Gross vs Net Income: What’s the Difference?

What Are the Differences Between Gross and Net Income?

If you’re a salaried employee, the amount of money that you bring home with each paycheck plays an important role in your overall financial picture. While there are several dollar amounts that likely appear on your paycheck, two of the most important are your gross income and your net income.

Your gross income represents the total amount of money that your employer has paid you. If you are an hourly employee, it will be your hourly wages multiplied by the number of hours that you worked. If you are salaried, then it is a proportional amount of your total annual salary.

But in terms of net income vs. gross income, the net amount is the sum that is on your paycheck or directly deposited to your bank account. This is the figure that results when you subtract withholding taxes, benefits, and other deductions from your gross salary.

Key Points

•   Gross income reflects the total earnings before any deductions, while net income is the amount received after taxes and other deductions are subtracted.

•   Different factors, such as marital status and retirement contributions, can affect the amount withheld from gross income, leading to variations in net income.

•   Gross income serves as a standard reference for comparing salaries, as it does not account for individual tax situations or deductions that can vary greatly.

•   Understanding the relationship between gross and net income is crucial for effective budgeting, as net income directly impacts available funds for expenses and savings.

•   Focusing on net income provides a clearer picture of financial health and aids in setting realistic budgets for living expenses and future goals.

What Is Gross Income?

Your gross income is your total salary or wages that you earn before any deductions or taxes are taken out of your paycheck. If you are a salaried employee, your gross income will be the portion of your salary that corresponds to the time period represented on your paycheck. For example, if you have a salary of $52,000 and are paid every two weeks, you will earn a gross income of $2,000 with each bi-weekly paycheck. If you were paid only once a month, however, your gross monthly income would be $4,333.33.

In some cases, an employee might be eligible for overtime pay, which could be reflected in their paycheck as well.

If you are an hourly employee, then your gross income will depend on the total number of hours you work and your hourly wage. If you work 80 hours during a pay period and have an hourly wage of $15/hour, your gross income will be $1,200 (80 times 15). In either case, any tips, bonuses, or one-time additions may also be added to your total gross income.

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What Is Net Income?

Here’s the difference between gross income vs. net income: While your gross income represents the total amount of money that you earn in a given pay period, your net income is the amount of money that you’ll actually receive. From your gross income, taxes and common payroll deductions like health insurance and any 401(k) contributions will be subtracted. Other deductions could include wage garnishments or charitable giving via your workplace.

The result is your net income, which may then be sent to your bank account via direct deposit or given to you as a paper check.

Gross vs Net Income: What’s the Difference?

When comparing net and gross income, know this: Your gross income should always be equal to or more than your net income. If you don’t have any of what are known as withholding taxes or other deductions, it is possible that your gross income and net income will be the same. But if you do have any money withheld for taxes, insurance, retirement savings, or other common deductions, they will be subtracted from your gross income. The result is your net income and is also often referred to as “take-home pay.”

Why Do We Go by Gross Income?

When people compare earnings and salary, they often do so by comparing the gross income, and net income isn’t considered. One reason for this is that your gross income is the best indicator to compare the amount of money paid for a particular job or position. The amount of deductions or taxes withheld can vary greatly depending on a person’s situation.

Consider two people that make the same salary — one who is married with children will usually have less taxes withheld than a single person. Also, one person might contribute, say, 10% of their salary to a company-sponsored retirement plan while another chooses not to. Another example could be one person who has deductions that reflect their carrying their family’s health insurance costs while another individual could be married and on their spouse’s plan and therefore have no such deduction.

Another reason that gross income is often a better comparison than net income is because the money that is withheld from your paycheck usually represents actual value that you receive. Money deducted for retirement savings is transferred to your 401(k) account; insurance premiums are used to pay for medical or dental insurance and taxes are paid to the government. Those deductions are serving an important and valuable purpose.

How Do Gross and Net Income Relate to Taxes?

It’s important to understand your taxes and how they relate to your gross and net income. Taxes (along with deductions) are one of the things that is subtracted from your gross income to make up your net income. The more money that you have withheld for taxes from your paycheck, the lower your net income will be. However, this may help minimize the possibility of your owing additional money to the federal or local government come tax season.

How Gross and Net Income Affect Your Finances

While your gross income can be a useful point of comparison in terms of how much you make, it’s your net income that most impacts your budget and finances. When managing your money and wondering whether to focus on your gross or net income, it’s likely that the latter is where you may want to focus.

After all, it’s your net income that represents the money that you actually receive each pay period. This money that you receive each month can be a good starting point as you learn to spend wisely by budgeting.

You can work to best allocate funds to pay your living expenses, make discretionary purchases, pay off debt, and save towards future goals. A line item budget can help you balance your finances and meet your near-term and longer-term goals.

The Takeaway

Gross income and net income are two different points of reference for how much money that you make. Your gross income represents the total wage or salary that you earned during a particular pay period. After any taxes or deductions are taken out, the result is your net income. Your net income is how much money that you actually take home and can be a starting point as you set up your budget.

Understanding how your gross income and net income affect your overall finances is a good first step on the path to a solid financial future. SoFi Checking and Savings can also help you manage your finances. It’s a single, convenient place to spend and save, pays a competitive Annual Percentage Yield (APY), and charges you zero account fees. What’s more, our tools like Vaults and Roundups can help you enhance your savings, and if you open a qualifying account with direct deposit, you can access your paycheck up to two days early.

Better banking is here with SoFi, NerdWallet’s 2024 winner for Best Checking Account Overall.* Enjoy up to 3.80% APY on SoFi Checking and Savings.

FAQ

How can I increase my net income?

Because net income and gross income are correlated, one way to increase your net income is to increase your gross income. You might do this by finding a new, higher-paying job or by starting a side hustle. The other option to raise your net income would be to lower the amount of taxes and deductions that are taken out each pay period. This could involve, say, increasing your tax allowances to lower the amount that is withheld for taxes or decreasing your other deductions, such as how much you contribute to retirement savings.

What are some budgeting tips to help you with your income?

One budgeting tip is to make sure you start with your net income and list out all of your expenses. Make sure that your total expenses are less than your total income (this may involve making some cuts) and create a plan to save at least some of the difference. You might want to research such budget guidelines at the 50/30/20 rule for inspiration.

Is gross income more important than net income?

Gross income and net income are both important and useful in different circumstances. For example, if you are wondering whether 40K a year is a good salary, it will depend on your situation. If you are single and/or live in an area with a low cost of living, it might be. But if you are the sole source of income for a family of four, live in a location with a high cost of living, and/or have considerable debt, that same gross income could be a challenge in terms of making ends meet.


Photo credit: iStock/Vasyl Faievych

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 members with Eligible Direct Deposit activity can earn 3.80% annual percentage yield (APY) on savings balances (including Vaults) and 0.50% APY on checking balances. Eligible Direct Deposit means a recurring deposit of regular income to an account holder’s SoFi Checking or Savings account, including payroll, pension, or government benefit payments (e.g., Social Security), made by the account holder’s employer, payroll or benefits provider or government agency (“Eligible Direct Deposit”) via the Automated Clearing House (“ACH”) Network during a 30-day Evaluation Period (as defined below).

Although we do our best to recognize all Eligible Direct Deposits, a small number of employers, payroll providers, benefits providers, or government agencies do not designate payments as direct deposit. To ensure you're earning 3.80% APY, we encourage you to check your APY Details page the day after your Eligible Direct Deposit arrives. If your APY is not showing as 3.80%, contact us at 855-456-7634 with the details of your Eligible Direct Deposit. As long as SoFi Bank can validate those details, you will start earning 3.80% APY from the date you contact SoFi for the rest of the current 30-day Evaluation Period. You will also be eligible for 3.80% APY on future Eligible Direct Deposits, as long as SoFi Bank can validate them.

Deposits that are not from an employer, payroll, or benefits provider or government agency, including but not limited to check deposits, peer-to-peer transfers (e.g., transfers from PayPal, Venmo, etc.), merchant transactions (e.g., transactions from PayPal, Stripe, Square, etc.), and bank ACH funds transfers and wire transfers from external accounts, or are non-recurring in nature (e.g., IRS tax refunds), do not constitute Eligible Direct Deposit activity. There is no minimum Eligible Direct Deposit amount required to qualify for the stated interest rate. SoFi members with Eligible Direct Deposit are eligible for other SoFi Plus benefits.

As an alternative to Direct Deposit, SoFi members with Qualifying Deposits can earn 3.80% APY on savings balances (including Vaults) and 0.50% APY on checking balances. Qualifying Deposits means one or more deposits that, in the aggregate, are equal to or greater than $5,000 to an account holder’s SoFi Checking and Savings account (“Qualifying Deposits”) during a 30-day Evaluation Period (as defined below). Qualifying Deposits only include those deposits from the following eligible sources: (i) ACH transfers, (ii) inbound wire transfers, (iii) peer-to-peer transfers (i.e., external transfers from PayPal, Venmo, etc. and internal peer-to-peer transfers from a SoFi account belonging to another account holder), (iv) check deposits, (v) instant funding to your SoFi Bank Debit Card, (vi) push payments to your SoFi Bank Debit Card, and (vii) cash deposits. Qualifying Deposits do not include: (i) transfers between an account holder’s Checking account, Savings account, and/or Vaults; (ii) interest payments; (iii) bonuses issued by SoFi Bank or its affiliates; or (iv) credits, reversals, and refunds from SoFi Bank, N.A. (“SoFi Bank”) or from a merchant. SoFi members with Qualifying Deposits are not eligible for other SoFi Plus benefits.

SoFi Bank shall, in its sole discretion, assess each account holder’s Eligible Direct Deposit activity and Qualifying Deposits throughout each 30-Day Evaluation Period to determine the applicability of rates and may request additional documentation for verification of eligibility. The 30-Day Evaluation Period refers to the “Start Date” and “End Date” set forth on the APY Details page of your account, which comprises a period of 30 calendar days (the “30-Day Evaluation Period”). You can access the APY Details page at any time by logging into your SoFi account on the SoFi mobile app or SoFi website and selecting either (i) Banking > Savings > Current APY or (ii) Banking > Checking > Current APY. Upon receiving an Eligible Direct Deposit or receipt of $5,000 in Qualifying Deposits to your account, you will begin earning 3.80% APY on savings balances (including Vaults) and 0.50% on checking balances on or before the following calendar day. You will continue to earn these APYs for (i) the remainder of the current 30-Day Evaluation Period and through the end of the subsequent 30-Day Evaluation Period and (ii) any following 30-day Evaluation Periods during which SoFi Bank determines you to have Eligible Direct Deposit activity or $5,000 in Qualifying Deposits without interruption.

SoFi Bank reserves the right to grant a grace period to account holders following a change in Eligible Direct Deposit activity or Qualifying Deposits activity before adjusting rates. If SoFi Bank grants you a grace period, the dates for such grace period will be reflected on the APY Details page of your account. If SoFi Bank determines that you did not have Eligible Direct Deposit activity or $5,000 in Qualifying Deposits during the current 30-day Evaluation Period and, if applicable, the grace period, then you will begin earning the rates earned by account holders without either Eligible Direct Deposit or Qualifying Deposits until SoFi Bank recognizes Eligible Direct Deposit activity or receives $5,000 in Qualifying Deposits in a subsequent 30-Day Evaluation Period. For the avoidance of doubt, an account holder with both Eligible Direct Deposit activity and Qualifying Deposits will earn the rates earned by account holders with Eligible Direct Deposit.

Separately, SoFi members who enroll in SoFi Plus by paying the SoFi Plus Subscription Fee every 30 days can also earn 3.80% APY on savings balances (including Vaults) and 0.50% APY on checking balances. For additional details, see the SoFi Plus Terms and Conditions at https://www.sofi.com/terms-of-use/#plus.

Members without either Eligible Direct Deposit activity or Qualifying Deposits, as determined by SoFi Bank, during a 30-Day Evaluation Period and, if applicable, the grace period, or who do not enroll in SoFi Plus by paying the SoFi Plus Subscription Fee every 30 days, will earn 1.00% APY on savings balances (including Vaults) and 0.50% APY on checking balances.

Interest rates are variable and subject to change at any time. These rates are current as of 1/24/25. There is no minimum balance requirement. Additional information can be found at http://www.sofi.com/legal/banking-rate-sheet.
SoFi® Checking and Savings is offered through SoFi Bank, N.A. ©2025 SoFi Bank, N.A. All rights reserved. Member FDIC. Equal Housing Lender.
The SoFi Bank Debit Mastercard® is issued by SoFi Bank, N.A., pursuant to license by Mastercard International Incorporated and can be used everywhere Mastercard is accepted. Mastercard is a registered trademark, and the circles design is a trademark of Mastercard International Incorporated.



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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Can You Cash a Check at an ATM?

Can You Cash Checks at an ATM?

If your paycheck or another check is burning a hole in your wallet, you might be able to cash it at an ATM. Depositing a check into an ATM can be a convenient, painless way to get your cash fast.

If you don’t have access to remote banking or just can’t make it to a bank during business hours, cashing a check at an ATM can be an excellent alternative.

Key Points

•   Cashing a check at an ATM requires a checking account, a debit card, and a PIN. Ensure these are ready before attempting the transaction.

•   The process involves endorsing the check, possibly filling out a deposit slip, and following the ATM’s on-screen instructions for cashing the check.

•   Various types of checks, including personal, cashier’s, and certified checks, can generally be cashed at ATMs, depending on the bank’s policies.

•   Not all ATMs support check cashing; it’s advisable to use ATMs located at your bank to avoid fees and ensure your check is processed efficiently.

•   Alternative methods for cashing checks include visiting a bank teller, using mobile deposit features, or cashing checks at retail stores, though fees may apply in some cases.

🛈 Cashing checks at an ATM is unavailable for SoFi members. As an alternative, members can deposit checks via the mobile app.

Steps to Cash a Check at an ATM

If you do use a bank that offers ATM check cashing, the first thing you’ll need in order to cash a check at an ATM is a checking account. A checking account traditionally comes with an account number and a debit card. You will need both of these.

Make sure you’ve activated your debit card, selected and memorized a PIN number, and know your account number. The debit card and PIN number are essential for performing the most basic of transactions, including making ATM deposits and withdrawals.

Once you have your account details, card, and PIN number, cashing your check at an ATM is pretty much the same as making a cash deposit at an ATM. Most banks will require you to have a minimum amount in your checking account in order to cash your check.

Here are the steps to cashing a check at an ATM:

•   Endorse the back of your check. With a pen (not pencil), sign your name on the back of your check and write your account number. Security tip: Wait until you get to the ATM location to sign the back of your check, even if you have to bring a pen with you. If an endorsed check gets lost or stolen, someone else could cash it.

However, do add your signature before your turn at the ATM itself to save time and as a courtesy to those waiting behind you.

•   Fill out a deposit slip. Some banks may still require you to fill out a deposit slip to insert into the ATM along with your check. The deposit slips are typically available in the bank branch or the ATM area. Some banks may require you to put a check and the slip into a deposit envelope.

•   Insert a compatible card. To begin the transaction, you’ll need a valid ATM card, debit card, or prepaid debit card issued from a bank or credit union.

•   Enter your PIN. After inserting your card, the ATM will prompt you to enter your personal PIN number. Do not share your PIN number with anyone.

•   Follow the prompts. Follow the ATM’s instructions that appear on the screen. This can involve selecting “Make a deposit” and “Get cash back” and entering a dollar amount.

•   Insert the check into the machine. The ATM will invite you to make your deposit. If no check envelope is used, it will scan your check and ask you to confirm the amount.

If you are a customer who qualifies for same-day deposits, you may be able to withdraw funds right away, essentially “cashing your check” while avoiding additional transaction fees. In other situations, you may only have, say, $225 available to withdraw.

One thing to keep in mind: Even an in-network machine may have ATM withdrawal limits — typically between $500 and $1000 per day.

With some bank’s ATMs and account types, the funds may not be available until the second business day after the deposit. And if you are using an out-of-network ATM, you may be charged additional ATM transaction fees, and it can take up to 5 business days before you see the money in your account.

Types of Checks That May Be Cashed at an ATM

There is more than one kind of check. Personal, cashier’s, and certified checks are all ways to distribute sums of money without the risk of handling cash. But what kind of checks will an ATM accept?

Here are some check types you can feed an ATM that won’t get spit back out:

•   Personal checks. If you find yourself wondering, “Can I cash a personal check at an ATM?”, the answer is “yes!” So, go on — deposit that birthday check from Aunt Trudy. You can even write a check to yourself from another account and deposit it.

•   Cashier’s check. A cashier’s check draws on a bank’s funds and is signed by a cashier to guarantee the money. To cash this kind of check, it is beneficial to use an ATM connected to the bank that issued the check. You can also deposit it in your own bank’s ATM if you want the money to go into your account.

•   Certified checks. Like cashier’s checks, certified checks are issued by the bank but signed by you vs. a cashier. As long as you have your debit card, you can go ahead and deposit it in the ATM.

•   Any pre-printed check. Basically, any pre-printed can be deposited and withdrawn against at an ATM if your bank allows it. Government checks (such as a tax refund check) are the easiest for a bank to verify, and you might get your money right away. Foreign-issued checks may take longer to process.

Do All ATMs Support Check Deposits?

Not all ATMs support check deposits. Some ATMs located in grocery and convenience stores, restaurants, and other businesses may only have the ability to dispense cash and check your bank balance.

If you’re looking to cash a check at an ATM, your best bet is to use the machine at your bank. Most major banks and credit unions support check cashing at their ATMs. Plus you’re likely to avoid ATM fees.

Alternative Ways to Cash a Check

You don’t have to use an ATM to turn your paycheck into paper money. There are other ways to cash a check for free because who wants to pay more in bank fees? These techniques include:

•   Go to a bank teller. If you have time during business hours, you can cash your check the old-fashioned way. Your bank branch or credit union will likely perform the service, as long as you have a deposit slip, debit card, a valid ID, and meet your account’s requirements.

•   Go to the check distributor’s bank. You may be able to cash the check by paying a visit to the bank where the check writer holds the account. This could be a valid option if you are unbanked (don’t have any bank accounts). The check writer’s bank will probably be able to verify that the issuing account is in good standing and extract the funds for you.

•   Mobile apps. Who uses cash anyway these days? If your bank offers a mobile banking feature, also called mobile deposit, and you have a smartphone, you can use their app to snap a photo of your check and deposit it from the comfort of your living room sofa. You can gain access to your money quickly (instantly with some accounts), and pay back your bestie through Venmo.

•   Visit a retail store. Some retail shops, such as Walmart, grocery stores, and even gas stations may cash your check. However, they could charge you a small fee.

•   Check-cashing stores. The name says it all. Check-cashing businesses will give you cash for your check, but typically charge a stiff transaction fee. You may want to pursue other options and save this as a last resort due to the steep charges.

The Takeaway

Using an ATM to cash a check can be a quick and secure way to get your money. As long as you have a bank that supports check cashing, have the minimal required funds in your account, and have your debit card and PIN number ready, you’ll likely be on your way with some green in your hand.

FAQ

Can you deposit a check at an ATM?

It depends on your bank or credit union, but most banking institutions allow you to deposit checks at an ATM.

How long does it take to cash a check at an ATM?

As long as you’ve endorsed your check, written the account number on the back, and have your debit card and PIN number ready, cashing a check at an ATM shouldn’t take more than a few minutes if the financial institution makes the funds available. Not all ATMs will be this fast; in some cases, it will take at least two days for the funds to clear.

Can any type of check be cashed at an ATM?

As long as the routing and account number are legible, you can insert most traditional check types into an ATM. Personal and government-issued checks will probably be validated and credited to your account faster.


SoFi members with Eligible Direct Deposit activity can earn 3.80% annual percentage yield (APY) on savings balances (including Vaults) and 0.50% APY on checking balances. Eligible Direct Deposit means a recurring deposit of regular income to an account holder’s SoFi Checking or Savings account, including payroll, pension, or government benefit payments (e.g., Social Security), made by the account holder’s employer, payroll or benefits provider or government agency (“Eligible Direct Deposit”) via the Automated Clearing House (“ACH”) Network during a 30-day Evaluation Period (as defined below).

Although we do our best to recognize all Eligible Direct Deposits, a small number of employers, payroll providers, benefits providers, or government agencies do not designate payments as direct deposit. To ensure you're earning 3.80% APY, we encourage you to check your APY Details page the day after your Eligible Direct Deposit arrives. If your APY is not showing as 3.80%, contact us at 855-456-7634 with the details of your Eligible Direct Deposit. As long as SoFi Bank can validate those details, you will start earning 3.80% APY from the date you contact SoFi for the rest of the current 30-day Evaluation Period. You will also be eligible for 3.80% APY on future Eligible Direct Deposits, as long as SoFi Bank can validate them.

Deposits that are not from an employer, payroll, or benefits provider or government agency, including but not limited to check deposits, peer-to-peer transfers (e.g., transfers from PayPal, Venmo, etc.), merchant transactions (e.g., transactions from PayPal, Stripe, Square, etc.), and bank ACH funds transfers and wire transfers from external accounts, or are non-recurring in nature (e.g., IRS tax refunds), do not constitute Eligible Direct Deposit activity. There is no minimum Eligible Direct Deposit amount required to qualify for the stated interest rate. SoFi members with Eligible Direct Deposit are eligible for other SoFi Plus benefits.

As an alternative to Direct Deposit, SoFi members with Qualifying Deposits can earn 3.80% APY on savings balances (including Vaults) and 0.50% APY on checking balances. Qualifying Deposits means one or more deposits that, in the aggregate, are equal to or greater than $5,000 to an account holder’s SoFi Checking and Savings account (“Qualifying Deposits”) during a 30-day Evaluation Period (as defined below). Qualifying Deposits only include those deposits from the following eligible sources: (i) ACH transfers, (ii) inbound wire transfers, (iii) peer-to-peer transfers (i.e., external transfers from PayPal, Venmo, etc. and internal peer-to-peer transfers from a SoFi account belonging to another account holder), (iv) check deposits, (v) instant funding to your SoFi Bank Debit Card, (vi) push payments to your SoFi Bank Debit Card, and (vii) cash deposits. Qualifying Deposits do not include: (i) transfers between an account holder’s Checking account, Savings account, and/or Vaults; (ii) interest payments; (iii) bonuses issued by SoFi Bank or its affiliates; or (iv) credits, reversals, and refunds from SoFi Bank, N.A. (“SoFi Bank”) or from a merchant. SoFi members with Qualifying Deposits are not eligible for other SoFi Plus benefits.

SoFi Bank shall, in its sole discretion, assess each account holder’s Eligible Direct Deposit activity and Qualifying Deposits throughout each 30-Day Evaluation Period to determine the applicability of rates and may request additional documentation for verification of eligibility. The 30-Day Evaluation Period refers to the “Start Date” and “End Date” set forth on the APY Details page of your account, which comprises a period of 30 calendar days (the “30-Day Evaluation Period”). You can access the APY Details page at any time by logging into your SoFi account on the SoFi mobile app or SoFi website and selecting either (i) Banking > Savings > Current APY or (ii) Banking > Checking > Current APY. Upon receiving an Eligible Direct Deposit or receipt of $5,000 in Qualifying Deposits to your account, you will begin earning 3.80% APY on savings balances (including Vaults) and 0.50% on checking balances on or before the following calendar day. You will continue to earn these APYs for (i) the remainder of the current 30-Day Evaluation Period and through the end of the subsequent 30-Day Evaluation Period and (ii) any following 30-day Evaluation Periods during which SoFi Bank determines you to have Eligible Direct Deposit activity or $5,000 in Qualifying Deposits without interruption.

SoFi Bank reserves the right to grant a grace period to account holders following a change in Eligible Direct Deposit activity or Qualifying Deposits activity before adjusting rates. If SoFi Bank grants you a grace period, the dates for such grace period will be reflected on the APY Details page of your account. If SoFi Bank determines that you did not have Eligible Direct Deposit activity or $5,000 in Qualifying Deposits during the current 30-day Evaluation Period and, if applicable, the grace period, then you will begin earning the rates earned by account holders without either Eligible Direct Deposit or Qualifying Deposits until SoFi Bank recognizes Eligible Direct Deposit activity or receives $5,000 in Qualifying Deposits in a subsequent 30-Day Evaluation Period. For the avoidance of doubt, an account holder with both Eligible Direct Deposit activity and Qualifying Deposits will earn the rates earned by account holders with Eligible Direct Deposit.

Separately, SoFi members who enroll in SoFi Plus by paying the SoFi Plus Subscription Fee every 30 days can also earn 3.80% APY on savings balances (including Vaults) and 0.50% APY on checking balances. For additional details, see the SoFi Plus Terms and Conditions at https://www.sofi.com/terms-of-use/#plus.

Members without either Eligible Direct Deposit activity or Qualifying Deposits, as determined by SoFi Bank, during a 30-Day Evaluation Period and, if applicable, the grace period, or who do not enroll in SoFi Plus by paying the SoFi Plus Subscription Fee every 30 days, will earn 1.00% APY on savings balances (including Vaults) and 0.50% APY on checking balances.

Interest rates are variable and subject to change at any time. These rates are current as of 1/24/25. There is no minimum balance requirement. Additional information can be found at http://www.sofi.com/legal/banking-rate-sheet.
SoFi® Checking and Savings is offered through SoFi Bank, N.A. ©2025 SoFi Bank, N.A. All rights reserved. Member FDIC. Equal Housing Lender.
The SoFi Bank Debit Mastercard® is issued by SoFi Bank, N.A., pursuant to license by Mastercard International Incorporated and can be used everywhere Mastercard is accepted. Mastercard is a registered trademark, and the circles design is a trademark of Mastercard International Incorporated.


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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woman on bed with laptop

What Is a Mortgage? Understanding the Basics

If you’re dreaming of owning your own home, whether that means a cute Colonial or a loft-style condo, you are likely contemplating financing, and that can mean a mortgage. A home loan can give you the funds required to purchase a property, but there can be a learning curve involved, especially if you are a first-time homebuyer. For instance, what term should you select? How do mortgage interest rates work, and is a fixed rate typically best?

In this guide, you’ll get the scoop on how home loans work, what kind of options you have, and how to assess which loan could be right for you.

What is a Mortgage?

A mortgage loan, also known simply as a mortgage, is issued to a borrower who is either buying or refinancing real estate.

The borrower signs a legal agreement that gives the lender the ability to take ownership of the property if the loan holder doesn’t make payments according to the agreed-upon terms.

Once issued a mortgage, the homebuyer will pay monthly principal (that’s the lump sum of the loan) and interest payments for a specific term. The most common term for a fixed-rate mortgage is 30 years, but terms of 20, 15, and even 10 years are available.

A shorter-term translates to a higher monthly payment but lower total interest costs. Put another way, you pay more every month, but the amount of interest over the life of the loan is lower.


💡 Quick Tip: You deserve a more zen mortgage loan. When you buy a home, SoFi offers a guarantee that your loan will close on time. Backed by a $5,000 credit.‡

A Buffet of Mortgage Choices

When homebuyers apply for a loan, they’ll need to choose whether they want a fixed interest rate or an adjustable rate and the length of the loan.

Fixed-Rate Mortgage

The interest rate on the home loan doesn’t change, so the monthly principal and interest payment remains the same for the life of the loan. Whether mortgage rates increase or decrease, the loan holder is locked in for their monthly payment.

Adjustable-Rate Mortgage (ARM)

With an ARM, the interest rate is generally fixed for an initial period of time, such as five, seven, or 10 years, and then switches to a variable rate of interest. The rate fluctuates with the rate index that it’s tied to.

As the rate changes, monthly payments may increase or decrease. These loans generally have yearly and lifetime interest rate caps (or maximums) that limit how high the variable rate can adjust to.

Next, borrowers will need to decide what type of mortgage loan works best for them.

Conventional Loans

Conventional loans are loans that are not backed by a government agency and must adhere to the requirements of Fannie Mae, Freddie Mac, or other investors. Typically, conventional loans are issued with at least 3% down. However, it’s worth noting that private mortgage insurance (commonly known as PMI) is generally required on loans with a down payment of less than 20%.

The coverage protects the lender against the risk of default. Your mortgage servicer must cancel your PMI when the mortgage balance reaches 78% of the home’s value or when the mortgage hits the halfway point of the loan term, if you’re in good standing.

PMI typically costs 0.2% to 2% of the loan amount per year.

Down payment: Generally between 3% and 20% of the purchase price or appraised value of the home, depending on the lender’s requirements.

FHA Loans

Loans insured by the Federal Housing Authority, or FHA loans, can be attractive to first-time homebuyers or those who struggle to meet the minimum requirements for a conventional loan. In a SoFi survey of 500 would-be homeowners conducted in April 2024, 28% of people who had filled out a loan application had applied for this type of loan, and fully 63% of those who filled out an application had applied for some type of government-backed financing.

These loans usually require a one-time upfront mortgage insurance premium (or MIP vs. PMI), which typically can be added to the mortgage, and an annual insurance premium, which is collected in monthly installments for the life of the loan in most cases.

Down payment: Starts at 3.5%

Recommended: First-Time Homebuyer Guide

VA Loans

Loans guaranteed by the U.S Department of Veterans Affairs are available to veterans, active-duty service members, and eligible surviving spouses. SoFi’s survey showed that 12% of potential homebuyers who applied for a loan had filled out a VA loan application.

VA-backed loans require a one-time “VA funding fee,” which can be rolled into the loan. The fee is based on a percentage of the loan amount and may be waived for certain disabled vets. The current range is from 1.5% to 3.3% of the loan amount.

Down payment: None for approximately 80% of VA-backed home loans.


💡 Quick Tip: A VA loan can make home buying simple for qualified borrowers. Because the VA guarantees a portion of the loan, you could skip a down payment. Plus, you could qualify for lower interest rates, enjoy lower closing costs, and even bypass mortgage insurance.†

How Does a Mortgage Work?

There are several components to a monthly mortgage payment.

Principal: The principal is the value of the loan. The portion of the payment made toward the principal reduces how much a borrower owes on the loan.

Interest: Each month, interest will be factored into payments according to an amortization schedule. Even though a borrower’s fixed payment may stay the same over the course of the loan, the amount allocated toward interest generally decreases over time while the portion allocated to principal increases.

Taxes: To ensure that a borrower makes annual property tax payments, a lender may collect monthly property taxes with the monthly mortgage payment. This money can be kept in an escrow account until the property tax bill is due, and the lender can make the property tax payment at that time.

Homeowners insurance: Mortgage lenders usually require evidence of homeowners insurance, which can cover damage from catastrophes such as fire and storms. As with property taxes, many lenders collect the insurance premiums as part of the monthly payment and pay for the annual insurance premium out of an escrow account. Depending on your property location, you may have to add flood, wind, or other additional insurance.

Mortgage insurance: When a borrower presents a down payment of less than 20% of the value of the home, mortgage lenders typically require private mortgage insurance. When developing a budget for owning a home, it’s important to know the difference between mortgage insurance and homeowners insurance and whether both are required.

Reverse Mortgage Loans: What Are They?

A reverse mortgage is available to homeowners 62 and older to supplement their income or pay for healthcare expenses by tapping into their home equity.

The loan can come in the form of a lump-sum payment, monthly payments, a line of credit, or a combination, usually tax-free. Interest accrues on the loan balance, but no payments are required. When a borrower dies, sells the property, or moves out permanently, the loan must be repaid entirely.

The fees for an FHA-insured home equity conversion mortgage, typically the most common type of reverse mortgage, can add up:

•  An initial mortgage insurance premium of 2% and an annual MIP that equals 0.5% of the outstanding mortgage balance

•  Third-party charges for closing costs

•  Loan origination fee

•  Loan servicing fees

You can pay for most of the costs of the loan from the proceeds, which will reduce the net loan amount available to you.

You remain responsible for property taxes, homeowners insurance, utilities, maintenance, and other expenses.

A HUD site details all the criteria for borrowers, financial requirements, eligible property types, and how to find an HECM counselor, a mandatory step.

If you’re considering a reverse mortgage, learn as much as you can about this often complicated kind of mortgage before talking to a counselor or lender, the Federal Trade Commission advises.

How to Get A Mortgage

For many people, it can be a good idea to shop around to get an idea of what is out there.

Not only will you need to choose the lender, but you’ll need to decide on the length of the loan, whether to go with a fixed or variable interest rate, and weigh the applicable loan fees.

The first step is to have an idea of what you want and then seek out quotes from a few lenders. That way, you can do a side-by-side comparison of the loans.

Once you’ve selected a few lenders to get started with, the next step is to get prequalified or preapproved for a loan. Based on a limited amount of information, a lender will estimate how much it is willing to lend you.

When you’re serious about taking out a mortgage loan and putting an offer on a house, the next step is to get preapproved with a lender.

During the preapproval process, the lender will take a closer look at your finances, including your credit, employment, income, and assets to determine exactly what you qualify for. Once you’re preapproved, you’re likely to be considered a more serious buyer by home sellers.

When shopping around for a mortgage, it can be a good idea to consider the overall cost of the mortgage and any fees.

For example, some lenders may charge an origination fee for creating the loan, or a prepayment penalty if you want to pay back the loan ahead of schedule. There may also be fees to third parties that provide information or services required to process, approve, and close your loan.

To compare the true cost of two or more mortgage loans, it’s best to look at the annual percentage rate, or APR, not just the interest rate. The interest rate is the rate used to calculate your monthly payment, but the APR is an approximation of all of the costs associated with a loan, including the interest rate and other fees, expressed as a percentage. The APR makes it easier to compare the total cost of a loan across different offerings so you can assess what is a good mortgage rate for your budget.

The Takeaway

If the world of mortgages feels like a mystery to you, you are not alone. Before taking on this colossal commitment, it can be best to soak up as much as you can about how mortgage loans work, what kinds of mortgages are available, potential challenges, and steps to qualify. You’ll be better prepared to take on what can be a major step in your personal financial journey.

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.


Veterans, Service members, and members of the National Guard or Reserve may be eligible for a loan guaranteed by the U.S. Department of Veterans Affairs. VA loans are subject to unique terms and conditions established by VA and SoFi. Ask your SoFi loan officer for details about eligibility, documentation, and other requirements. VA loans typically require a one-time funding fee except as may be exempted by VA guidelines. The fee may be financed or paid at closing. The amount of the fee depends on the type of loan, the total amount of the loan, and, depending on loan type, prior use of VA eligibility and down payment amount. The VA funding fee is typically non-refundable. SoFi is not affiliated with any government agency.
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.

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

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


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


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


Tax Information: This article provides general background information only and is not intended to serve as legal or tax advice or as a substitute for legal counsel. You should consult your own attorney and/or tax advisor if you have a question requiring legal or tax advice.


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.


SOHL-Q324-107

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toy house with percentage sign

What Is the Average Down Payment on a House?

You may have heard that 20% is the ideal down payment on a house, but that doesn’t mean you must pony up that amount to become a homeowner. In truth, the average house down payment is considerably smaller. Currently, the median down payment for a house is 15%, according to data from the National Association of Realtors® (NAR).

Here, you’ll learn more about down payments so you can house-hunt like an insider. Getting a sense of what others are paying and how that differs based on geographic area is helpful. We’ll also share how you might access help if you can’t come up with 20%. Armed with this intel, you’ll be better prepared to navigate that major rite of passage: purchasing a home.

Key Points

•   The median down payment for a house in the US ranges widely from 10% to 35% of the purchase price.

•   The amount of the down payment can vary based on factors like loan type, credit score, and lender requirements.

•   A larger down payment can result in lower monthly mortgage payments and potentially better loan terms.

•   Down payment assistance programs and gifts from family members can help with affordability.

•   It’s important to save and plan for a down payment to achieve homeownership goals.

Average Down Payment Statistics

As of 2023, the median down payment for a house was 15%, or $63,908 if you consider that the median national home price in 2023 was $426,056, according to Redfin. This was up slightly from 13% in 2022, according to the NAR. (The median means half of buyers put down less and half put down more; it’s generally considered a better barometer than an average, because the latter can be thrown off by outliers — people who spend wildly more or less than usual.)

This 15% figure shows that the conventional wisdom that you need 20% down to purchase a home is, to a large extent, untrue. In fact, in an April 2024 SoFi survey of prospective homebuyers, many planned to put down far less than 20%. Almost a third of respondents (29%) said they planned to put down 10% or less, and 7% of those surveyed were exploring zero-down-payment options.

A 20% down payment will lower your mortgage amount and monthly payments vs. a smaller down payment, and will allow you to avoid private mortgage insurance (PMI), but it’s not the only game in town.

Average Down Payment on a House for First-Time Buyers

First-time buyers make about a third of all home purchases, and the typical down payment for first-time buyers in the NAR survey was 8%, while repeat buyers’ typical down payment was 19%. (Repeat buyers often have money from the sale of their first residence to put toward the purchase of their next one.)

Down Payment Requirements by Mortgage Loan Type

The amount of money you put down on a home may be governed in part by the type of mortgage loan you choose (and conversely, how much money you have saved for a down payment could dictate the type of mortgage you qualify for). Let’s take a look at the different loan types and their down payment requirements.

Remember that if you are buying your first home or you haven’t purchased a residence in three or more years, you may qualify as a first-time homebuyer and be eligible for special first-time homebuyer programs.

Conventional Loan

This is the kind of loan favored by most buyers, and for first-time homebuyers some conventional home loans can allow for as little as 3% down on a home purchase. A repeat homebuyer might need to put down a bit more — say 5%.

FHA Loan

An FHA loan, acquired through private lenders but guaranteed by the Federal Housing Administration, allows for a 3.5% minimum down payment if the borrower’s credit score is at least 580.

VA Loan and USDA Loan

These loans usually require no down payment, although there are still other hoops to jump through to qualify for one of these loans.

A VA loan backed by the Department of Veterans Affairs, is for eligible veterans, service members, Reservists, National Guard members, and some surviving spouses. The VA also issues direct loans to Native American veterans or non-Native American veterans married to Native Americans. For a typical VA loan borrower, no down payment is required.

A USDA loan backed by the U.S. Department of Agriculture is for households with low to moderate incomes buying homes in eligible rural areas. The USDA also offers direct subsidized loans for households with low and very low incomes. Typically, a credit score of 640 or higher is needed. While borrowers can make a down payment, one is not required.

Jumbo Loan

A jumbo loan is a loan for an amount over the conforming loan limit, which is set by the Federal Housing Finance Agency (FHFA). In most U.S. counties, the conforming loan limit for a single-family home in 2025 is $806,500. Minimum down payment rules for jumbo loans vary by lender but are generally higher than those for conforming loans. Some lenders require a 10% down payment, and others require as much as 20%.

For all of the above loan types, the home being purchased must be a primary residence in order to qualify for the minimum down payment, but a homebuyer can use a conventional or VA loan to purchase a multifamily property with up to four units if one unit will be owner-occupied.

Average Down Payment by Age Group

The latest NAR Home Buyers and Sellers Generational Trends Report breaks down by age the percentage of a home that was financed by homebuyers in 2023.

Older buyers tend to use proceeds from the sale of a previous residence to help fund the new home. Buyers 59 to 68 years old, for instance, put a median of 22% down, the NAR report shows.

Most younger buyers depend on savings for their down payment. Buyers ages 25 to 33 put down a median of 10%, and those ages 34 to 43, 13%. A fortunate 20% of the younger homebuyers (those age 25-33) received down payment help from a friend or relative.

Percentage of Home Financed

All buyers Ages 25-33 Ages 34-43 Ages 44-58 Ages 59-68 Ages 69-77 Ages 78-99
< 50% 15% 6% 8% 15% 22% 31% 29%
50-59% 6% 2% 5% 5% 9% 14% 11%
60-69% 6% 2% 5% 6% 9% 11% 9%
71-79% 13% 13% 14% 14% 12% 9% 15%
80-89% 23% 26% 27% 22% 19% 18% 14%
90-94% 13% 19% 14% 12% 10% 4% 8%
95-99% 14% 22% 17% 12% 8% 4% 7%
100% (financed the whole purchase) 12% 9% 11% 13% 9% 9% 6%

Average Down Payment by State

The average house down payment in any given state is tied to home prices in that location. You can look into the cost of living by state for an overview and then find the median home value in a particular state at a given point in time and estimate what your down payment might be.

The least expensive states in which to buy a home? Iowa, Oklahoma, Ohio, Mississippi, and Louisiana are among them, according to Redfin.

Average Down Payment On a House in California

California, the most populous state and one of the largest by area, is joined by Hawaii and Colorado on many lists of the most expensive states in which to buy a house. Redfin shows a median sales price of $859,300 in California in spring of 2024. A 3% down payment would be $25,779; 10% down, $85,930; and 20% down, $152,260. The Los Angeles housing market is among the toughest in California, with the median sale price up more than 10% in the last year to $1,050,000. You might want to check out housing market trends by city as well if you are interested in finding out where owning a home could be more or less expensive.

Hawaii comes out near the top with a median home price of $754,800. Three percent down would be $22,644; 10% down, $75,480; and 20%, $150,960. In Hawaii, the conforming loan limit is $1,209,750, a reflection of the state’s high home prices. If you need a mortgage for more than that amount in Hawaii, you’ll be in the market for a jumbo loan.

Recommended: How to Afford a Down Payment on Your First Home

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


Source of Down Payment

You’re probably wondering where homebuyers get the money to afford a down payment, especially first-time homebuyers. NAR has polled buyers to probe that question. Not surprisingly, more than half of buyers (53%) simply say they have saved up the money — which of course isn’t simple at all.

Savings is especially likely to fund a home purchase for those ages 25-33. Almost three-quarters of younger buyers rely on it for their down payment. Older buyers also use savings but are more likely to draw on the sale of a primary residence. This is especially true after age 59.

Other down payment sources include gifts from relatives or friends, sale of stock, a loan or draw from a 401K or pension, or an inheritance. For those who don’t have generational wealth or savings to rely on, first-time homebuyer programs can make home ownership possible.

City, county, and state down payment assistance programs are also out there. They may take the form of grants or second mortgages, some with deferred payments or a forgivable balance.

How Does Your Down Payment Affect Your Monthly Payments?

Curious to see what your potential mortgage would look like based on different down payments? Start with a home affordability calculator (like the one below) to get a feel for how much you’ll need to put down and other expenses.

Or use this mortgage calculator to estimate how much your mortgage payments would be, depending on property value, down payment, interest rate, and repayment term.

Should You Aim for 20% Down?

You’re probably wondering if you should try to put 20% down to get a mortgage loan? Not necessarily. It’s an individual decision. Here are some things to consider:

If Your Down Payment Is 20% or More

Putting down at least 20% has benefits:

•  You won’t have to pay for mortgage insurance: If you put down 20% or more with a conventional loan, you won’t be required to pay for PMI, which protects the lender if you were to stop making payments.

•  Your loan terms may be better: Lenders look at an applicant’s credit history, employment stability, income, debt-to-income ratio, and savings. They’ll calculate the loan-to-value (LTV) ratio, or what percentage of the home’s purchase price will be covered by the mortgage.

Lenders often provide a better rate to borrowers who have an LTV ratio of 80% or lower — in other words, at least a 20% down payment — because they consider them a better risk.

•  You have instant equity in the property: You borrowed less than you could have, which translates to a lower mortgage payment, less interest paid over the life of the loan, and the potential later to take out a home equity loan.

Recommended: What Do I Need to Buy a House?

If Your Down Payment Is Less Than 20%

If your down payment will be less than 20%, you now know that you’ll have plenty of company. (In SoFi’s survey, 14% of would-be buyers said not having an adequate down payment was their primary challenge.) Consider these ways to optimize the situation:

•  A government loan could be the answer: FHA loans are popular with some first-time buyers because of the lenient credit requirements. The down payment for an FHA loan is just 3.5% if you have a credit score of 580 or more. Just know that upfront and monthly mortgage insurance premiums (MIP) always accompany FHA loans, and remain for the life of the loan if the down payment is under 10%. If you put 10% or more down, you’ll pay MIP for 11 years.

•  You may be able to improve your loan terms: If you can’t pull together 20% for a down payment, you can still help yourself by showing lenders that you’re a good risk. You’ll likely need a FICO® score of at least 620 for a conventional loan. If you have that and other positive factors, you may qualify for a more attractive interest rate or better terms.

•  You can eventually cancel PMI: Lenders are required to automatically cancel PMI when the loan balance gets to 78% LTV of the original value of the home. You also can ask your lender to cancel PMI on the date when the principal balance of your mortgage falls to 80% of the original home value.

You may be able to find down payment assistance: City, county, and state down payment assistance programs are out there, and SoFi’s survey suggests they don’t get enough attention: About half (49%) of the homebuyers who said they were challenged to come up with a down payment hadn’t looked into city or state down payment assistance programs. The assistance may take the form of grants or second mortgages, some with deferred payments or a forgivable balance.

Dream Home Quiz

The Takeaway

What is the average down payment on a house? Currently, it’s about 15% of the home’s purchase price, which usually means mortgage insurance and higher payments for the buyer. But buyers who put less than 20% down on a house unlock the door to homeownership every day. If you want to join them, you can be helped along by low down payments for first-time homebuyers, as well as government loans, down payment assistance, and other programs.

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


SoFi Mortgages: simple, smart, and so affordable.

FAQ

Is 10% down payment enough for a house?

Yes. More than a third of all buyers put down 10% or even less to buy a home. Lower down payments are especially common among younger and/or first-time homebuyers.

What is the minimum you should put down on a house?

Conventional wisdom says the minimum down payment is 20%, but most buyers put down less — 15% is far more common. Younger buyers and first-time homebuyers, especially, often put down far less and some home loans allow you to finance 97% or even 100% of the home’s cost.

What factors can affect my down payment requirements?

The amount of down payment you’ll need to come up with depends on your loan type, credit history and credit score, the cost of the property you’re buying, and whether you are a first-time homebuyer.

What are the pros and cons of putting down less than 20% on a house?

Putting down less than 20% on a house might allow you to buy a home sooner. It might also permit you to set aside money for renovations or to pay off other debts. The disadvantage is that those who put down less than 20% usually have to pay for private mortgage insurance which adds to their monthly costs. (Those with FHA loans who put down less than 20% will pay a mortgage insurance premium.)


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


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



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

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


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


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


Tax Information: This article provides general background information only and is not intended to serve as legal or tax advice or as a substitute for legal counsel. You should consult your own attorney and/or tax advisor if you have a question requiring legal or tax advice.

¹FHA loans are subject to unique terms and conditions established by FHA and SoFi. Ask your SoFi loan officer for details about eligibility, documentation, and other requirements. FHA loans require an Upfront Mortgage Insurance Premium (UFMIP), which may be financed or paid at closing, in addition to monthly Mortgage Insurance Premiums (MIP). Maximum loan amounts vary by county. The minimum FHA mortgage down payment is 3.5% for those who qualify financially for a primary purchase. SoFi is not affiliated with any government agency.
Veterans, Service members, and members of the National Guard or Reserve may be eligible for a loan guaranteed by the U.S. Department of Veterans Affairs. VA loans are subject to unique terms and conditions established by VA and SoFi. Ask your SoFi loan officer for details about eligibility, documentation, and other requirements. VA loans typically require a one-time funding fee except as may be exempted by VA guidelines. The fee may be financed or paid at closing. The amount of the fee depends on the type of loan, the total amount of the loan, and, depending on loan type, prior use of VA eligibility and down payment amount. The VA funding fee is typically non-refundable. SoFi is not affiliated with any government agency.

SOHL-Q324-107

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Buying a House Sight Unseen

6 Tips for Buying a House Sight Unseen

Whether relocating for a new job or competing in a seller’s market, many buyers need to move quickly. When time is of the essence, some may make an offer on a home without touring it in person.

Although this sounds complex, it’s nothing new, and the practice saw a resurgence during the COVID-19 pandemic. But even now that we have returned to the days of live open houses, 40% of home-shoppers say they’re willing to buy a home sight unseen if it meets their criteria and budget, according to an April 2024 SoFi survey of 500 people. (More than a third, 39%, said they wouldn’t buy sight unseen, and another 21% weren’t sure.)

Thinking about buying a house sight unseen? Here are six tips for navigating risk in the remote real estate market.

1. Get Preapproved for a Home Loan

Before making an offer, prospective buyers can do some front-end work to expedite the purchase process if they need financing. Becoming prequalified for a home loan is a quick first step to get an estimate of how large a mortgage a buyer would likely qualify for. This helps house hunters focus their search on homes they can reasonably expect to obtain financing for.

Lenders determine prequalification according to basic financial information, such as income, debt, and assets. Often buyers simply self-report their finances at this stage.

Then there’s mortgage preapproval, a much deeper dive into qualifying for a mortgage. Becoming preapproved often requires bank statements, proof of assets, and a look at credit history.

When buying a house sight unseen, especially in a hot market, getting preapproved can reasonably assure sellers that buyers can get financing for the amount they’ve offered.

In a superheated market, with bidding wars, cash offers, and skipped inspections, some agents suggest going through full underwriting, with only the appraisal left in order to close the deal.

If you’re buying a vacation home or investment property, you’ll be evaluated by lenders in a similar fashion to your first home loan.


💡 Quick Tip: You deserve a more zen mortgage loan. When you buy a home, SoFi offers a guarantee that your loan will close on time. Backed by a $5,000 credit.‡

2. Research the Neighborhood

Whether you’re looking to buy in your favorite vacation destination or have never set foot in the area, there are resources available to better inform your search.

While listings can do a good job of capturing a house in its best light, they do not give buyers the full picture of the property’s curb appeal and neighborhood. To get the lay of the land, Google Maps and Google Earth are easy tools for exploring the property and neighborhood via street view and satellite imagery. Walk Score is useful to determine a home’s proximity to amenities like grocery stores, restaurants, and coffee shops.

Other apps can give insight into community characteristics and local happenings. NeighborhoodScout provides localized information on crime, school rankings, and real estate prices. Another option is Nextdoor, which lets users connect with neighbors, local businesses, and other resources.

A look at housing market trends in select cities can help you home in popular neighborhoods, home prices, demographics, and more.

3. Find a Trusted Real Estate Agent

Once you’ve taken care of financing and focused your search geographically, finding a reputable real estate agent can help take the guesswork out of buying a house sight unseen.

Since you won’t be able to tour the house in person, a buyer’s agent can act as your eyes and ears on the ground. Without their assistance, the sight-unseen house cost could rise significantly, thanks to unforeseen repairs and upgrades.

Finding a real estate agent who is familiar with the area can be advantageous for evaluating sight-unseen house prices. Their experience in the local market makes it easier to find comparable listings and weigh options.

When interviewing potential agents, you can ask if they’ve helped clients buy sight unseen before. Because your relationship will be virtual leading up to inspection or move-in day, it’s important to consider communication skills and style.

In SoFi’s survey, among people willing to buy a home sight unseen, getting additional information and thorough documentation from the seller (usually via the real estate agent) was the top way buyers planned to mitigate risk.

4. Take a Virtual Tour

Starting with online listing photos and virtual walk-throughs is helpful to determine if a house is worth a closer look. What’s more, photo editing and wide-angle shots can misrepresent a space, so organizing a guided virtual tour with a friend, relative, or real estate agent onsite may serve a buyer well. In SoFi’s survey of potential homebuyers, 39% of people had used a virtual tour to evaluate a property.

Using FaceTime, Zoom, or similar video chat apps can let buyers ask questions in real-time and get a more intimate sense of the property. Seeing the space firsthand (albeit virtually) may give a more realistic impression than measurements and square footage alone can convey.

💡 Quick Tip: If you refinance your mortgage and shorten your loan term, you could save a substantial amount in interest over the lifetime of the loan.

5. Touch Base After the Inspection, If You Have One

A home inspection is common with most real estate transactions.

A home inspector examines a house’s physical and interior structure, as well as major systems like plumbing, HVAC, and electrical. The resulting inspection report highlights any visible problems, necessary repairs, and potential risks.

When buying a house sight unseen, it can be beneficial to have your real estate agent attend and video call to walk you through any notable issues that arise.

A home inspection contingency in an offer generally allows buyers to pull out of the purchase if major issues are found. It may also be possible to negotiate with the seller to have repairs addressed or costs deducted from the purchase price.

In a supercharged market, buyers may choose to waive the home inspection contingency to improve their candidacy in a multiple-offer situation. Those who take this path may still be able to arrange a pre-offer home inspection. The results won’t be negotiable or permit backing out without losing the deposit.

Waiving the home inspection is a risk that may be best reserved for buyers with sufficient cash for repairs.

6. Arrange a Virtual Closing

If you have to buy sight unseen and can’t attend the closing in person, there are options for closing remotely, depending on the state and lender.

Certain documents, such as the deed and affidavit of title, need to be notarized to finalize the home purchase. Remote online notarization allows buyers to sign closing documents with an electronic signature and allows all parties to meet virtually.

The process is authorized in most states, but certain documents, including promissory notes, may need to be signed in person. Also, be sure to check if your state requires a lawyer to be physically present at the closing.

Lenders will usually need an appraisal of the property to finalize a home loan. This process can be arranged from afar or coordinated through your real estate agent.

At a virtual closing, closing costs can be paid electronically with a bank-to-bank or wire transfer.

Giving your lender, real estate agent, and the title company ample notice that you intend to close virtually can help seal the deal without a hitch.

The Takeaway

Do people put offers on homes without seeing them? Some do, yes. Having your mortgage financing in order, working with a knowledgeable real estate agent, and doing virtual research can be helpful when buying a house sight unseen.

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/MicroStockHub


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*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 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.


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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