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What Is a Good Mortgage Interest Rate Right Now?

Most people consider a “good” mortgage rate to be the lowest average current rate available. But here’s what they may not realize: Not everyone will qualify for the best rates out there.

So what is a good mortgage rate? It can be different for every borrower, depending on their financial situation and credit score.

Many factors go into determining the mortgage rate you can get. Once you understand what these variables are, the better equipped you’ll be to navigate the mortgage market and find the best loan for your situation.

This guide will get you on your way.

What Is a Mortgage Interest Rate?

If you’re a first-time home buyer, you may have a lot of questions about mortgage interest rates. The interest rate on a loan is the cost you pay to borrow money. You pay the interest each month as part of your regular payments for your loan.

There are different types of mortgage rates. With a fixed rate mortgage, your interest stays the same over the life of the loan. This means your monthly payment will always be the same.

An adjustable-rate mortgage (ARM) changes with the prime interest rate, which is influenced by the federal funds benchmark set by the Federal Reserve (the Fed). An ARM typically starts with a fixed rate for the first five to seven years, and then might fluctuate, based on the prime rate. This could potentially make your payments much higher, depending on the state of the economy.

First-time homebuyers can
prequalify for a SoFi mortgage loan,
with as little as 3% down.

Questions? Call (888)-541-0398.


How Do Mortgage Interest Rates Work?

So what is a good mortgage interest rate? Interest rates are always changing. A variety of factors determine mortgage rate changes. Some you have control over, and others you don’t.

One of the critical factors that’s outside your control is what’s happening in the economy. Major economic events have a significant effect on interest rate fluctuations. For instance, if employment rates are high, the interest rate typically rises as well.

Inflation, which limits consumers’ purchasing power, also plays a role. Since 2022, inflation has been on the rise, and the Fed has raised interest rates numerous times to try to tame it.

Your personal financial situation also affects the interest rate you get, as outlined below.

How Lenders Determine Your Mortgage Rate

In addition to the economic factors and the influence of the Fed, your unique financial situation will help determine the mortgage rate you qualify for.

Here are a few key factors lenders typically consider when determining your rate.

Credit Score

Most lenders review your credit history to determine if you’re eligible for a mortgage.

With this in mind, you want to make sure you check your score regularly and that you’re doing everything you can to keep your score as high as possible, like paying your bills on time and keeping your credit balances low.

Credit report agencies will assign you a credit score by evaluating these factors. The most common model is the FICO® credit score, which ranges from 300 to 850.

Usually, if you have a credit score of 800 or higher, it’s considered exceptional, whereas a credit score between 740 and 799 is considered very good.

A credit score of 739 to 670 is good, and a score between 669 and 580 is fair. A score of 579 and lower is considered poor. A low credit score indicates that a borrower represents a higher risk. Borrowers with these credit scores may have trouble getting approved for a loan.

It’s important to note that specific credit score requirements may depend on the loan you apply for.

Income and Assets

Your income is another important factor lenders use to determine if you’re eligible for a mortgage. Lenders prefer borrowers with a steady income. To determine if you qualify, lenders evaluate your income and other assets, such as investments.

Also, your debt-to-income ratio (DTI) is essential information. Your DTI indicates what percentage of your monthly income is used for debt payments. This number gives lenders an idea of how well you’re doing financially.

If your DTI ratio is high, it may show that you’re not in a position to take on more debt. A lender might give you a higher interest rate or deny your mortgage application altogether.

Down Payment Amount

Sometimes your down payment amount can lower your interest rate or even determine what loans you’re eligible for. Lenders may see you as less of a risk if you put more money down.

A good standard tends to be a 20% down payment. A 20% down payment may help you get the most favorable interest rates.

However, if you’re applying for a government-backed loan, you may not need such a big down payment. For example, a Veterans Affairs mortgage requires no money down, and a Federal Housing Administration (FHA) loan only requires 3.5% down.

Also, some conventional home loans do not require 20% down.

Loan Term and Type

The loan term you select, such as 15 or 30 years, can also make a difference in the interest rate you receive. In general, a shorter-term loan will have a lower interest rate than a longer-term loan. However, your monthly payments will be higher with a shorter-term mortgage.

There are also several types of mortgage loan categories, including conventional, FHA, USDA, and VA loans. Each loan product may have very different rates.

Finally, as discussed, with a fixed-rate mortgage, your interest rate will remain the same for the life of the loan. But if you choose an adjustable-rate mortgage, your interest rate will vary after an initial fixed rate.

Before you take out any loan, it’s important to compare all of your options to make sure you find the best rate available.

Location

Where your property is located can also play a role in the interest rate you receive. Some real estate markets are simply more costly than others. For instance the cost of living in California is higher than it is in some other locations.

You can check the cost of living by state to see how your state ranks.

Other Factors That Determine Your Mortgage Rate

In addition to your financial situation and location, and the type of loan you’re applying for, there are some other things that may influence the mortgage rate you get. They include:

The lender you choose

Different lenders offer different mortgage rates and terms. Shop around to find the best rate you can qualify for.

Housing market conditions

This factor is out of your control, but it’s good to understand how it works. If demand for houses is strong, mortgage rates tend to rise. And the opposite is true: When demand slows, rates tend to decrease. Knowing what the housing market is doing when you’re shopping for a home loan can help prepare you for what to expect.

What Is Considered a Good Mortgage Rate

Currently, in mid-June 2023, the average rate on a 30-year fixed-rate mortgage is 6.67%, according to Freddie Mac. Anything below or close to that number might be considered good.

But again, what’s a good mortgage rate for you depends on your financial situation and many other factors. A good rate is what you can qualify for. Be sure to compare rates from different lenders to get the best deal and the lowest rate you can.

As you’re comparing your options, be sure to look at the loan’s APR (annual percentage rate). An APR gives borrowers a more comprehensive measure of the cost to borrow money than the interest rate alone does.

The APR includes the interest rate, any points, mortgage broker fees, and other charges you pay to borrow money. So when you’re comparing options, you’ll want to review each lender’s APR to indicate the true cost of borrowing.

To get an idea of what your mortgage payments might be, you can use a mortgage calculator.

How to Get a Good Mortgage Rate

Now that you know the answer to the question, what is a good interest rate for a mortgage?, you’ll want to make sure you get the best rate for you. Making sure your finances are in order before you apply for a mortgage will likely help you obtain a better interest rate and loan terms. Here are some ways to do that.

•   Pay off higher-interest debt. If you have debt like credit card debt, you’re likely paying a lot of money in interest. That money could be going toward other things like a mortgage payment. Second, carrying a large amount of debt means you lower your chances of approval for a home loan. Pay off as much of your debt as you reasonably can.

•   Save more for a large down payment. Buyers who put down less than 20% may end up paying for private mortgage insurance (PMI), which typically costs between 0.5% and 1.5% of the loan amount annually.

•   Review your credit history and check for errors. You can get a free copy of your credit report from the three major credit bureaus or from AnnualCreditReport.com. If you spot any errors, be sure to alert the credit bureaus right away. Correcting any mistakes may help improve your ability to get a home loan.

The Takeaway

What is a good interest rate on a mortgage? Your financial health, the health of the economy, the loan type and term, and other factors help determine the actual rates you’re offered. What you can do is work to strengthen your credit and financial situation and pay down debt you have, such as credit card debt.

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 is the 30 year mortgage rate right now?

Right now, as of mid-June 2023, the average rate for a 30-year mortgage is 6.67%, according to Freddie Mac.

What is a good interest rate for a mortgage now?

A good rate for a mortgage now is anything below the average rate for a 30-year mortgage, which is 6.67% in mid-June 2023. But a good mortgage rate can be different for every borrower, depending on their financial situation and credit score, as well as the type of home loan they’re applying for, among other factors.

Is 4% a good rate for a mortgage?

Currently, in 2023, 4% is considered a good rate for a mortgage, compared to the average rate for a 30-year fixed-rate mortgage, which is 6.67%.


About the author

Ashley Kilroy

Ashley Kilroy

Ashley Kilroy is a seasoned personal finance writer with 15 years of experience simplifying complex concepts for individuals seeking financial security. Her expertise has shined through in well-known publications like Rolling Stone, Forbes, SmartAsset, and Money Talks News. Read full bio.




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.

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.

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.

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.


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bicycle in front of home

How Long Does It Take to Close on a House?

As of mid-2024, the average closing time on a house was 43 days after acceptance of an offer, down slightly from 48 in 2022, according to ICE Mortgage Technology, Inc. Whether that timeline feels swift or slow will depend on your personal circumstances, but once you’ve found a home to buy, it’s natural to want to close the deal quickly.

Online mortgage options can speed this process along, and many home sales can be buttoned up in as little as 20 to 30 days. Still, delays can happen.

Here’s what you need to know in order to get to the closing table.

How Long Does Closing on a House Take?

If you’re paying cash for a house, you’ll typically be able to close quickly.

But let’s assume a home loan will be part of the process. You’ve jumped through the initial hoops of the mortgage loan process an made an offer on a home you like.

If the offer is accepted, you’ll provide an earnest money deposit and sign a purchase contract. The price and any contingencies — conditions that must be met for the deal to proceed — are included in the purchase agreement.

This begins the due diligence period. It includes a title search to verify ownership and look for any liens that need to be paid off to ensure clear title to the new home. Most but not all issues will be reflected in a preliminary title report.

A typical contingency period is 30 to 60 days, though something like the inspection could be required within 10 days or less. Buyers can ask for extensions in writing.

Here are four common contingencies:

Financing Contingency

The mortgage contingency nullifies the deal if you can’t procure a mortgage within a certain time. The contingency language may be specific about the type of loan, down payment, and interest rate.

Getting preapproved for a mortgage is standard, but it’s not a guarantee. After your chosen home is under contract, your mortgage still has to go through underwriting.

Recommended: How Does the Mortgage Preapproval Process Work?

Home Sale Contingency

You may need to sell your current house to complete the purchase. You’ll typically be given 30 to 60 days to do so. In a competitive market, many sellers won’t even consider the offer with a home sale contingency.

But some sellers may employ a kick-out clause, which allows them to keep showing their home and “kick out” the contingent buyers if the sellers receive an offer without a home sale contingency.

Appraisal Contingency

An appraisal is usually required when a home is being financed. If the property valuation is less than your offer, you may walk away from the deal. You could also cough up the difference or ask the sellers to lower the price.

How long after the appraisal to close? About two weeks.

(By the way, if you’re still in the shopping stage, you can put an offer on a house that’s contingent.)

Home Inspection Contingency

A home inspection is generally not mandatory for any loan type but will help ensure that the home is free of issues that may result in expensive repairs. In a seller’s market, many properties are sold as is, meaning sellers won’t negotiate for repairs after the inspection.

In a buyer’s market, sellers might agree to pay for some repairs or to reduce the home’s price.

First-time homebuyers can
prequalify for a SoFi mortgage loan,
with as little as 3% down.

Questions? Call (888)-541-0398.


How a Mortgage Closing Works

You’ve qualified for a mortgage and chosen a lender.

After you’ve supplied income, asset, and other documentation, all of the contingencies have been satisfied, and your mortgage has received final approval from underwriting, it’s time to prepare for closing.

This will be the big day, when signing the closing documents legally transfers ownership from the sellers.

Sign Documents

Three days before your closing date, your lender will provide you with a closing disclosure that outlines the final closing costs and terms of your home loan. You can compare this five-page form with the loan estimate you received after applying for the mortgage.

Paperwork (lots of it) will have been prepared for you, including the deed of trust or mortgage and the settlement statement.

In some cases, everyone gathers in one place to sign closing paperwork. Other times, buyers sign separately from sellers. Forty-seven states and the District of Columbia now allow remote online notarization.

Pay Closing Costs

The lender will usually tell you the amount needed for closing several days before the event. A wire transfer may be arranged a day or two before closing. Or you can present a cashier’s check or certified check that day.

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

Transfer the Home Title

After signing a mountain of documents, the closing attorney, escrow officer, or title company representative will record the deed, and you will be given the house keys.

Recommended: First-Time Homebuyer Guide

The House Closing Process, Step By Step

Here are the basics.

1.    Seller signs the purchase agreement.

2.    Buyer may order a home inspection.

3.    Buyer applies for the mortgage (and considers asking to lock in the rate).

4.    Lender orders a home appraisal and conducts credit underwriting.

5.    Mortgage is approved.

6.    Buyer provides proof of homeowners and title insurance.

7.    Buyer receives the closing disclosure; notice of closing time, date and location; and what to present at closing, like a photo ID and cashier’s check or proof of wire transfer for cash to close.

8.    Buyer takes a final walk-through, verifying that sellers have made any required repairs and that nothing in the purchase agreement was removed. The buyer can check for leaks, turn on heating and air conditioning, and so forth.

What Causes Delays When Closing on a House?

A buyer and seller agree to a target closing date in the purchase contract, but the closing doesn’t always happen on or before that date.

Financing, appraisal, inspection, and other issues can delay a closing. Here’s a taste of what may cause a postponement:

Lender wants more documentation. Even if buyers were pre-approved, received their mortgage commitment, and were cleared to close, lenders will review credit and bank statements one last time within a few days of closing. Any abnormalities can delay the closing.

The mortgage is denied. Even after preapproval, a home loan may be denied for lots of reasons, sending buyers back to the starting block.

Interest rates surge unexpectedly. This can affect qualification if the loan is not locked.

The appraisal comes in low. A home may appraise for less than the purchase offer. Buyers can request a second appraisal, ask the sellers to renegotiate the price, put more down to cover the difference, or walk away. (This is where having an appraisal contingency is key.)

The inspection reveals that major repairs are needed. If it’s an as-is sale, buyers can walk away if they had an inspection contingency in the contract. They could still try asking the sellers to make certain repairs, request a decrease in the sale price based on the cost of repairs, or ask for a home warranty.

The title is not clear. A contractor’s lien, for example, can cause a closing delay if the contractor can’t be found to settle it.

Buyers can’t sell their house in time. If sellers agreed to a home sale contingency, the clock is ticking. If the buyers’ home doesn’t sell in time, the deal could fall through.

Instrument survey issues. Boundary line encroachments or disputes can hang up a closing.

Unrealistic closing date. Any complication can cause a deadline to fail. An extension must be approved by each party.

The Takeaway

How long does it take to close on a house? The average closing takes place 43 days from the time an offer is accepted, but the timeline varies. Getting to the closing table, in person or remotely, is an accomplishment. It means you qualified and persevered.

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

SoFi Mortgages: simple, smart, and so affordable.

FAQ

How long does it take to close on a house with cash?

In general, it takes only 2 to 3 weeks to close on a house with cash because there’s no need to wait for a lender to approve a loan. Once seller and buyer agree on a price and the inspection is done (if the buyer requires one), the closing can be scheduled immediately.

How long does it take to close on a house after the appraisal?

It could take anywhere from 2 to 6 weeks to close on a house after the appraisal. If the home appraises for the agreed-upon price and your mortgage documents are all in order, you could find yourself at the closing table in as little as 14 days. Complications with the appraisal, home inspection, or mortgage approval will extend this timeline.


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


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



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

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


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

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

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Building Generational Wealth Through Homeownership

How Homeownership Can Help Build Generational Wealth

One of the time-honored ways to build wealth and financial stability is by buying real estate. Properties typically appreciate over time and may provide cash flow as well.

Owning your own home not only gives you a great place to live, but it will likely turn out to be a good investment, one that can help build generational wealth for your family.

What Is Considered Generational Wealth?

Generational wealth refers to assets passed on from one generation to another within the same family. Assets is a broad term that includes cash; stocks, bonds and other securities; a family business; and real estate, including the family home.

Because of the high rates of appreciation in the past several decades, real estate can be one of the most valuable assets passed down from one generation to another.


💡 Quick Tip: SoFi’s award-winning mortgage loan experience means a simple application — we even offer an on-time close guarantee. We’ve made $7.5 billion in home loans so we know a thing or two about what makes homebuyers happy.‡

How Does Homeownership Build Wealth?

Homeownership can help build wealth directly through price appreciation. When the value of a home rises, owners are able to sell for that higher price, sometimes moving into a new, larger home. For homeowners who aren’t selling, price appreciation adds to their home equity and overall financial assets.

Of course, if home values decline, as they did in the 2007-2009 Great Recession, the opposite can happen and owners may find they owe more than the home is worth. But real estate has proved to be one of the most reliable assets in the long term.

The bottom line: A person’s home is often their largest financial asset, the benefits of which are often passed on to the next generation.

If you’re just getting started, know that a first-time homebuyer can be anyone who has not owned a principal residence in the past three years, some single parents, and others. The prospective purchasers can often get assistance (such as low or no down payment) as they progress towards buying their first property. Programs such as these can be a stepping stone to building generational wealth.

First-time homebuyers can
prequalify for a SoFi mortgage loan,
with as little as 3% down.

Questions? Call (888)-541-0398.


Direct and Indirect Building of Wealth

Next, consider different ways of building wealth over the generations.

Inheritance

Inheriting appreciated capital assets like real estate, stocks, bonds, ETFs, or a small business can have a big tax benefit, thanks to the “step-up in basis.” The value of the inherited asset is “stepped up” to the fair market value on the date the original owner dies.

If the heir sells the property, the step-up in basis will greatly reduce capital gains taxes due or make them moot if there is no gain. Any capital gain from the sale of inherited property is considered long-term. Current long-term capital gains taxes are 0%, 15%, or 20%, depending on your income and filing status.

For married couples, the death of one spouse results in a partial step-up in most states, but here’s a simplified example. Let’s say you inherit your grandmother’s home, purchased in 1940 for $10,000. The home is valued at $450,000 on the date of her death, which is the stepped-up basis. If you sell the home for $450,000, you’ll pay no capital gains tax. If you sell for a higher sum, capital gains tax will apply only to the amount over $450,000.

Imagine using the stepped-up basis provision over more than one generation of a family. An heir could sell a phenomenally appreciated asset and pay a minimal amount in capital gains tax or none at all on their inheritance, as long as the asset was included in the decedent’s estate.

Indirect Benefits

Heirs of homeowners may well inherit the actual real estate, but generational wealth can also be more indirect. Consider these points:

•   Homeowners are often more financially secure than renters, passing that security on to children.

•   Homeowners are able to borrow against the equity to improve the home (and often boost its value) or take care of other financial needs.

•   Many homeowners are located in districts with high-performing schools, enhancing overall opportunities for their children.

•   Down the line, the equity in a home can help finance retirement and health care needs, shielding adult children from that financial burden.

All of these factors can positively affect the next generation and add to their wealth.

How Discrimination Can Affect Generational Wealth

When housing discrimination occurs, it can keep people of color, women, and families with children, immigrants, and people with disabilities from living in the place they want. Importantly, it can also have a serious impact on generational wealth.

Considering the following statistics from the Fed for the fourth quarter of 2023:

The homeownership rate for non-Hispanic white households overwhelmingly led the pack, at 73.8%. Asian, Native Hawaiian, and Pacific Islander families came a distant second, at 63%. Hispanic families of any race had only a 49.8% homeownership rate, and African American households logged in at 45.9%.

A number of factors have contributed to the race gap in homeownership; not the least is the legacy of race-based discrimination in the housing market.

When homeownership lags among a certain group because of housing discrimination, so does the possibility for generational wealth.


💡 Quick Tip: 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.

Understanding Home Appreciation and Home Equity

To understand how homeownership can build wealth, it’s important to understand the concepts of home appreciation rates and home equity. These are some key points:

•   The increase in the value of a home over time is known as appreciation or the appreciation rate.

•   Home equity is the property value minus the outstanding balance of mortgages, liens, or other debt on the property.

•   Your first contribution to home equity is your down payment.

•   Every time you make a monthly mortgage payment, you are paying down the amount you owe and slowly paying part of the principal on your loan, which builds equity.

•   Price appreciation and home improvements can also add to home equity.

Most people purchase real estate with the expectation that their home will increase in value over time. But many things come into play when it comes to home appreciation and the amount of home equity you can build. Some you can control and some you can’t.

Recommended: How Much Is a Down Payment on a House?

The Economy

Housing prices can be affected by several economic indicators. When a recession hits, unemployment rises, or inflation jumps, the real estate market often declines.

Interest rates are also vitally important. Low mortgage interest rates can fuel demand, which can increase home prices in many areas. Conversely, a rise in mortgage rates can have a cooling effect on buyer demand.

The correlation between the housing markets and the rest of the economy can be surprising at times. For instance, during the initial stages of the pandemic, when economic indicators were showing signs of trouble, the nation saw a giant rise in home prices. This was particularly true in rural and suburban areas as urban dwellers sought more space and fewer crowds.

Recommended: How Rising Inflation Affects Mortgage Interest Rates

Laws and Regulations

Federal legislation can have a big effect on the U.S. housing market. Government tax credits, deductions, and subsidies aimed at certain homeowners can fuel the housing markets.

Local policies and regulations can also affect housing appreciation. Local investments in infrastructure or new schools and parks can increase your home’s value. Local zoning laws can also have an effect, positive or negative.

Home Improvements

This encompasses everything from an extensive addition to a fresh coat of paint. All kinds of improvements can add to the resale value of your home and, importantly, enhance your life while you’re living there.

Whether you decide to remodel a kitchen, a bathroom, or a remodel a living room, updated appliances and décor and energy-efficient improvements are often valuable upgrades.

To fund them, some homeowners use home improvement loans.

Is Homeownership a Smart Investment?

The answer to that question isn’t always straightforward. First, your home is the place where you live, of course, and hopefully you derive happiness from that. In that sense, the costs associated with your home and your mortgage payment can be considered living expenses, not necessarily an investment.

On the other hand, appreciation and home equity can be seen as the return on your investment in your home.

The sweet spot is often a combination of the two: a great place to live and a profitable investment.

Still, homeowners’ net worth far outpaces renters’. Every three years, the Federal Reserve issues the Survey of Consumer Finances, which compares the net worth of homeowners and renters. The latest report shows that homeowners had a median net worth of $396,200; renters, $10,400.

Keeping your expectations realistic can effectively put your home value into the context of your overall financial wellness and estate planning. To do that, you may need to keep in mind the total costs of owning and maintaining real estate. Too often, people subtract their purchase price from the expected sale price and figure the difference is the return on investment. But there are many more costs involved in homeownership.

To calculate your true return, you’ll want to add up the following:

•   Down payment

•   Closing costs

•   Mortgage points

•   Any mortgage insurance

•   Home maintenance expenses

•   Home improvements

•   Total mortgage payments

•   Taxes

•   Any homeowners association fees

•   Estimated selling costs (such as the real estate agent’s fees and staging charges).

That total is the number you want to compare against home appreciation to determine your actual return.

The Takeaway

How does homeownership build generational wealth? In direct and indirect ways. The real estate itself can likely grow in value, and the homeowner may enjoy such benefits as raising a family in a good school district. Buying real estate can build a foundation for a family today and for generations ahead.

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.


Photo credit: iStock/Capuski


*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.


SoFi On-Time Close Guarantee: If all conditions of the Guarantee are met, and your loan does not close on or before the closing date on your purchase contract accepted by SoFi, and the delay is due to SoFi, SoFi will give you a credit toward closing costs or additional expenses caused by the delay in closing of up to $10,000.^ The following terms and conditions apply. This Guarantee is available only for loan applications submitted after 04/01/2024. Please discuss terms of this Guarantee with your loan officer. The mortgage must be a purchase transaction that is approved and funded by SoFi. This Guarantee does not apply to loans to purchase bank-owned properties or short-sale transactions. To qualify for the Guarantee, you must: (1) Sign up for access to SoFi’s online portal and upload all requested documents, (2) Submit documents requested by SoFi within 5 business days of the initial request and all additional doc requests within 2 business days (3) Submit an executed purchase contract on an eligible property with the closing date at least 25 calendar days from the receipt of executed Intent to Proceed and receipt of credit card deposit for an appraisal (30 days for VA loans; 40 days for Jumbo loans), (4) Lock your loan rate and satisfy all loan requirements and conditions at least 5 business days prior to your closing date as confirmed with your loan officer, and (5) Pay for and schedule an appraisal within 48 hours of the appraiser first contacting you by phone or email. This Guarantee will not be paid if any delays to closing are attributable to: a) the borrower(s), a third party, the seller or any other factors outside of SoFi control; b) if the information provided by the borrower(s) on the loan application could not be verified or was inaccurate or insufficient; c) attempting to fulfill federal/state regulatory requirements and/or agency guidelines; d) or the closing date is missed due to acts of God outside the control of SoFi. SoFi may change or terminate this offer at any time without notice to you. *To redeem the Guarantee if conditions met, see documentation provided by loan officer.
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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Home Appraisals 101: What You Need to Know

Before applying for refinancing, listing your house on the market, or buying a house, you’ll need to get a home appraisal. This is an important independent assessment of a property’s value, which matters to all parties involved: you, your buyer (if you’re selling), and a lender.

Here, learn the ins and outs of home appraisals so you understand the process and can manage it successfully. You’ll find out:

•   What is a home appraisal?

•   How long does a home appraisal take?

•   How can you prepare for a home appraisal?

•   What can you do if a home appraisal comes in low?

What Is a Home Appraisal?

A home appraisal is an objective and professional analysis of a home’s value. An appraisal aggregates an array of information including details on the home itself (the floor plan, amenities, and how big it is), a visual inspection, real estate trends in your area, and how much nearby homes in your area sold for.

Generally, an appraisal will be completed when someone is buying, selling, or refinancing a home. It will tell a homeowner whether or not the price they’re putting on the home is fair based on the condition of the home, its amenities, and its location.

Home appraisals will let those buying a home know if a home is a good price. (This can be especially reassuring for first-time homebuyers, who are new to the whole process.)

If you think it’s time to refinance and are getting an appraisal done, it shows the home mortgage lender that you, the borrower, aren’t receiving more money from them than the home is actually worth. The lender wants to know that they are loaning funds to a property that is holding the stated value.

According to a National Association of Realtors® study from June 2024, appraisal issues led to real estate contract delays in 7% of transactions, so it’s important to get the appraisal right the first time around. That’s an important step in selling your home fast.

How Much Does a Home Appraisal Cost?

The home appraisal cost is typically several hundred dollars, and the borrower will most likely be responsible for paying it. Most people can expect to pay between $300 to $610 for a home appraisal, but it could be higher depending on the specific property. Some examples:

•   If the property contains a pond or lake, you can expect the home appraisal cost to be more.

•   If the appraiser is inspecting a larger home and/or a bigger overall property, then the home appraisal cost will go up. The same applies to jumbo loans, which are usually given to borrowers purchasing homes priced in the upper six-figure and $1 million-plus range.

It’s worth noting that there are a few cases in which the seller will cover the cost. These include the following situations:

•   If a homeowner wants to get an appraisal and see what modifications they can then make to increase their home value when they’re ready to sell it, they would pay for it.

•   If a homeowner is going to sell their home to a family member or friend, an appraisal can help ensure that the parties involved are getting a fair price.

The cost of a home appraisal covers things like the appraiser’s training, licensing, insurance, and expertise. It also covers the time it’ll take for the appraiser to assess nearby sales and market trends as well as conduct a visual inspection.

You’re paying for the appraisal report (more on that in a minute), which will show how the appraiser came to their conclusion on the price and information about your home.

At the end of the appraisal, if it comes up lower than the amount for which you want to refinance or sell it, then you may need to work out a new deal with your lender or purchasing party. That topic is explored in more detail below.

First-time homebuyers can
prequalify for a SoFi mortgage loan,
with as little as 3% down.

Questions? Call (888)-541-0398.


What Is the Home Appraisal Process?

The appraisal process may seem complicated, and you may wonder about how long a home appraisal will take and how deeply a home will be scrutinized. Fortunately, trained appraisers will be able to explain and guide you through every step. But it’s worthwhile to keep reading so you can be ready and prepare a bit. Some points to know:

•   Generally, if a home is being sold, the appraisal happens after an offer on a house is accepted and within a week after an inspector has toured the home. Sellers have the option, should they wish to pay for it, to do a pre-listing appraisal so they have more information and are better prepared for negotiations.

•   In most cases, the mortgage lender will seek out a third-party appraisal management company to come up with an objective analysis of the home and the appraisal estimate. The lender will determine the cost of the home appraisal, with the borrower usually being responsible for covering the expense.

Next, how long does a home appraisal take? The actual on-premises inspection appraisal can take between one and three hours, depending on how big and complex the home is. Here’s how it typically goes:

•   The appraiser will usually bring a form to collect information about the home including things like measurements, nearby housing trends, the demographics of the neighborhood, the condition of your home, and how it compares to other properties in your area. (Some of this is research the appraiser will do back at their desk.)

•   The appraiser will also review things like the home’s location, quality of construction, parking situation, exterior condition, its age, its structure, the quality of the siding and gutters, and the square footage.

•   They will also research the appliances and mechanical systems, health and safety factors, the number of bedrooms and bathrooms, and the code compliance throughout.

•   The appraiser will usually take photos of the home as well as make notes. If you are the homeowner, try to avoid getting in the way when the appraiser is taking photos or interrupting them while they’re working.

•   The appraiser may ask questions about what has been done with the home to get a more accurate report. If the homeowner doesn’t want to be there for the appraisal, the real estate agent you’re working with can fill in to answer questions that may come up during the appraisal.

After the appraiser finishes, they’ll put together a report. This involves research into pricing and home values in your area, as well as prevailing market trends. The appraiser may need to check that you had permits to make upgrades, which could delay the process. Typically, however, the finished product is delivered within a week to 10 days.

The report is usually about 10 pages long, but it could be longer if a property is large or complex. It will show details about the home as well as local properties that are similar to it. Here’s how its content could impact your sale:

•   If the appraised value is around the same price as listed, then the sale could close shortly after that.

•   If it’s lower than expected, you have what’s known as an appraisal gap, and it may be necessary to get in touch with the lender to see if a mortgage will be approved. Keep reading for more details on this scenario.

Recommended: Refinance Your Mortgage and Save

What If an Appraisal Comes in Low?

If the appraisal comes in low versus what you think your home’s value is, you likely want to dispute that in some way. One option could be to print out a list of similar homes in the community and show that they were valued at a higher price than your home. You may have the option to appeal the appraisal, but note you’ll likely need to support your argument and the appraiser may not change their appraisal. If you are working with a Realtor, they may be able to provide examples of comparable homes being of higher value.

Each lender may have different criteria for formally disputing an appraisal, so should there be an issue, contact the lender to review their policies. In most cases, only the lender can request a second appraisal.

What if the appraisal is low but you don’t want to dispute it? In this case, if you might negotiate with the buyer, seller, or lender. They may be flexible on the price; all you have to do is ask.

Recommended: Track the value of your home

Home Appraisal Checklist

Before getting a home appraised, there are a few things you can do to help the process go smoothly.

1.    Declutter. While messiness shouldn’t impact the value of your home, if you get rid of clutter (perhaps donate to a local thrift shop), the appraiser can do their job more easily and quickly.

2.    Clean. Thoroughly clean the inside and outside of the home, including the yard. Break out the cleaning supplies or hire a professional cleaning team. It can improve the overall impression of a home’s condition.

3.    Make minor repairs. It’s also a good idea to repair any cracks in the wall, paint over paint that is peeling, and make any other visual repairs that may need attention. Making some common home repairs may cost a little money, but it’s preferable to having a long list of things flagged in the appraiser’s report.

4.    Check fixtures and appliances. Test the lights, faucets, ceiling fans, and security system, as well as confirming that the windows and doors open and close easily. Run appliances like the oven and dishwasher as well to guarantee there are no problems.

5.    Think curb appeal. The exterior of your home is among the factors that affect property value. Consider trimming hedges, getting rid of cobwebs, cleaning the gutters, pulling weeds, and mowing the lawn. Adding plants or flowers could help, too.

   Worth noting: Since the appraiser will be walking outside, avoid watering the grass on the day of the appraisal. This can help avoid mud or dirt being tracked through the house.

6.    Plan for pets. If you have pets, consider putting them in a designated room or taking them to a family member or friend’s home during the appraisal.

7.    Wrangle upgrade info. If possible, make a list of all the upgrades that have been completed on the home and attach permits and receipts detailing how much it all cost.

The Takeaway

Whether you’re buying, selling, or refinancing a home, a home appraisal is a key part of the process. Knowing what to expect can help ensure the process goes as smoothly as possible. It’s also a good idea to understand the factors that go into an appraisal so you can be prepared if the results are not in the range expected.

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 will fail a home appraisal?

Deferred maintenance is one major factor that can cause a home appraisal to fail to come in at the desired value. The longer the list of outdated or broken systems or appliances, the more likely the appraiser is to consider the house of lesser value. Or it could be due to the local market: If home sales are declining in value in your area, that could cause your number to go down as well.

How should I prepare for a home appraisal?

If you’re hoping to buy the house, you simply sit back and let the appraiser do their job. If you are the seller, you can prepare for a home appraisal by cleaning up your property and making whatever repairs are required. These moves can both make the process go more smoothly and possibly enhance the home’s value.

Does messiness affect a home appraisal?

A messy or cluttered house should not impact a home appraisal. Licensed appraisers are trained to look past such issues and focus on the house, not its contents. That said, if your property is untended and in rough condition, with peeling paint or overgrown landscaping, for example, that can take the home’s value down a notch.


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


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



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

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


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

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Beginner’s Guide to Homeowners Associations

Perhaps the idea of home ownership sounds appealing, but the thought of all the maintenance involved — inside and out — doesn’t sound so great. Dealing with snow removal or tending to your lawn might be the last thing you want to add to your already full plate.

If that resonates, buying a home that has a homeowners association, or HOA, might be the right move. Whether you’re shopping for a condo or a 3-bedroom house in a new development, an HOA could be a valuable thing. These organizations, funded by dues, take care of many of those maintenance responsibilities, run shared facilities (like a pool), and create guidelines (and enforce them) for the community of homeowners.

That said, interacting with an HOA and following its guidelines may not be for everyone. Read on to learn:

•   What is an HOA, or homeowners association

•   How do HOAs work

•   How much are HOA dues

•   What are the pros and cons of HOAs

•   How will HOA fees impact your costs as a homeowner

What Is an HOA (Homeowners Association)?

An HOA is typically a non-profit volunteer group that manages aspects of homeownership in certain planned unit developments (PUDs), condos, and other housing communities. The HOA collects fees from each member of the community and uses them to handle maintenance duties and amenities. These may include:

•   Landscaping and maintenance of walkways and the like

•   Pest control

•   Maintenance and utilities of shared spaces, such as lounges and pool areas

•   Garbage pickup

•   Parking

•   Security

Another answer to “What is an HOA?” should mention that these associations typically make enforceable rules about the look and feel of the community. There may be guidelines about, say, the size of pets one may own, or the color schemes permissible for a townhome’s exterior. The existence of an HOA will be an important consideration when you are shopping for a place to live and HOA fees need to be built into a homebuyer’s financial plan, just like home loan payments.

Recommended: Condo vs. Townhouse: 9 Major Differences

How Does an HOA Work?

HOAs can be staffed in different ways. They can be run by people owning property within its boundaries, run by a board of directors, or through a similar arrangement, with board designees elected to oversee and enforce HOA rules.

Many HOAs are incorporated, which makes them subject to the laws of the state and may require them to file annual reports with the corporation commission, in order to remain in good standing.

People who purchase properties within an HOA jurisdiction become members of that organization, and they must abide by the rules contained within that organization’s bylaws and Declaration of Covenants, Conditions, and Restrictions (CC&Rs).

HOA rules, fees and restrictions vary. Some bylaws and CC&Rs are strict, while others are looser, typically focusing on how residents must keep properties maintained according to stated specifications. In a planned unit subdivision of single-family homes, for example, rules may include what types of landscaping are permitted, or exterior colors of paint, what kinds of fencing is allowed, and more.

They can include usage rules for common property, such as a pool, and typically outline penalties for rule violations, ranging from forcing a homeowner to comply to fees and, sometimes, litigation.

How Common Are HOAs?

Here are some recent statistics that will help you get an idea of how common HOAs currently are in the U.S.:

•   Approximately 75.5 million Americans live in HOAs, cooperatives, or condominium units.

•   30% of all U.S. homeowners live in HOA communities.

•   28.2 million housing units in America are part of HOA communities.

As you see, HOAs are quite popular.

What Is an HOA Fee?

Now that you know a bit about what is a homeowners association, let’s look at those fees they charge. People who buy property in an HOA-governed condo or community usually must pay dues — also known as HOA fees — typically due monthly. These fees help to maintain common areas of buildings, such as lobbies and patios, and perhaps community clubhouses. These fees can cover maintenance on elevators or swimming pools, if applicable, or could be used for landscaping expenses, and so forth. Additional special assessments may be charged for major repairs, such as roof repairs.

Some studies suggest that average HOA fees range from $200 to $400 per month, although they can be as low as $50 and as high as $2,500 or more. It depends on the HOA complex, where it is, what amenities the project maintains, and sometimes on how the individual HOA is managed.

What’s most important when shopping for a new home is that you are clear about what fees would be assessed on your individual unit and whether that fits your budget.

First-time homebuyers can
prequalify for a SoFi mortgage loan,
with as little as 3% down.

Questions? Call (888)-541-0398.


When Considering an HOA Property

When considering whether or not to buy a property within a homeowners association, it makes sense to understand what you’d be committing to if you bought this property.

To get an understanding of how the organization operates, you can ask the board of directors if you could read minutes from meetings — if you have a real estate agent, they should be able to help you access records. This may give you a good overview of any challenges the organization is facing, and insights into how solutions are brainstormed and implemented.

Questions to investigate can include:

•   What are the HOA fees each month? What do they cover?

•   If the fees seem low, does it appear as though enough funds are collected to maintain general areas? What about meeting rooms, the gym, pool area, and so forth?

•   If the HOA fees are higher than expected, do they seem excessive for what you’d get in return?

•   Are homeowners also being charged special assessments to cover other costs? If so, how often and what are they?

•   How many units are not paying their HOA fees? What are the consequences for that? Are penalties being imposed?

•   If certain units don’t pay their HOA fees, can these unpaid costs be imposed upon other owners to make up the difference?

•   If desired, will you be allowed to sublet your unit? Over what term and with what restrictions?

•   Are you allowed to have a pet? If so, what restrictions exist? Ask to read a copy of the CC&Rs which is recorded public information.

•   Does pending litigation exist against the HOA? If so, of what type? Does it involve, say, damage to one unit, or does it affect the entire organization?

If you have friends or family members who are part of this HOA, consider asking them what they like about living there, and what they don’t. If you have a friend or family member who owns housing under a different HOA, chat with them as well. Their insights can be valuable in regards to what questions to ask and issues to explore before buying.

You can also review the bylaws, which usually share voting rights of members, budget and assessment rules, meeting requirements, and so forth. Check to see what actions can be taken without a member vote — if they include raising assessments or creating rules, this could have an impact on your buying decision.

Recommended: Mortgage Servicing: Everything You Need to Know

Pros vs Cons of HOAs

There are several benefits of buying a property that’s part of an HOA. Consider these upsides:

•   Guidelines to help maintain the look of the community, settle issues, and create harmony among residents.

•   Enhanced quality of life and property values.

•   Maintenance services so homeowners don’t need to do the work themselves or hire freelance help.

That said, there are also possible drawbacks to being part of an HOA. These can include:

•   The cost of the HOAs fees can be prohibitively expensive, and the possibility of assessments can be financially challenging.

•   Potentially restrictive guidelines that inhibit your freedom over your property (that is, you may not be allowed to have a certain kind of pet or put in solar panels).

•   Those who run the HOA may be volunteers vs. skilled real estate professionals, which could lead to inefficiencies.

Can You Afford to Buy into an HOA?

When shopping for a new home or condo, one key consideration is how much you can afford for a house — with the true cost being more than just principal, interest, and homeowners insurance. If you are considering properties that have HOA charges, it’s vital to factor those in to make sure your budget is manageable.

You’ll need a down payment on the home. There are also property taxes, insurance, closing costs (which can run from 3% to 5% of the home’s cost, paid by the buyer and/or seller according to the contract). And there are expenses other than closing costs such as moving expenses, furniture costs, and more that should be considered as you grapple with how much you can afford.

Plus, you might want to have an emergency fund established for unexpected expenses, whether unanticipated housing repairs, or medical expenses, or something else entirely.

To help you figure out that affordable house payment number, you could check out our mortgage calculator.

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

What to Know About Mortgages and HOAs

There’s one more wrinkle to the topic of what is a homeowners association and should you buy into one: the impact it may have on securing your mortgage.

When you buy a property that is part of an HOA, you may need additional documentation for your lender. If your bid is accepted, the lender will likely request a homeowners association certification, called an HOA cert for short. This document provides your lender with a snapshot of how the HOA is being run, and may provide information such as:

•   How old the project is

•   Whether a condominium development was converted from an apartment building or specifically built as condo units

•   How many units exist in the project

•   How many units are occupied

•   How many occupied units are owner occupied and how many are rented to someone else

•   How much HOA fees are

•   The amount of insurance on the project

If this information is requested, it will likely be reviewed to confirm that this property meets the lender’s loan eligibility guidelines. Because guidelines can vary from lender to lender and loan program to loan program, it makes sense to check with your lender of choice as soon as possible to determine if this financial institution considers your condo to be eligible for financing.

The HOA cert may also be obtained by the escrow/title company and provided to your lender, along with the relevant CC&Rs. This provides insight into any property restrictions and other aspects that may affect a home’s lendability and marketability.

Recommended: Home Loan vs. Mortgage: What You Should Know

The Takeaway

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

Why do HOAs exist?

Homeowners associations exist to manage and maintain common areas, to enforce community rules, and to collect and manage the finances used for community upkeep. Many people who participate in HOAs expect the association to help enhance their property values.

How much are HOA fees?

HOA fees vary widely based on the amenities offered by the development but most people can expect to pay at least $200 to $300 per month.


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


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


*SoFi requires Private Mortgage Insurance (PMI) for conforming home loans with a loan-to-value (LTV) ratio greater than 80%. As little as 3% down payments are for qualifying first-time homebuyers only. 5% minimum applies to other borrowers. Other loan types may require different fees or insurance (e.g., VA funding fee, FHA Mortgage Insurance Premiums, etc.). Loan requirements may vary depending on your down payment amount, and minimum down payment varies by loan type.
Financial Tips & Strategies: The tips provided on this website are of a general nature and do not take into account your specific objectives, financial situation, and needs. You should always consider their appropriateness given your own circumstances.

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

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