Low- and very-low-income buyers may apply directly to the USDA for a subsidy to lower mortgage payments for a period of time.

The Takeaway

A person who receives disability benefits may be able to buy a house if they qualify based on income, debts, and credit score. There are also programs to help buyers qualify for a mortgage.

If you need a reliable partner in your home-buying journey, give SoFi a look. SoFi offers low-fixed-rate mortgages, and qualifying first-time buyers may put just 3% down.

Take a look at home mortgage loans with SoFi today.

FAQ

Can you get preapproved for a mortgage while on disability?

Yes, it is possible to get preapproved for a mortgage while on disability. You’ll submit an application to one or more lenders, which will look at your income, debt, assets, and credit history.

Is it possible to buy a house on disability?

Yes. You will need to show that your disability income will continue for at least three years or that you have a comparable job waiting once you’ve recovered.

Can I buy a house on SSI?

Yes, you can use Supplemental Security Income to qualify for a home as long as there’s no documented expiration date in the next three years. SSI payments alone usually aren’t enough to pay mortgage payments, but it might be possible to buy a house with help from family members.

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Photo credit: iStock/baona

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.

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

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

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.

SOHL0222001

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Some buyers may be, well, buoyed by the thought of living on the water full time. Living in a floating house is unique, and building one may be a more ambitious undertaking than building a houseboat.

What’s the cost of building a floating house? Read on to learn about the expenses, benefits, and considerations associated with these aquatic abodes.

Average Cost of Building a Floating Home

The cost to build a floating house will vary based on the size, features, labor, and materials, but a 1,200-square-foot model starts at over six figures, a Dutch architect and advocate says.

These are not houseboats, which are self-propelled and free to move about. Nor are they usually tiny house tiny, though some are. They’re often twice as big as a houseboat.

An alternative to building a floating home is to buy an existing one. A quick look shows listings ranging from under $100,000 to over $1 million on the West Coast, and a home floating in the Florida sun for a few hundred thousand. Buying or renting a slip will add to the cost.

In comparison, the cost to build a house of 1,200 square feet could be about $165,600, based on $138 per square foot, not including the land.

Factors That Affect the Cost of Building a Floating Home

There are at least two foundational considerations when building a floating home: constructing the platform the home will rest on, and finding a slip at a moorage for rent or purchase.

The cost of building a floating house could ebb and flow depending on who’s doing the building — is this a DIY project or do you need to find contractors? — and the following factors.

The Foundation

Traditionally, floating homes rested on giant logs, but over time logs begin to sag and sink, requiring pressure-filled barrels under them to shore up the whole shebang.

Nowadays, these homes stay afloat using concrete floats. One type of concrete float is filled with foam, which creates buoyancy. The other concrete float is empty, and like a bowl placed upside down in water, the space and pressure keep the home floating.

Size of the House

Generally, the bigger the home, the more expensive the build. And the larger the home, the more floats it will require, further adding to the cost.

Floating homes are limited by the size of the moorage, meaning buyers have to work within specific parameters. That means building up, but only as much as the floats allow.

Design and Materials

The more custom or high-end designs integrated into the home, the more the build could cost. From custom cabinets in the kitchen to nonstandard windows, these add-ons carry a higher price tag.

Alternatively, floating homes can be prefabricated, using a standard design to lower the cost. Similarly, some companies are now using decommissioned shipping containers as building materials, which could cut down on the total cost to build a floating house.

Another cost to keep in mind is the siding material. Float houses are on the water and subject to the elements, which means the exterior materials must be resilient.

Interior Finishes

As with a traditional home, the choice of interior finishes can drive the cost of a floating house up or down. Opting for a prefabricated floating house may lower the spend on the interior.

Other Expenses of a Floating Home

Mooring and Insurance

Floating-home owners pay a monthly moorage fee or a homeowners association fee. The cost will vary by moorage but could be $1,000 a month.

There could be a transfer fee to assume a rental slip. Insurance may be hard to find and expensive. Marinas may require liability coverage.

Utilities

Floating homes are permanently affixed to the moorage and hooked up to local utilities, including water, sewage, and electric or gas.

If a floating house is designed with efficiency in mind, the monthly cost of utilities will likely be similar to traditional homes in the area. But a lack of shade could mean higher bills for cooling.

Some floating homes rely on a plumbing pump to carry sewage out of the home. It could create a higher electric bill.

Furniture

The average cost to furnish a home is $16,000, but since a floating home resides dockside, it’s harder to transport large items to the property. That could mean hiring extra labor or larger delivery fees.

Additionally, floating homeowners may be constrained by the dimensions of a smaller space, meaning custom or specialty furniture that fits in with and into the home.

Financing Your Floating Home

In some states, a floating home is considered personal property, so it cannot be built or purchased with a traditional home mortgage loan. A local bank or credit union may offer a floating home loan with at least 20% down and at a higher rate than a usual home loan. An inspection, at your expense, will likely be required to see if the home is in adequate shape to qualify.

Another option is a personal loan, which provides fast cash but usually has a higher rate than a secured loan.

Options for homeowners who have built sufficient home equity and are dreaming of a floating home include a home equity line of credit (HELOC), home equity loan, and cash-out refinance.

How Long Do Floating Homes Last?

With regular upkeep and maintenance, owners of floating homes can expect their property to last 50 to 60 years before requiring rebuilding or refurbishment.

Pros and Cons of Living on a Floating Home

If you hear the siren call of the floating-house lifestyle, it’s a good idea to weigh the good vs. the not-so-great before taking the plunge.

Pros

Some of the benefits floating-home owners can expect include:

•   Tight-knit community. Dock living means living close to neighbors. A floating community could be a great fit if that’s your thing.

•   Good choice if downsizing: Minimalists, retirees, and others with an affinity for the water may find a floating home a chance to downsize.

•   Doesn’t require an engine. Floating homes are permanently docked, so buyers or builders don’t need to factor in the costs of a motor. Greener still, one DIY floating-home builder crafted a home on a lake in British Columbia that has a pellet stove, solar power, a composting toilet, and an evaporation gray water system.

•   Water views all the time. If you prioritize proximity to nature, you can’t beat living on the water. A cup of coffee or glass of wine is always accompanied by a pretty vista.

•   May be less expensive housing. You may be able to build a floating home for less than a single-family home, especially in some of the hot spots for floating homes.

•   Potential for tax breaks. In some states, floating homes are considered personal property, not “real property.” Those owners will not pay annual property taxes but will pay personal property tax. Also, interest paid on a loan for a floating home as a first or second home can be included in the mortgage interest deduction if you itemize.

Cons

Now the potential downers:

•   Costs go beyond the build: Moorage or HOA fees can range from a few hundred dollars to $1,000 a month. Insurance can be pricey.

•   Limited locations. Floating-home communities are uncommon, meaning vacancies are even less frequent. It could be hard to find a dock community to take a floating home to, or it could mean waiting for a spot.

•   Weather damage. Constant exposure to saltwater or freshwater can take a toll on a floating home. That can translate into more frequent repairs and replacements, adding to the cost of upkeep.

•   Financing challenges. It can be hard to secure financing to construct or buy a floating home.

The Takeaway

Build your own floating home? A few do take on that challenge, which can pay off in terms of cost and self-satisfaction. Others will look into buying a floating house that’s already berthed, as moorage can be a challenge.

Whether you’re interested in building or buying a floating home, a HELOC brokered by SoFi could be the answer.

Access up to 95%, or $500,000, of your home equity, and borrow what you need, when you need it.

Tap your home equity to tether your floating-home vision to reality.

FAQ

Can you live permanently in a floating home?

Yes, floating homes can be permanent residences.

Do you have to pay property tax on a floating home?

Floating-home owners don’t have to pay property taxes in some states or cities. It varies by location.

Where can you get a loan to build a floating home?

Floating homes don’t qualify for traditional mortgages. Options include a floating-home loan from a small pool of lenders, a personal loan, a home equity line of credit, a home equity loan, and a cash-out refinance.

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Photo credit: iStock/Roman_Makedonsky

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.

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.

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Did you know you can use a home loan for renovations? Renovation home loans cover the cost of purchasing and renovating a home. If you’re familiar with construction loans, renovation loans are similar. Also called “one-close” loans or renovation mortgages, renovation loans can offer buyers simplified financing for transforming a fixer-upper into an attractive, modernized home.

We’ll explain how to add renovation costs to your home loan, and other ways you might want to use extra funds.

What Is a Renovation Home Loan?

A renovation home loan combines the cost of a home purchase and money for renovations in one mortgage. There’s only one closing and one loan when buying a new home or refinancing an existing home. The lender has oversight of the renovation funds, including the budget, vetting of the contractor, and disbursement of funds for renovation work as it is completed.

The borrower, their property, and their lender must all meet criteria set out by the remodel home loan program to qualify, which can present a challenge. Qualifying lenders in particular can be hard to find. That’s because most lenders must maintain a custodial account for the renovations over the course of an entire year, which requires extra work and resources. However, if you can find a lender that can handle the process, renovation loans can be a convenient way to improve a promising fixer-upper.

Types of Home Loans That Can Include Renovations

Most mortgages will not include renovations in the loan amount. Renovation mortgages are niche products serviced by a fraction of lenders. Buyers and properties must also meet certain requirements, which we’ll outline below.

There are several different types of home loans you can apply for that are eligible for adding renovation costs to the mortgage.

1. FHA 203K

An FHA 203(k) is a mortgage serviced by the Federal Housing Authority in which the cost of repairs is combined with the mortgage amount. It’s different from a traditional FHA loan that does not include improvement expenses, but qualifications (credit score, down payment, etc.) are very similar.

Interest rates and terms are also similar to what you see in a standard FHA loan. However, you can expect additional lender fees to cover the extra oversight needed on a renovation loan.

The amount you can borrow is equal to either the value of the property plus the cost of renovations or 110% of the projected value of the property after rehabilitation. Borrowers must use an FHA-approved lender for this type of mortgage.

Eligible properties must be one to four units. Repairs can include those that enhance the property’s appearance and function, the elimination of health and safety hazards, landscape work, roofing, accessibility improvements, energy conservation, and more. A limited 203(k) is also available for repairs costing $35,000 or less.

2. Fannie Mae HomeStyle

The Homestyle Renovation loan from Fannie Mae takes into account the value of the property after renovations are complete. The amount of allowable renovation money can equal 75% of the value of the property after renovations are complete.

In the world of home loans, the loan-to-value ratio (LTV) is the percentage of your home’s value that is borrowed. Many lenders limit your LTV to 80% to 85%.

A HomeStyle loan allows an LTV of up to 97%. This means it’s possible to put as little as 3% down. Some investment properties are also eligible for this type of loan. Renovations are eligible as long as they are permanently affixed to the property. Work must be completed within 15 months from the closing date of the loan.

3. Freddie Mac CHOICERenovation

The Freddie Mac CHOICERenovation program is virtually identical to the Fannie Mae HomeStyle program. This renovation loan is for buyers who want a loan with more flexibility than an FHA renovation loan.

Like HomeStyle, renovations that are permanently affixed to the property are eligible in one- to four-unit residences, one-unit investment properties, second homes, and manufactured homes. The maximum allowable renovation amount is 75% of the “as-completed” appraised value of the home — meaning the appraised value of the home before renovations but accounting for all planned changes. The maximum loan-to-value (LTV) ratio is 95% (97% for HomePossible or HomeOne loans).

The Freddie Mac CHOICEReno eXPress Mortgage is an extension of the CHOICERenovation mortgage. The CHOICEReno eXPress mortgage is a streamlined mortgage for smaller-scale home renovations. Renovation amounts are limited to 10% or 15% of the “as-completed” appraised value of the home. Borrowers need to work with an approved lender to apply for one of these programs.

4. USDA Purchase with Rehabilitation and Repair Loan

A USDA Purchase with Rehabilitation and Repair Loan assists moderate- to very-low-income households in rural areas with repairs and improvements to their homes. Buyers can secure 100% financing with this loan.

For very low-income borrowers, there’s a separate loan you can qualify for with a subsidized, fixed interest rate set at 1% with a 20-year term. This makes borrowing incredibly affordable.

To apply, you must have a household income that qualifies as low to moderate in your county per USDA standards. The property must be your primary residence (no investments), and rehab funds cannot be used for luxury items, such as outdoor kitchens and fireplaces, swimming pools and hot tubs, and income-producing features. Manufactured homes, condos, and homes built within the last year are not eligible.

5. VA Alteration and Repair Loan

The VA allows qualified service members to bundle repairs and alterations with the purchase of a home. As with all VA loans, 100% financing is available on these low-interest loans.

Alterations must be those “ordinarily found” in comparable homes. Renovations are also required to bring the property up to the VA’s minimum property standards.

The loan amount can include the “as completed” value of the home as determined by a VA appraiser. Leftover money from the home loan after renovations are complete is applied to the principal.

Home Style Quiz

Other Options for Financing Home Renovations

While a renovation home loan is a great way to finance a renovation, it’s not your only option for borrowing money for home improvements. Nor is it the most flexible. Alternative loans — such as cash-out refis, home renovation personal loans, and home equity loans -– have a lot more flexibility.

Cash-out Refinance

A cash-out refinance is where you replace your old mortgage with a new mortgage, and the equity (here, the “cash”) is refunded to the homeowner. You will have closing costs with a new mortgage, but you won’t have separate financing costs for the money you’re using for renovations.

Personal Loan

Personal loans are often used for a home remodel or renovation. Because the funds are not secured by your property, you’ll likely have to pay a higher interest rate. The bright side of funding this way means you won’t lose your home if you stop paying back the loan.

This type of loan comes with a shorter repayment period, higher monthly payment, and lower loan amount. You can find these loans through banks, credit unions, and online lenders.

Home Equity Loan

A home equity loan is a secured loan that uses your home as collateral. That means the lender can foreclose on the home if you stop paying the loan, and so interest rates are typically lower. A home equity loan also comes with a longer repayment period than a personal loan.

Home Equity Line of Credit (HELOC)

A HELOC is a line of credit that lets homeowners borrow money as needed, up to a predetermined limit. As the balance is paid back, homeowners can then borrow up to the limit again through the draw period, typically 10 years. The interest rate is usually variable, and the borrower pays interest only on the amount of credit they actually use.

After the draw period ends, borrowers can continue to repay the balance, typically over 20 years, or refinance to a new loan.

Recommended: A Personal Line of Credit vs. a HELOC

Private Loan

A private loan is a loan made without a financial institution. Loans made from a family member, friend, or peer-to-peer source are considered private loans. Qualification requirements will depend on the individual or group lending the money. There are some serious drawbacks to obtaining funding from a private source, but these loans can help some borrowers in buying a home.

Government or Nonprofit Program

It is possible to finance the cost of remodeling with the help of government programs. Federal programs like HUD have financing options for renovations, as do some state and local government agencies.

Recommended: What Is HUD?

The Takeaway

Homeowners have a lot of options for financing renovations, especially in an era when home equity is higher than ever before. Renovation home loans allow borrowers to purchase and renovate a property with one loan, but that’s not the only way you can remodel a fixer-upper. Some alternatives to renovation home loans include home equity loans, HELOCs, and personal loans.

A HELOC allows owners to pull from their property’s equity continually over time. A HELOC brokered by SoFi allows homeowners to access up to 95% of their home’s equity, or $500,000, and offers lower interest rates than personal loans. Borrow what you need to finance home improvements or consolidate debt.

Learn more about turning your home equity into cash with a HELOC brokered by SoFi.

FAQ

How do renovation mortgages work?

Home renovation loans are known for combining the cost of financing a renovation or remodel with the cost of purchasing the home into a single-closing transaction. Lenders calculate the amount to be borrowed based on the value of the home after renovations are complete.

Can you include renovation costs in a mortgage?

A home loan can include renovations, but you must work with your lender to be approved for specific renovation loan programs.

Can you add renovation costs to your mortgage?

You cannot add renovation costs to an existing mortgage, but you can refinance your mortgage with a new “renovation mortgage.” However, you will need to choose a specialized home loan product. You can also apply for a renovation home loan when you make a new purchase.

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Photo credit: iStock/Hispanolistic

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.

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

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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