It may come as no surprise that many Americans are stressed about medical debt and the rise of healthcare costs. The average family health insurance premium has increased 43% in the past 10 years, according to a 2022 survey conducted by the Kaiser Family Foundation (KFF). What’s more, one-third of insured Americans are concerned about being able to afford their monthly premiums, and about four in 10 adults (41%) carry some form of medical debt.
Fortunately, there may be some options for those struggling with medical debt.
How Much Do Americans Spend on Healthcare Each Year?
Many people receive health insurance through an employer. And even though employers generally help pay for a portion of the costs, the financial burden can still be significant. A typical household spends $431 per month — or $5,177 per year — on healthcare expenses, according to the U.S. Bureau of Labor Statistics Consumer Expenditure Survey. This includes routine things such as health insurance costs, doctor’s visits, medications, and medical supplies.
At the same time, the U.S. tends to outspend other countries when it comes to healthcare. In 2021, healthcare spending topped $4.3 trillion, or $12,914 per person, according to the latest figures available from the Centers for Medicare & Medicaid Services. That figure represents 18.3% of the country’s Gross Domestic Product.
How Many Americans Struggle With Medical Debt?
Despite employer-sponsored health plans covering some of the costs, some Americans struggle to pay their medical bills.
In fact, nearly 1 in 10 adults — or around 23 million people — owe at least $250 in medical bills, a 2022 KFF analysis found. Of that, 11 million people owe more than $2,000, and 3 million people owe more than $10,000.
Certain groups of people appeared to be more impacted than others. For instance, people aged 35-49 and 50-64 are more likely than other adults to report medical debt. The same goes for people in poor health and those living with a disability. And among racial and ethnic groups, a larger share of Black adults (16%) report having medical debt compared to White (9%), Hispanic (9%), and Asian American (4%) adults.
What Happens If Medical Debt Is Not Paid?
Even if you’re facing an overwhelming amount of medical debt, the worst thing to do is ignore it. Depending on the state where you live, a medical provider might charge you a late fee for bills not paid on time and may even charge interest if payments aren’t made at all.
After a few months, if medical bills go unpaid, the provider might choose to pass the debt over to a debt collection agency.
If the medical provider does decide to give the debt to a debt collection agency, the debt might immediately appear on the debtor’s credit report and affect their credit score. The debt collector will take steps to collect the bill. If the debt is not collected, the provider may take it even further and take legal action.
While U.S. laws don’t allow debtors to be imprisoned for unpaid debts, they could face another consequence, such as wage garnishment. If the case goes to court and a judge rules in favor of the medical service provider, there’s a chance the debtor’s wages could be garnished. In simple terms, this means that payment will be taken out of their paycheck and sent to the provider.
While there are no one-size-fits-all solutions to help ease the financial burden of medical debt, the following ideas may be worth considering. It’s also a smart move to contact a professional before taking any action.
1. Medical Debt Payment Plans
Because healthcare services are often costly, contacting medical providers to ask if they offer payment plans might be one plan of action to consider. Some medical providers may offer payment plans to pay off debt in installments instead of paying it off all at once, which might make the debt more manageable.
2. Negotiating Medical Debt
It may feel counterintuitive or inappropriate to negotiate medical bills, but some providers actually expect it. While it may seem awkward at first, negotiating medical bills can help make them more manageable. Additionally, negotiating may even help avoid a credit score ding, or worse, getting sued.
For starters, reaching out to the provider’s billing department directly to see if negotiation is possible might be an option. Many providers have financial departments that can determine if patients qualify for discounts or reductions. Remember, when negotiating, try to be as polite as possible. But it can be helpful to be persistent, too.
Another point to remember is that providers may favor cash. So those who can afford to make a lump sum payment might consider asking if the provider offers a discount for a cash payment.
If the medical bills keep piling up, it may be worthwhile to consider finding a nonprofit advocate or reputable credit counseling organization that offers assistance with managing money and debts, creating a budget, and providing resources to help consumers pay off the debt that’s dogging them.
Certified counselors that have been trained to help individuals create a plan to solve financial concerns can be found through the U.S. Department of Justice. These organizations offer counseling and debt management plans and services.
One solution credit counselors may suggest is a debt management plan. These plans may help the borrowers get their debt under control.
With one type of debt management plan, the borrower makes a lump sum payment to the credit organization, and then the organization pays the creditor in installment payments. If you decide to go this route, make sure not to confuse a credit counseling nonprofit organization with a debt settlement company.
In contrast to credit counseling nonprofits, debt settlement companies are profit-driven. They negotiate with creditors to reduce the debt owed and accept a settlement — a lump sum — that’s less than the original debt. However, these companies can charge a 15% to 25% fee on top of the debt settled. While some of these companies are legitimate, consumers are cautioned to be wary of scams.
Some deceptive practices include guarantees that all of a person’s debts will be settled for a small amount of money, that debtors should stop paying their debts without explaining the consequences of such actions, or collection of fees for services before reviewing a person’s financial situation. Researching a company’s reputation can be done through the state attorney general’s office or the state consumer protection agency.
4. Using a Personal Loan
Using a credit card to pay off medical bills doesn’t help anything when you’re trying to reduce your overall debt. Taking out a personal loan could be a way to streamline multiple bills into one monthly payment.
Consolidating medical debt might include a number of benefits, but it’s important to note that it isn’t a cure-all. A loan will not erase your debt, but it could help you get a fixed monthly payment and, potentially, reduced interest rates.
It’s important to compare rates and understand how a new loan could pay off in the long run. If your monthly payment is lower because the loan term is longer, for example, it might not be a good strategy, because it means you may be making more interest payments and therefore paying more over the life of the loan.
Taking the Next Steps
If you’re steeped in medical bills, you’re hardly alone. One in 10 adults owe medical debt, with 3 million people saying they owe more than $10,000, according a 2022 analysis from the Kaiser Family Foundation. While dealing with the debt may not be pleasant, it’s a task you shouldn’t ignore. You may end up having to pay a late fee or interest rate on unpaid bills, or the provider could choose to pass the debt to a collections agency. This could negatively impact your credit score.
Fortunately, there are some debt relief options you may want to consider. Examples include exploring debt payment plans, negotiating the debt with your provider, enlisting the help of a nonprofit advocate, or taking out a personal loan to help pay off the bills.
If you are thinking about taking out a loan to consolidate your debt, a SoFi personal loan may be a good option for your unique financial situation. SoFi personal loans offer competitive, fixed rates and a variety of terms. Checking your rate won’t affect your credit score, and it takes just one minute.
See if a personal loan from SoFi is right for you.
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You probably know how easily you can tap to pay for items when shopping and click to send a friend money for your share of a dinner tab. Why can’t most of your financial transactions be that easy?
They can be. You can be freed from much of the usual day-to-day account activity by automating your finances. Doing so can eliminate your wondering whether you have paid bills on time, allocated the right amount to savings, and more.
Automating your finances can be a smart money move that saves you on late fees and reduces financial stress. It may also help you establish and stick to a budget, as well as get on a path to growing your wealth.
Deciding where and when to automate personal finances need not be complicated. Here’s a guide sharing what it means to automate your finances, the different ways you can put your money management on autopilot, and tips for making the process super simple.
What Does It Mean to Automate Your Finances?
Automating your finances means you use today’s technology to pre-schedule and preapprove transfers of your funds. It’s a “set it and forget it” way to pay bills, move money from checking to savings, and even enrich your retirement account.
The beauty of doing so means you can avoid late fees (which many of us, no matter how responsible we are, get hit with sooner or later). You may also become more organized and free your mind to ponder better things. Worrying about when bills are due is so last decade, after all!
Check out our Money Management Guide.
This article is from SoFi’s guide on how to manage your money, where you can learn basic money management tips and strategies.
What Kind of Accounts Can You Automate?
If you’re wondering what kind of accounts you can automate, you’ll probably like this answer: Almost any kind. Here’s a list of some of the most popular:
• Credit cards
• Rent or mortgage
• Utilities
• Investment accounts
• Loans (car, personal, etc.)
• Insurance
• Savings (from short-term vacation funds to your emergency fund to retirement accounts).
Automating payments can spare you late fees and overdraft charges. It can also help you streamline the process of staying active and accountable on your accounts (a great way to avoid winding up with credit charge offs).
It may also help keep your credit score from being impacted by missed payments. In fact, payment history contributes 35% to your FICO® score. You want to protect those digits.
(Btw, it’s a good idea to scan for common credit report errors on an annual basis, just to make sure nothing is amiss.)
💡 Quick Tip: Want to save more, spend smarter? Let your bank manage the basics. It’s surprisingly easy, and secure, when you open a bank account online.
Get up to $300 when you bank with SoFi.
No account or overdraft fees. No minimum balance.
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Different Ways to Automate Your Finances
When it comes to the set-up of automating personal finances, there are a few different techniques to try. Here, you’ll learn some of the most popular options so you can decide what’s right for you, whether it’s one method or a combination.
Option 1: Sign Up for Automatic Payments with Your Creditor
Here’s how this works: Say your wifi provider or landlord of your rental apartment gives you an automatic bill payment option.
• Through their payment portal, you’ll set up an autopay schedule, connecting the service provider to your bank account. On the agreed-upon date (say, rent is due by the 7th of every month so you select to pay on the 6th), they will automatically deduct the amount from your checking.
• In some cases, you may be assessed a fee for this privilege; it varies with the provider.
• When you opt into this kind of plan, you may be given the opportunity to have the payment charged to a credit card or deducted from an account other than your bank account. Look carefully, though; you may wind up paying additional fees for this.
You may find that some creditors don’t offer you the kind of convenience described above, but your bank may swoop in and help you pay automatically. Many major banks will issue payments on your behalf to a creditor or service provider, which can make your life infinitely easier. No more writing checks every month and digging around for stamps. The steps to take:
• Check with your bank about what they offer. Typically, they will need the account number and address of the business you are paying.
• You’ll also need to assess how long this process will take every month; it may not be instantaneous. You’ll want to make sure the money arrives on time and you are not charged any late fees so your credit score doesn’t suffer.
• Then you’ll sign up for the series of payments to be handled by your bank.
Option 3: Set Up Direct Deposit with Your Employer (if You Have the Option)
An excellent way to automate and fund your personal finances is to set up direct deposit of your paycheck (the vast majority of salaried workers are paid this way). You’ll know your salary is getting sent to your bank account and when it hits. Some pointers:
• You’ll likely need to share your account number and routing number with your employer in order to establish direct deposit.
• You may also need a voided check to get the funds moving to the right place.
• You can then schedule your automated payments for the right dates, when your balance is feeling especially flush.
• A great hack to know about: Some bank accounts will allow you access to your paycheck funds a day or two early if you sign up for direct deposit with them. That’s another great way to keep abreast of those bills.
💡 Quick Tip: As opposed to a physical check that can take time to clear, you don’t have to wait days to access a direct deposit. Usually, you can use the money the day it is sent. What’s more, you don’t have to remember to go to the bank or use your app to deposit your check.
Option 4: Set Up Automatic Retirement Contributions
It’s all too easy to think, “I’ll get around to saving for retirement…someday.” Perhaps that’s why the average American had only $65,000 stashed away for retirement according to the Federal Reserve’s most recent survey. That’s probably not enough if your dream is moving to Hawaii at age 65 and spending your days with your toes in the sand.
That’s why learning how to automate your finances for retirement savings can be such a helpful practice. Experts agree that 10% to 15% of your pretax income is a good amount to have deposited into your retirement plan every paycheck. Some tips:
• You can authorize your HR or payroll department to automatically whisk away a certain amount of your pre-tax income every paycheck and put it toward retirement. You won’t miss what never hits your checking account, right?
• Aim for the maximum amount allowed, or at least put in enough to get any company match that’s offered. Otherwise, you’re leaving free money on the table.
If you’re self-employed, you can also automate your savings with recurring transfers into such vehicles as a solo 401(k), SEP IRA, or SIMPLE IRA as you save for your future.
Option 5: Put Your Savings on Autopilot
Your non-retirement savings are another important account to automate. Again, if your salary hits your checking account, you may feel rich and go spend more than you should. By automating your savings and funneling money from your paycheck straight into an account, you may avoid going on shopping sprees.
This can be a very effective tool. In one study by financial psychologist Brad Klontz, people who visualized their goals and set up automatic withdrawals enjoyed a 73% increase in their savings after just one month.
Into what kind of account can you direct those funds? That’s up to you. Perhaps you want to have a few separate accounts that feed different goals. You might have one account for a down payment fund, one for vacation savings, and one for your child’s future educational expenses. You can direct how much and how often you want each transfer to be.
Of course, there are options about where exactly you keep your savings. Some possibilities to consider:
• Standard savings accounts are good, but a high-yield savings account can be even better. These tend to pay a significantly higher annual percentage yield (APY) than a standard account and are often offered by online vs. traditional banks.
• CD accounts can be another good option. These are time deposits, meaning you commit to keep the funds with the financial institution for a specific period of time, which may typically range from a few months to several years. In return, you are assured a specific interest rate. However, there may be penalties if you withdraw funds early.
• A TreasuryDirect account can allow you to make recurring purchases of electronic savings bonds directly from your paycheck. You can learn more about this at the TreasuryDirect website .
Option 6: Set Up Regular Contributions to Your Emergency Fund
Your emergency fund is another bundle of cash that can benefit from automated infusions of money. An emergency fund is a stockpile of easily accessed cash that can tide you over when unexpected circumstances hit. Perhaps you get a major car repair or medical bill or are laid off from your job. An emergency fund can let you pay bills without accessing a high-interest line of credit (say, ringing up too much debt on your credit card).
In terms of emergency funds, keep the following in mind:
• It’s wise to have at least a few to several months’ worth of basic living expenses in the bank. That means mortgage or rent, utilities, insurance payments, food, childcare, and other must-have goods and services, plus minimum debt payments.
• Most people can’t create this fund with a single, lump-sum deposit. Making regular transfers into your account (even if it’s only $20 per paycheck or per month) will get you started. Any contribution is better than nothing!
• Where to keep your emergency fund? Since you want it to be available almost immediately in urgent situations, a high-yield savings account or standard savings account can be a good option. Either way, you’ll earn some interest. A money market account may also serve this purpose.
Option 7: Sign Up for Automated Investing with Your Brokerage
If you currently have an investment portfolio or are planning on starting one, that’s another task that can be made simpler by technology. Automated investing can allow you to achieve consistency with minimal effort, which can help you build your net worth over time.
Some examples:
• As noted above, you might set up recurring transfers into a retirement plan that invests the funds for you.
• You can automatically transfer money from your checking account into a brokerage account.
• You might work with a robo-advisor that picks investments based on your needs and preferences and also rebalances your portfolio.
• Investing apps are another possibility. These can be as simple as the ones that round up the price of purchases and then invest the change for you.
Tips to Successfully Automate Your Finances
Now that you have a good grounding in the benefits and how-to’s of automating personal finances, consider these success strategies:
Create a Budget Based on the Balance You Get Paid
Look at where your money stands after you deduct your retirement and savings amounts. With the remaining funds, you can plan out ways to budget. There are various techniques out there, like the 50-30-20 budget rule, among others. Do an online search and see what resonates with you.
A budget will guide your saving and spending and can reveal how you are doing in terms of setting financial goals and meeting them on other fronts, such as a vacation fund or a retirement account.
It will help you handle good vs. bad debt more effectively. All are terrific ways to avoid excessive debt and build wealth.
Be Aware of All Your Bill Due Dates
As you automate your finances, do pay careful attention to the due dates on your bills. Who wants to see their hard-earned cash get drained by late fees?
• Look at the calendar; check when your paycheck hits and when certain bills are due. Some creditors may set your due date in stone; others may have some flexibility.
Similarly, some autopay portals may allow you to set the payment date; others may have a specific date on which they will debit funds.
• Make sure you understand if there’s any lag with automatic payments. Be sure they will arrive on time.
• It can be better to stagger autopayments so you don’t risk overdrawing your account. See what best suits your lifestyle and money style to keep your account in good shape.
Review Your Bank Account and Bank Statements Often to Stay on Top of Your Transactions
One of the pleasures of automating your finances is that you are freed from thinking and worrying about your money and your bills on a regular basis. However, daily life involves all kinds of money blips, from treating your bestie to a fancy birthday dinner to (ugh) having fraudulent charges appear on your credit card bill.
So do review your bank account and other statements regularly to make sure everything is as it should be and that your balance isn’t too low. Check in with your accounts often. Should you check your bank account every day? Not necessarily. A couple of times a week can be a good cadence.
Increase Your Contributions When It Makes Sense
While you’re checking your finances and bank balances, don’t overlook whether it’s time to increase your contributions. If you’ve gotten a raise or paid off a student loan, you may have funds available to save more.
Or you might find that a chunk of change has accumulated in your checking account which could do more for your finances if used elsewhere. There are times when you may want to increase your transfers to reflect your positive financial status.
The Takeaway
Automating your finances can be a great way to take control of your money and make bill paying and saving so much more convenient. That kind of organization can let you breathe easier when it comes to managing your money and be more successful in meeting your financial goals.
Interested in opening an online bank account? When you sign up for a SoFi Checking and Savings account with direct deposit, you’ll get a competitive annual percentage yield (APY), pay zero account fees, and enjoy an array of rewards, such as access to the Allpoint Network of 55,000+ fee-free ATMs globally. Qualifying accounts can even access their paycheck up to two days early.
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FAQ
How often should I review and adjust my automated finances?
You should review your finances and automated transactions regularly, which for some people may mean a couple of times weekly; for others, it might be every other week. Also, it’s wise to check in when you have significant changes in your life, whether you’ve gotten a raise, took out a mortgage, or moved to an area with a higher cost of living. You may want to recalibrate your transfers.
Is it safe to automate my finances?
By and large, it is safe to automate your finances. You should, however, check in regularly to make sure you are not overdrafting or getting close to it, and also to keep in touch with your money. While there is a small risk of glitches or fraud with automatic transfers, it’s not a significant concern.
What are the best tools or apps to use for automating my finances?
There are an array of tools and apps for automating your finances. A good place to start may be with your very own financial institution. They may have roundup apps, automated savings and investing products, and other tools to help you make the most of your money and grow your wealth.
Can I still make manual payments even if I have automatic payments set up?
In many cases, you will still be able to make a manual payment even if you have automated payments set up. This could occur when you have an additional bill to an account that is set on autopay, or when you have a credit and want to pay a lower amount. Check with your creditor or the financial institution handling the transfer for details on how to do this smoothly.
SoFi members with direct deposit activity can earn 4.20% annual percentage yield (APY) on savings balances (including Vaults) and 0.50% APY on checking balances. 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 (“Direct Deposit”) via the Automated Clearing House (“ACH”) Network during a 30-day Evaluation Period (as defined below). Deposits that are not from an employer 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 Direct Deposit activity. There is no minimum Direct Deposit amount required to qualify for the stated interest rate. SoFi members with direct deposit are eligible for other SoFi Plus benefits.
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A jumbo loan is a home mortgage loan that exceeds maximum dollar limits set by the Federal Housing Finance Agency (FHFA). Loans that fall within the limit are called conforming loans. Loans that exceed them are jumbo loans.
Jumbo mortgages may be needed by buyers in areas where housing is expensive, and they’re also popular among lovers of high-end homes, investors, and vacation home seekers.
What Is a Jumbo Loan?
To understand jumbo home loans, it first helps to understand the function of Freddie Mac and Fannie Mae. Neither government-sponsored enterprise actually creates mortgages; they purchase them from lenders and repackage them into mortgage-backed securities for investors, giving lenders needed liquidity.
Each year the FHFA sets a maximum value for loans that Freddie and Fannie will buy from lenders — the so-called conforming loans.
Jumbo Loans vs Conforming Loans
Because jumbo home loans don’t meet Freddie and Fannie’s criteria for acquisition, they are referred to as nonconforming loans. Nonconforming, or jumbo, loans usually have stricter requirements because they carry a higher risk for the lender.
Jumbo Loan Limits
So how large does a loan have to be to be considered jumbo? In most counties, the conforming loan limits for 2023 are:
• $726,200 for a single-family home
• $929,850 for a two-unit property
• $1,123,900 for a three-unit property
• $1,396,800 for a four-unit property
The limit is higher in pricey areas. For 2023, the conforming loan limits in those areas are:
• $1,089,300 for one unit
• $1,394,775 for two units
• $1,685,850 for three units
• $2,095,200 for four units
Given rising home values in many cities, a jumbo loan may be necessary to buy a home. Teton County, Wyoming, for instance, has an average home value of $1,624,087 and a conforming loan limit of $1,089,300.
Approval for a jumbo mortgage loan depends on factors such as your income, debt, savings, credit history, employment status, and the property you intend to buy. The standards can be tougher for jumbo loans than conforming loans.
The lender may be underwriting the loan manually, meaning it’s likely to require much more detailed financial documentation — especially since standards grew more stringent after the 2007 housing market implosion and during the pandemic.
Lenders generally set their own terms for a jumbo mortgage, and the landscape for loan requirements is always changing, but here are a few examples of potential heightened requirements for jumbo loans.
• Your debt-to-income (DTI) ratio. This ratio compares your total monthly debt payments and your gross monthly income. The figure helps lenders understand how much disposable income you have and whether they can feel confident you’ll be able to afford adding a new loan to the mix.
To qualify for most mortgages, you need a DTI ratio no higher than 43%. In certain loan scenarios, lenders sometimes want to see an even lower DTI ratio for a jumbo loan, or they may counter with less favorable loan terms for a higher DTI.
• Your credit score. This number, which ranges from 300 to 850, helps lenders get a snapshot of your credit history. The score is based on your payment history, the percentage of available credit you’re using, how often you open and close accounts such as credit cards, and the average age of your accounts.
To qualify for a jumbo loan, some lenders require a minimum score of 700 to 740 for a primary home, or up to 760 for other property types. Keep in mind that a lower score doesn’t mean you won’t be able to get a jumbo loan. The decision depends on the lender and other factors, such as the loan program requirements, your debt, down payment amount, and reserves.
• Down payment. Conforming mortgages generally require a 20% down payment if you want to avoid paying private mortgage insurance (PMI), which helps protect the lender from the risk of default.
Historically, some lenders required even higher down payments for jumbo mortgages, but that’s not necessarily the case anymore. Typically, you’ll need to put at least 20% down, although there are exceptions.
A VA loan can be used for jumbo loans. The Department of Veterans Affairs will insure the part of the loan that falls under conforming loan limits. The down payment requirement is based on the portion of the jumbo loan that’s above the conforming loan limit. The loan is available from some lenders with nothing down and no PMI. VA loans have a one-time “funding fee,” though, a percentage of the amount being borrowed.
• Your savings. Jumbo loan programs often require mortgage reserves, housing costs borrowers can cover with their savings. The number of months of PITI house payments (principal, interest, taxes, insurance), plus any PMI or homeowner association fees, needed in reserves after loan closing depends on many factors. For a jumbo loan, some lenders may require reserves of three to 24 months of housing payments.
You don’t necessarily need to have all the money in cash. Part of mortgage reserves can take the form of a 401(k), stock portfolios, mutual funds, money market accounts, and simplified employee pension accounts.
Also, depending on the loan program, a lender may be comfortable with lower cash reserves if you have a high credit score, low DTI ratio, a high down payment, or some combination of these things.
• Documentation. Lenders want a complete financial picture for any potential borrower, and jumbo loan seekers are no exception. Most lenders operate under the “ability to repay” rule, which means they must make a reasonable, good-faith determination of the consumer’s ability to repay the loan according to their terms. Applicants should expect lenders to vet their creditworthiness, income, and assets.
First-time homebuyers can
prequalify for a SoFi mortgage loan,
with as little as 3% down.
Jumbo Loan Rates
You might assume that interest rates for jumbo loans are higher than for conforming loans since the lender is putting more money on the line.
But jumbo mortgage rates fluctuate with market conditions. Jumbo mortgage rates can be similar to those of other mortgages, but sometimes they are lower.
Because the absolute dollar figure of the loan is higher than a conforming loan, it is reasonable to expect closing costs to be higher. Some closing costs are fixed, such as a loan processing fee, but others, such as title insurance, are tiered based on the purchase price or loan amount.
Pros and Cons of Jumbo Loans
Benefits
Because a jumbo loan is for an amount greater than a conforming loan, it gives you more options for ownership of homes that are otherwise cost-prohibitive. You can use a jumbo loan to purchase all kinds of residences, from your main home to a vacation getaway to an investment property.
Drawbacks
Due to their more stringent requirements, jumbo loans may be more accessible for borrowers with higher incomes, strong credit scores, modest DTI ratios, and plentiful reserves.
However, don’t assume that jumbo loans are just for the rich. Lenders offer these loans to borrowers with a wide variety of income levels and credit scores.
Lender requirements vary, so if you’re seeking a jumbo loan, you may want to shop around to see what terms and interest rates are available.
The most important factor, as with any loan, is that you are confident in your ability to make the mortgage payments in full and on time in the long term.
How to Qualify for a Jumbo Loan
To qualify for a jumbo loan, borrowers need to meet certain jumbo loan requirements. You’ll likely need to show a prospective lender two years of tax returns, pay stubs, and statements for bank and possibly investment accounts. The lender may require an appraisal of the property to ensure they are only lending what the home is worth.
Is a Jumbo Loan Right for You?
You’ll need to come up with a large down payment on a property that merits a jumbo loan, and some of your closing costs will be higher than for a conventional loan. But depending on where you wish to buy, the cost of the property, and the amount you wish to borrow, a jumbo loan may be your only choice for a home mortgage loan. It’s a particularly attractive option if you have good credit, a low DTI, and a robust savings account. And sometimes jumbo home loans actually have lower interest rates than other loans.
What About Refinancing a Jumbo Loan?
After you’ve gone through the mortgage and homebuying process, it could be helpful to have information about refinancing. Some borrowers choose to refinance in order to secure a lower interest rate or more preferable loan terms.
This could be worth considering if your personal situation or mortgage interest rates have improved.
Refinancing a jumbo mortgage to a lower rate could result in substantial savings. Since the initial sum is so large, even a change of just 1 percentage point could be impactful.
Refinancing could also result in improved loan terms. For example, if you have an adjustable-rate mortgage and worry about fluctuating rates, you could refinance the loan to a fixed-rate home loan.
The conforming loan limits set by the Federal Housing Finance Agency can vary based on the county where you are buying a home.
In most areas of the country, the conforming loan limit for a one-unit property increased to $726,200 in 2023 (the amount rises for multiunit properties). The chart below shows exceptions to the $726,200 limit by state and county.
State
County
2023 limit for a single unit
Alaska
All
$1,089,300
California
Los Angeles County, San Benito, Santa Clara, Alameda, Contra Costa, Marin, Orange, San Francisco, San Mateo, Santa Cruz
$1,089,300
California
Napa
$1,017,750
California
Monterey
$915,400
California
San Diego
$977,500
California
Santa Barbara
$805,000
California
San Luis Obisbo
$911,950
California
Sonoma
$861,350
California
Ventura
$948,750
California
Yolo
$763,600
Colorado
Eagle
$1,075,250
Colorado
Garfield
$948,750
Colorado
Pitkin
$948,750
Colorado
San Miguel
$862,500
Colorado
Boulder
$856,750
Florida
Monroe
$874,000
Guam
All
$1,089,300
Hawaii
All
$1,089,300
Idaho
Teton
$1,089,300
Maryland
Calvert, Charles, Frederick, Montgomery, Prince George’s County
Bronx, Kings, Nassau, New York, Putnam, Queens, Richmond, Rockland, Suffolk, Westchester
$1,089,300
New York
Dutchess, Orange
$726,525
Pennsylvania
Pike
$1,089,300
Utah
Summit, Wasatch
$1,089,300
Utah
Box Elder, Davis, Morgan, Weber
$744,050
Virgin Islands
All
$1,089,300
Virginia
Arlington, Clarke, Culpeper, Fairfax, Fauguier, Loudon, Madison, Prince William, Rappahannock, Spotsylvania, Stafford, Warren, Alexandria, Fairfax City, Falls Church City, Fredericksburg City, Manassas City, Manassas Park City
$1,089,300
Washington
King, Pierce, Snohomish
$977,500
Washington D.C.
District of Columbia
$1,089,300
West Virginia
Jefferson County
$1,089,300
Wyoming
Teton
$1,089,300
Source: Federal Housing Finance Agency
The Takeaway
What’s the skinny on jumbo loans? They’re essential for buyers of more costly properties because they exceed government limits for conforming loans. Luxury-home buyers and house hunters in expensive counties may turn to these loans, but they’ll have to clear the higher hurdles involved.
If you’re interested in refinancing a jumbo mortgage at competitive rates, consider SoFi. You can prequalify online and put as little as 10% down.
Jumbo loans typically require a credit score of at least 700, a low DTI, and a down payment of at least 20%, although there are always exceptions.
What is the difference between a jumbo loan and a regular loan?
A jumbo loan is a home mortgage loan that exceeds maximum dollar limits set by the Federal Housing Finance Agency. Jumbo loans are typically used by buyers in regions with higher-priced housing but are also popular among luxury homebuyers and investors.
SoFi Loan Products
SoFi loans are originated by SoFi Bank, N.A., NMLS #696891 (Member FDIC). For additional product-specific legal and licensing information, see SoFi.com/legal. Equal Housing Lender.
SoFi Mortgages
Terms, conditions, and state restrictions apply. Not all products are available in all states. See SoFi.com/eligibility for more information.
Financial Tips & Strategies: The tips provided on this website are of a general nature and do not take into account your specific objectives, financial situation, and needs. You should always consider their appropriateness given your own circumstances.
Third-Party Brand Mentions: No brands, products, or companies mentioned are affiliated with SoFi, nor do they endorse or sponsor this article. Third-party trademarks referenced herein are property of their respective owners.
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A 12% increase in the conforming loan limits for 2023 raised the baseline loan limit for a single unit to $726,200 in most counties in the United States.
The adjustment is a result of a change in the average price of a home nationwide from the third quarter of 2021 to the third quarter of 2022. Home prices increased an average of 12.21%, and the baseline conforming loan limit kept pace.
Conforming loans may be cheaper than nonconforming loans like jumbo mortgages, but jumbo loans have their place.
Conforming Loan Limits for 2023
The conforming loan limits set by the Federal Housing Finance Agency can vary based on area and the number of units in the property.
In most counties, that number increased to $726,200 in 2023 for a one-unit property. In high-cost areas, the limit is $1,089,300 for a one-unit property.
In general, here’s how the baseline conforming loan limits break down for 2023.
Maximum baseline loan limit for 2023
Units
Many counties in the contiguous states, District of Columbia, and Puerto Rico
Staying under a conforming loan limit means you’ll most likely obtain a lower-cost mortgage. Mortgages that “conform” to the limits can be acquired by Fannie Mae and Freddie Mac, government-sponsored enterprises.
Because these mortgages can be bought by the agencies and then sold to investors on the secondary mortgage market, they represent a lower risk to the lender and a lower cost to the consumer.
If you need to finance more than the conforming limit, you’ll need to look at jumbo mortgage loans.
Getting a jumbo loan involves clearing more hurdles than a conforming loan. The rate will usually be similar to conforming loan rates, but sometimes it can be lower. How jumbo can a loan be for a primary residence, second home, or investment property? It’s up to each lender.
Government-backed mortgages are also nonconforming loans, and although they serve certain homebuyers, they also may be more expensive than conforming conventional loans because they usually come with additional fees.
Loan limits are higher in counties where the average home price is above 115% of the local median home value. The loan ceiling is 150% of the baseline value.
For 2023, the high-cost-area loan limit increased from $970,800 to $1,089,300 on a one-unit property. Alaska, Hawaii, Guam, and the U.S. Virgin Islands also have a baseline loan limit of $1,089,300.
The following is a chart of counties in high-cost areas with an increased baseline loan limit. The increased amount for high-cost areas is either maxed out at $1,089,300 or the average percentage of increase for the price of a home in the area.
State
County
2022 limit for a single unit
2023 limit for a single unit
% change year over year
Alaska
All
$970,800
$1,089,300
12%
California
Los Angeles County, San Benito, Santa Clara, Alameda, Contra Costa, Marin, Orange, San Francisco, San Mateo, Santa Cruz
$970,800
$1,089,300
18%
California
Napa
$897,000
$1,017,750
13%
California
Monterey
$854,400
$915,400
7%
California
San Diego
$879,950
$977,500
11%
California
Santa Barbara
$783,150
$805,000
3%
California
San Luis Obisbo
$805,000
$911,950
13%
California
Sonoma
$764,750
$861,350
13%
California
Ventura
$851,000
$948,750
11%
California
Yolo
$675,050
$763,600
13%
Colorado
Eagle
$862,500
$1,075,250
25%
Colorado
Garfield
$856,750
$948,750
11%
Colorado
Pitkin
$856,750
$948,750
11%
Colorado
San Miguel
$756,750
$862,500
14%
Colorado
Boulder
$747,500
$856,750
15%
Florida
Monroe
$710,700
$874,000
23%
Guam
All
$970,800
$1,089,300
12%
Hawaii
All
$970,800
$1,089,300
12%
Idaho
Teton
$970,800
$1,089,300
12%
Maryland
Calvert, Charles, Frederick, Montgomery, Prince George’s County
Bronx, Kings, Nassau, New York, Putnam, Queens, Richmond, Rockland, Suffolk, Westchester
$970,800
$1,089,300
12%
New York
Dutchess, Orange
$726,525
$726,525
0%
Pennsylvania
Pike
$970,800
$1,089,300
12%
Utah
Summit, Wasatch
$970,800
$1,089,300
12%
Utah
Box Elder, Davis, Morgan, Weber
$647,200
$744,050
15%
Virgin Islands
All
$970,800
$1,089,300
12%
Virginia
Arlington, Clarke, Culpeper, Fairfax, Fauguier, Loudon, Madison, Prince William, Rappahannock, Spotsylvania, Stafford, Warren, Alexandria, Fairfax City, Falls Church City, Fredericksburg City, Manassas City, Manassas Park City
$970,800
$1,089,300
12%
Washington
King, Pierce, Snohomish
$891,250
$977,500
10%
Washington D.C.
District of Columbia
$970,800
$1,089,300
12%
West Virginia
Jefferson County
$970,800
$1,089,300
12%
Wyoming
Teton
$970,800
$1,089,300
12%
Will Conforming Loan Limits Rise or Fall?
The baseline conforming loan limit is adjusted each year to reflect the change in the average home value in the United States.
The conforming loan limit has increased in six of the past 10 years and has never declined. From 2006 to 2016, for example, the conforming loan limit remained at $417,000, despite declining home values across the country. If home values continue to rise, the conforming loan limit will also rise.
First-time homebuyers can
prequalify for a SoFi mortgage loan,
with as little as 3% down.
Conforming Loan Limits Over the Past 10 Years
The 12% increase in loan limits for 2023 is lower than the 18% increase of 2022, which was the largest jump in the past 40 years. But it still represents an increase of $79,000 over the past year alone.
Conforming loan limit
Year
Amount
2023
$726,200
2022
$647,200
2021
$548,250
2020
$510,400
2019
$484,350
2018
$453,100
2017
$424,100
2016
$417,000
2015
$417,000
2014
$417,000
The Takeaway
Conforming loan limits are intended to keep costs low for homebuyers. This means competitive pricing on mortgages, no matter what the housing market looks like each year.
If you’re looking to apply for a home mortgage loan, check out how SoFi can help. SoFi offers fixed-rate mortgages, and qualifying first-time buyers can put as little as 3% down.
If a supersized loan is needed, SoFi offers jumbo loans with as little as 10% down and no private mortgage insurance.
Check out the full range of SoFi Mortgages today.
Photo credit: iStock/marchmeena29
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 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.
Modular homes are increasingly capturing interest as a fast and affordable housing option. The global market for modular homes is forecast to grow from $82 billion in 2022 to $139 billion in 2029. These houses are built from factory-made components and are then constructed on a permanent foundation on a building site. They must meet the Department of Housing and Urban Development standards, as well as local guidelines.
Not to be confused with manufactured homes (previously called mobile homes), which can be moved from location to location, a modular home can be a good option to what are known as stick-built or traditionally constructed homes.
Could one be right for you? Here are the pros and cons of these structures, to help you decide if this might be your next home sweet home.
Modular homes are constructed in a way that differs from a traditionally built home. Many of the components are made in a factory and then shipped to the property, where they are assembled on a permanent foundation.
The process is typically less expensive and faster than a stick-built home (meaning ones that are assembled piece by piece at the site).
As briefly noted above, modular homes are permanent structures and are subject to local and federal standards.
Key Points
• Modular homes have limitations in terms of customization and design flexibility compared to traditional homes.
• Financing options for modular homes may be more limited and interest rates may be higher.
• Resale value of modular homes may be lower compared to traditional homes.
• Zoning and building code restrictions may limit where modular homes can be placed.
• Some people may perceive modular homes as having lower quality or being less durable than traditional homes.
One of the biggest differences from a traditional home is the way modular homes are constructed. The house’s components are assembled in a factory and delivered to the homesite in one or more trips. The modules may be akin to three-dimensional boxes that are connected to one another and the foundation at the job site.
The benefit of constructing modular home components in a factory is the controlled environment. Because the parts are assembled under ideal conditions (perfect temperature, humidity, etc.), buyers can usually expect a consistent, high-quality build.
In addition, the actual build can move more quickly. Estimates of the time to build a modular home range from 16 to 32 weeks, depending on how customized the plans are and other variables.
💡 Quick Tip: Don’t overpay for your mortgage. Get your dream home or investment property and a great rate with SoFi Mortgage Loans.
The Pros and Cons of Modular Homes
As with most things in life, there are pluses and minuses to modular homes. Consider these points to decide if one could be right for you. First, the upsides:
• Modular homes are typically 10% to 20% less expensive than traditionally built homes.
• They can be built up to 30% to 60% faster than stick-built homes.
• Depending on the builder, they may be customized to suit your needs, both in terms of layout/square footage and finishes. You can get a very basic home or a truly luxe, mansion-like one.
• They can be more energy-efficient than traditionally built houses, and the materials and building process may be more environmentally friendly as well.
• They are considered better able to withstand environmental threats (flooding, hurricanes) than traditionally built homes.
That said, there are some disadvantages to modular homes to consider:
• You need to add in some costs to your home-buying budget: the cost of the land, the foundation, and other related expenses. Yes, you are paying for those things when you buy a stick-built house, but it’s already rolled into the price.
• You will need to investigate how to finance your home. If it’s an already built home, then a home loan will work. But if you are building from the ground up? Rather than getting a mortgage (since you aren’t buying an existing home from a seller), you may want to look into construction loans. Some modular home companies offer their own financing and lending programs.
• Depending on the modular home company, you may not be able to get every last detail you want. Shopping around can help you find the top features you want in your home.
First-time homebuyers can
prequalify for a SoFi mortgage loan,
with as little as 3% down.
Modular Home Risks
There are a couple of considerations prospective modular homeowners should be aware of:
• Finding land can be difficult in some areas. If you love modular homes but want to live in a suburb that has a hot housing market, you may be hard pressed to find a lot that works for you.
(You also may need a land loan to purchase your property if you do find a lot you love.)
• It may be difficult to make changes once construction has started because so much of the home is pre-built.
• Bias exists. Some people confuse modular homes with manufactured or mobile homes, which don’t have a foundation, and may therefore avoid them. This could mean a real estate agent might not show buyers a modular home that’s for sale, for example, due to this misperception.
How to Find Modular Homes for Sale
You can shop for pre-existing modular homes on major real estate websites like Realtor.com and also on specialized sites that list this type of home.
To construct a modular home, you can look at such sites as modularhome.org and modularhomeowners.com. Also, with the growing popularity of modular homes, you may well be able to get a word-of-mouth referral from someone in your circle.
How to Choose a Modular Home
When considering a modular home builder, much will depend on the following factors:
• Do you like the style of the houses they build? The floorplans?
• Are their prices lining up with your budget? Do they offer financing, if you need it?
• Where are they located? If their factory is somewhat close to you, which can help reduce transportation expenses?
• Are you impressed with the quality of their work? Their customer service?
• Which brands do they partner with? Many manufacturers work with certain vendors for windows, doors, appliances, etc.
💡 Quick Tip: A home equity line of credit brokered by SoFi gives you the flexibility to spend what you need when you need it — you only pay interest on the amount that you spend. And the interest rate is lower than most credit cards.2
How to Finance a Modular Home
Financing a modular home will take different paths depending on whether the house is already constructed or you’re building it.
• For already built homes, you may look into conventional mortgage loans, FHA, USDA, and VA loans, just as you would for any other property you are interested in.
• If you are building your own modular home, then you will probably need to apply for a construction loan to have the funds to get your house over the finish line.
• Some modular home companies offer financing options.
• You might also see if a personal loan could help you afford a modular home. Some lenders will allow you to buy a property with the funds; check with your lender, and understand the interest rate you will be charged.
Are Modular Homes Worth It?
Whether a modular home is worth it is a very personal decision.
For some people, there may be no greater satisfaction than working with a modular builder to specify their dream home and seeing their home come together, usually more quickly and less expensively than other building methods. They can collaborate with their builder and find a house plan that checks off all (or most) of the items on their home wish list.
Many people are thrilled with the eco-friendly aspects of these homes as well.
However, there are also people who find a vintage home more appealing or who would rather walk through an already built home and know exactly what they are buying.
If you’re set on buying a modular home, here are things to consider:
• Style of home. Modular homes come in various styles, from contemporary to log cabins. It can be wise for buyers to shop around and work with a modular home manufacturer that suits their taste.
• Manufacturer location. The cost of transporting a modular home can be high. It may be essential for the budget-conscious modular homebuyer to work with a manufacturer close to the home’s final destination.
• Custom builds. Some modular home manufacturers may offer more customizable options, from floor plans and finishes. Do your research, and find a builder who can check off most of the priorities on your wish list.
• Timeline. Some modular homes go up relatively quickly, while other manufacturers could be dealing with back orders. If time is of the essence, choose your builder carefully.
The Takeaway
Modular homes are growing in popularity. Components (modules) are factory-built and then assembled on a foundation; this process can be faster and more affordable than buying a traditionally built home. They also often have environmental benefits.
However, they aren’t for everyone: Building your own home is very different than hitting the open houses, and financing a modular home likely takes you on a path that involves a construction loan. If, however, you fall in love with an already built modular home, then you can usually apply for a mortgage from a number of lenders.
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 a modular home a good investment?
A modular home can be a good investment. They often offer energy efficiency which is a selling point. However, a modular home’s value will be dependent on the housing market in your area, just as it would be with any other kind of home.
Are modular homes dangerous?
The dangers of modular homes are minimal. As long as the assembly of the modular home complies with local building codes, modular homes are as safe as a traditionally built home.
Is the value of modular homes decreasing?
Modular homes appreciate and depreciate in a way that’s similar to traditional builds.
Where can you get financing for modular homes?
Among the possibilities from various lenders are a construction loan, financing from your builder, or a personal loan.
How long will a modular home last?
With proper maintenance and high-quality materials, a modular home should last as long as, or longer than, any traditionally built home. Some of the first modular homes, built in the early 1900s, are still standing today.
Photo credit: iStock/turk_stock_photographer
*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.
²SoFi Bank, N.A. NMLS #696891 (Member FDIC), offers loans directly or we may assist you in obtaining a loan from SpringEQ, a state licensed lender, NMLS #1464945. All loan terms, fees, and rates may vary based upon your individual financial and personal circumstances and state.You should consider and discuss with your loan officer whether a Cash Out Refinance, Home Equity Loan or a Home Equity Line of Credit is appropriate. Please note that the SoFi member discount does not apply to Home Equity Loans or Lines of Credit not originated by SoFi Bank. Terms and conditions will apply. Before you apply, please note that not all products are offered in all states, and all loans are subject to eligibility restrictions and limitations, including requirements related to loan applicant’s credit, income, property, and a minimum loan amount. Lowest rates are reserved for the most creditworthy borrowers. Products, rates, benefits, terms, and conditions are subject to change without notice. Learn more at SoFi.com/eligibility-criteria. Information current as of 06/27/24.In the event SoFi serves as broker to Spring EQ for your loan, SoFi will be paid a fee.
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 for more information.
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.
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.
