There are more than 20,000 U.S.-listed stocks available to investors. You don’t need to buy all of them, but to build a diversified portfolio, you need exposure to a lot of them.
If you don’t want to spend hundreds of hours researching individual stocks, another option is to buy index funds — baskets of stocks that track broad-market indexes like the S&P 500.
Below, we’re looking at some of the best index funds that track the S&P 500 and Nasdaq-100 indexes.
5 of the best index funds tracking the S&P 500
Index funds work by tracking specific market indices. So you’ll need to know which market index you want your index fund to track before you start investing.
Here are some of the best index funds pegged to the S&P 500.
Index fund
Minimum investment
Expense ratio
Vanguard 500 Index Fund – Admiral Shares (VFIAX)
Schwab S&P 500 Index Fund (SWPPX)
No minimum.
Fidelity 500 Index Fund (FXAIX)
No minimum.
Fidelity Zero Large Cap Index (FNILX)
No minimum.
T. Rowe Price Equity Index 500 Fund (PREIX)
Data current as of market close on January 31, 2024. For informational purposes only.
Vanguard 500 Index Fund Admiral Shares (VFIAX)
This fund is also known as the Vanguard S&P 500 Index fund. It was founded in 1976 and is the granddaddy of all index funds. Like the other S&P 500 funds on this list, this fund gives exposure to 500 of the largest U.S. companies, which make up about 75% of the U.S. stock market’s total value.
Schwab S&P 500 Index Fund (SWPPX)
As research firm Morningstar notes, this is one of the cheapest S&P 500-tracking funds out there. Launched in 1997, this Schwab fund charges a scant 0.02% expense ratio and requires no minimum investment. That makes it attractive for investors concerned about costs.
Fidelity 500 Index Fund (FXAIX)
Founded in 1988 (formerly known as Institutional Premium Class fund), Fidelity removed this fund’s investment minimum so investors with any budget size can get into the low-cost index fund action.
Fidelity Zero Large Cap Index (FNILX)
In the race for the lowest of the low-cost index funds, this Fidelity fund made news by being among the first to charge no annual expenses. That means investors can keep all their cash invested for the long run.
T. Rowe Price Equity Index 500 Fund (PREIX)
Founded in 1990, the fund’s expense ratio is competitive with other providers. However, the $2,500 minimum may be steep for beginning investors.
Top 3 index funds for the Nasdaq-100
Here are some of the best index funds pegged to the Nasdaq-100 index.
Index fund
Minimum investment
Expense ratio
Invesco NASDAQ 100 ETF (QQQM)
No minimum
Invesco QQQ (QQQ)
No minimum
Fidelity NASDAQ Composite Index Fund (FNCMX)
No minimum
Data current as of Feb. 9, 2024. For informational purposes only.
Invesco NASDAQ 100 ETF (QQQM)
QQQM includes 100 of the biggest nonfinancial companies listed on the Nasdaq. It also includes at least 90% of the assets on the NASDAQ-100 index and is rebalanced quarterly.
QQQM has an expense ratio of 0.15%. For every $1,000 invested, you’d pay a $1.50 fee annually.
Invesco QQQ (QQQ)
QQQ holds 101 companies, tracks the NASDAQ-100, and has $151.51 billion in assets under management.
QQQ has an expense ratio of 0.20%. For every $1,000 invested, you’d pay a $2 fee annually.
Fidelity NASDAQ Composite Index Fund (FNCMX)
FNCMX aims to mirror the performance of the Nasdaq Composite index. The fund usually holds 80% of stocks included in the index. In addition to the typical sectors represented by a Nasdaq index fund (such as IT, consumer services and health care), FNCMX also includes the real estate and material sectors.
FNCMX has an expense ratio of 0.37%. For every $1,000 invested, you’d pay a $3.70 fee annually.
Frequently asked questions
What are some of the advantages of index funds?
Exposure to hundreds of stocks with a single purchase.
You can build a balanced, diversified portfolio with just a few index funds.
May be cheaper to buy and easier to research than individual stocks.
What are some of the disadvantages of index funds?
Distributions may generate income tax liability.
Some index mutual funds have large investment minimums.
Index funds can’t beat the market — they deliver the market return.
The author owned shares of Invesco QQQ at the time of publication.
With more pet ownership happening across the country, finding the best cities for pets could help you live more comfortably. The best cities for pets provide pet-friendly apartments, as well as plenty of amenities, such as off-leash parks, hiking spots, veterinary hospitals and doggie daycares.
Finding the best cities for pets
In our search for the best cities for pets, we analyzed the percentage of apartments in our database that were pet-friendly and allowed dogs or cats.
We also looked at the average cost of veterinarian services in large metro areas with populations above 100,000 and the number of pet-related businesses and parks per capita. Then, we ranked them accordingly.
Here are the best cities for pets in the U.S.
10. Davie, FL
Just north of Miami, Davie is a town with plenty of scenic parks. Head over to Happy Tails Dog Park, the city’s pristine dog park, where your dog can socialize and run obstacle courses. The park has three different play areas and doggie water fountains.
There’s also Central Broward Park, which features 110 acres of fields and playgrounds, Vista View Park, a hilly green space to spend the day hiking and Peace Mound Park, which has an ancient burial site.
Located in Broward County, Davie is known for its colleges, universities and technical colleges. It’s home to plenty of family-friendly activities, such as hanging at the Flamingo Garden and Everglades Holiday Park.
9. Vacaville, CA
Fast-growing city Vacaville in Northern California, just 55 miles outside of San Francisco and because it’s not in the heart of the city, it’s a lot more affordable, too.
Vacaville is a great place to get on your bike and take your dog on a run through Alamo Creek Bike Trail or Lagoon Valley Park, a green, fenced off area for off-leash dogs to run around.
Besides sprawling, recreational areas and charming parks, you can also spend the afternoon checking out some of the local wineries.
Vacaville even has its own little museum, honoring the local heritage. It’s an ideal place away from the hustle and bustle, but close enough if you ever need to access a bigger city (only 35 miles from Sacramento).
8. Naperville, IL
Naperville is a suburb of Chicago — it sits just 35 miles west of the Windy City and is home to paths and bridges that hug the DuPage River. Just like Vacaville, Naperville is far enough from the concrete jungle of Chicago so residents can enjoy the more scenic vibe of public art, colorful local shops, cafes and restaurants.
Grab the leash and take your dog on a stroll through Naperville Riverwalk, which has a two-mile path that opens up to the heart of the city. It’s picturesque with lots of green space, shopping and places to eat or get takeout along the way.
7. Arvada, CO
When it comes to outdoor activities, you really can’t find a better place than Colorado. Arvada, which is near Denver, offers a unique, small-town feel with a retro vibe. The city has a historic shopping district called Olde Town and offers plenty of parks, trails (it has 125 miles of hiking and biking!) and lakes where you can see the mountains and bald eagles.
You can hike Mesa Trail and see views of the Flatirons or check out Eldorado Canyon State Park to climb amid sandstone cliffs. Because of its close proximity to nature, low crime rate and educated workforce, Arvada is a popular place to live. It encompasses the top 20 of Colorado’s wealthiest ZIP Codes.
6. Scottsdale, AZ
While summers are hot, the rest of the year in Scottsdale is relatively mild, which makes it a comfortable place to live with your pet and get outside. Just outside of Arizona’s capital Phoenix, Scottsdale is well-known for incredible views of rock formations at Camelback Mountain and Hole in the Rock, a geological cluster with big open spaces.
Scottsdale even has a number of popular pet-friendly hotels (for some cool, indoor time for those scorching summers) and is generally welcoming of pets in public places, such as its posh Scottsdale Fashion Square and local wineries.
5. Tyler, TX
In eastern Texas, Tyler is known for its rose gardens and even has a museum dedicated to remembering the rich history of the town’s annual Texas Rose Festival.
Tyler is the kind of place where you can visit popular attractions, such as the Tyler Azalea trail and any of their lakes, such as Lake Tyler and East Lake Tyler.
The city’s location and access to nature make it a great place for pets. The Sunrise Paw Park is a massive dog park — four acres, to be exact. The park, just northwest of Old Jackson Highway, has separate fenced off sections for small and large dogs to play and socialize.
4. Boulder, CO
At the base of the Rocky Mountains is Boulder, CO. The city offers the best of both worlds, with the intricate rock formations of the Flatirons just west and the convenience of Pearl Street’s downtown’s shops, cafes and restaurants.
You can take your furry best friend just about anywhere in Boulder, including hiking trails and picnics with some spectacular scenery.
A dog-friendly must-do hike is the Flatirons Vista and Doudy Draw Trail, which is a beginner-level, 3.7-mile hike that will take about three hours. It’s an incredible way to spend the day, especially in the spring.
3. Ann Arbor, MI
Ann Arbor is near the Huron River and nicknamed “Tree Town” because of its abundance of green space — even their downtown is filled with trees. Known as one of the best places to live in Michigan, Ann Arbor is a welcoming place for young professionals, families and their pets.
A popular destination for dog-lovers is Swift Run Dog Park, which is an outdoor grassy area with 10 acres of freedom for Fido to get some exercise and be off-leash.
Stroll through the coffee shops and historic downtown area that’s lined with vintage clothing shops, independent bookstores and historic theaters. Ann Arbor is also home to the University of Michigan, and its creative, youthful vibe makes it feel like a typical university town.
2. Charleston, SC
For being such an old city, founded in 1670, Charleston is surprisingly pet-friendly, with tons to do and see with Fido, including James Island County Park. This play haven features a dog beach, four acres of grass, a cleaning station and a fenced play area for small dogs.
Besides dog parks, beaches and trails, Charleston exudes an old, historic charm. The port city has cobblestone streets, especially in the French Quarter and Battery districts.
Go for a stroll down the promenade and Waterfront Park for a relaxing view of the Charleston Harbor. There are also tons of local shopping venues, theaters, museums, cafes and gardens.
1. Greeley, CO
The No. 1 city for Fido is in Greeley, a city in northern Colorado, about an hour away from Denver. There’s plenty of outdoor activities to do with your pet, from spending the afternoon at Poudre River Trail or taking advantage of the green space at Rover’s Run Dog Park.
Greeley is a central hub for community events and unlike its more expensive counterparts in Denver and Boulder, it’s considered a hidden gem due to its affordability in housing.
Greeley is a thriving cultural area, known for its art, entertainment and food-driven events, such as their summer-long Friday Fest and OktoBREWfest in the fall.
Greeley also landed in the No. 35 spot in a well-being index report, which measures community social and health data across populations.
The 50 best cities for pets
If you want to know what other cities made the list beyond the top 10, here are the top 50 best cities for pets.
Finding a pet-friendly apartment
Here’s what you need to know in order to find the best find a pet-friendly apartment for your needs.
Search for pet-friendly amenities
Newer apartment buildings come with all sorts of amenities, beyond a pool and fitness center. Pet-friendly apartments will have on-site dog parks, washing stations and even pet daycare.
Get renters insurance
You may have heard why it’s important to get renters insurance. Consider buying it for the year if you’re ready to move to a new apartment with your pet. It could show your new landlord that you’re responsible and are covered in case your pet causes any damage to the unit.
Depending on the type of coverage and policy you choose, renters insurance may include:
Property damage to the unit
Liability in case someone gets hurt in your unit
Theft of belongings in your apartment and car
Additional living expenses if your home becomes uninhabitable as a result of a covered emergency
Get a recommendation
Ask your former landlord to write a letter of recommendation, highlighting your dog’s behavior and the condition of your previous apartment. You may want to include other types of documentation when talking to your landlord, such as:
Obedience school documents
Pet sitters who took care of your dog
A former neighbor
Pay a pet deposit
This topic will inevitably come up when you look for a pet-friendly apartment. Most apartment buildings will require a pet deposit, which is generally a few hundred dollars.
Take photos of your apartment before you move in
When you find the right place to live, be sure to take photos of your apartment before you move in. This could serve a few purposes for you, including proof that your pet didn’t ruin the unit.
You could show these photos to future landlords to state your case that your dog is well behaved. It could also help you get your security deposit back.
Methodology
To determine the best cities for pets, we looked at all cities with at least 100,000 people according to the U.S. Census Bureau’s 2019 estimates and then ranked each city by the following factors:
Pet-friendliness (50%)
The percentage of available properties that allow dogs or cats. Listings are from Apartment Guide and Rent.’s November 2020 multifamily rental property inventory.
Veterinarian costs (20%)
Pet businesses per capita (30%)
Businesses include vets, animal hospitals, pet shops, pet training facilities, pet boarding, pet supplies and parks. Counts come from a database of 8 million commercially licensed business listings and may not reflect recent openings or closures.
Each of these factors was weighted differently, and the cities with the best overall score were determined to be the best cities for pets.
Many or all of the products featured here are from our partners who compensate us. This may influence which products we write about and where and how the product appears on a page. However, this does not influence our evaluations.
After a long year, tax season is finally upon us. You’re probably getting all your ducks in a row—collecting all the information you need, choosing your tax software, and so on. If you’re a homeowner, you might be able to catch a few tax breaks—but can you get a tax break for buying a house?
If you itemize your deductions via Schedule A rather than claiming the standard deduction, you could be eligible for one or more home-related tax breaks. And if you work from home, you might be able to claim a home office deduction (more on that later). The information below is general information regarding these deductions. It is always best to consult a tax professional if you have any questions related to your specific situation.
Deductions vs. Credits
Many people mistake deductions for credits—but they’re not the same thing. Let’s take a closer look at both types of tax breaks.
Deduction
Deductions reduce your taxable income according to the highest federal income tax bracket you fall into. So, if you qualify for a $2,000 deduction, the amount of money you can be taxed on will be reduced by $2,000.
There are two types of deductions: standard and itemized. Standard deductions are specific amounts based on your filing status and are updated annually. Itemized deductions are specific amounts you paid during the taxable year and you should use itemized deductions when your total of allowable itemized deductions is higher than the standard deduction.
Credit
Credits lower your income tax liability by a fixed dollar amount. If you qualify for a $500 tax credit, you pay $500 less in taxes.
Good to know: Some tax credits are nonrefundable, so if you don’t owe a lot of tax to begin with, you don’t qualify for the entire credit. Other tax credits, like the Earned Income Tax Credit, are refundable, so you get the entire amount under any tax circumstances. The remaining amount of credit available that wasn’t needed to pay down your tax bill comes to you in your tax refund.
Nondeductible Home Expenses
Unfortunately, some homeownership expenses just aren’t deductible. These include:
Closing costs (title insurance, appraisals, etc.)
Depreciation
Domestic service
Down payment
Fire insurance
Mortgage insurance premiums
Mortgage principal
Utilities such as gas, electricity, and water
Common Homeownership Deductions
If you itemize your deductions, there are several homeownership deductions available.
Home Mortgage Interest Deduction
Arguably the most well-known tax break for homeowners, the home mortgage interest deduction (HMID) lets you deduct interest paid on your mortgage up to $750,000 (or $375,000 if married filing separately).
If you take out a home equity loan or a home equity line of credit (HELOC) to make home improvements or buy or build a primary or secondary residence, you can deduct the interest through 2025.
You can claim this deduction on Form 1040, Schedule A.
Property Tax Deduction
Do you pay property taxes monthly or yearly? In either case, both state and federal property taxes are tax deductible on your federal return. For tax year 2023, the deduction amount is capped at $10,000 for married couples filing jointly and $5,000 for other tax statuses.
You can also claim taxes paid at closing when you buy or sell your home and certain payments made to town or county tax assessors. However, you can’t claim taxes paid on commercial or rental property.
To claim this deduction, report your total state and local income taxes in box 5a on Schedule A of Form 1040.
Mortgage Points Deductions
A homebuyer can purchase mortgage points, also called discount points, at the time of closing to lower their interest rate. For example, buying one point may lower your interest rate by 0.25%.
You can either deduct these points in the year in which you opened the mortgage or over the mortgage term. There are limitations, which you can view on the IRS website.
You can file for this deduction using Form 1040, Schedule A.
Home Office Deduction
If you’re self-employed and work from home, you can claim a home office deduction. To do so, you have to prove that you’ve used a portion of your home exclusively for business purposes. In other words, your office or another “separately identifiable space” counts, but your bedroom doesn’t—even if you work on your laptop in bed. Voluntary, occasional, or incidental freelance work won’t entitle you to a home office deduction.
There are occasions where you don’t need to meet the exclusive-use test. These include:
If you use part of your home as a day care facility for children, disabled adults, or elderly individuals
If you use part of your home to store physical inventory or product samples
Deductible expenses include:
Refurbishment and repair costs
Depreciation
A portion of your rent or mortgage payment
A portion of your utility bill
Business insurance
Office supplies
You can’t deduct landscaping or lawn care costs unless you’re a gardener or you’re in the lawn care business.
You can also consider using the simplified method for claiming your home office. That allows you to deduct $5 per square foot of your home used for business purposes. Often, this is a much more convenient way to deduct your home office versus taking the time to itemize each of your expenses.
Important: Before 2017, traditional employees could claim unreimbursed employee business expenses that exceeded 2% of their adjusted gross income on their tax return, including home office expenses. The Tax Cuts and Jobs Act eliminated that option until at least 2026. So, if you have an employer, you can’t currently write off any unreimbursed expenses related to your home office.
To claim this deduction, you’ll need to complete Form 8829, Expenses for Business Use of Your Home as part of your tax return.
Rental Expenses Deduction
If you rent your home, you can deduct some landlord expenses on your taxes, including operating expenses, depreciation, and repairs.
You can only deduct costs associated with keeping the rental in good operating condition. For example, you could deduct the cost of repairing a full bathroom that flooded, but you couldn’t deduct the cost of renovating a half bath into a full bath.
To claim this deduction, complete Form 4562, Depreciation and Amortization (Including Information on Listed Property).
Medical Capital Expense Deduction
If you have a medical condition that requires you to make improvements to your home or install special equipment, you may be eligible to deduct some or all of their cost.
Common capital expense deductions include:
Constructing ramps to exterior doors to make entering and exiting the home easier
Widening doorways or hallways to allow for wheelchairs or other mobility equipment
Installing railings, support bars, and other bathroom safety modifications
Lowering or modifying cabinets to make them usable
Installing a lift or otherwise modifying stairways
Modifying warning systems, such as fire alarms and smoke detectors
To file this deduction, use Worksheet A Capital Expense Worksheet to determine your medical capital expenses and enter the total on your Schedule A (Form 1040).
Common Homeownership Credits
As a homeowner, you may also qualify for specific homeownership tax credits.
Mortgage Interest Credit
Some lower-income first-time homeowners may receive a Mortgage Credit Certificate (MCC) from their state or local government, subsidizing the purchase of their home up to $2,000 on mortgage interest.
This credit comes with a few stipulations. For example, you’ll have to deduct the total amount of the credit from the mortgage interest you deduct. See the instructions page of Form 8396 for a complete list of stipulations. You’ll need to submit this as part of your tax return to claim the credit.
Residential Clean Energy Credit
Formally the Residential Energy Efficient Property Credit, the Residential Clean Energy Credit has a credit rate of 30% through 2032 and can cover costs related to renovating or building a home that runs on clean energy.
Specific limitations vary based on the type of improvements made, but they can apply to:
Solar electricity
Solar water heating
Small wind energy
Geothermal heat pumps
Biomass fuel
Fuel cells
See the IRS website for more details.
To claim the credit, complete Form 5695, Residential Energy Credits Part I as part of your tax return.
Energy Efficient Home Improvement Credit
If you improve your home’s energy efficiency, you may qualify for the Energy Efficient Home Improvement Credit.
Qualifying improvements include:
Building envelope components
Home energy audits
Residential energy property (i.e., central air conditioners that meet the Consortium for Energy Efficient (CEE) highest efficiency tier)
Heat pumps and biomass stoves and boilers
Each improvement has specific limits and guidelines. Learn more at the IRS website.
To claim the credit, complete Form 5695, Residential Energy Credits Part II as part of your tax return.
Alternative Fuel Vehicle Refueling Property Credit
Owners of electric vehicles may opt to add a charging station to their home. If you did so in 2023, you may qualify for the Alternative Fuel Vehicle Refueling Property Credit when you file your taxes. However, currently, this credit applies only to homes in low-income or urban areas.
To claim the credit, complete Form 8911.
A Word About Capital Gains
Many people worry about the amount of capital gains tax they’ll pay on a home sale. If you plan to sell your primary home and believe you’ll make a profit, you can exclude up to $250,000 of the gain from your income, or $500,000 if you file a joint return with your spouse. But there’s a catch: You have to have lived at the home for a minimum period of two years before the sale.
How Much Does Buying a House Help With Taxes?
Do you get a tax break for buying a house? It depends! Based on your tax situation, you could take advantage of various tax breaks available to homeowners.
Most homeowner credits and deductions only apply if you itemize your return—and you’ll only know whether itemization is worth it after you complete your tax forms. If you’re looking for a simple solution for filing your taxes, use TaxAct. As you enter information into your return, TaxAct will recommend whether itemizing your deductions or claiming the standard deduction is better for you.
You don’t have to wait for tax season to save money! Get your free credit report card from Credit.com. See where you need to work to start improving your credit to prepare for home ownership.
Disclosure: All TaxAct offers, products and services are subject to applicable terms and conditions. Price paid is determined at the time of filing and is subject to change.
The TaxAct® name and logo are registered trademarks of TaxAct, Inc. and are used here with TaxAct’s permission.
Welcome to NerdWallet’s Smart Money podcast, where we answer your real-world money questions. In this episode:
Master self-employment taxes and avoid common tax mistakes with expert strategies for managing your finances year-round.
How do self-employed taxes work? What are some common tax mistakes self-employed people make? And can you really write off payments on a luxury vehicle if you use it for work purposes? Hosts Sean Pyles and Elizabeth Ayoola discuss the intricacies of self-employment taxes and strategies for financial success and IRS compliance to help you understand how to navigate tax season as an independent worker.
CPA and financial strategist Krystal Todd joins them to delve further into the details of self-employment taxes, with tips and tricks on budgeting for personal and professional life, the importance of making quarterly tax payments, and whether to DIY taxes or hire a professional. They also discuss strategies like depreciating assets, the benefits of hiring family members, and navigating the complexities of tax deductions.
Plus: financial strategies for handling unexpected income and managing self-employment taxes, the importance of setting aside funds for unexpected expenses, and the advantages of timing revenue recognition and prepaying expenses for tax benefits.
Check out this episode on your favorite podcast platform, including:
NerdWallet stories related to this episode:
Episode transcript
This transcript was generated from podcast audio by an AI tool.
Sean Pyles:
As Ben Franklin himself said, in this world, nothing is certain except death and taxes. Taxes, as we all know, can be wildly confusing, and that goes double when an employer isn’t there to help.
Krystal Todd:
We need quarterly payments just of you estimating how much you think you’ll be paying in taxes, and then at the end of the year when you actually file your taxes, they’ll make adjustments based on whatever credits and deductions you’re eligible for, what you’ve already paid, and then you’ll see what you net.
Sean Pyles:
Welcome to NerdWallet’s Smart Money Podcast. I’m Sean Pyles.
Elizabeth Ayoola:
And I’m Elizabeth Ayoola.
Sean Pyles:
Today we bring you episode two of our nerdy deep dive into self-employment. In our last episode, we talked about the importance of budgeting when you’re working for yourself. Obviously here at Smart Money we think it’s a good idea for everyone to budget, but especially if you’re self-employed, you’re going to need to budget for both your personal life and your professional life.
So in this episode, we’re going to answer the most important tax questions self-employed people have, like how do self-employed taxes even work? Is it better to DIY your taxes or hire a pro? And can you really write off payments on a luxury vehicle if you use it for work purposes? Welcome to tax season.
Elizabeth Ayoola:
Womp womp. My favorite part of tax season is when it’s over. Thankfully, I’m getting better at taxes every year and I’m also learning to outsource. Shout out to my tax person. Anyways, yes, it’s February and it’s tax time for all of us. And if you’re a gig worker, freelancer, contractor, or other solo entrepreneur, you need to make sure that you’re doing all the heavy lifting an employer would usually do for you. And you have to do that to avoid mistakes and IRS penalties. Hopefully those who aren’t new to self-employment have withheld enough quarterly taxes throughout the year so they’re not hit with an IRS penalty. New listeners who are about to dip their toes into self-employment are about to learn about how self-employed taxes work.
Sean Pyles:
Yeah, that is no bueno. I know people who, when they started freelancing, had no idea that they were supposed to be paying taxes all year long quarterly instead of saving up for a big payment at the end of the year. The IRS does not look kindly on that, even if it ends up that you overpaid. And by people here, I am absolutely referring to myself because I once found myself in a world of tax hurt back when I was a contractor, and that is a lesson I shall not soon forget.
Elizabeth Ayoola:
It’s good to know I’m not alone, Sean, because I’ve been there too and it wasn’t fine.
Sean Pyles:
Elizabeth Ayoola:
It hurts. It’s a heartbreak.
Sean Pyles:
All right, well, we want to hear what you think too, listeners. To share your ideas and questions around self-employment with us, leave us a voicemail or text the Nerd Hotline at 901-730-6373. That’s 901-730-NERD. Or email a voice memo to [email protected].
So Elizabeth, who are we hearing from today?
Elizabeth Ayoola:
Today we’re going to be chatting with Krystal Todd. She happens to be a certified public accountant, a financial strategist, a money mentor and an entrepreneur. Her resume puts her in a good position to give us the juicy details we need on self-employed taxes.
Sean Pyles:
That’s coming up in a moment. Stay with us.
Elizabeth Ayoola:
Hi Krystal. Thank you for coming onto the podcast.
Krystal Todd:
Yes, thank you so much for having me. Really excited to talk taxes. This is my bread and butter. I love talking about anything money, really.
Elizabeth Ayoola:
No, I’m with you. I’m not going to lie, I do not love taxes, but I do love to understand taxes because I don’t want to pay the IRS more than I have to pay them.
Krystal Todd:
Oh, no. That’s why I’m here.
Elizabeth Ayoola:
Another tax year is upon us, and I think this information is going to be super helpful. So with that said, I’m going to jump straight into the first question I have for you, which is how do self-employed taxes work? And I know this is a big question, but I know I learned the hard way about self-employed taxes and I learned that they’re higher than what you pay when you’re working a traditional job with an employer.
So I want you to tell us why self-employed taxes are higher, especially when the government seems to provide so many incentives for small business owners.
Krystal Todd:
So it’s a double whammy because not only is it higher because we’re paying both sides of the employer tax, but we also have to pay it ourselves. So if you’re coming from a W-2 world into self-employment world, normally in W-2 world, it’s all handled for you. The biggest difference is that you’re having to have full control over paying your taxes, paying quarterly, whereas a W-2, you’re paying every paycheck. It doesn’t feel like that, but that’s what’s going on. And then the self-employment tax. So typically with your W-2 employee, you’ll pay half that piece and then your employer pays half of it, but because you’re self-employed, you are the employee and the employer, so you’re paying 15% in taxes.
Elizabeth Ayoola:
That 15%, I remember the first time I saw it and whipped out my calculator and I was like, “Wait, what? This was a chunk of money.” So I was a little unpleasantly shocked by that number.
Krystal Todd:
Yeah, there is a way to get around it.
Elizabeth Ayoola:
Tell me, tell me.
Krystal Todd:
If you’re just starting out, maybe it wouldn’t be most beneficial. It does depend, and of course you have to always throw a disclaimer out there. Everyone’s situation is different. I’m a CPA, but not your personal CPA, so take everything I’m saying as little seeds of wisdom to go research.
When you’re first starting out, maybe you don’t have your EIN, which is just basically your social security for your business, employee identification number. So it’s like your social security number but for your business, because businesses are their own entity. But when you’re first starting out, maybe you’re not doing all of that. So if you’re in the sole proprietor category, which means you’re just working for yourself, you hired yourself, maybe the next level up is LLC, limited liability company. So you’ve gone ahead and filed for that LLC so you have some protection, but you’re still going to be paying a lot of taxes.
It’s not until you get into the S Corp. And of course there’s a couple of qualifications there, but once you get into S Corp, you can actually pay yourself as a W-2 employee in your business. And then that’s how you circumvent that self-employed tax because even though it’s your business, you’re an employee of the business so it looks like a W-2. And the benefit of that too is especially if you’re self-employed, and I know some people have felt me on this, if you’re trying to get a loan for a car, once they see you’re self-employed, guns are blazing, right? They’re ready to ask you all types of questions. You have to provide so much information. As an S Corp, if you’re paying yourself, you’re going to receive a W-2 from your business so they don’t have to know it’s your business. They just see W-2 and no questions asked. There are some benefits to having an S Corp for sure.
Elizabeth Ayoola:
By the way, for everyone listening, we’re going to go a lot deeper into the different business structures in a subsequent episode, so don’t worry. We’re going to touch on that some more.
So now back to taxes. I know estimated taxes are something that I now do. Didn’t do before, but I remember when I was first researching self-employment taxes, that came up a lot. But I thought, “Hey, I can just pay it in one lump sum,” and I didn’t really dig deeper to read all of the fine details. Can you explain to us what estimated taxes are and how exactly it worked?
Krystal Todd:
Of course. So as I mentioned previously, as a W-2 employee, you’re paying taxes every single pay period. So you don’t necessarily have to worry about that, but as a self-employed individual, you’re not paying any taxes. So what the government has said is, “You’re not off the hook.” You’re not going to pay just one time at the end of the year. We need quarterly payments just of you estimating how much you think you’ll be paying in taxes, and then at the end of the year when you actually file your taxes, they’ll make adjustments based on whatever credits and deductions you’re eligible for, what you’ve already paid, and then you’ll see what you net.
So it’s crucial to pay quarterly taxes, and you can use things out there that help you track your expenses and your income and can even help you calculate that too, so you don’t have to necessarily do it all on your own.
Elizabeth Ayoola:
Absolutely. So tell us, when are the self-employed taxes due and what happens if you don’t pay them?
Krystal Todd:
Yes, they’re quarterly. If you don’t pay them quarterly or they realize that you haven’t paid enough, you will get fined. You don’t have to end up in jail if it was a legitimate accident, so you’ll be fine, but you will get penalized and it can be a little costly. So definitely make sure that you are just getting that done ahead of time. It’s a fresh new year, so new opportunities to make sure we’re staying on target.
Elizabeth Ayoola:
Yes. And for those who maybe are listening and unfortunately missed out on paying quarterly taxes and maybe in April are going to end up being hit with a bill, are there any options in terms of how they can pay it if they don’t have that lump sum cash?
Krystal Todd:
It depends on your situation. Sometimes the IRS will say, “No, you need to make this payment,” and sometimes they’ll work with you depending on the amount. So it does depend on your circumstances.
Elizabeth Ayoola:
What was this I heard about that you can sometimes do a payment plan with the IRS. So is this true?
Krystal Todd:
Yeah, no, it’s true. It’s true. I think it just depends on, like I said, your circumstances. Maybe there’s situations where if you had issues before, they’re a little bit more strict on you, but you can make payments.
Elizabeth Ayoola:
So now we want to get into the mistakes so other people can learn from those mistakes. So what are some common mistakes that you see clients make when it comes to paying their self-employed taxes? So for me, for example, I just wasn’t good at bookkeeping initially. I had my money in too many different accounts, so it was overwhelming when tax season came around to see what my deductions were and just basically my income. So as a CPA, tell us maybe two or three common mistakes you see people make.
Krystal Todd:
The common mistake by far is not making sure that they’re taking all the deductions and credits that they’re actually eligible for. So ultimately, a lot of people will think about taxes as a January through April situation, but it’s a year-round thing. Tax planning is almost more important than actually tax preparation. You want to think about the whole year and ways you can save money, different things you could probably invest in to bring your taxes down. So missing out on tax planning and then trying to just rush everything towards the end of the year is by far the biggest mistake. I’ll see people scrambling for receipts, looking back, and a lot of times if you’re just starting out, typically maybe they won’t have a separate business account as well.
Depreciation is the biggest one that I think people miss out on, not only for things like Airbnb in your home, but also your car. If you’re doing Uber or Lyft, you can get credit for the wear and tear on your car. If you have a computer or any devices that you have, those things are also depreciable or you can actually fully deduct them in certain cases. I definitely think that you should be empowered and doing it yourself, but if your taxes are getting complicated, you’d want to make sure that you’re leaning on a tax professional who will catch those expenses because a lot of people are paying too much.
Elizabeth Ayoola:
Thanks for sharing all of those incredible ways that people can reduce their taxes. Can you tell me about some other deductions or ways that people can reduce their self-employed taxes?
Krystal Todd:
Yeah, so a really neat one is making sure you hire your family in any capacity that you can. Now, of course, there’s some caveats here. You have to make sure you’re paying them a reasonable wage. So if they’re just an administrator, you can’t pay them multiple six figures. It has to be reasonable, but to the extent that it’s reasonable, you can actually hire them on. And I especially love this with kids.
So as an example of my own life, I hire my daughter and she’ll help me with my videos, she’ll help me with setup. She helps me with product development, and she’s been featured in a few of my videos online. So I will pay her. She’s a 1099 worker, so it’s not a W-2, so it’s simple. I just have to give her a check, and what I love about that is that I get to reduce my taxes, and this is more like W-2, but either way, we all get a standard deduction.
If I pay my child up to the standard deduction amount, which was just a little over $13,000 for 2023. If I pay her $13,000, I get to reduce my taxable income by that same $13,000. She pays no taxes on it because of the standard deduction, which basically is the IRS giving you some credits for having a kid or just whatever else is happening in life. They say, “Here’s just one flat rate. You just take that.” So she doesn’t pay taxes on that, and then I can put it into a custodial IRA for her and it’ll grow tax-free because it’s Roth. You’re saving money, they’re not paying any taxes, I mean, that’s a really good tax loophole there.
Elizabeth Ayoola:
For sure, for sure. And speaking of which, since we’re on the topic of deductions, I know sometimes people go a little over the top with these deductions, forgetting that the IRS does audit people. I know recently I’ve seen something floating around on social media about being able to buy a Mercedes Benz, also known as G-Wagon, and write it off using your taxes. And the rules for this are really complicated, so make sure to work with the CPA if you’re thinking about doing it. So is this true? And if it is, what is the catch?
Krystal Todd:
There are some caveats. It must be used in business. You can’t just buy a G-Wagon, you never drive in it. If you’re a realtor, for example, that might make sense. You have an image. If you’re a realtor, you’re selling million-dollar homes, you want to look the part. That might make sense. But if you’re a content creator working at home, you never go in the car to do anything, you cannot do that. In the eyes of the IRS that is illegal, so you have to make sure that it’s being used for business use. It doesn’t have to be exclusively, but if it is half business, half personal, you’ll have to adjust your taxes to account for that.
Elizabeth Ayoola:
So sorry to get into the nitty-gritty, but when you say business use, someone might say, “Oh, I have a meeting, I don’t know, once a month, and I’m driving it to my meeting.” A content creator. Does the IRS get into the details of how frequently you’re using the car?
Krystal Todd:
Yes, and the location. So if you’re driving from your home to a meeting, that doesn’t count. It’s only if you’re going from, let’s say, your primary job to your second job. Then that could actually be considered a deductible expense. So yeah, they’re very particular about what you’re using it for, where you’re driving from, and if you get audited, you better be prepared.
Elizabeth Ayoola:
So can you tell us, on that note, some major red flags or even myths that you hear of when it comes to tax deductions?
Krystal Todd:
Yes. I think that people think they could just deduct anything because it’s eligible. The government makes you go through hoops, especially after the Tax Cuts and Jobs Act where the standard deduction was doubled. They’re really trying hard to make you just take the standard deduction and just take that and go.
If you’re saying, “No, I’ve had more than $13,000 worth of expenses,” you might have. That doesn’t mean they’re all going to be eligible. So for example, for health costs that you’ve spent, maybe you spent $10,000 in health expenses for this year, but the government does not give you dollar for dollar, and if you take that, it has to be itemized. So you might do all this work trying to itemize your deductions and you were better off taking the standard deduction because they make you go through a lot of different hoops. There’s percentages, there’s phase-outs if you’re making a certain amount of money. So it’s super, super nuanced, and just circling back to what we talked about earlier as far as DIY goes, if you’re in that situation, unless you’re going to really put the effort into research, you probably are better off just getting someone who already has done this before and they’re comfortable with it because of all those different nuanced requirements that they have.
Elizabeth Ayoola:
So in the spirit of… Well, I don’t want to say in the spirit of getting audited because I don’t think anyone wants to get audited, but just in case, give us some bookkeeping tips. I’m still refining my bookkeeping because it’s just not my strong area, but what are some bookkeeping tips so that if the IRS comes knocking, people are ready?
Krystal Todd:
I strongly suggest getting software. If you have a software, you’re able to attach receipts directly to it. They’ll organize it for you. If you’re not someone who’s too familiar with income statements and cash flows and all of that, they prepare those documents for you. That by far has dramatically changed my business. And also having separate accounts. You can’t even imagine how many people will dig through their personal account looking for business expenses. Even if you’re just starting out, from the decision you’ve made to take this business seriously, please get your EIN so you can open up your business bank account, and that way everything is just flowing through one account. Lean on these different tools that will organize it for you and just be sure to keep receipts.
I would say you should be at least monthly. All these billion-dollar corporations, I mean, they’re doing things very frequently, but every single month we are balancing the books, we are going over our expenses and then we’re tax planning. So many people wait until the end of the year and then it just becomes a hassle. So to the extent that you can, get it done monthly. That is the best advice I have so you’re not stressing yourself out during these times.
Elizabeth Ayoola:
We’re in a very tech-savvy age, so how are digital receipts? So every time maybe you make a purchase or whatever, just keeping a digital file of your stuff.
Krystal Todd:
Yes, absolutely. And let’s say maybe you’re not ready for the software. That’s what I was doing when I first started out and I wasn’t too sure. Just a simple folder in your computer would work. Document everything in the moment as it happens, that way nothing is slipping through the cracks and you should be in good shape.
Elizabeth Ayoola:
So the last question I have, because in this series we’re trying to cover people who also have how they can manage your finances when they have inconsistent income. So for someone who has inconsistent income throughout the year, maybe they don’t make as much during the beginning of the year, but let’s say halfway through the year they land a huge contract.
How do they budget then for self-employed taxes or estimated taxes, rather? Because I know that’s based on how much you think you’re going to make, but you don’t always know. So maybe you’ve been underpaying for the first half of the year and then the end of the year comes. How do you manage that?
Krystal Todd:
I always say be as conservative as possible. It’s kind of like a dual opinion I have here because on one end, you don’t want to give the government an interest-free loan. That’s essentially what you’re doing when you get a tax refund. But on the other end, you also don’t want to deal with owing money, maybe being penalized and then having to pay that next year. So to the extent that you can, I would say be as conservative as possible when it comes to paying your taxes. Again, there’s different software that’ll help you establish what you should be paying. When you get that windfall, you weren’t really expecting it, right? So I like to live off of my most conservative amount of money.
So let’s say maybe it’s $10,000 a month. If I made $20,000 a month, I will ignore that $10,000 and put it to the side just because you’ll have that extra cushion to keep you protected in the event that you have a windfall you don’t expect. That happened to me last year, actually. I had quite the windfall and I wasn’t expecting it, but I had practiced what I preach and I had some money to the side, so it was okay. So whenever you get those large sums of money, pretend like you didn’t. Just live conservatively and then once a year is done, once you calculate your taxes and you pay it, then you can enjoy the rest. So it’s delayed gratification.
Elizabeth Ayoola:
Oh, I like that as a way of looking at it. And one day when I was complaining about my taxes, I remember someone saying, “The brighter side of that is that you made more money.” So we welcome a windfall, we just have to prepare for those windfalls.
Krystal Todd:
This is a little bit more technical, but something that I love because this again happened to me last year. Let’s say seasonality is something that your company is affected by. Maybe you get a big windfall of purchases or something at the end of the year. In certain circumstances, it might be best to ask them to pay you next year, right?
If you are a cash-basis type of accounting, you won’t get taxed unless you actually receive the money. So maybe you did make that revenue, but if you can have it pushed off to the next year because you didn’t expect that windfall and you don’t want to necessarily deal with the influx of the money you have to pay for those taxes, maybe you can have your customers pay you January 1st or January 2nd. That way you’re not going to be affected by that surprise, and that’s 100% legal. You can delay that or you can bring forward some expenses too.
This only works if, again, you are a cash basis, but if you want to pay something off for the whole year, you’ll be able to deduct that even if the whole year hasn’t actually happened yet. So there’s different ways towards the end of the year to try to get some last minute things in just to further insulate yourself.
Elizabeth Ayoola:
Love that. Those are some really, really good tips and a reminder of why it’s good to talk to CPAs. Do you have any final words of wisdom or anything that people might not be thinking about relating to self-employed taxes that you want to share?
Krystal Todd:
Yes. You are the driver. A lot of times people will shy away from it because it is intimidating, but in the age of information that we’re in right now, there is an influx of free information online. This is an example of one of them. Don’t be paralyzed by fear. Really lean into it because the difference between small business, and I really don’t use that word lightly because no matter if you’re small or big, you have to do the same exact stuff. So why even identify with your revenue or the size of your company? But a business is a business, and these larger companies become larger because they are hands-on and they’re very proactive with how they’re managing their money.
So I suggest that you do so too and do not be afraid of delegation. I, in other areas of life, have not delegated, and that is what comes back to haunt you. So you don’t have to do it all on your own. There are free resources, there are paid resources. Definitely make sure you’re just taking advantage of what you can take advantage of and you’re planning so that you can not be surprised with tax bills at the end of the year.
Elizabeth Ayoola:
Yes, absolutely. Echoing what Krystal said, you do not have to do it alone, and that is something that has made taxes a lot less daunting for me. Thank you, thank you, thank you, Krystal. This was so informative. I have learned so many new things that I’m going to apply when it comes time to do my self-employed taxes, so thank you. Thank you for coming.
Krystal Todd:
You’re so welcome. Thank you for having me, and good luck everybody in this tax season.
Sean Pyles:
Elizabeth, I never thought I’d say this, but that was actually a super interesting conversation about taxes. I am someone who was a planner in all aspects of my life, and like Krystal said, planning ahead with your taxes is so key whether you’re finding deductions, hiring your family, or making quarterly tax payments, but also there is a big difference between planning and scheming. I’m so glad that you guys talked about that viral G-Wagon tax hack because I have seen that so many times on TikTok. I have been really worried about people getting themselves into a world of trouble with their taxes.
Elizabeth Ayoola:
I’m telling you, on the journey of self-employment, I have realized that there are some things that are not too good to be true, but other things are too good to be true, and I think that’s one of them.
So while taxes can be a snooze fest, I think learning about ways to save and avoid penalties will always grab my attention. I love all the tax saving strategies that Krystal shared, and also the deduction red flags to look out for. I mean, for me, this episode was also a reminder about how important it is to talk to a tax professional who has extensive knowledge, and that’s even if you’re a DIY type person.
I feel more confident about filing my self-employed taxes now because of all the information we just got. But Sean, before we go, I do want to mention one development that we didn’t address with Krystal.
Sean Pyles:
What is that?
Elizabeth Ayoola:
Well, starting this year, there’s a new law called the Corporate Transparency Act. And what that says is that anyone with an official business designation, especially a one or two-person LLC, is going to want to be aware of.
This is an effort to stem money laundering and tax evasion in the small business category, and basically you have to file some extra paperwork with the Treasury Department called a Beneficial Ownership Information Report. If you don’t do that, you could be fined $500 and possibly get up to two years jail time, and don’t nobody want two years jail time.
Sean Pyles:
Elizabeth Ayoola:
Nobody. So definitely talk to your tax accountant and or your business attorney about that.
Sean Pyles:
Yourself included, Elizabeth. I do not want you to go to jail, so please get this done.
Well, thanks for that information. Elizabeth, please tell us what’s coming up in episode three of this series.
Elizabeth Ayoola:
Sean, we are all about getting to retirement here on Smart Money, but saving for it can often be an extra challenge when you are self-employed. We’re going to walk listeners through their options and how to make sure you’re planning for the future, even while you’re going into business for yourself.
Ayesha Selden:
If I can get to 10%, a double-digit percentage of my pay, of my gross pay, my pre-tax pay, I’m in the right ballpark. If you are self-employed, then the onus is on you, of course, to put in everything into your own personal retirement plan.
Elizabeth Ayoola:
For now, that’s all we have for this episode. Do you have a money question of your own? If you do, turn to the Nerds and call or text us your questions at 901-730-6373. That’s 901-730-NERD. You can also email us at [email protected]. You can also visit nerdwallet.com/podcast for more information on this particular episode. And remember to follow, rate, and review us wherever you’re getting this podcast.
Sean Pyles:
This episode was produced by Tess Vigeland. I helped with editing, Courtney Neidel helped with fact checking, Sara Brink mixed our audio, and a big thank you to NerdWallet’s editors for all their help.
Elizabeth Ayoola:
And here’s our brief disclaimer. We are not financial or investment advisors. This nerdy info is provided for general educational and entertainment purposes, and it may not apply to your specific circumstances.
Sean Pyles:
And with that said, until next time, turn to the Nerds.
A mortgage transfer is when another person or an entity takes over your existing mortgage.
Most mortgages are not transferable, but lenders may approve a transfer in a few situations.
In most circumstances, a mortgage can’t be transferred from one borrower to another. That’s because most lenders and loan types don’t allow another borrower to take over payment of an existing mortgage.
In some cases, though, a mortgage transfer is necessary and allowed, such as in the event of a death, divorce or separation, or when a living trust is involved.
What is a mortgage transfer?
A transfer of a mortgage is when a borrower reassigns an existing home loan to another person or entity.
“In essence, this transfers all responsibilities associated with the mortgage and lien on the property to somebody new,” says Rene Segura, head of consumer lending for FBX, the banking division of Informa Financial Intelligence, based in Dallas.
This transfer, or assignment, is usually only allowed when the mortgage is assumable, says Rajeh Saadeh, a Somerville, New Jersey-based real estate attorney. When transferring an assumable mortgage, the new borrower agrees to make all future payments at the original interest rate. The transfer typically severs any legal obligations the original borrower has to the loan.
How a transfer of mortgage works
When you transfer a mortgage, another person assumes the financial responsibility of repaying the outstanding loan balance, under the same terms and conditions. The monthly payment, loan length and interest rate will remain the same once the mortgage is transferred to the new borrower. After the successful transfer of a mortgage, the original borrower is usually relieved of any financial obligations for repaying the loan.
Transferring a mortgage has benefits for both the original borrower and the new borrower. For example, transferring a mortgage can help the original borrower avoid foreclosure if they’re unable to continue paying their loan. For the new borrower, assuming an existing mortgage can potentially help them get a better interest rate than what’s offered in the current market and avoid the closing costs required with a new mortgage.
Can I transfer my mortgage to another person?
The short answer is yes, you can transfer your mortgage to another person, but only under certain circumstances. To find out if your mortgage is transferable, assumable or assignable, contact your lender and ask.
“Most lenders would prefer not to do a loan transfer, as it doesn’t benefit them in any way unless the buyer is at risk of being in default,” says Dustin Singer, a real estate agent and an investor in Pittsburgh.
Make no mistake: Most mortgages are not transferable from one borrower to another. That’s true of conventional loans, which are not government-backed (meaning they’re not an FHA, VA or USDA loan), as well as conforming loans that meet funding criteria for Fannie Mae and Freddie Mac.
“These types of loans tend to use a due-on-sale clause, which requires a loan to be repaid in full or conveyance of the full interest in a property to allow the mortgage transfer,” says Segura. “In other words, the loan must be fully repaid, and a new mortgage would need to be executed to achieve a transfer.”
Loans that are usually assumable, meaning you can transfer them in some cases, include:
FHA loans
VA loans
USDA loans
Keep in mind there are exceptions to this rule, so not all loans will be transferable.
“FHA loans are typically assumable but depend on the current state of the loan and the creditworthiness of the new borrower at the time of attempted transfer,” says Segura, adding that to complete the transfer, the new borrower would have to go through the application process and may need to have a property appraisal done, as well.
For VA loans, this same process applies, but only if the loan closed before March 1, 1988. VA loans closed after that date may require approval by the lender or loan servicer.
USDA loans may also be transferable pending lender approval.
Exceptions to the rule
Even if your mortgage has a due-on-sale clause and isn’t assumable, there are certain circumstances under which your lender may approve a transfer. These include:
Death of a spouse, joint tenant or relative
Transfers between family members, including the borrower’s spouse or children
Divorce or separation agreements in which an ex-spouse continues to live in the home
Living trust arrangements in which the borrower is a beneficiary
For these mortgage transfers to work, the new borrower needs to be added to the property’s deed, the deceased owner needs to be removed from the deed or a spouse relinquishing ownership must sign a quitclaim deed.
When a mortgage transfer makes sense
There are several situations when transferring a mortgage might make sense. Some of those scenarios include:
A family member has an ownership stake in the home: If an immediate family member has an ownership stake in the property, you might transfer the mortgage into their name.
A family member is better suited financially to take on the loan: Transferring a mortgage can be a good solution if you have a family member who is in a better financial position to repay the loan.
The original borrower has passed away: If the original mortgage borrower dies, it makes sense to transfer the loan to a relative or survivor who has the ability to pay it back.
“All of these scenarios are still on a case-by-case basis in which the lender will need to approve the transfer,” says Segura.
“Many people try to assume mortgages so they can take advantage of lower interest rates than what they would qualify for today,” says Than Merrill, founder of FortuneBuilders in San Diego.
How to transfer a mortgage
To learn how to transfer ownership of a house with a mortgage, you’ll need to talk to your lender and see if your mortgage qualifies for a transfer. Here’s how the process might look:
Contact your lender. Before doing anything else, reach out to your lender to check that your mortgage is transferable.
Consider legal representation. Transferring a mortgage can be complicated. If you’re nervous about doing it alone, you can hire an attorney to help you navigate the process.
Begin the transfer process. After confirming your eligibility, you can work with your lender to start the transfer. Depending on your loan and lender, this can include completing paperwork and verifying that you’re current on your payments. The lender will also assess the new borrower’s credit profile.
Complete the transfer. Mortgage transfers aren’t instant. Until yours is approved, don’t forget to keep making loan payments and comply with any follow-up instructions sent by your lender.
What are transfer taxes?
Some state and local governments impose a one-time real estate transfer tax that must be paid any time a property is transferred from one person to another. In many cases, the seller must cover transfer taxes, but this varies by jurisdiction. The amount of the tax also depends on where you live, but it’s usually either a flat rate or a percentage of your home’s sale price.
Alternatives to a mortgage transfer
Instead of transferring a mortgage, consider these alternatives:
Buying the home from the original borrower: The person who wishes to assume the loan applies for a new mortgage and buys the home from the previous borrower. However, this means dealing with new loan terms and interest rates.
Adding a second borrower: This option involves adding the new borrower to the loan. However, it won’t remove the original borrower, so they’ll remain liable for the debt.
Refinancing and adding a borrower: Refinancing your mortgage and adding a second borrower lets you adjust the loan’s terms and rate. It may be easier to add another borrower by refinancing. However, this also has the drawback of not freeing the original borrower from their liability for the loan.
Unofficial transfers: With this option, you can have the new borrower send payments to the original borrower, who then pays the loan. However, this is a bad idea because the initial borrower is liable for the debt and has little recourse if the new borrower stops paying. It may also break the terms of the mortgage, especially if the original borrower moves out.
FAQ
While most mortgages aren’t transferable, some lenders might make an exception for transfers between parents and children. You’ll need to speak with your lender to see if you’re eligible and understand the requirements.
For an official transfer, you’ll need to work with your lender to initiate and complete the process. There are also unofficial transfers, where the original borrower continues paying the loan using funds from the new borrower (and neither party notifies the lender). This isn’t recommended because it has legal and financial risks.
A bank might transfer a mortgage for several reasons, including death and divorce. Living trust arrangements can also trigger a mortgage transfer.
Bottom line
Transferring a mortgage can simplify things: The new borrower wouldn’t have to apply for a new loan, pay for closing costs or possibly risk paying higher interest rates. However, many kinds of mortgages aren’t transferable, and if yours is, you’ll have to prepare for a lot of paperwork to make it official.
“The mortgage transfer will require a lot of documentation, with several new guidelines and criteria on the loan,” says Segura. “Read all documents thoroughly for any potential changes on the mortgage rights.”
Also, keep in mind that a mortgage transfer doesn’t change the debt obligation on the loan; the new borrower still needs to pay off the same outstanding balance.
If in doubt, consider discussing this option with a real estate attorney and skilled financial professional before proceeding.
If you rent, rather than own, your home, you’re off the hook for homeowners insurance. But you may still need or want renters insurance, which can help cover your assets in the event of a calamity.
Like all other forms of insurance coverage, choosing a renters insurance policy involves choosing a deductible, which will have an effect on your overall policy cost.
Let’s learn more about how a renters insurance deductible works and how to choose one that’s right for your circumstances.
What Is a Renters Insurance Deductible?
If you have renters insurance and wind up needing to file a claim, the insurance company will still expect you to pay some of the cost. That out-of-pocket expense is called your deductible, and is separate from the premium you pay on a regular basis to keep the policy active.
For example, say you have a renters insurance policy that covers up to $20,000 worth of your belongings in the event of a covered loss. If your deductible is a flat $500, you’d pay $500, and the insurance company would pay $19,500 toward replacing your belongings.
Your deductible might also be calculated as a percentage of your property coverage. So in this example, if your deductible is 2%, you’d pay $400 (2% of $20,000) and the insurer would pay out $19,600.
Your premium, on the other hand, is the amount you pay monthly or annually in order to support the policy. In the case of renters insurance, that might be about $200 a year, or around $20 or less a month. 💡 Quick Tip: Online renters insurance can cover your belongings not just at home but also in your car and on vacation.
Choosing a Renters Insurance Deductible
You may be happy to know that you have some agency when it comes to choosing your renters insurance deductible. While many policies offer flat deductible options of either $500 or $1,000, certain companies do offer lower or higher amounts. Occasionally, you may even find a program available with a $0 or 0% deductible, which means you wouldn’t pay anything out of pocket if you were to make a claim.
Paying less during a time of loss probably sounds like an unmitigated good thing. But there is a bit of a catch. Generally speaking, the lower your deductible, the higher your premium, which means you’re paying more on a regular basis for a benefit you might get if a loss occurs.
On the other hand, if you hedge your bets and go for a high deductible, your regular premium payments will be lower — but you’ll be on the hook for a lot more if you do need to file a claim.
Recommended: What Does Renters Insurance Cover and How Does it Work
How Does Your Renters Insurance Deductible Affect Your Premiums?
While the inverse relationship between deductibles and premiums is fairly standard, other factors do play into your specific renters insurance costs.
For example, your insurer may cut you a break if you have certain security equipment installed, such as an alarm system or smoke alarm. On the other hand, if you live in what’s deemed a high-risk area or your credit score could use some work, your available coverage options may be more expensive, even if you choose a high deductible.
Renters Insurance by State
Because different states have different risk levels, both for criminal activity and natural damage, the average cost of renters insurance varies depending on what state you’re in. Here are the average monthly renters insurance premiums by state, per data from the Zebra:
• Alabama: $23
• Alaska: $15
• Arizona: $20
• Arkansas: $26
• California: $18
• Colorado: $17
• Connecticut: $24
• Delaware: $21
• District of Columbia: $20
• Florida: $21
• Georgia: $22
• Hawaii: $20
• Idaho: $16
• Illinois: $20
• Indiana: $28
• Iowa: $14
• Kansas: $21
• Kentucky: $17
• Louisiana: $38
• Maine: $12
• Maryland: $19
• Massachusetts: $18
• Michigan: $22
• Minnesota: $13
• Mississippi: $26
• Missouri: $24
• Montana: $19
• Nebraska: $16
• Nevada: $17
• New Hampshire: $14
• New Jersey: $19
• New Mexico: $19
• New York: $26
• North Carolina: $23
• North Dakota: $13
• Ohio: $18
• Oklahoma: $23
• Oregon: $16
• Pennsylvania: $19
• Rhode Island: $24
• South Carolina: $18
• South Dakota: $14
• Tennessee: $19
• Texas: $32
• Utah: $14
• Vermont: $9
• Virginia: $18
• Washington: $14
• West Virginia: $24
• Wisconsin: $14
• Wyoming: $11
Keep in mind that your specific monthly price will vary further based on your city and even your neighborhood, as well as many other factors. Check with your insurer for actual insurance premium prices available to you.
Recommended: Why Do Landlords Require Renters Insurance?
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Renters Insurance Overview
Renters insurance can be a truly valuable tool if you suffer a loss as a renter. While it doesn’t cover the structure of your home the way homeowners insurance does — the building’s owner is responsible for those costs — renters insurance does cover your belongings in case of damage or theft. It also covers personal liability costs in the event that someone is injured while at your home and sues you.
Some landlords require renters insurance, while others don’t. But for most renters, it’s a good idea to at least consider it, especially since it’s usually pretty affordable. (Many renters insurance programs cost less than $200 per year or about $15 to $20 monthly.)
Do keep in mind that renters insurance, like all types of insurance coverage, doesn’t cover everything.
What Does Renters Insurance Cover?
Generally, renters insurance offers coverage in the following four categories:
• Personal property: This covers your possessions.
• Personal liability: This would take care of the medical or legal fees you might incur if someone is hurt while at your home.
• Loss-of-use or additional living expenses: This covers the money you’d need to spend to find yourself a place to stay and food to eat if your home was, for some reason, rendered unlivable.
• Additional coverages: These may be purchased to cover items and services that wouldn’t otherwise be eligible for coverage on your policy (such as lock replacement).
Keep in mind also that certain high-value categories of items may have coverage limits, though these can often be exceeded if you purchase a separate rider or endorsement for them. These categories may include cash, jewelry, watchers, fur clothing, and firearms. 💡 Quick Tip: It’s important to create an inventory of your personal possessions in case you ever need to file a renters insurance claim. One easy way to do that is to walk through your home and photograph all your belongings — especially anything of value.
The Takeaway
Renters insurance is a kind of insurance that can cover your belongings and personal liability if you’re a renter. Like other forms of insurance, a deductible likely applies. The lower the deductible you choose, the higher your premium is likely to be.
While insurance isn’t anyone’s favorite bill to pay, it’s the kind of thing you’re grateful for when you do turn out to need it.
Looking to protect your belongings? SoFi has partnered with Lemonade to offer renters insurance. Policies are easy to understand and apply for, with instant quotes available. Prices start at just $5 per month.
Explore renters insurance options offered through SoFi via Experian.
Photo credit: iStock/Edwin Tan
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When you rent a car during your travels, you usually aren’t thinking about what happens if you crash your car. that is, until the agent at the rental car desk paints that worst-case scenario during their collision damage waiver pitch.
Should you pay extra to cover your car in the case of an accident? Not if you hold the Capital One Venture X Rewards Credit Card.
If you are involved in a fender bender, you can rely on your credit card coverage to pay for damage to your rental car without making a claim against your personal auto insurance.
Although it’s a great idea to use your Capital One Venture X Rewards Credit Card to book your rental cars, the auto rental collision damage waiver benefit on the card doesn’t cover everything or every trip.
Here’s what you need to know about what the policy covers and how to file a claim.
How the Capital One Venture X Rewards Credit Card rental car insurance works
Every credit card car rental insurance requires you to use the card for your rental transaction and decline the car rental company’s collision damage waiver option. The car rental coverage provided by the Capital One Venture X Rewards Credit Card is no different.
If you want your Capital One Venture X Rewards Credit Card car rental insurance to cover your rental car, here’s what you must do:
You must use your Capital One Venture X Rewards Credit Card to reserve and pay for your entire rental car transaction.
You must decline the car rental company’s collision damage waiver provisions.
Simply being a Capital One Venture X Rewards Credit Card member isn’t enough — you must use the card to cover your rental transaction and decline the collision damage waiver offered by the rental counter.
Be aware that some rates include collision damage waiver insurance. If you book using one of these rates, you won’t be covered by the Capital One Venture X Rewards Credit Card car rental insurance on that rental.
What is covered?
The most important thing to understand about Capital One’s car rental insurance is what it covers. It covers only the following types of losses:
Damage to a rental car caused by a collision.
Loss of a rental car due to theft.
While your card’s insurance coverage will reimburse you for damage to your rental car, an accident can also cause damage to another driver’s vehicle or result in bodily injury.
If you injure someone (including yourself) in an accident or if you damage someone else’s vehicle, the Capital One Venture X Rewards Credit Card car rental insurance won’t cover these losses. Here are some items that are not covered by Capital One’s rental car insurance.
Personal liability.
Loss or theft of personal belongings.
Bodily injuries of any kind to anyone.
Damage to anything other than the rental vehicle.
Wear and tear or mechanical breakdowns.
Most likely, you’ll want travel insurance or personal auto insurance to shield yourself from liability, in case you are involved in an accident that damages someone else’s car or causes an injury.
Finally, Capital One car rental insurance covers rental periods of only 15 or fewer consecutive days within your country of residence. Rentals outside your country of residence are covered up to 31 consecutive days.
Notable exclusions
Certain vehicles
Capital One car rental insurance is meant to cover rentals of non-luxury passenger vehicles. The policy will pay only for the actual cash value of cars with a manufacturer’s suggested retail price (MSRP) of up to $75,000 when new, so extremely expensive luxury cars won’t be covered.
If you’re renting a Toyota Corolla, you’re going to be covered. If you want to drive an Aston Martin, you’ll need to find other insurance. Here are some of the types of automobiles that are excluded:
Expensive automobiles with an MSRP of over $75,000 when new.
Antique vehicles that are over 20 years old or have not been manufactured for 10 years.
Vans, other than those designed for small-group transportation and seat up to nine people.
Trucks and vehicles with an open cargo bed.
Two-wheeled vehicles like mopeds, motorcycles and motorbikes.
Limousines.
Recreational vehicles.
Certain destinations
Most car rental insurance policies provided by credit cards exclude certain countries from coverage. Your
Capital One Venture X Rewards Credit Card car rental insurance does not cover rentals in Israel, Jamaica, the Republic of Ireland or Northern Ireland.
Who is covered?
Capital One provides rental car damage and theft coverage only to you, the person whose name is embossed on your eligibleCapital One Venture X Rewards Credit Card. You must reserve, pick up and pay for the rental car and be listed as the primary driver.
Additional drivers on the rental car are covered by your Capital One car rental insurance, but you (the cardholder) must be the primary renter of the car.
How to file a claim
If you have an accident or your rental car is stolen, you will need to call the car rental benefit administrator to report the incident as soon as possible, regardless of your liability.
Within the U.S., call 800-825-4062. If you’re traveling outside the U.S., you can make a collect call to 804-965-8071. You can also initiate your claim online at https://www.eclaimsline.com/.
🤓Nerdy Tip
Be sure to submit your claim form within 90 days of the date of theft or damage or your claim may be denied. Submit the claim form even if you don’t yet have access to all other requested information.
To prepare to submit your claim, you’ll want to collect documentation that will be needed to process your claim. Here’s what you should collect and be prepared to submit to the benefit administrator.
The accident report form provided by the rental company.
A copy of the front and back of the initial and final rental agreements.
A copy of repair estimates and an itemized repair bill.
At least two photographs of the vehicle.
A police report, if one can be obtained.
A copy of any demand letter you receive from the car rental agency.
You’ll also need to fill out a claim form and submit the above documentation, plus a copy of your credit card billing statement including the rental charge. The benefit administrator may also request additional documentation to validate your claim.
Your claim will usually be processed within 15 days after the benefit administrator has received all requested documentation.
Capital One Venture X rental car insurance recapped
The Capital One Venture X Rewards Credit Card offers car rental insurance that covers damage to or theft of your rental vehicle when you decline the car rental company’s collision damage waiver insurance and charge the entire rental transaction to your credit card.
The coverage does not include liability coverage of any kind or cover trips longer than 15 days in your country of residence or 31 days abroad. Be sure to check your card’s Guide to Benefits for coverage details.
How to maximize your rewards
You want a travel credit card that prioritizes what’s important to you. Here are our picks for the best travel credit cards of 2024, including those best for:
For some, the new tax season might serve as a stressful reminder of past taxes that have yet to be filed and paid. Taxpayers owed over $120 billion in back taxes, penalties and interest in 2022, according to the IRS. And there soon may be more concrete reminders coming: The IRS resumed sending automated collection notices for unpaid taxes in 2024 after pausing them “due to the unprecedented effects of the COVID-19 pandemic” in February 2022.
If you’re one of the many taxpayers who owe tax debt this season, addressing the issue sooner rather than later can save you from penalties, interest and other more serious consequences. And you can get started even if you can’t afford to pay in full. Here’s what you can do to get back on track.
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If you get a notice, read it
The longer you delay reading and responding to unpaid tax notices, the more serious your tax situation could become.
“People come into our office, and they have all these unopened letters,” says Kenneth Portera, an enrolled agent and owner of Kenneth Portera and Associates in New Jersey who works with clients who owe back taxes. He wishes people would open these notices when they arrive, he notes. “If you do get a letter, open it up and find out what’s going on.”
If you continue to ignore notices, the IRS may resort to severe measures, including tax liens, wage garnishment, asset seizure and passport restrictions. And if you owe state taxes, you could face additional collections and garnishments.
However, the IRS and state tax agencies will always try to contact you before escalating to more extreme measures. If you show the agency that you’re willing to pay — even if it’s not the full amount — you can avoid the worst outcomes.
Set up a payment plan
Most taxpayers can set up short- or long-term payment plans, including installment agreements, through the IRS website. To apply for one online, you must owe less than $50,000 in combined tax, penalties and interest for a long-term plan or less than $100,000 for a short-term plan. The agency waives setup fees for low-income taxpayers and has options for businesses, too.
Once you contact the IRS and set up a plan, the government will stop sending notices about your tax debt because collection has already been accomplished, Portera says.
If you have an existing payment plan, you can update it to account for this year’s taxes.
Contact a pro
Not everyone with overdue taxes needs a tax attorney. But if you’re dealing with tax authorities, owe large amounts of money or have a tax situation that you feel unable to handle on your own, Portera recommends enlisting the help of a licensed tax professional, such as a certified public accountant, enrolled agent or tax attorney.
When you don’t file your return, the IRS puts together a substitute return for you with a proposed assessment of what you owe. This tax return the IRS files for you is “almost always going to be not in your favor,” says Robert Persichitte, a CPA at Delagify Financial in Colorado who has experience working with clients in urgent tax situations.
According to Persichitte, some tax preparers will look at your substitute return for free and tell you if it needs to be amended. Sometimes, a licensed tax professional can negotiate with the IRS to reduce the amount you owe. In serious cases, they may help you apply for an offer in compromise, an agreement with the IRS that settles your tax liability at a lower amount.
Remember, though, that tax relief isn’t usually a quick fix — and promises of a dramatic cut to your tax debt may be a scam.
“If it sounds too good to be true, guess what? It usually is,” Portera says. The process for negotiating a reduced tax bill is complicated, he notes. If a tax relief company can’t deliver and fumbles communications, he adds, it could result in more interest and penalties for you, and no resolution.
For low-cost options, contact the Taxpayer Advocate Service or your local Low Income Taxpayer Clinic, which provides free or low-cost assistance for low-income taxpayers.
Simple tax filing with a $50 flat fee for every scenario
With NerdWallet Taxes powered by Column Tax, registered NerdWallet members pay one fee, regardless of your tax situation. Plus, you’ll get free support from tax experts. Sign up for access today.
for a NerdWallet account
Transparent pricing
Hassle-free tax filing* is $50 for all tax situations — no hidden costs or fees.
Maximum refund guaranteed
Get every dollar you deserve* when you file with this tax product, powered by Column Tax.
Faster filing
File up to 2x faster than traditional options.* Get your refund, and get on with your life.
*guaranteed by Column Tax
Don’t forget about current tax returns
When taking care of overdue taxes, don’t forget to file taxes for 2023.
Even if you have overdue penalties — or don’t have the funds to pay this year’s fees in full — stay compliant with the IRS by filing your returns annually. The agency is much more likely to waive your penalties or even agree to reduce your tax debt if you have a history of compliance.
Claire Tsosie, an assigning editor at NerdWallet, contributed reporting to this article.
This article was written by NerdWallet and was originally published by The Associated Press.
An IPO, or initial public offering, refers to privately owned companies selling shares of the business to the general public for the first time.
“Going public” has benefits: It can boost a company’s profile, bring prestige to the management team, and raise cash that can be used for expanding the business.
But there are downsides to going public as well. The IPO process can be costly and time-consuming, and subject the business to a high level of scrutiny.
Key Points
• An IPO, or initial public offering, is when a privately owned company sells shares of the business to the general public for the first time.
• Companies typically hire investment bankers and lawyers to help them with the IPO process.
• Reasons for a company IPO include raising capital, providing an exit opportunity for early stakeholders, and gaining more liquidity and publicity.
• Pros of an IPO include an opportunity to raise capital, future access to capital, increased liquidity, and exposure.
• Cons of an IPO include costs and time, disclosure obligations, liability, and a loss of managerial flexibility.
IPO Definition
IPO stands for “initial public offering,” which marks the first time a private corporation offers its securities for sale to the public.
In such a process, a portion of the firm’s shares are transferred from private ownership by company insiders to public markets, so that both retail and institutional investors can buy IPO shares.
How Do IPOs Work?
To have an IPO, a company must file a prospectus with the SEC. The company will use the prospectus to solicit investors, and it includes key information like the terms of the securities offered and the business’s overall financial condition.
Behind the scenes, companies typically hire investment bankers and lawyers to help them with the IPO process. The investment bankers act as underwriters, or buyers of the shares from the company before transferring them to the public market. The underwriters at the investment bank help the company determine the offering price, the number of shares that will be offered, and other relevant details.
The company will also apply to list their stock on one of the different stock exchanges, like the New York Stock Exchange or Nasdaq Stock Exchange.
Access BrightSpring Health IPO shares with SoFi Invest®.
BrightSpring Health ($BTSG) just filed to go public. Open an Active Invest account, check out the prospectus, and request shares for an opportunity to invest in the IPO.
*No offer to buy the securities can be accepted and no part of the purchase price can be received until the registration statement has become effective, and any such offer may be withdrawn or revoked, without obligation or commitment of any kind, at any time prior to notice of its acceptance given after the effective date. To see if participating in an IPO is right for you, please fill out your investor profile prior to submitting any indication of interest. Investing in IPOs comes with risk, including the risk of loss. Please visit sofi.com/iporisk/. Offered via SoFi Securities LLC, Member FINRA/SIPC.
IPO Price vs Opening Price
The IPO price is the price at which shares of a company are set before they are sold on a stock exchange. As soon as markets open and the stock is actively traded, that price begins to go up or down depending on consumer demand, which is known as the opening price.
💡 Quick Tip: The best stock trading app? That’s a personal preference, of course. Generally speaking, though, a great app is one with an intuitive interface and powerful features to help make trades quickly and easily.
History of IPOs
While there are some indications that shares of businesses were traded during the Roman Republic, the first modern IPO is widely considered to have been offered by the Dutch East India Company in the early 1600s. In general, the Dutch are credited with inventing the stock exchange, with shares of the Dutch East India Company being the sole company trading in Amsterdam for many years.
In the U.S., Bank of North America conducted the first American IPO, which likely took place in 1783. A report claims investors hiding cash in carriages evaded British soldiers to buy shares of the first American IPO.
Henry Goldman led investment bank Goldman Sachs’ first IPO — United Cigar Manufacturers Co. — in 1906, pioneering a new way of valuing companies. A challenge for retail companies at the time was that they lacked hard assets, as other big businesses like railroads had at the time. Goldman pushed to value companies based on their income or earnings, which remains a key part of IPO valuations today.
Why Does A Company IPO, or “Go Public”?
Answering the question, “what’s an IPO?” doesn’t explain why a company “goes public” — an important detail in the process. Because an IPO requires a significant amount of time and resources, a business probably has good reason to go through the trouble.
Raising Money
A common reason is to raise capital (money) for possible expansion. Prior to an IPO, a private company may procure funding through angel investors, venture capitalists, private investors, and so on.
A company may reach a size where it is no longer able to procure enough capital from these sources to fund further expansion. Offering sales of stock to the public may allow a company to access this rapid influx of investment capital. 💡 Quick Tip: Keen to invest in an IPO? Be sure to check with your brokerage about what’s required. Typically IPO stock is available only to eligible investors.
Exit Opportunity
An IPO may be a way for early stakeholders, such as angel investors and venture-capital firms, to cash out of their holdings. Venture-capital firms in particular have their own investors that need to provide returns for. IPOs are a way for them to transfer their share of a private company by selling their equity to public investors.
More Liquidity
Venture-capital firms and angel investors aren’t the only ones who may be seeking more liquidity for stakes in companies. Liquidity refers to the ease with which an investor can sell an asset. Stocks tend to be much more liquid assets than private-company stakes.
Hence, employees with equity options can also use IPOs as a way to gain more liquidity for their holdings, although they are usually subject to lock-up periods.
Publicity
From the roadshow that investment banks hold to inform potential investors about the company to when executives may ring the opening bell at a stock exchange, an IPO can bring out greater publicity for a company.
Being listed as a public company also exposes a business to a wider variety of investors, allowing the business to obtain more name recognition.
Pros and Cons of an IPO
As with any business decision, there are downsides and risks to going public that should be considered in conjunction with the potential benefits. Here’s a look at a few:
Pros
Cons
An IPO may allow a company to raise capital on a scale otherwise unavailable to it. It can use these funds to expand the business, build infrastructure, and to fund research and development.
Public companies must keep the public informed about their business operations and finance. They are subject to a host of filing requirements from the SEC, from initial disclosure obligations to quarterly and annual financial reports.
After an IPO, companies can issue more stock, which can help with future efforts to raise capital.
Companies and company leaders may be liable if legal obligations like quarterly and annual filings aren’t met.
IPOs increase liquidity, which allows business owners and employees to more easily exercise stock options or sell shares.
Public companies must consider the concerns and opinions of a potentially vast pool of investors. Private companies on the other hand, often answer to only a small group of owners and investors.
Public companies may use stock as payment when acquiring or merging with other businesses.
Public companies are under more scrutiny than their private counterparts, as they’re forced to disclose information about their business operations.
IPOs can generate a lot of publicity.
Going public is time consuming and expensive.
Participating in an IPO: 3 Steps to Buying IPO Stock
1. Read the Prospectus
IPOs can be hard to analyze: It’s difficult to learn much about a company going public for the first time. There’s not a lot of information floating around beforehand since when companies are private, they don’t really have to disclose any earnings with the SEC. Before an IPO, you can look at two documents to get information about the company: Form S-1 and the red herring prospectus.
2. Find Brokerage
If you want to purchase shares of a stock in an IPO, you’ll most commonly have to go through a broker. Some firms also let you buy shares at the offering price as opposed to the trading price once the stock is on the public market.
3. Request Shares
Once a brokerage account is set up, you can let your broker know electronically or over the phone how many shares of what stock you’d like to buy and what order type. The broker will execute the trade for you, usually for a fee, although many online brokerages now offer zero commission trading.
Who Can Buy IPO Stock?
Not everyone has the ability to buy shares at the IPO price. When a company wants to go public, they typically hire an underwriter — an investment bank — that structures the IPO and drums up interest among investors. The underwriter acquires shares of the company and sets a price for them based on how much money the company wants to raise and how much demand they think there is for the stock.
The underwriter will likely offer IPO shares to its institutional investors, and it may reserve some for other people close to the company. The company wants these initial shareholders to remain invested for the long-term and tries to avoid allocating to those who may want to sell right after a first-day pop in the share price.
Investment banks go through a relatively complicated process in part to help them avoid some of the risks associated with a company going public for the first time. It’s possible that the IPO could become oversubscribed, e.g when there are more buyers lined up for the stock at the IPO price than there are actual shares.
When Can You Sell IPO Stock?
Shortly after a company’s IPO there may be a period in which its stock price experiences a downturn as a result of the lock-up period ending.
The IPO lock-up period is a restriction placed upon investors who acquired company stock before it went public that keeps them from selling their shares for a certain period of time after the IPO. The lock-up period typically ranges from 90 to 180 days. It’s meant to prevent too many shares in the early days of the IPO from flooding the market and driving prices down.
However, once the period is over, it can be a bit of a free-for-all as early investors cash in on their stocks. It may be worth waiting for this period to pass before buying shares in a newly public company.
Things to Know Before Investing in an IPO
An IPO, by definition, gives the investing public an opportunity to own the stock of a newly public company. However, the SEC warns that IPOs can be risky and speculative investments.
IPO Market Price
To understand why investing in an IPO can be risky, it is helpful to know that the business valuation and offering price have not been determined not by the market forces of supply and demand, as is the case for stocks trading openly in a market exchange.
Instead, the offering price is usually determined by the company and the underwriters who negotiate a price based on an often-competing set of interests of involved parties.
Post-IPO Trading
Purchasing shares in the market immediately following an IPO can also be risky. Underwriters may do what they can to buoy the trading price initially, keeping it from falling too far below the offering price.
Meanwhile, IPO lock-up periods may stop early investors and company executives from cashing out immediately after the offering. The concern to investors is what happens to the price once this support ends.
Data from Dealogic shows that since 2010, a quarter of U.S. IPOs have seen losses after their first day.
IPO Due Diligence
Investors with the option to invest in an IPO should do so only after having conducted their due diligence. The SEC states that “being well informed is critical in deciding whether to invest. Therefore, it is important to review the prospectus and ask questions when researching an IPO.”
Investors should receive a copy of the prospectus before their broker confirms the sale. To read the prospectus before then, check with the company’s most recent registration statement on EDGAR, the SEC’s public filing system.
IPO Alternatives
Since the heady days of the dot-com bubble, when many new companies were going public, startups have become more disgruntled with the traditional IPO process. Some of these businesses often complain that the IPO model can be time-consuming and expensive.
Particularly in Silicon Valley, the U.S. startup capital, many companies are taking longer to go public. Hence, the emergence of so many unicorn companies — businesses with valuations of $1 billion or greater.
In recent years, alternatives to the traditional IPO process have also emerged. Here’s a closer look at some of them.
Recommended: Guide to Tech IPOs
Direct Listings
In direct listings, private companies skip the process of hiring an investment bank as an underwriter. A bank may still offer advice to the company, but their role tends to be smaller. Instead, the private company relies on an auction system by the stock exchange to set their IPO price.
Companies with bigger name brands that don’t need the roadshows tend to pick the direct-listing route.
SPACs
Special purpose acquisition companies or SPACs have become another common way to go public. With SPACs, a blank-check company is listed on the public stock market.
These businesses typically have no operations, but instead a “sponsor” pledges to seek a private company to buy. Once a private-company target is found, it merges with the SPAC, going public in the process.
SPACs are often a speedier way to go public. They became wildly popular in 2020 and 2021 as many famous sponsors launched SPACs.
Crowdfunding
Crowdfunding is collecting small amounts of money from a bigger group of individuals. The advent of social media and digital platforms have expanded the possibilities for crowdfunding.
The Takeaway
Initial public offerings or IPOs are a key part of U.S. capital markets, allowing private businesses to enter the world’s biggest public market. Conducting an IPO is a multi-step, expensive process for private companies but allows them to significantly expand their reach when it comes to fundraising, liquidity and brand recognition.
For investors, buying an IPO stock can be tempting because of the potential of getting in on a company’s growth early and benefiting from its expansion. However, it’s important to know that many IPO stocks also tend to be untested, meaning their businesses are newer and less stable, and that the stock price can fluctuate — creating considerable risk for investors.
Whether you’re curious about exploring IPOs, or interested in traditional stocks and exchange-traded funds (ETFs), you can get started by opening an account on the SoFi Invest® brokerage platform. On SoFi Invest, eligible SoFi members have the opportunity to trade IPO shares, and there are no account minimums for those with an Active Investing account. As with any investment, it’s wise to consider your overall portfolio goals in order to assess whether IPO investing is right for you, given the risks of volatility and loss.
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While the dream of homeownership might seem elusive on a tight budget, the availability of low income home loans offers a beacon of hope.
These specialized loans come in handy, particularly when the obstacles of saving for a down payment loom large—a common hurdle if you’re already strapped with rent payments.
So if you’re wondering how to bridge the financial gap between renting and owning, read on to explore the various low income home loan programs that could unlock the door to your future home.
Verify your home buying eligibility. Start here
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Can I buy a house with low income?
Yes, you can buy a house with a low income by qualifying for housing assistance programs and special mortgage loans. That’s because there is no minimum income requirement to buy a house.
However, your ability to do so will depend on a variety of factors specific to your financial situation. A mortgage lender will examine your credit score, debt-to-income ratio, and down payment to determine if you qualify.
Check your mortgage eligibility. Start here
What are low income home loans?
The path to homeownership can be fraught with challenges, particularly for those with limited financial resources. Enter low income home loans—a specialized type of mortgage designed to level the playing field for buyers facing financial barriers.
Low-income mortgage programs focus on addressing the common challenges that low-income earners encounter, such as managing debt, maintaining less-than-stellar credit scores, and struggling to save for a significant down payment.
Verify your home buying eligibility. Start here
Minimal down payment requirements: One of the most daunting aspects of buying a home is accumulating a large down payment. Low income home loans often require smaller down payments, making it easier for buyers to make the initial leap.
Lenient credit criteria: Having a perfect credit score is not always feasible, especially when living on a limited income. These loans often have more flexible credit requirements, allowing for a broader range of credit histories.
Reduced costs at closing: High closing costs can be another hurdle. Low income home loan programs may offer reduced or even waived closing costs in certain circumstances.
Competitive mortgage interest rates: High interest rates can quickly make a mortgage unaffordable. Low income home loans often feature competitive interest rates, reducing long-term costs.
Lower mortgage insurance premiums: Some programs offer reduced premiums for mortgage insurance, further lowering monthly payments.
Interestingly enough, some of these programs often have income caps, essentially barring applicants who have incomes that are considered too high. This ensures that the programs benefit those who need them most.
Requirements for low income home loans
Your ability to qualify for a loan is not solely based on your income. Lenders will assess your debt-to-income (DTI) ratio, a key metric that represents your monthly debts as a percentage of your monthly income. Generally, a DTI under 35% is viewed as favorable, making you a more appealing candidate for a mortgage.
If saving a down payment is your chief concern, don’t worry; there are plenty of options that require minimal, or sometimes zero, down payments. Despite common misconceptions, a 20% down payment is not a universal requirement.
Additional Assistance
Beyond the loan itself, there are various homebuyer assistance programs that can help with the down payment and closing costs. Some of these are structured as grants that don’t require repayment, making it easier to achieve the dream of owning a home.
Navigating the complexities of mortgages and home buying can be intimidating, but low income home loans and assistance programs offer a lifeline to those who dream of owning their own home. These financial products and services are tailored to alleviate the most common obstacles, offering a viable path to homeownership for those who may have thought it was out of reach.
Low income home loans
Low income home buyers have plenty of loan options and special assistance programs to help with a home purchase. Here’s what you can expect.
Check your mortgage eligibility. Start here
Loan Type
Credit Score
Down Payment
Unique Requirements
HomeReady
Generally 620
As low as 3%
Income limits based on area, homebuyer education course required
Home Possible
Generally 660
As low as 3%
Must be primary residence, income limits may apply, can include 1-4 unit properties
Must be a qualifying service member, veteran, or eligible spouse; primary residence only
USDA Loans
Usually 640
No down payment required
Must be in a qualifying rural area, income limits apply, primary residence only
HomeReady and Home Possible mortgages
Fannie Mae’s HomeReady program and Freddie Mac’s Home Possible loan are geared toward lower-income home buyers. You need only 3% down to qualify, and there is no minimum “required contribution” from the borrower. That means the money can come from a gift, grant, or loan from an acceptable source.
Even better, the home seller can pay closing costs worth up to 3% of the purchase price. Instead of negotiating a lower sales price, try asking the seller to cover your closing costs.
Private mortgage insurance (PMI) may also be discounted for these low income home loans. You’re likely to get a lower PMI rate than borrowers with standard conventional mortgages, which could save you a lot of money from month to month.
“This is the biggest benefit,” says Jon Meyer, The Mortgage Reports loan expert and licensed mortgage loan originator. “The PMI is offered at a lower rate than with a standard conventional loan.”
Finally, Home Possible and HomeReady might make special allowances for applicants with low incomes. For instance, HomeReady lets you add income from a renter on your mortgage application, as long as they’ve lived with you for at least a year prior. This can help boost your qualifying income and make it easier to get financing.
You might qualify for HomeReady or Home Possible if your household income is below local income limits and you have a credit score between 620 and 660.
FHA loans
FHA loans offer flexible approval requirements for repeat and first-time home buyers alike. This program, which the Federal Housing Administration backs, relaxes borrowers’ standards to get a mortgage. This can open up the home-buying process to more renters.
You might be able to get an FHA home loan with a debt-to-income ratio (DTI) up to 45% or a credit score as low as 580 while paying only 3.5% down
Select FHA lenders even allow credit scores as low as 500, provided the buyer can make a 10% down payment
Thanks to these perks and others, the FHA loan is one of the most popular low-down-payment mortgages on the market.
Check your FHA loan eligibility. Start here
VA loans
Veterans Affairs-backed VA loans provide military homebuyers with a number of advantages.
No down payment requirement. You can finance 100% of the purchase price. You can also refinance 100% of your home’s value using a VA loan
No mortgage insurance. But you will pay a one-time VA Funding Fee. You can wrap it into the loan amount.
No minimum credit score. Although lenders are allowed to add their own minimums. Those that do often require a FICO score of at least 580 to 620.
Sellers can pay up to 4% of the purchase price in closing costs. So if you find a motivated seller, you could potentially get into a home with nothing out of pocket
If you’re a veteran, active-duty service member, or surviving spouse, the VA mortgage program should be your first stop.
Check your VA loan eligibility. Start here
USDA loans
If you’re not buying in a large city, you may qualify for a USDA home loan. Officially called the Single-Family Housing Guaranteed Loan Program, the USDA loan was created to help moderate- and low-income borrowers buy homes in rural areas.
With a USDA loan, you can buy a home with no money down. The only catch is that you must buy in a USDA-approved rural area (though these are more widespread than you might think). You can find out if the property you’re buying is located in a USDA-eligible rural area and whether you meet local income limits using the USDA’s eligibility maps.
Your monthly payments might be cheaper, too. That’s because interest and mortgage insurance rates are typically lower for USDA loans than for FHA or conforming loans.
There are two types of USDA loans.
The Guaranteed Program is for buyers with incomes up to 115% of their Area Median Income (AMI)
The Direct Program is for those with incomes between 50% and 80% of the AMI
Standard USDA-guaranteed loans are available from many mainstream lenders. But the Direct program requires borrowers to work directly with the U.S. Department of Agriculture.
You typically need a credit score of 640 or higher to qualify.
Check your USDA loan eligibility. Start here
Low income home loan programs
Aside from mortgages that are designed to help people with low incomes buy a home, there are also a number of other programs that offer help to make homeownership more accessible.
Verify your home buying eligibility. Start here
Program
Description
Who Is Eligible
Hud Homes
Discounted homes sold by the Department of Housing and Urban Development.
Low- to moderate-income families, with preference for those who will make it their primary residence. May include single-family homes.
Housing Choice Voucher Program
Vouchers to subsidize the cost of housing in the private market.
Low-income families; must meet income and other criteria set by state and local housing programs.
Good Neighbor Next Door
Significant discounts on homes for teachers, firefighters, police officers, and EMTs.
Must commit to living in the property as a primary residence for at least 36 months. Includes single-family homes.
HFA Loans
Loans offered by state Housing Finance Agencies with reduced interest rates and down payment assistance.
First-time or repeat buyers with low to moderate incomes must meet income requirements. Often, it must be a primary residence.
Down Payment Assistance
Grants or loans to cover the down payment and sometimes closing costs.
Typically for low- to moderate-income families, though criteria can vary by program. Often for single-family homes.
State or Local Assistance
Various grants, loans, or tax credits are offered at the state or local level.
Eligibility varies but usually targets low- to moderate-income families. May include single-family homes.
Mortgage Credit Certificates
Tax credit to reduce federal income tax liability.
First-time homebuyers who meet income requirements; must be primary residence.
Manufactured and Mobile Homes
Loans or grants specifically for manufactured or mobile homes.
Low- to moderate-income families; must meet criteria set by specific housing programs. Usually must be primary residence.
Hud Homes
When the FHA forecloses on homes, those properties are often put up for sale as HUD Homes. And, you can generally purchase one at a steep discount. To qualify for a HUD Home, it will need to be your primary residence for at least 12 months. Additionally, you must not have purchased another HUD in the past 24 months.
Keep in mind that HUD Homes are sold as-is. Many are fixer-uppers. Moreover, HUD Homes are purchased through a bidding process. You’ll need a real estate agent or mortgage broker licensed with HUD to bid on an FHA property.
You can find HUD Homes on the official HUD website, hudhomestore.com. There, you’ll see all HUD real estate owned (REO) single-family properties in your area.
Good Neighbor Next Door
The Good Neighbor Next Door program offers unique benefits for nurses, first responders, and teachers. If you’re eligible, you can buy HUD foreclosure homes at a 50% discount. Use an FHA mortgage, and you only need $100 for a down payment.
You can find the homes on the U.S. Department of Housing and Urban Development website. You’ll also need a HUD-licensed real estate agent to put your offer in for you.
If your offer is accepted and you qualify for financing, you get the home. The 50% discount makes homeownership a lot more affordable. However, be aware that this discount is actually a second mortgage. But it has no interest and requires no payments. Live in the home for three years, and the second mortgage is forgiven entirely.
HFA home loans
Not to be confused with FHA loans, HFA loans are offered in partnership with state and local Housing Finance Authorities.
Many HFA loans are conventional mortgages backed by Fannie Mae and Freddie Mac. They may require as little as 3% down, and many HFA programs can be used with down payment assistance to reduce the upfront cost of home buying.
Borrowers who qualify for an HFA loan might also be in line for discounted mortgage rates and mortgage insurance premiums. To qualify, you’ll typically need a credit score of at least 620. But eligibility requirements vary by program.
Find and contact your state’s public housing finance agency or authority to learn more and see if you qualify. Also, be aware that this type of loan program will require additional approval steps that may make loan closing take longer.
Down payment assistance programs (DPAs)
Down payment assistance is exactly what it sounds like. It provides help with down payments on home purchases and often closing costs. Government agencies, nonprofits, and other sources commonly offer down payment and closing cost assistance. They are usually in the form of a grant or loan (though the loans may be forgiven if you stay in the house for five to ten years).
Most DPA programs target low-income home buyers and have guidelines that make qualifying easier. Some, however, provide assistance to people who buy in “underserved” or “redevelopment” areas, regardless of income. Many DPA programs offer assistance worth tens of thousands of dollars.
Talk to a lender about your options. Start here
Mortgage Credit Certificates (MCCs)
Mortgage credit certificates (MCCs) can stretch your home-buying power. If you meet income requirements, you could get a tax credit equal to some percentage of your mortgage interest. Lenders are allowed to add this credit to your qualifying income when underwriting your mortgage. This allows you to qualify for a higher mortgage amount than you otherwise could.
There are numerous states, counties, and cities that issue mortgage credit certificates, and their regulations and amounts vary greatly. Check with your local housing finance authority to find out whether MCCs are available where you live.
Housing Choice Voucher Program
The Housing Choice Voucher homeownership program (HCV) provides both rental and home buying assistance to eligible low-income households. Also known as Section 8, this program allows low-income home buyers to use housing vouchers to purchase their own homes.
Because local public housing agencies run these voucher programs, eligibility varies depending on location. Still, you’ll likely need to meet the following requirements:
Program-specific income and employment conditions
Being a first-time home buyer
Completing a pre-assistance homeownership and counseling program
Keep in mind that not all states offer voucher programs, and some programs have waiting lists. Also, these programs could limit how much you can sell the home for later on. To find out if your area offers a participating program, use the HUD locator web tool.
Manufactured and mobile homes
A manufactured home usually costs less than a traditional, site-built home. When placed on approved foundations and taxed as real estate, manufactured homes can be financed with mainstream mortgage programs.
Many programs require slightly higher down payments or more restrictive terms for manufactured homes. HomeReady, for example, increases the minimum down payment from 3% to 5% if you finance a manufactured home. Other programs require the home to be brand new.
Additionally, there are often requirements regarding the year the home was built and the property’s foundation. These guidelines will vary between lenders. Mobile homes that are not classified as real estate can be purchased with personal loans like the FHA’s Title 2 program. These are not mortgages because the homes are not considered real estate.
Check your mortgage options. Start here
Tips for buying a house with low income
Whether you’re buying a new home or your first home, these tips can help you achieve your homeownership goals.
Verify your home buying eligibility. Start here
Improve your credit history
Improving your FICO score is the best way to increase your chances of loan approval and qualify for lower mortgage rates.
The credit score needed to purchase a home varies depending on the type of loan you apply for. Conventional loans typically require a score of at least 620, while FHA loans often require at least 580.
Start by pulling free credit reports from annualcreditreport.com to determine your current score. Next, consider a few of the common methods for increasing credit scores. The amount of work that you’ll need to do will depend on your personal financial situation.
As an example, if your credit score is low because you’re using too much of your available credit, you may benefit from a debt consolidation loan to tame your high-interest account balances and improve your credit utilization.
On the other hand, if your credit history reveals missed payments, you’ll need to show at least 12 months of regular, on-time payments to improve your score.
Save for a down payment
The average first-time home buyer puts just 13% down on a new home. Yet, many loan programs require as little as 3% down or no down payment at all.
Remember that you still have to pay closing costs, which are typically around 2% to 5% of your mortgage loan amount. If you put less than 20% down, you’ll almost certainly have to pay for mortgage insurance.
In addition, you may need cash reserves in your savings account. This assures lenders that you can make your monthly mortgage payments should you suffer a financial setback. However, don’t let the down payment scare you away from homeownership. Many buyers qualify without even knowing it.
Pay down debts
Paying down debts will lower your debt-to-income ratio and improve your odds of mortgage approval. This is especially true for those with high-interest credit card debt.
You’ll likely qualify for lower rates when you have:
A low debt-to-income ratio (DTI)
High credit score
3% to 5% down payment
Stable income for the past two consecutive years
Use a first-time home buyer program
First-time buyer programs offer flexible guidelines for qualified buyers. Plus, these special programs exist in every state to help low-income households achieve homeownership.
Unlike traditional conventional loans, the government backs many first-time buyer mortgages. This allows mortgage lenders to offer loans with better rates and lower credit score requirements than they normally would be able to.
Verify your low income home loan eligibility. Start here
Model your budget
Owning a home requires more than qualifying for a loan and making monthly mortgage payments. Homeowners are responsible for a variety of ongoing costs, including:
Homeowners insurance
Property taxes
Mortgage insurance (in many cases)
Utility bills
Ongoing home maintenance
Home improvements
Appliance repair and replacement
Home buyers who have experience paying these ongoing costs of homeownership will be better prepared for the big day when they get the keys to their dream home.
Plus, sticking to this model budget in the months and years before purchasing a home and then saving the money you would spend on housing costs, such as insurance premiums and utilities, is a great way to build cash reserves and save for a down payment.
Use a co-signer
If you’re on the edge of qualifying for your own loan, using a co-signer may be an option.
Essentially, when you buy a house with a co-signer, you and your co-signer are both responsible for making the monthly payments. You’ll both also build and share in the home’s equity. Purchasing a home with a co-signer is quite common among unmarried couples, friends, and family members.
FAQ: Low income home loans
Verify your home buying eligibility. Start here
How do you buy a house with low income?
To buy a house with a low income, you have to know which mortgage program will accept your application. A few popular options include: FHA loans (allowing low income and as little as 3.5 percent down with a 580 credit score); USDA loans (for low-income buyers in rural and suburban areas); VA loans (a zero-down option for veterans and service members); and HomeReady or Home Possible (conforming loans for low-income buyers with just 3 percent down).
I make $25K a year; can I buy a house?
Mortgage experts recommend spending no more than 28 percent of your gross monthly income on a housing payment. So if you make $25K per year, you can likely afford around $580 per month for a house payment. Assuming a fixed interest rate of 6 percent and a 3 percent down payment, that might buy you a house worth about $100,000. But that’s only a rough estimate. Talk with a mortgage lender to get the exact numbers for your situation.
How do I qualify for a low-income mortgage?
Whether or not you qualify for a low income home loan depends on the program. For example, you might qualify for an FHA mortgage with just 3.5 percent down and a 580 credit score. Or, if your house is in a qualified area and you’re below local income caps, you might be able to get a zero-down USDA mortgage. Veterans can qualify for a low-income mortgage using a VA loan. Or, you can apply for the mortgage with a co-borrower and qualify based on combined incomes.
What programs are available for first-time home buyers?
Low income home loans can help first-time home buyers overcome hurdles like low credit or income, smaller down payments, or high levels of debt. A few good programs for first-time home buyers include Freddie Mac’s Home Possible mortgage, Fannie Mae’s HomeReady mortgage, the Conventional 97 mortgage, and government-backed loans like FHA, USDA, and VA. First-time home buyers can also apply for down payment assistance grants through their state or local housing department.
Can the government help me buy a house?
There are a number of ways the government can help you buy a house. Perhaps the most direct way to get help is by applying for down payment assistance. This is a grant or low-interest loan to help you make a down payment. You can also buy a house using a government-backed mortgage, like the FHA or USDA. With these programs, the government essentially insures the loan, so you can buy with a lower income, credit score, or down payment than you could otherwise.
How do I buy a house without proof of income?
You can no longer buy a house without proof of income. You have to prove you can pay the loan back somehow. But there are modern alternatives to stated-income loans. For instance, you can show “proof of income” through bank statements, assets, or retirement accounts instead of W2 tax forms (the traditional method). Many people who want to buy a house without proof of income these days find a bank statement loan to be a good option.
How do you rent to own?
A lease option or rent-to-own home isn’t exactly what it sounds like. You don’t simply rent until the house is paid off. Instead, you usually pay a higher rent for a set period of time. That excess rent then goes toward a down payment when you buy the house at a later date. Rent-to-own might help you buy a house if you don’t have a lot of cash on hand right now or if you need to improve your credit score before applying for a mortgage. However, rent-to-own requires seller cooperation and comes with unique risks.
Can I rent-to-own with no down payment?
Rent-to-own does not mean you can buy a house with no down payment. When you rent-to-own, you’re paying extra rent each month that will go toward your down payment later on. And usually, rent-to-own contracts include an option fee that’s a lot like a down payment. The option fee is smaller. Think 1 percent of the purchase price instead of 3 to 20 percent. And that fee eventually goes toward your purchase. But it’s still a few thousand dollars you must pay upfront to secure the right to buy the home later on.
Can I get a grant to buy a house?
Qualified buyers can get a grant to buy a house. These are called down payment assistance grants. They won’t pay for the whole house, but they can help cover your down payment to make a mortgage more affordable. You’re most likely to qualify for a grant to buy a house if you have a low to moderate income and live in a target area.
What type of low income home loan is the easiest to qualify for?
FHA loans are generally the easiest low income home loan to qualify for. The federal government insures these loans, which means lenders can relax their qualifying rules. It’s possible for a home buyer with a credit score of 500 to get approved for an FHA loan, but most FHA lenders look for scores of 580 or better. And a FICO score of 580 lets you make the FHA’s minimum down payment of 3.5 percent.
How can I get a home loan with low monthly payments?
To get the lowest possible monthly payment, choose a 30-year loan term, find a cheaper home, put more money down, and make sure you have excellent credit before applying for your mortgage. If you can afford a 20 percent down payment, you can avoid PMI premiums, which lower your monthly payments even more. Veterans can get VA loans that require no PMI, regardless of their down payment size.
What’s the lowest amount you can put on a house?
Some home buyers can put no money down with a VA or USDA loan. Conventional loans will require at least 3 percent down, and FHA loans will require at least 3.5 percent down. Down payment assistance grants and loans could help you cover some or all of this down payment.
How much house can I afford if I make $30K a year?
If you make $30,000 a year, you could probably spend about $110,000 on a house, assuming you get a 30-year fixed-rate mortgage at 6 percent. This is a rough estimate. Your unique financial situation may be different. Getting a pre-approval from a lender is the only way to find your actual price range.
What are today’s mortgage rates for low income home loans?
Many low-income mortgage programs have lower interest rates than “standard” mortgage loans. So you might get a great deal.
However, interest rates vary depending on the borrower, the loan program, and the lender.
To find out where you stand, you’ll need to compare loan offers from several lenders and then choose your best deal.
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