Getting the most money possible when selling your car isn’t as difficult as it once was. The internet allows you to reach a wider audience and increase your odds of finding a buyer willing to pay more — whether selling to an individual, online-only auto retailer or traditional dealership.
When choosing where to sell your car, the decision comes down to whether your top priority is convenience and speed or getting the highest sales price. If your main objective is getting the most money, expect to spend a little more time in your endeavor.
Here are steps to help you get the most money for your car, from prepping for the sale to selecting the best sales platform.
Preparing to sell your car
Before presenting your car for sale, there are some preliminary steps to take. These can vary depending on where and how you intend to sell it.
Know your car’s fair market value
Regardless of where you sell your car, research what dollar amount you can realistically expect to receive. Online valuation sites like Edmunds or Kelley Blue Book show average prices paid to buy a vehicle like yours from individual sellers or dealerships in your area. Providing your vehicle identification number (VIN) or license plate number, as opposed to just entering the make and model, will give you a more accurate value.
Have a price range that you’ll accept in mind. That way you can be prepared to set your asking price at the high end if you create your own listing. And, you’ll know a realistic bottom line if a potential buyer wants to negotiate or a dealership makes you an offer.
Invest time to present your car in its best light
Clean your car inside and out, and have this done professionally if possible to remove any odors or stains. You may also want to clean the engine bay and make any minor repairs, such as restoring cloudy headlights. Your car’s appearance can be very important in convincing a potential buyer (or dealer) that the vehicle is well-maintained and worth more.
Also, gather maintenance records as proof that your car has been taken care of and is less likely to have mechanical problems.
Create a detailed description of your car
This step is needed only if you plan to list your car on sites that sell to private parties. Write a description that shows and tells potential buyers why your car is worth the price you’re asking. Take quality photos from all angles, and write a description highlighting selling points like low mileage, upgrades or any remaining transferable warranty.
Choosing where to sell your car
A lot has changed since the days of selling your car by putting a “for sale” sign in its window, a flyer in the supermarket or a classified ad in the local newspaper. While those are still options, you have a wide range of other possibilities available, too.
Here we focus on the three main avenues for selling a car — selling to an individual, to an online-only retailer or to a traditional dealership. Some websites enable you to use more than one approach, for example getting both private party and dealer offers for your car.
We’ll start with the option that typically results in car sellers receiving the highest prices.
Sell your car to an individual or private party
Selling your car to an individual, also called a private-party sale, is typically where you can get the most money. However, it can also be more time-consuming and come with added risk.
You can use traditional ways of letting people know your car is available, like word of mouth. But you can reach a bigger audience by listing your car on online private sales sites — like Facebook Marketplace, Craigslist, Autotrader or eBay Motors.
While you can make the most selling your car privately, that amount could be reduced slightly by certain expenses. Some private sale sites let you list a car for free while others charge a fee, so consider what you’ll be paying. For example, Autotrader charges $49 for a listing, but this fee also includes a Kelley Blue Book listing and a free vehicle history report for possible buyers. Remember to take into account whether you could have travel or transport expenses to get your car to someone who doesn’t live near you.
Also, be wary of scams when selling your car to an individual, which could be the difference between receiving the most money for your car or not receiving payment at all. Scammers can fake just about every form of payment — including cash, cashier’s checks and certified checks. If your buyer is local, you could meet at that person’s bank to ensure the cash or check is legitimate.
If the buyer isn’t local, using an escrow company — a third party that holds your car title until payment is confirmed — is a good option. But beware that escrow companies can be fake, too. To avoid escrow fraud, don’t use a company suggested by the buyer. Take time to identify a legitimate escrow service, such as a local bank or attorney, or a well-known online service. AutoTrader offers escrow services when you sell through its site, but expect to pay the greater of $49 or 0.99% of the car’s selling price.
Sell to an online used car retailer
Selling your car directly to an online-only car retailer, like CarMax, Carvana or NerdWallet’s own Automotive Marketplace, provides a middle ground. The nonnegotiable offer you receive is likely to be less than what you could get from an individual buyer. However, it’s typically quite a bit more than you would get from a traditional dealership.
Online auto retailers provide an easy way to submit your vehicle information online, receive an immediate offer and in some cases even have your car picked up. At pick-up, you’ll most likely have a check handed to you, or you may receive payment into your bank account via direct deposit or wire transfer. You won’t have to worry about scammers or a possibly drawn-out process of fielding inquiries from strangers.
Online retailers do have vehicle requirements. For example, Carvana only buys cars that are model year 1992 or newer, have a working odometer and are safe to drive. However, if your vehicle doesn’t meet such requirements, you may have options to sell to companies like Peddle and NerdWallet Automotive Marketplace that accept older and damaged vehicles.
Sell to a traditional car dealership
Selling your car to a nearby used car lot may be convenient, but it’s usually where you’ll get the least amount of money. Brick-and-mortar dealerships have overhead business expenses that individuals and online retailers don’t, so dealer offers are commonly the least competitive.
Occasionally a dealer might beat other offers, especially if you’re selling an in-demand car that the dealer needs in inventory, but that isn’t the norm. And, it’s up to you to provide other, higher offers for the dealer to beat.
One way to do this is to get offers from online-only retailers, then ask the traditional dealership if it can do better. Another option is to get and compare offers from many dealers through companies like Cars.com, CarGurus and TrueCar, where you can request bids from local dealers or a network of dealerships.
🤓Nerdy Tip
If you’re buying a car from a dealer and trading in your old one, expect the trade-in value to be less than what you could get selling the car yourself. But you may pay less in taxes, since most states charge sales tax on the difference between the trade-in value and new-car price.
Getting more offers can mean more money
Whether you decide to sell your car privately, through an online retailer or at a local dealership — or in some combination of the three — it’s a good idea to cast a wide net. Unless you’re paying to list on a private sale site, it won’t cost you anything to seek offers from multiple sources.
For example, offers from sites like CarMax and Carvana can vary by thousands of dollars, and one doesn’t consistently pay more than the other. So why not get offers from both, along with several other sites? It’s a small investment of time to find the highest offer and make the most possible when selling your car.
Ready to make your money work for you? Before you jump in and start investing, take the time to learn about brokerage accounts first. After all, in most cases, a brokerage account is the best way to actively manage your investments.
To help you make an informed decision and open a brokerage account, we’ve compiled a comprehensive guide covering everything from fees to plan for your investments. So, take a few moments to equip yourself with all the answers to your burning investment questions, and you’ll be on your way to financial freedom!
How does a brokerage account work?
A brokerage account allows you to purchase and sell stocks and funds through a digital platform. You can generally deposit funds with cash or check and pay a pre-defined commission to your broker.
The fee you pay fluctuates according to the service you get and the level of automation provided by your chosen platform. Unlike a savings account where you gain a consistent interest rate on your deposits, a brokerage account earns (or sustains losses) depending on the performance of your chosen investments.
Although there is more risk involved, you are likely to reap higher profits than a low-interest savings account. However, if you have a strong appetite for risk, particularly if you are aiming for long-term investment, then considering a brokerage account as part of your savings portfolio might be viable.
Check Out Our Top Picks for 2024:
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Types of Brokerage Accounts
When it comes to investing, there are a variety of brokerage accounts available to select from, each tailored to suit your individual investment objectives and risk appetite. Some common types of brokerage accounts include:
Individual brokerage account: An individual brokerage account is a standard taxable account that is held in the name of a single investor, allowing them to purchase and sell securities such as stocks, bonds, mutual funds, and ETFs.
Joint brokerage account: For those who wish to invest together, a joint brokerage account is an option, held in the names of two or more individuals, such as married couples or business partners.
Retirement account: Retirement accounts are specifically tailored to helping investors save for retirement, offering certain tax advantages that can help their savings grow in the long term, including traditional IRAs, Roth IRAs, SEP IRAs, and 401(k)s.
Trust account: Trust accounts are also available, set up to hold assets for a third party, like a minor or estate beneficiary. These can be revocable or irrevocable trusts.
Business brokerage account: Business brokerage accounts are set up to buy and sell securities on behalf of a business, such as a small business or startup looking to invest their cash reserves or raise capital.
Custodial account: Custodial accounts are designed for minors, often set up by a parent or guardian to save for a child’s education or other expenses, such as a 529 savings plan.
What can you invest in with a brokerage account?
There are actually a wide variety of options available. You may want to pick one type to start with, or you could choose several to diversify your portfolio. Perhaps the most familiar type of investment is a common stock, in which you essentially purchase shares of a specific company.
If you work for a large public company, you might receive shares as part of your compensation package. Or you can choose from any of the companies listed in the stock market, ranging from behemoths like Facebook to successful small niche companies. On top of common stocks, you can also add the following to your brokerage account:
Preferred stocks
Corporate or sovereign bonds
Real estate investment trusts (REITs)
Stock options
Certificates of deposit (CDs)
Money market accounts (MMAs)
Exchange-traded funds (ETFs)
Mutual funds
Master limited partnerships (MLPs)
What should you consider when picking an online broker?
When opening an online brokerage account, the first thing to consider is whether you want a full-service or discount broker. Full-service brokerage accounts invariably comes with higher fees. But the upside is that you get a financial advisor who is dedicated to your investment account. You can discuss your financial situation and future monetary goals with your financial advisor and build an ongoing relationship.
With a managed brokerage account, financial advisors perform trades for you based on your financial goals and risk appetite. If you have questions or concerns, you can directly communicate with your broker by phone, email, or even an in-person meeting. You’re likely to pay commissions that are higher than those of a discount broker, but you have access to a seasoned professional at all times.
Discount Brokerage Firms
Discount brokerage firms, on the other hand, typically operate solely online. You execute all of your own trades in a truly do-it-yourself fashion. The advantage is that you can save lots of money. The disadvantage is that you have to rely solely on your own market research to develop your portfolio, and can cost yourself money by making mistakes out of sheer inexperience.
Still, if you want to be hands-on with your investments, online discount brokers make the stock market accessible — and affordable — in a way it has never been before. Here are a few other things to think about when choosing your brokerage firm.
Costs
There are typically two types of costs associated with an online brokerage account. The first is a commission fee, which can range anywhere between $5 and $10 for each trade you make. These fees usually apply to stocks and options, and sometimes ETFs, plus transaction fees for mutual funds.
Trading Fees
However, some online brokerage accounts offer fee-free trades for ETFs and mutual funds. If either of those is a large part of your investment strategy, you may benefit from choosing a brokerage that doesn’t charge any fees for those.
Brokerage Account Fees
The second cost you’ll come across is various potential account fees. These can include an annual fee for maintaining your brokerage account, inactivity fees, and research and data fees for information provided by your broker.
Withdrawal & Transfer Fees
You may also incur fees for withdrawing or transferring your funds. Think about how often you plan to trade and what resources you want access to when assessing the value of these fees at different companies. If your annual fee is high, but you’ll save money on lower trading fees, it might be worth it.
Similarly, if you don’t intend to trade very frequently, you might want to find a brokerage firm with low or no inactivity fees. Be sure to do a full review of all costs involved to make sure you get the best value across the board for your specific needs. Otherwise, your trades could end up costing you money over time, rather than earning you money.
Account Balance
Another factor to consider when choosing a brokerage account is how much money you initially plan to invest. Some online brokerages have a minimum amount just to get started, often requiring at least a few thousand dollars. Others don’t have any minimum requirements. In either case, you may notice varying fees depending on how much you invest.
For example, you may receive a discount by meeting a certain deposit threshold. In those cases, it also means you’ll end up paying more if you have a lower account balance. Carefully consider how much you intend to invest and where you receive the best perks for that amount.
Customer Service
In addition to research and data made available online (and often resulting in fees), consider what type of personal service you receive. Would you like an annual check-in with a real financial advisor? Do you prefer 24/7 email or chat support? Or do you need something more hands-on?
Just as the level of service varies between full-service brokers and discount brokers, you’ll see a difference even among different online brokers. Pay attention to your needs, and don’t be afraid to change your brokerage account further down the road if you feel you need more or less attention.
Cash Account vs. Margin Account
Yet another breakdown in types of brokerage accounts is a cash account versus a margin account. So, what’s the difference? A cash account is extremely straightforward: you simply trade with the exact amount of funds currently available in your account. This can be relatively restrictive for a couple of different reasons.
First, cash used to purchase new stocks must be settled in your brokerage account, so if a previous transaction is still pending, you can’t use that money for a new trade. Second, you can’t make any withdrawals from a cash account until the money is fully settled.
Trading on Margin
A margin account essentially allows you to borrow money from your brokerage firm to cover short-term capital needs. The advantage is that it gives you a bit more flexibility in making time-sensitive trades.
One of the disadvantages is that you’ll have to pay a margin rate, which serves as interest on the short-term loan. Additionally, you may need to place a higher account minimum to compensate for the risk of the broker potentially losing money.
You can potentially qualify for a lower margin rate by permitting rehypothecation, which allows brokerage firms to reuse your collateral for their own purposes. Clearly, this brings additional risk to your portfolio.
If you’re a beginning investor, it’s probably wise to stick to straightforward cash trading. As you become more comfortable and active with the trading process, you can begin exploring the intricacies of margin trading with your broker.
How to Open a Brokerage Account
Opening a brokerage account isn’t terribly difficult and just requires a few pieces of personal information and, of course, money. When you’re ready to get started, gather basic materials such as your Social Security number or tax ID number, driver’s license, date of birth, and contact information.
You’ll also need employment and income information, including your employer, annual income (usually submitted using a W9 form), and your net worth. Assuming this information is easy for you to pull together, the process is both quick and easy, especially if you opt to open a brokerage account online.
You’ll also need cash to open a brokerage account. You cannot use a credit card to deposit funds. Instead, you’ll likely need to perform an electronic funds transfer from your bank account.
Keep a paper check on hand to facilitate the transfer. This process can take anywhere between a few days and a week so that the money can be verified. Once the funds hit your brokerage account, you can get started trading!
Should you use a brokerage account for retirement funds?
This is a very personal question which depends upon your retirement savings goals. First, it’s critical to take advantage of any employer-sponsored retirement accounts like a 401(k), especially if you receive a company match for your contributions. Then, consider contributing to a tax-advantaged retirement account like a Roth IRA.
There are limits on how much you can contribute each year, but you do both to enjoy different tax advantages. For example, a traditional IRA is not taxed until you begin withdrawing, making your annual contributions tax-deductible. Roth IRA contributions, on the other hand, are taxed when you make them.
The upside is that you don’t pay taxes when you start to withdraw, potentially saving you money during your retirement. If you’ve maxed out an appropriate amount of these account types, you might consider supplementing your retirement savings with a brokerage account.
Before you do, consider a few things. First, the earnings you make on selling investments are taxable, usually as capital gains tax. You’ll also want to review the amount of risk in your portfolio as you approach retirement age. Remember to review your holdings regularly, especially if you’re not a frequent trader.
Getting Started
With so many options available for brokerage accounts today, investing is more accessible — and affordable — than ever before. If you’re just beginning to get your feet wet, start by investing just a small amount of money to help you learn through rookie mistakes. Then you can grow into more sophisticated trading methods as you learn the full potential of your brokerage account.
Alternatively, you can switch to a more service-oriented account to take the day-to-day trading out of your hands. The options are quite limitless when it comes to managing a brokerage account.
Frequently Asked Questions
Are brokerage accounts insured?
The Securities Investor Protection Corporation (SIPC) offers insurance for cash and securities held in a brokerage account should the brokerage fail, though this coverage only extends to the custodial function of the brokerage. Unfortunately, it does not extend to losses resulting from inadequate investment decisions or drops in the value of investments.
In addition, SIPC guarantees up to $500,000 per customer, with a $250,000 cap on cash. However, keep in mind that SIPC insurance does not shield against market losses or other dangers associated with investing.
Which brokerage account is the most suitable for beginners?
When selecting a brokerage account as a novice investor, there are a host of factors to consider, including the kind of investment products you have your eye on, fees and commissions, user-friendliness, and customer service. Here are some of the options you may want to think about:
Robinhood: For those wishing to begin investing without incurring too many costs, Robinhood may be a good choice; it offers commission-free trading for numerous popular stocks and ETFs. However, it should be noted that Robinhood does not provide the same features as more traditional brokerage firms, such as access to research and investment advice.
E*TRADE: E*TRADE is a much-revered brokerage firm that provides a vast selection of investment products, including stocks, ETFs, mutual funds, and options. The platform also provides access to educational materials and investment guidance, as well as a navigable platform with a wide range of tools and resources for rookies. That being said, E*TRADE does impose commissions on some trades and, as such, may not be suitable for those looking to make numerous trades.
Charles Schwab: Charles Schwab is yet another highly regarded brokerage firm that offers various investment products and a user-friendly platform, and it boasts a plethora of resources and tools for novice investors, such as educational materials and investment guidance. Although it does charge commissions for certain trades, Charles Schwab does offer commission-free trading for certain ETFs.
At the end of the day, the best brokerage account for a beginner depends on their individual needs and objectives. Hence, it is advisable to shop around and compare the fees, commissions, and features of different brokerage firms before choosing.
How old do you have to be to open a brokerage account?
In the United States, you must be at least 18 to open a brokerage account in your own name. However, some brokerage firms may require a Social Security number or tax identification number to proceed.
If this applies to you, and you are under 18, it may still be possible to open an account with the help of a parent or guardian. A few brokerage firms offer custodial accounts, which are held in the name of minors, but managed by adults.
How much do you need to open a brokerage account?
The amount of capital required to start a brokerage account differs depending on the broker and type of account. Some brokers may require a minimum of $500 or $1,000 to open a regular account, while others may not have any minimum balance requirement. It all depends on the institution and the account you select.
What is a taxable brokerage account?
A taxable brokerage account is a type of investment account funded with after-tax dollars, meaning the money you put in has already been taxed at your marginal tax rate. Capital gains tax is typically assessed on the profits you make when you sell an asset for more than you paid for it, and is based on how long you hold the asset.
If held for a year or less, short-term capital gains are taxed at your ordinary income tax rate; if held for more than a year, the profits are considered long-term capital gains and are taxed at a lower rate.
Additionally, any dividends or interest earned from your investments in the account are considered taxable income, and must be reported and taxed accordingly. To ensure you make the most informed decisions and minimize your tax liability, consult a financial professional or tax advisor before investing.
A lower credit score doesn’t necessarily mean a lender will deny you a home equity loan. It does mean the loan will be more expensive, as you won’t get the lowest interest rate.
It’s possible to get a home equity loan with a fair credit score — as low as 620 — as long as other requirements around debt, equity and income are met.
Strategies for getting a loan despite your bad credit include taking on a co-signer, applying to a place where you currently bank, and writing a letter of explanation to the lender.
Alternatives to a home equity loan include personal loans, cash-out refinances, reverse mortgages and shared equity agreements.
Can you get a home equity loan with bad credit?
Yes, you can. A lower credit score doesn’t necessarily mean a lender will deny you a home equity loan. Some home equity lenders allow for FICO scores in the “fair” range (the lower 600s) as long as you meet other requirements around debt, equity and income.
That’s not to say it’ll be easy: Lenders tend to be stringent, even more so than they are with mortgages. Still, it’s not impossible. Here’s how to get a home equity loan (even) with bad credit.
Requirements for home equity loans
Not all home equity lenders have the exact same borrowing criteria, of course. Still, general guidelines do exist. Typical requirements for home equity loan applicants include:
A minimum credit score of 620
At least 15 percent to 20 percent equity in your home
A maximum debt-to-income (DTI) ratio of 43 percent, or up to 50 percent in some cases
On-time mortgage payment history
Stable employment and income
To learn the requirements for a home equity loan with a specific lender, you’ll need to do some research online or contact a loan officer directly. If you aren’t ready to apply for the loan just yet, ask for a no-credit check prequalification to avoid having the loan inquiry affect your credit score.
What are “good” and “bad” scores for home equity loans?
First, let’s define our terms. Here’s how FICO — the most popular credit scoring model — categorizes different scores:
Score
Classification
Source: MyFico.com
300-579
Poor
580-669
Fair
670-739
Good
740-799
Very Good
800-850
Excellent
When it comes to home equity loans, lenders set a high bar for creditworthiness — higher, even, than mortgages. That’s because they are considered riskier than mortgages: You, the applicant, are already carrying a big debt load. Should you default and your home get seized, the home equity loan — as a “second lien” — only gets paid after the primary (the original) mortgage.
Furthermore, home equity loans don’t have government backing, like some mortgages do. The lender bears all the risk.
So home equity lenders set stricter criteria, demanding scores squarely in the “fair” range. A score in the 500s – good enough for an FHA mortgage — will have a tough time qualifying for a home equity loan. Some lenders have loosened their standards of late and are approving applicants with scores as low as 620. But a “good” score, preferably above 700, remains the threshold for many institutions. It can vary even within one lender, depending on factors like the loan amount or other loan terms.
And of course — as with any loan — the lower your credit score, the less likely you will qualify for the best interest rates.
How to apply for a bad credit home equity loan
Before applying for a home equity loan, remember that it’s not just a question of getting the financing, but also how you can overcome a lower credit score to get the best possible rate. Here are some steps to take:
1. Check your credit report
While it’s possible to get a home equity loan with bad credit, it’s still wise to do all you can to improve your score before you apply (more on that below). A better credit score gets you a better rate. It can also help you get a bigger loan (up to the tappable amount of your equity, of course).
Check your credit reports at AnnualCreditReport.com to get a sense of where you stand. If there are any errors, like incorrect contact information, contact the credit bureau — Equifax, Experian or TransUnion — to get it updated as soon as possible.
2. Determine your equity level
To qualify for a home equity loan, lenders typically require at least 15 percent or 20 percent equity. The amount of equity you have, your home’s appraised value and combined loan-to-value (CLTV) ratio help determine how much you can borrow.
Home Equity
Bankrate’s home equity loan calculator can quickly estimate your potential home equity loan amount.
To estimate your home’s equity, take the value of your home and subtract the balance left on your mortgage. While lenders will only consider the official appraised value of your home when determining how much you can borrow, you can get an idea of your home’s value through Bankrate or a real estate listing portal or brokerage. Let’s say your home is worth $420,000 and you have $250,000 to pay on your mortgage:
$420,000 – $250,000 = $170,000
In this example, you’d have $170,000 in home equity. That doesn’t mean you can borrow $170,000, however. If the lender requires you to maintain at least 20 percent equity, you’d need to preserve $84,000 ($420,000 * 0.20). That leaves you with a home equity loan of up to $86,000 ($170,000 – $84,000).
Say you want to add a $60,000 home equity loan to the mix. That would increase your total mortgage debt — for both your first mortgage and the home equity loan — from $250,000 to $310,000.
That 20 percent equity requirement also means you’d need a CLTV ratio of 80 percent or lower. To calculate your CLTV ratio, divide the total mortgage debt ($310,000) by the value of your home ($420,000):
($250,000 + $60,000) / $420,000 = 73.8%
In this example, you’d be under the lender’s 80 percent CLTV requirement.
3. Find out your DTI ratio
The DTI ratio is a measure lenders use to determine whether you can reasonably afford to take on more debt. To calculate your DTI ratio, simply divide your monthly debt payments by your gross monthly income. For example, say you bring in $6,000 a month in income and have a $2,200 monthly mortgage payment and a $110 monthly student loan payment:
$2,310 / $6,000 x 100 = 38.5%
To make things even easier, you can use Bankrate’s DTI calculator.
For a home equity loan, most lenders look for a DTI ratio of no more than 43 percent.
4. Consider a co-signer
If your credit disqualifies you for a home equity loan, a co-signer with better credit might be able to help, in some cases.
“A co-signer can help with credit and income issues for an applicant who has a lower credit score, but ultimately the main applicant or primary borrower will have to have at least the bare minimum credit score that is required based on the bank’s underwriting guidelines,” says Ralph DiBugnara, president of Home Qualified, a real estate platform for buyers, sellers and investors.
A co-signer is just as responsible for repaying the loan as the primary borrower, even if they don’t actually intend to make payments. If you fall behind on loan payments, their credit suffers along with yours.
5. Try a lender you already work with
If your bank, credit union or mortgage lender offers home equity products, it might be able to extend some flexibility, or at least help with your application, since you’re an existing customer.
“A loan officer familiar with the details of an applicant’s situation can help them present it to an underwriter in the best possible way,” says DiBugnara.
6. Write a letter to the lender
Write a letter of explanation describing why your credit score is low, especially if it has taken a recent hit. This letter should matter-of-factly explain credit issues — avoid catastrophizing — and include any relevant paperwork, like bankruptcy documentation. If your credit score was impacted by late payments due to job loss, for example, but you’re employed now, your lender can take this context into consideration.
Lenders that offer home equity loans with bad credit
There are home equity lenders that offer loans to borrowers with lower credit scores. Here are some to consider, along with requirements:
Lender
Bankrate Score (scale of 1-5)
Loan types
Credit score minimum
Maximum CLTV
Maximum DTI
Figure
4.37
HELOC
640
75%-90%
Undisclosed
Guaranteed Rate
3.3
HELOC
620
90%-95%
50%
Spring EQ
2.7
Home equity loan, HELOC
620 for home equity loans, 680 for HELOCs
Up to 97.5%
43%
TD Bank
4.0
Home equity loan, HELOC
660
Undisclosed
Undisclosed
Connexus Credit Union
3.5
Home equity loan, HELOC
640
90%
Undisclosed
Discover
4.4
Home equity loan
660
90%
43%
Pros and cons of getting a home equity loan with bad credit
Getting a home equity loan with bad credit has its benefits and drawbacks. You can tap your equity to help with expenses, but it’s also risky.
Pros
You’ll pay a fixed rate: Home equity loans are for a fixed sum at a fixed interest rate, so you’ll know exactly how much your payment is each month. This can help you budget for and reliably pay down debt, which can help boost your credit score.
You could get out of costlier debt: If you have high-interest debt — like credit card debt — you could pay it off with a lower-rate home equity loan, then repay that loan, with one payment, for less.
Cons
You’re taking on more debt: If you’ve had trouble managing money in the past, it might not be wise to take on more debt with a home equity loan, even if you qualify.
It’ll be more expensive: A lower credit score won’t qualify you for the best home equity loan rates, meaning you’ll pay more in interest.
You could lose your home: If you fall behind on loan payments, you’ll further damage your credit. Even worse: If you’re eventually unable to pay back the loan, your home could go into foreclosure.
What to do if your home equity loan application is denied
If your application for a home equity loan is rejected, don’t despair. First, ask the lender for specific reasons why your application was denied. The answer can help you address any issues before applying in the future.
If your credit was one of the deciding factors, you can improve your score by making on-time payments and paying down any outstanding debt. If you don’t have enough equity in your home, wait until you’ve built a bigger stake (mainly by making your monthly mortgage payments) before submitting a new application.
Both these approaches may take a half-year to a year to make a significant difference in your credit profile. If you’re in more of a hurry, consider applying to other lenders, as their criteria may differ. Just bear in mind that more lenient terms often mean higher interest rates or fees.
And of course, you can consider other forms of financing.
Home equity loan alternatives if you have bad credit
If you need cash but have bad credit, a home equity loan is just one option. Here are some alternatives:
Personal loans
Personal loans can be easier to qualify for than a home equity product, and they aren’t tied to your home. This means that if you fail to repay the loan, the lender can’t go after your house. Personal loans have higher interest rates, however, and shorter repayment terms. This translates to a more expensive monthly payment compared to what you might get with a home equity loan.
Cash-out refinance
In a cash-out refinance, you take out a brand-new mortgage for more than what you owe on your existing mortgage, pay off the existing loan and take the difference in cash. Most lenders require you to maintain at least 20 percent equity in your home in order to cash out.
A caveat, however: A cash-out refi makes the most sense when you can qualify for a lower rate than what you have on your current mortgage, and if you can afford the closing costs. With bad credit, getting that lower rate might not be possible.
Reverse mortgage
Reverse mortgages allow homeowners over the age of 62 to tap their home’s equity as a source of tax-free income. These types of loans need to be repaid upon your death or when you move out or sell the home. You can use reverse mortgages for anything from medical expenses to home renovations, but you must meet some requirements to qualify.
Shared equity agreement
Home equity investment companies might work with you even if you have a lower credit score, often lower than what traditional lenders would accept. These companies offer shared equity agreements in which you receive a lump sum in exchange for an ownership percentage in your home and/or its appreciation.
Unlike with home equity lines of credit (HELOCs) or home equity loans, you don’t make monthly repayments in a shared equity arrangement. Some companies wait until you sell your home, then collect what they’re owed; others have multi-year agreements in which you’ll pay the balance in full at the end of a stated period.
Make sure you understand all the terms of this complex arrangement. Technically, you’re not borrowing money, you’re selling a stake in your home — to a financial professional who naturally wants to see a return on their investment.
How to get a HELOC with bad credit
Applying for a HELOC is pretty much the same as applying for a home equity loan, but if you have bad credit, a loan might have a slight edge over the line of credit. That’s because home equity loans have fixed interest rates and fixed payments, so you’ll know exactly what you need to repay each month. This predictability could help you better manage your budget and keep up with payments.
A HELOC, on the other hand, has a variable rate, which can cause unexpected increases in your monthly payments. For this reason, lenders often have higher credit score criteria for HELOCs than home equity loans.
Tips for improving your credit before getting a home equity loan
To increase your chances of getting approved for a home equity loan, work on improving your credit score well before applying — at least several months. Here are three tips to help you improve your score:
Pay bills on time every month. At the very least, make the minimum payment, but try to pay the balance off completely, if possible — and don’t miss that due date.
Don’t close credit cards after you pay them off. Either leave them open or charge just enough to have a small, recurring payment every month. That’s because closing a card reduces your credit utilization ratio, which can decrease your score. The recommended utilization ratio: no more than 30 percent.
Be cautious with new credit. Getting a higher credit limit on a card or getting a new card can lower your credit utilization ratio — but not if you immediately max things out or blow through the bigger balance. Treat the newly available funds as sacred savings.
FAQ on getting a home equity loan with bad credit
In general, it’s better to get a home equity loan with bad credit. A home equity loan often has a lower credit score requirement compared to a HELOC, and it comes with a fixed interest rate, so your payment will be the same every month, making it easier to plan for.
Yes — in fact, this is the rule for any type of loan, including a home equity product. The higher your credit score, the lower your interest rate.
If you’re trying to save some money, trimming some discretionary spending categories from your budget can be a good way to start.
But it isn’t necessarily the only or best way to save — especially if reducing or removing things like streaming services, concerts, or monthly massages from your budget makes it harder to stick to your plan.
Instead, it may make sense to track where your money is going for a few weeks and then take a look at all your spending categories to determine which cuts could have the biggest impact.
What Are Spending Categories?
Spending categories can help you group similar expenses together to better organize your budget. They can come in handy when you’re laying out your spending priorities, deciding how much money to allot toward various wants and needs, and determining whether an expense is essential or nonessential.
Many of the budgets you’ll see online use pretty much the same spending categories, such as housing, transportation, utilities, food, childcare, and entertainment. But you may find it’s more useful to track your spending for a while with a money tracker, and then create some of your own categories. You may choose to drill down to specific bills or go broader, breaking down your budget into just the basics.
By personalizing your spending categories, you may be able to put together a budget that’s more manageable — and, therefore, one you’re more likely to stay with.
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How Do Spending Categories Work?
To customize your spending categories, it can help to gather as much information as possible about where your money is actually going.
You can start by looking at old bank and credit card statements to get a good picture of past spending. Your bigger spending categories should be easier to figure out. Those bills are often due on the same day every month and are usually about the same amount. But you’ll also want to keep an eye out for expenses that come just once or a few times a year (such as taxes, vet bills, etc.). And, if you use cash frequently, you’ll want to determine where that money went, too.
A tracking app can help you grasp the hard truth about your spending as you move forward. That cute plant you bought for your windowsill? Pitching in for a co-worker’s going-away gift? Those little splurges can add up before you know it.
Once your spending picture comes into focus, you can divide your expenses into useful personal budget categories, and start thinking about what you might be able to trim or cut out altogether. 💡 Quick Tip: When you have questions about what you can and can’t afford, a spending tracker app can show you the answer. With no guilt trip or hourly fee.
Examples of Spending Categories
Although it can be effective to organize your spending categories in a way that’s unique to you, there are a few basic classifications that can work for most households when making a budget: They include:
Essential Spending
• Housing: This category could include your rent or mortgage payment, property taxes, homeowners or renters insurance, HOA fees, etc.
• Utilities: You could limit this to basic services like gas, electricity, and water, or you might decide to include your cell phone service, cable, and WiFi costs.
• Food: This amount could be limited to what you spend on groceries every month, or it could include your at-home and away-from-home food costs.
• Transportation: Your car payment could go in this category, along with fuel costs, parking fees, car maintenance, car insurance, public transportation, and DMV fees. You could also include the cost of Uber rides.
• Childcare: If you need childcare while you work, this cost would be considered necessary spending. If it’s for a night out, you may want to move it to the entertainment or personal care category.
• Medical Costs and Health Care: This could include your health insurance premiums, insurance co-pays and prescription costs, vision and dental care, etc.
• Clothing: Clothing is a must-have, of course, but with limits. You may want to put impulse items in a separate category as a nonessential or discretionary expense.
Non-essential Spending
• Travel: This category would be for any travel that isn’t work-related, whether it’s a road trip or a vacation in Paris.
• Entertainment: You could get pretty broad in this category, but anything from streaming services and videogames to concerts and plays could go here.
• Personal: This might be your category for things like salon visits, your gym membership, and clothes and accessories that are more of a want than a need.
• Gifts: If you’re a generous gift-giver, you may find you need a separate category for these expenses.
Other Spending
• Savings and investments: Though it isn’t “essential” for day-to-day life, putting money aside for long- and short-term goals is a must for most budgets.
• Emergency fund: This will be your go-to for unexpected car repairs, home repairs, or medical bills.
• Debt repayment: Student loan payments, credit card debt, and other balances you’re trying to pay off could fit in this category.
Pros and Cons of Spending Categories
The idea of making a budget can be daunting, particularly if you’re trying to fit your needs and wants into spending categories that aren’t suited to how you live. Here are some pros and cons to using categories for spending that might keep you motivated and help you avoid potential budgeting pitfalls.
Pros
• More control: Creating a budget with spending categories that match your lifestyle can help you put your money toward things that really matter to you.
• Less stress: If you’re living paycheck to paycheck even though you know your income is sufficient to cover your needs, a budget with realistic spending categories can help you see where your money is going.
• Better planning: Whether you’re trying to save for a vacation, wedding, house, retirement, or all of the above, including those goals in your spending categories will help ensure they get your attention.
Cons
• May feel limiting: Working with a budget can feel restrictive, especially if you’ve been winging it for a while or aren’t including enough discretionary spending.
• Time consuming: It might take some trial and error to find a budget system that works for you. And if you’re budgeting as a couple, you’ll likely have to work out some compromises when determining your spending categories.
• Requires maintenance: Budgeting isn’t a one and done. You’ll be more likely to succeed if you consistently track your spending to make sure you’re hitting your goals.
Common Spending Categories to Cut First
Often when you see or hear budgeting advice, it tends to focus on cutting back on small extras — $6 daily lattes at your favorite café, for example, or those weekly Happy Meals for the kids. Some other top spending categories that traditionally are among the first to hit the chopping block include:
• Gym memberships
• Dining out
• Subscription services you don’t use anymore
• Cable
• Personal care services you can do at home for less, such as manicures and pedicures
• Alcoholic beverages
• Cigarettes and vaping products
• Vacations
But it can also be useful to review, and potentially cut back on, how much you’re budgeting for basic living expenses, such as:
• Clothing and shoes
• Utility bills
• Groceries
• Insurance
• Cars
• Cellphones and computers
• Rent
Tips for Customizing Your Spending Categories
As you create your spending plan, keep in mind that it doesn’t have to be like anyone else’s. If you track your expenses and use that information to create your personalized budget, you may have a better chance of building a plan you can stick with.
Here are some more steps to consider as you get started:
• Be realistic. It may take a while to get to your goal, but doing even a little bit consistently can make a difference. Know yourself and do what you can.
• Don’t forget irregular expenses. Bills that you pay every month can be easy to remember. (You might even put them on autopay to make things more convenient.) But infrequent expenses such as tax bills can get away from you if you don’t include them in your spending categories.
• Avoid spending more than you have. Knowing how much you’ll have left after taxes each month is an important part of successful planning. An emergency fund can help you stay on track when unexpected expenses pop up.
• Leave room for fun. Eliminating date nights and small splurges completely could make it much harder to stay with your plan.
• Pay yourself. Make saving and investing goals a separate spending category.
• Find a budgeting method that works for you. Whether it’s the popular 50/30/20 budget — which divides your after-tax income into needs, wants, and savings — or a detailed spending breakdown with multiple categories, try various budgeting methods until you find one that motivates you.
💡 Quick Tip: Income, expenses, and life circumstances can change. Consider reviewing your budget a few times a year and making any adjustments if needed.
The Takeaway
Want to save some money but know you need to make some changes? Monitoring where your money is going every month can help you create a spending plan with categories that are customized to your needs, wants, and goals. A plan that’s realistic, but not too restrictive, can give you the kind of control and motivation you need to get and stay on track financially.
Take control of your finances with SoFi. With our financial insights and credit score monitoring tools, you can view all of your accounts in one convenient dashboard. From there, you can see your various balances, spending breakdowns, and credit score. Plus you can easily set up budgets and discover valuable financial insights — all at no cost.
With SoFi, you can keep tabs on how your money comes and goes.
FAQ
What are the four main categories in a budget?
The four main spending categories for most budgets are housing, food, utilities, and transportation. Once you’ve established how much you’ll need to cover these costs, you can move on to planning for other expenses.
What is the 50/30/20 rule of budgeting?
The 50/30/20 rule is a budgeting method that allocates your take-home income to three main spending categories: needs or essentials (50%), wants or nonessentials (30%), and saving or financial goals (20%).
What are the four characteristics of a successful budget?
A successful budget usually includes accurate income and spending projections, realistic and personalized spending categories, consistent and frequent check-ins, and solid savings goals.
Photo credit: iStock/mapodile
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Average mortgage rates rose very slightly yesterday. I’m afraid it’s a sign that Wednesday’s moderate fall wasn’t necessarily the start of much happier times.
Earlier this morning, markets were signaling that mortgage rates today could barely budge. However, these early mini-trends frequently alter direction or speed as the hours pass.
Current mortgage and refinance rates
Find your lowest rate. Start here
Program
Mortgage Rate
APR*
Change
Conventional 30-year fixed
7.29%
7.34%
+0.03
Conventional 15-year fixed
6.744%
6.822%
+0.04
30-year fixed FHA
7.129%
7.179%
+0.21
5/1 ARM Conventional
6.682%
7.918%
-0.01
Conventional 20-year fixed
7.15%
7.207%
+0.07
Conventional 10-year fixed
6.607%
6.68%
+0.02
30-year fixed VA
7.28%
7.324%
+0.2
Rates are provided by our partner network, and may not reflect the market. Your rate might be different. Click here for a personalized rate quote. See our rate assumptions See our rate assumptions here.
Should you lock your mortgage rate today?
I reckon it’s likely to be some months before we begin to see consistently falling mortgage rates. The economy is currently too robust and inflation is too warm for a sustained downward trend. And there are few signs of that changing until the summer or fall — or perhaps even later.
So my personal rate lock recommendations remain:
LOCK if closing in 7 days
LOCK if closing in 15 days
LOCK if closing in 30 days
LOCK if closing in 45 days
LOCKif closing in 60days
However, with so much uncertainty at the moment, your instincts could easily turn out to be as good as mine — or better. So, let your gut and your own tolerance for risk help guide you.
>Related: 7 Tips to get the best refinance rate
Market data affecting today’s mortgage rates
Here’s a snapshot of the state of play this morning at about 9:50 a.m. (ET). The data are mostly compared with roughly the same time the business day before, so much of the movement will often have happened in the previous session. The numbers are:
The yield on 10-year Treasury notes ticked lower to 4.62 from 4.63%. (Good for mortgage rates.) More than any other market, mortgage rates typically tend to follow these particular Treasury bond yields
Major stock indexes were mixed this morning. (Neutral for mortgage rates.) When investors buy shares, they’re often selling bonds, which pushes those prices down and increases yields and mortgage rates. The opposite may happen when indexes are lower. But this is an imperfect relationship
Oil prices decreased to $82.77 from $82.98 a barrel. (Neutral for mortgage rates*.) Energy prices play a prominent role in creating inflation and also point to future economic activity
Goldprices rose to $2,398 from $2,393 an ounce. (Neutral for mortgage rates*.) It is generally better for rates when gold prices rise and worse when they fall. Because gold tends to rise when investors worry about the economy.
CNN Business Fear & Greed index — nudged down to 32 from 35 out of 100. (Good for mortgage rates.) “Greedy” investors push bond prices down (and interest rates up) as they leave the bond market and move into stocks, while “fearful” investors do the opposite. So, lower readings are often better than higher ones
*A movement of less than $20 on gold prices or 40 cents on oil ones is a change of 1% or less. So we only count meaningful differences as good or bad for mortgage rates.
Caveats about markets and rates
Before the pandemic, post-pandemic upheavals, and war in Ukraine, you could look at the above figures and make a pretty good guess about what would happen to mortgage rates that day. But that’s no longer the case. We still make daily calls. And are usually right. But our record for accuracy won’t achieve its former high levels until things settle down.
So, use markets only as a rough guide. Because they have to be exceptionally strong or weak to rely on them. But, with that caveat, mortgage rates today look likely to be unchanged or close to unchanged. However, be aware that “intraday swings” (when rates change speed or direction during the day) are a common feature right now.
Find your lowest rate. Start here
What’s driving mortgage rates today?
Today
There are no economic reports scheduled for release today. And the words of the sole senior Federal Reserve official with a speaking engagement, Chicago Fed President Austan Goolsbee, are unlikely to affect markets. His boss, Fed Chair Jerome Powell, laid out the central bank’s position on future cuts to general interest rates as recently as Tuesday.
Of course, mortgage rates can still move on days like today. But they’re generally driven by market sentiment or occasionally by important news that affects the economy.
Next week
Next Monday is much like today: zero economic reports on the schedule. Tuesday’s purchasing managers’ indexes (PMIs) could produce some movement in mortgage rates. But that’s typically limited and temporary, a description that applies to Wednesday’s durable goods orders data, too.
Things could warm up next Thursday when the first reading of gross domestic product (GDP) for the January-March quarter is due.
And next Friday should bring the March personal consumption expenditures (PCE) price index. That’s the Federal Reserve’s favorite gauge of inflation. So, it can certainly affect mortgage rates.
Don’t forget you can always learn more about what’s driving mortgage rates in the most recent weekend edition of this daily report. These provide a more detailed analysis of what’s happening. They are published each Saturday morning soon after 10 a.m. (ET) and include a preview of the following week.
Recent trends
According to Freddie Mac’s archives, the weekly all-time lowest rate for 30-year, fixed-rate mortgages was set on Jan. 7, 2021, when it stood at 2.65%. The weekly all-time high was 18.63% on Sep. 10, 1981.
Freddie’s Apr. 18 report put that same weekly average at 7.1%, up from the previous week’s 6.88%. But note that Freddie’s data are almost always out of date by the time it announces its weekly figures.
Expert forecasts for mortgage rates
Looking further ahead, Fannie Mae and the Mortgage Bankers Association (MBA) each has a team of economists dedicated to monitoring and forecasting what will happen to the economy, the housing sector and mortgage rates.
And here are their rate forecasts for the four quarters of 2024 (Q1/24, Q2/24 Q3/24 and Q4/24).
The numbers in the table below are for 30-year, fixed-rate mortgages. Fannie’s were updated on Mar. 19 and the MBA’s on Apr. 18.
Forecaster
Q1/24
Q2/24
Q3/24
Q4/24
Fannie Mae
6.7%
6.7%
6.6%
6.4%
MBA
6.8%
6.7%
6.6%
6.4%
Of course, given so many unknowables, both these forecasts might be even more speculative than usual. And their past record for accuracy hasn’t been wildly impressive.
Important notes on today’s mortgage rates
Here are some things you need to know:
Typically, mortgage rates go up when the economy’s doing well and down when it’s in trouble. But there are exceptions. Read ‘How mortgage rates are determined and why you should care’
Only “top-tier” borrowers (with stellar credit scores, big down payments, and very healthy finances) get the ultralow mortgage rates you’ll see advertised
Lenders vary. Yours may or may not follow the crowd when it comes to daily rate movements — though they all usually follow the broader trend over time
When daily rate changes are small, some lenders will adjust closing costs and leave their rate cards the same
Refinance rates are typically close to those for purchases.
A lot is going on at the moment. And nobody can claim to know with certainty what will happen to mortgage rates in the coming hours, days, weeks or months.
Find your lowest mortgage rate today
You should comparison shop widely, no matter what sort of mortgage you want. Federal regulator the Consumer Financial Protection Bureau found in May 2023:
“Mortgage borrowers are paying around $100 a month more depending on which lender they choose, for the same type of loan and the same consumer characteristics (such as credit score and down payment).”
In other words, over the lifetime of a 30-year loan, homebuyers who don’t bother to get quotes from multiple lenders risk losing an average of $36,000. What could you do with that sort of money?
Verify your new rate
Mortgage rate methodology
The Mortgage Reports receives rates based on selected criteria from multiple lending partners each day. We arrive at an average rate and APR for each loan type to display in our chart. Because we average an array of rates, it gives you a better idea of what you might find in the marketplace. Furthermore, we average rates for the same loan types. For example, FHA fixed with FHA fixed. The end result is a good snapshot of daily rates and how they change over time.
How your mortgage interest rate is determined
Mortgage and refinance rates vary a lot depending on each borrower’s unique situation.
Factors that determine your mortgage interest rate include:
Overall strength of the economy — A strong economy usually means higher rates, while a weaker one can push current mortgage rates down to promote borrowing
Lender capacity — When a lender is very busy, it will increase rates to deter new business and give its loan officers some breathing room
Property type (condo, single-family, town house, etc.) — A primary residence, meaning a home you plan to live in full time, will have a lower interest rate. Investment properties, second homes, and vacation homes have higher mortgage rates
Loan-to-value ratio (determined by your down payment) — Your loan-to-value ratio (LTV) compares your loan amount to the value of the home. A lower LTV, meaning a bigger down payment, gets you a lower mortgage rate
Debt-To-Income ratio — This number compares your total monthly debts to your pretax income. The more debt you currently have, the less room you’ll have in your budget for a mortgage payment
Loan term — Loans with a shorter term (like a 15-year mortgage) typically have lower rates than a 30-year loan term
Borrower’s credit score — Typically the higher your credit score is, the lower your mortgage rate, and vice versa
Mortgage discount points — Borrowers have the option to buy discount points or ‘mortgage points’ at closing. These let you pay money upfront to lower your interest rate
Remember, every mortgage lender weighs these factors a little differently.
To find the best rate for your situation, you’ll want to get personalized estimates from a few different lenders.
Verify your new rate. Start here
Are refinance rates the same as mortgage rates?
Rates for a home purchase and mortgage refinance are often similar.
However, some lenders will charge more for a refinance under certain circumstances.
Typically when rates fall, homeowners rush to refinance. They see an opportunity to lock in a lower rate and payment for the rest of their loan.
This creates a tidal wave of new work for mortgage lenders.
Unfortunately, some lenders don’t have the capacity or crew to process a large number of refinance loan applications.
In this case, a lender might raise its rates to deter new business and give loan officers time to process loans currently in the pipeline.
Also, cashing out equity can result in a higher rate when refinancing.
Cash-out refinances pose a greater risk for mortgage lenders, so they’re often priced higher than new home purchases and rate-term refinances.
Check your refinance rates today. Start here
How to get the lowest mortgage or refinance rate
Since rates can vary, always shop around when buying a house or refinancing a mortgage.
Comparison shopping can potentially save thousands, even tens of thousands of dollars over the life of your loan.
Here are a few tips to keep in mind:
1. Get multiple quotes
Many borrowers make the mistake of accepting the first mortgage or refinance offer they receive.
Some simply go with the bank they use for checking and savings since that can seem easiest.
However, your bank might not offer the best mortgage deal for you. And if you’re refinancing, your financial situation may have changed enough that your current lender is no longer your best bet.
So get multiple quotes from at least three different lenders to find the right one for you.
2. Compare Loan Estimates
When shopping for a mortgage or refinance, lenders will provide a Loan Estimate that breaks down important costs associated with the loan.
You’ll want to read these Loan Estimates carefully and compare costs and fees line-by-line, including:
Interest rate
Annual percentage rate (APR)
Monthly mortgage payment
Loan origination fees
Rate lock fees
Closing costs
Remember, the lowest interest rate isn’t always the best deal.
Annual percentage rate (APR) can help you compare the ‘real’ cost of two loans. It estimates your total yearly cost including interest and fees.
Also, pay close attention to your closing costs.
Some lenders may bring their rates down by charging more upfront via discount points. These can add thousands to your out-of-pocket costs.
3. Negotiate your mortgage rate
You can also negotiate your mortgage rate to get a better deal.
Let’s say you get loan estimates from two lenders. Lender A offers the better rate, but you prefer your loan terms from Lender B. Talk to Lender B and see if they can beat the former’s pricing.
You might be surprised to find that a lender is willing to give you a lower interest rate in order to keep your business.
And if they’re not, keep shopping — there’s a good chance someone will.
Fixed-rate mortgage vs. adjustable-rate mortgage: Which is right for you?
Mortgage borrowers can choose between a fixed-rate mortgage and an adjustable-rate mortgage (ARM).
Fixed-rate mortgages (FRMs) have interest rates that never change unless you decide to refinance. This results in predictable monthly payments and stability over the life of your loan.
Adjustable-rate loans have a low interest rate that’s fixed for a set number of years (typically five or seven). After the initial fixed-rate period, the interest rate adjusts every year based on market conditions.
With each rate adjustment, a borrower’s mortgage rate can either increase, decrease, or stay the same. These loans are unpredictable since monthly payments can change each year.
Adjustable-rate mortgages are fitting for borrowers who expect to move before their first rate adjustment, or who can afford a higher future payment.
In most other cases, a fixed-rate mortgage is typically the safer and better choice.
Remember, if rates drop sharply, you are free to refinance and lock in a lower rate and payment later on.
How your credit score affects your mortgage rate
You don’t need a high credit score to qualify for a home purchase or refinance, but your credit score will affect your rate.
This is because credit history determines risk level.
Historically speaking, borrowers with higher credit scores are less likely to default on their mortgages, so they qualify for lower rates.
So, for the best rate, aim for a credit score of 720 or higher.
Mortgage programs that don’t require a high score include:
Conventional home loans — minimum 620 credit score
FHA loans — minimum 500 credit score (with a 10% down payment) or 580 (with a 3.5% down payment)
VA loans — no minimum credit score, but 620 is common
USDA loans — minimum 640 credit score
Ideally, you want to check your credit report and score at least 6 months before applying for a mortgage. This gives you time to sort out any errors and make sure your score is as high as possible.
If you’re ready to apply now, it’s still worth checking so you have a good idea of what loan programs you might qualify for and how your score will affect your rate.
You can get your credit report from AnnualCreditReport.com and your score from MyFico.com.
How big of a down payment do I need?
Nowadays, mortgage programs don’t require the conventional 20 percent down.
Indeed, first-time home buyers put only 6 percent down on average.
Down payment minimums vary depending on the loan program. For example:
Conventional home loans require a down payment between 3% and 5%
FHA loans require 3.5% down
VA and USDA loans allow zero down payment
Jumbo loans typically require at least 5% to 10% down
Keep in mind, a higher down payment reduces your risk as a borrower and helps you negotiate a better mortgage rate.
If you are able to make a 20 percent down payment, you can avoid paying for mortgage insurance.
This is an added cost paid by the borrower, which protects their lender in case of default or foreclosure.
But a big down payment is not required.
For many people, it makes sense to make a smaller down payment in order to buy a house sooner and start building home equity.
Verify your new rate. Start here
Choosing the right type of home loan
No two mortgage loans are alike, so it’s important to know your options and choose the right type of mortgage.
The five main types of mortgages include:
Fixed-rate mortgage (FRM)
Your interest rate remains the same over the life of the loan. This is a good option for borrowers who expect to live in their homes long-term.
The most popular loan option is the 30-year mortgage, but 15- and 20-year terms are also commonly available.
Adjustable-rate mortgage (ARM)
Adjustable-rate loans have a fixed interest rate for the first few years. Then, your mortgage rate resets every year.
Your rate and payment can rise or fall annually depending on how the broader interest rate trends.
ARMs are ideal for borrowers who expect to move prior to their first rate adjustment (usually in 5 or 7 years).
For those who plan to stay in their home long-term, a fixed-rate mortgage is typically recommended.
Jumbo mortgage
A jumbo loan is a mortgage that exceeds the conforming loan limit set by Fannie Mae and Freddie Mac.
In 2023, the conforming loan limit is $726,200 in most areas.
Jumbo loans are perfect for borrowers who need a larger loan to purchase a high-priced property, especially in big cities with high real estate values.
FHA mortgage
A government loan backed by the Federal Housing Administration for low- to moderate-income borrowers. FHA loans feature low credit score and down payment requirements.
VA mortgage
A government loan backed by the Department of Veterans Affairs. To be eligible, you must be active-duty military, a veteran, a Reservist or National Guard service member, or an eligible spouse.
VA loans allow no down payment and have exceptionally low mortgage rates.
USDA mortgage
USDA loans are a government program backed by the U.S. Department of Agriculture. They offer a no-down-payment solution for borrowers who purchase real estate in an eligible rural area. To qualify, your income must be at or below the local median.
Bank statement loan
Borrowers can qualify for a mortgage without tax returns, using their personal or business bank account as evidence of their financial circumstances. This is an option for self-employed or seasonally-employed borrowers.
Portfolio/Non-QM loan
These are mortgages that lenders don’t sell on the secondary mortgage market. And this gives lenders the flexibility to set their own guidelines.
Non-QM loans may have lower credit score requirements or offer low-down-payment options without mortgage insurance.
Choosing the right mortgage lender
The lender or loan program that’s right for one person might not be right for another.
Explore your options and then pick a loan based on your credit score, down payment, and financial goals, as well as local home prices.
Whether you’re getting a mortgage for a home purchase or a refinance, always shop around and compare rates and terms.
Typically, it only takes a few hours to get quotes from multiple lenders. And it could save you thousands in the long run.
Time to make a move? Let us find the right mortgage for you
Current mortgage rates methodology
We receive current mortgage rates each day from a network of mortgage lenders that offer home purchase and refinance loans. Those mortgage rates shown here are based on sample borrower profiles that vary by loan type. See our full loan assumptions here.
Editor’s Note: Options are not suitable for all investors. Options involve risks, including substantial risk of loss and the possibility an investor may lose the entire amount invested in a short period of time. Please see the Characteristics and Risks of Standardized Options.
Forex options, also called currency options, are contracts that give the purchaser the option to buy foreign currency from the exchange at a specific price on or before a specific date.
Like stock options, there are two different types of forex options: A call option gives the holder the right to buy currency at a specified price (the strike price), while the holder of a put option has the right to sell a currency at a predetermined price.
Those investing in foreign countries may use forex options as a way to hedge against unfavorable fluctuations of foreign currencies or to speculate on volatility.
What Is Forex Options Trading?
Like options in the stock market, currency options are a derivative instrument. In this case, the underlying asset is a foreign currency pair. Currencies (also known as FX or forex) are generally traded in pairs. One major currency pair, for example, is EUR/USD, which indicates the value of the euro against the U.S. dollar.
Foreign currency options are a way to invest in foreign currency markets without trading in the actual currencies themselves. 💡 Quick Tip: Before opening an investment account, know your investment objectives, time horizon, and risk tolerance. These fundamentals will help keep your strategy on track and with the aim of meeting your goals.
How Forex Options Trading Works
If you understand how to trade options in the stock market, currency options work in a similar manner. Buying a currency call option gives you the right (but not the obligation) to purchase a particular foreign currency at a specified price (the strike price) at any time before its expiration date.
A currency put option works in a similar way, except that the buyer has the right (but not the obligation) to sell a currency at a given price before the expiration of the option.
You can also purchase combinations of both put and call options at different strike prices and/or different expiration dates, depending on how you think the market will move. You can always close out your position before the options expire. Owning options gives you exposure to movements in the exchange rate without having to actually purchase the currency.
Types of Forex Options Available
The most basic currency options come in two types: so-called ‘vanilla’ calls and puts.
Vanilla Call and Put Options
A forex call option gives the holder the right (but not the obligation) to purchase a given currency at a specific price, any time on or before the option’s expiration date. You would generally buy a forex call option if you have a bullish outlook on a particular currency.
A forex put option works in the opposite manner. If you hold a put option, you have the right (but not the obligation) to sell a specific currency at a particular price before the options expire.
Purchasing a put option is something that you would do if you have a bearish outlook on the underlying currency.
SPOT Options
Another type of currency option is single payment options trading (SPOT). With a SPOT option, an investor and broker can set more detailed conditions for the option to pay out. These conditions are either met, or not. Because there are only two possible outcomes upon the option expiring, these options are sometimes called binary currency options.
Example of Trading Forex Options
If an investor expects the value of a currency will fall, they may choose to buy a put option to earn the right (but not the obligation) to sell the currency in question at a predetermined price during a set timeframe.
For example, if a U.S. investor expects the euro will fall in value against the U.S. dollar, they may buy a EUR/USD put option. Essentially, the option can help the option holder protect themselves against depreciation of a given currency. 💡 Quick Tip: Options can be a cost-efficient way to place certain trades, because you typically purchase options contracts, not the underlying security. That said, options trading can be risky, and best done by those who are not entirely new to investing.
Benefits and Risks of Forex Options Trading
Here are some of the pros and cons of trading forex options:
Benefits
Using forex options can be a cost effective way to potentially help hedge an investors’ portfolio against currency risk. For example, an investor who owns foreign stocks may consider investing in local currencies via options to reduce currency risk. Investors may want to weigh the option’s premium, as well as risk against possible outcomes.
Risks
Like any investment, trading currency options comes with a set of risks. Options are complex, high-risk instruments that require investors to understand how they work.
Currency values may fluctuate based on macroeconomic events, economic data, or political events. This means that FX options investors must bear in mind the risk profile of particular countries, as well as that of their own portfolio. Because currencies react to interest rates, trading currency options also bears interest rate risk. Traders who use leverage to potentially earn higher profits with less money, also risk losing more than their initial investment.
Benefits
Risks
Using forex options is a low-cost way to potentially hedge against adverse currency moves.
The price of currencies can be extremely volatile.
Using leverage, there is the potential for higher profits with less money invested.
Political risk as currency markets react to local governments’ policies.
You have many different ways to trade depending on your market outlook.
Options may be less liquid than the currencies themselves.
The Takeaway
Trading forex options can be a way for you to invest in the foreign currency market without actually owning the currency itself. You can use call options, put options, or a combination based on how you think the market will perform.
Qualified investors who are ready to try their hand at options trading, despite the risks involved, might consider checking out SoFi’s options trading platform. The platform’s user-friendly design allows investors to trade through the mobile app or web platform, and get important metrics like breakeven percentage, maximum profit/loss, and more with the click of a button.
Plus, SoFi offers educational resources — including a step-by-step in-app guide — to help you learn more about options trading. Trading options involves high-risk strategies, and should be undertaken by experienced investors.
For a limited time, opening and funding an Active Invest account gives you the opportunity to get up to $1,000 in the stock of your choice.
FAQ
What are some types of forex options?
The two kinds of forex options are call options and put options. A call option allows the holder to buy the specified currency at a given strike price, while a put option allows the holder to sell a given currency at a particular price. There are also SPOT, or binary currency options.
What is a forex call option?
A forex call option allows the holder to buy a specific currency at a specific price, on or before the expiration date.
How are forex options settled?
If you hold a currency option that is in the money at expiration, there are two possibilities for settlement. You can settle the option with cash or by a physical delivery of currency. If you are short an in-the-money option at expiration, you may need to deposit cash into your account to settle your account.
Photo credit: iStock/supersizer
SoFi Invest® INVESTMENTS ARE NOT FDIC INSURED • ARE NOT BANK GUARANTEED • MAY LOSE VALUE SoFi Invest encompasses two distinct companies, with various products and services offered to investors as described below:
Individual customer accounts may be subject to the terms applicable to one or more of these platforms.
1) Automated Investing and advisory services are provided by SoFi Wealth LLC, an SEC-registered investment adviser (“SoFi Wealth“). Brokerage services are provided to SoFi Wealth LLC by SoFi Securities LLC.
2) Active Investing and brokerage services are provided by SoFi Securities LLC, Member FINRA (www.finra.org)/SIPC(www.sipc.org). Clearing and custody of all securities are provided by APEX Clearing Corporation.
For additional disclosures related to the SoFi Invest platforms described above please visit SoFi.com/legal.
Neither the Investment Advisor Representatives of SoFi Wealth, nor the Registered Representatives of SoFi Securities are compensated for the sale of any product or service sold through any SoFi Invest platform.
Options involve risks, including substantial risk of loss and the possibility an investor may lose the entire amount invested in a short period of time. Before an investor begins trading options they should familiarize themselves with the Characteristics and Risks of Standardized Options . Tax considerations with options transactions are unique, investors should consult with their tax advisor to understand the impact to their taxes. Disclaimer: The projections or other information regarding the likelihood of various investment outcomes are hypothetical in nature, do not reflect actual investment results, and are not guarantees of future results. Financial Tips & Strategies: The tips provided on this website are of a general nature and do not take into account your specific objectives, financial situation, and needs. You should always consider their appropriateness given your own circumstances.
Claw Promotion: Customer must fund their Active Invest account with at least $25 within 30 days of opening the account. Probability of customer receiving $1,000 is 0.028%. See full terms and conditions.
Along the scenic shores of the Chesapeake Bay, Maryland offers a captivating blend of vibrant urban centers and picturesque landscapes. From the bustling streets of Baltimore, with its historic charm and lively cultural scene, to the quaint waterfront town of Annapolis, steeped in colonial heritage and nautical tradition, this state has a lot to offer its residents. However, living in Maryland comes with its challenges. In this ApartmentGuide article, we’ll dive into the pros and cons of living in Maryland giving you a clear picture of what to expect.
Renting in Maryland snapshot
1. Pro: Rich historical sites
Maryland has a wealth of rich historical sites that offer residents a fascinating glimpse into the past. From the colonial-era streets of Annapolis to the Civil War battlefields of Antietam, history buffs can immerse themselves in the state’s diverse heritage. These landmarks along with historical sites provide insight into Maryland’s significant role in shaping American history.
2. Con: High cost of living
Maryland’s high cost of living, especially in cities like Bethesda and Columbia, poses a challenge for many residents. Housing costs, including rent and property prices, are notably steep, making it difficult to afford adequate accommodation. In fact, the median sale price in Bethesda is $1,123,750 where rent for a one-bedroom apartment is $2,522. Additionally, expenses for everyday necessities such as groceries, healthcare, and transportation tend to be higher compared to national averages, impacting residents’ overall quality of life and financial well-being.
3. Pro: Access to quality education
Maryland offers residents access to quality education through its esteemed institutions and strong public school system. Universities like Johns Hopkins and the University of Maryland rank among the nation’s top academic institutions, providing students with world-class education and research opportunities.
4. Con: Traffic congestion
Maryland’s major urban centers, particularly the Baltimore-Washington metropolitan area, grapple with significant traffic congestion. Daily commutes are often plagued by long delays and gridlock on highways and major thoroughfares.
5. Pro: Outdoor recreation
From the sandy beaches of Ocean City to the rolling hills of the Appalachian Mountains in Western Maryland, the state’s varied terrain caters to outdoor enthusiasts of all kinds. Residents can explore scenic hiking trails in places like Patapsco Valley State Park, kayak along the tranquil waters of the Chesapeake Bay, or enjoy birdwatching in the marshes of Blackwater National Wildlife Refuge on the Eastern Shore.
6. Con: Weather variability
Maryland’s weather is characterized by variability, with residents experiencing a range of climatic conditions throughout the year. Winters can be cold and snowy, while summers are hot and humid, with occasional heatwaves. Additionally, the state is prone to severe weather events such as thunderstorms, hurricanes, and nor’easters, which can disrupt daily life and pose risks to property and safety.
7. Pro: Delicious seafood
Maryland’s proximity to the Chesapeake Bay and the Atlantic Ocean ensures a bounty of delicious seafood for residents to enjoy. The state is renowned for its blue crabs, prized for their sweet and succulent meat, which are a staple of Maryland cuisine. Residents can indulge in iconic dishes like crab cakes, steamed crabs, and Maryland crab soup at local seafood restaurants and crab shacks throughout the state.
8. Con: High pollen levels
Maryland’s diverse environment and seasonal changes contribute to high pollen levels, triggering allergies for many residents. Springtime brings pollen from trees like oak, maple, and birch, while summer and fall see increased pollen from grasses and weeds.
9. Pro: Proximity to major cities
Maryland’s strategic location along the East Coast provides residents with easy access to major cities like Washington D.C. and Philadelphia. Commuters can take advantage of commuter rail services like MARC and Amtrak to travel to urban centers for work or leisure. This proximity to major cities also offers cultural amenities, entertainment options, and job opportunities for Maryland residents.
10. Con: High humidity
Maryland’s humid subtropical climate brings high humidity levels, especially during the summer months, creating uncomfortable conditions for residents. Coastal areas like Annapolis and Ocean City experience muggy air and oppressive humidity, making outdoor activities challenging. The combination of heat and humidity can lead to discomfort, dehydration, and heat-related illnesses.
11. Pro: Sports culture
12. Con: Property taxes
Maryland’s high property taxes are largely influenced by the state’s higher housing costs, especially in affluent areas like Bethesda and Potomac. The demand for housing in these regions drives up property values, resulting in higher assessed values and subsequently higher property tax bills for homeowners. These additional costs should be considered when jumping from renting to homeownership.
Methodology : The population data is from the United States Census Bureau, walkable cities are from Walk Score, and rental data is from ApartmentGuide.
The main types of mortgages are conventional loans, government-backed loans, jumbo loans, fixed-rate loans and adjustable-rate loans.
There are other types of mortgages for various purposes, such as building or renovating a home or investing in property.
The right mortgage for you depends on the strength of your credit score and finances along with your goals.
Most of us need a mortgage to buy a home, but this type of loan isn’t one-size-fits-all. To help you find the right home loan for your needs, here’s our guide to the five main types of mortgages.
Types of home loans
There are five main kinds of mortgages, each with their own benefits and features.
Conventional loan: Best for borrowers with good credit scores
Jumbo loan: Best for borrowers with good credit looking to buy a more expensive home
Government-backed loan: Best for borrowers with lower credit scores and minimal cash for a down payment
Fixed-rate mortgage: Best for borrowers who’d prefer a predictable, set monthly payment for the duration of the loan
Adjustable-rate mortgage: Best for borrowers who aren’t planning to stay in the home for an extended period, prefer lower payments in the short term or are comfortable with possibly having to pay more in the future
1. Conventional loan
Conventional loans, the most popular type of mortgage, come in two flavors: conforming and non-conforming.
Conforming loans: A conforming loan “conforms” to a set of Federal Housing Finance Agency (FHFA) standards, including guidelines around credit, debt and loan size. When a conventional loan meets these standards, it’s eligible to be purchased by Fannie Mae and Freddie Mac, the two government-sponsored enterprises (GSEs) that back much of the mortgage market.
Non-conforming loans: These loans do not meet one or more of the FHFA’s standards. One of the most common types of non-conforming loan is a jumbo loan, a mortgage in an amount that exceeds the conforming loan limit. Non-conforming loans can’t be purchased by the GSEs, so they’re considered a riskier prospect for lenders.
Pros of conventional loans
Available from the majority of lenders
Can be used to finance primary residences, second or vacation homes and investment or rental properties
Can put down as little as 3% for a conforming, fixed-rate loan
Cons of conventional loans
Need a credit score of at least 620 to qualify
Lower debt-to-income (DTI) ratio threshold compared to other types of mortgages
Need to pay private mortgage insurance (PMI) premiums if putting less than 20% down
Who are conventional loans best for?
If you have a strong credit score and can afford to make a sizable down payment, a conventional mortgage is the best pick. The 30-year, fixed-rate option is the most popular choice for homebuyers. Compare conventional loan rates.
2. Jumbo loan
Jumbo mortgages are home loans in an amount that surpasses FHFA’s conforming loan limits. In 2024, that means any loan over $766,550, or $1,149,825 in higher-cost areas. Because these are bigger loans ineligible to be purchased by the GSEs, they can present more risk.
Pros of jumbo loans
Can finance a more expensive home
Competitive interest rates, nowadays on par with those on conforming loans
Often the only option in areas with high home values
Cons of jumbo loans
Not available with every lender
Higher credit score requirement, often a minimum of 700
Higher down payment requirement, often 10% to 20%
Who are jumbo loans best for?
If you’re looking to finance a home with a purchase price exceeding the latest conforming loan limits, a jumbo loan is the best route. Compare jumbo loan rates.
3. Government-backed loan
The U.S. government isn’t a mortgage lender, but it does play a role in making homeownership accessible to more Americans by backing three main types of mortgages:
FHA loans: Insured by the Federal Housing Administration (FHA), FHA loans can be had with a credit score as low as 580 and a 3.5 percent down payment, or a score as low as 500 with 10 percent down. FHA loans also require you to pay mortgage insurance premiums, adding to your costs. These premiums help the FHA insure lenders against borrowers who default. In addition, you can’t borrow as much money with an FHA loan; its ceiling is much lower than those on conventional conforming loans.
VA loans: Guaranteed by the U.S. Department of Veterans Affairs (VA), VA loans are for eligible members of the U.S. military (active duty, veterans, National Guard and Reservists) as well as surviving spouses. There’s no minimum down payment, mortgage insurance or credit score requirement, but you’ll need to pay a funding fee ranging from 1.25 percent to 3.3 percent at closing.
USDA loans: Guaranteed by the U.S. Department of Agriculture (USDA) loans help moderate- to low-income borrowers buy homes in rural, USDA-eligible areas. These loans don’t have a credit score or down payment requirement, but do charge guarantee fees.
Pros of government-backed loans
Much more flexible credit and down payment guidelines
Help borrowers who wouldn’t otherwise qualify
Cons of government-backed loans
Additional cost for FHA mortgage insurance, VA funding fee and USDA guarantee fees
Limited to borrowers buying a home priced within FHA loan limits or in a rural area, or servicemembers
Who are government-backed loans best for?
If your credit or down payment prevents you from qualifying for a conventional loan, an FHA loan can be an attractive alternative. Likewise, if you’re buying a home in a rural area or are eligible for a VA loan, these options might be easier to qualify for. Compare FHA loan rates and VA loan rates.
4. Fixed-rate mortgage
Fixed-rate mortgages maintain the same interest rate over the life of your loan, which means your monthly mortgage payment (the loan principal and interest) always stays the same. Fixed loans typically come in terms of 15 years or 30 years, although some lenders offer flexible term lengths.
Pros of fixed-rate mortgages
Fixed monthly mortgage payment
Easier to budget for
Cons of fixed-rate mortgages
Interest rates usually higher than introductory rates on adjustable-rate loans
Need to refinance to get a lower rate
Who are fixed-rate mortgages best for?
If you’re planning to stay in your home for some time and looking for the stability of a monthly payment that doesn’t change (notwithstanding homeowners insurance premium and property tax increases), a fixed-rate mortgage is right for you. Compare current mortgage rates.
5. Adjustable-rate mortgage (ARM)
In contrast to fixed-rate loans, adjustable-rate mortgages (ARMs) come with interest rates that change over time. Typically with an ARM, you’ll get a lower, fixed introductory rate for a set period. After this period, the rate changes, either up or down, at predetermined intervals for the remainder of the loan term. A 5/6 ARM, for example, has a fixed rate for the first five years; the rate then increases or decreases based on economic conditions every six months until you pay it off. When your rate goes up, your monthly mortgage payment does as well, and vice versa.
Pros of ARMs
Lower introductory rates
Could pay less over time if prevailing interest rates fall
Cons of ARMs
Ongoing risk of higher monthly payments
Tougher to plan your budget as rate changes
Who are adjustable-rate mortgages best for?
If you don’t plan to stay in your home beyond a few years, an ARM could help you save on interest payments. However, it’s important to be comfortable with a certain level of risk that your payments might increase if you’re still in the home. Compare ARM loan rates.
Other types of home loans
In addition to these common kinds of mortgages, there are other types you might encounter when shopping around for a loan:
Construction loans
If you want to build a home, a construction loan can be a good financing choice — especially a construction-to-permanent loan, which converts to a traditional mortgage once you move into the residence. These short-term loans are best for those who can make a higher down payment.
Interest-only mortgages
With an interest-only mortgage, the borrower makes interest-only payments for a set period – usually five or seven years — followed by payments for both principal and interest. You won’t build equity as quickly with this loan since you’re initially only paying back interest. These loans are best for those who know they can sell or refinance, or reasonably expect to afford the higher monthly payment later.
Piggyback loans
A piggyback loan, also referred to as an 80/10/10 loan, involves two loans: one for 80 percent of the home price and another for 10 percent. You’ll make a down payment for the remaining 10 percent. These loan products are designed to help the borrower avoid paying for mortgage insurance, but also require two sets of closing costs. You’ll also accrue interest on two loans, making this unconventional arrangement best for those who’ll actually save money using it.
Balloon mortgages
A balloon mortgage requires a large payment at the end of the loan term. Generally, you’ll make payments based on a 30-year term, but only for a short time, such as seven years. When the loan term ends, you’ll make a large payment on the outstanding balance, which can be unmanageable if you’re not prepared. These loans are best for those who have the stable financial resources needed to make a large balloon payment once the loan term ends.
Portfolio loans
While most lenders sell the loans they make to investors (more on that here), some choose to keep them in their portfolio, or “on the books.” Because the lender holds onto these loans, they don’t have to adhere to FHFA or other standards. As such, they might have more lenient qualifying requirements.
Renovation mortgages
If you want to purchase a home that needs major work, you could use a renovation loan. These loans combine the costs of purchasing and renovation into one mortgage.
Physician loans
Because doctors often have large amounts of medical school debt, qualifying for a traditional mortgage can be hard, even with a good-paying job. Enter physician loans, which help doctors, nurses and other health professionals buy a home.
Non-qualifying loans
Non-qualifying mortgages or non-QM loans don’t meet certain standards set by the Consumer Financial Protection Bureau, so they offer more lenient credit and income requirements. This might appeal to a borrower with unique circumstances, such as an inconsistent income. Some non-QM loans, however, come with higher down payments and interest rates.
How to choose the right type of mortgage loan for you
Depending on your credit and finances, more than one type of mortgage could make sense for you. Likewise, you might be able to strike some loan types off your list immediately. You can’t get a VA loan, for example, if you or your spouse haven’t served in the military.
As you think about which type of mortgage to get, consider:
Your credit score – Which loan types do you qualify for from a credit standpoint?
Your anticipated down payment – Do you need a low- or no-down payment loan? What about down payment assistance? Will you be using gift funds from family or friends?
Your debt and income – After debt payments, is your monthly income sufficient to cover a mortgage?
Your appetite for risk – Do you need a stable monthly payment? Do you expect to earn more money in the future?
Your future plans – Do you plan to move in the short term? Do you want to pay off your mortgage sooner than 30 years?
Once you’ve weighed these questions, compare mortgage lenders and talk to a loan officer. They can help you pinpoint the best fit. Here’s more on how to get a mortgage.
In the far northwestern corner of the United States lies the vast landscape of Alaska. Renowned for its rugged wilderness, towering mountains, and icy fjords, Alaska offers an adventurous lifestyle for those seeking it. Cities like Anchorage, with its urban amenities amidst stunning natural surroundings, and Juneau, the picturesque capital nestled amid mountains and glaciers, exemplify life in Alaska. However, living in Alaska does present its own unique challenges. In this ApartmentGuide article, we’ll outline the pros and cons of living in Alaska, helping you decide if the “Last Frontier” state is right for you.
Renting in Alaska snapshot
1. Pro: Stunning natural beauty
Alaska’s landscapes offer breathtaking views that include towering mountains, expansive forests, and pristine waterways. Residents can enjoy outdoor activities like hiking in Denali National Park or kayaking among glaciers in Kenai Fjords National Park, immersing themselves in nature. Whether it’s witnessing the northern lights or encountering majestic wildlife like bears and whales in their natural habitats, Alaska offers unparalleled experiences.
2. Con: Extreme weather conditions
Alaska is known for its extreme weather conditions, ranging from frigid temperatures in the winter to intense storms and high winds. For instance, parts of the state can experience temperatures dropping below -50°F during the coldest months, posing risks of frostbite and hypothermia. Coastal areas face the brunt of severe storms, with the Bering Sea experiencing powerful winter storms known as “Bering Bombs,” characterized by hurricane-force winds and heavy snowfall.
3. Pro: Unique wildlife experiences
Alaska offers unparalleled wildlife experiences, with diverse ecosystems providing habitats for a wide range of species. Visitors can witness majestic creatures like grizzly bears fishing for salmon at Brooks Falls in Katmai National Park or marvel at pods of orcas swimming along the Inside Passage. Additionally, Alaska’s remote wilderness areas offer opportunities for wildlife enthusiasts to observe rare and iconic species.
4. Con: Geographic isolation
Many areas in Alaska are remote and can only be accessed by plane or boat, leading to a sense of isolation from the rest of the country. This can also result in higher costs for goods and services due to transportation challenges. Cities like Unalaska is a great example where you’ll need to take either a ferry or plane to reach it.
5. Pro: Northern lights
Alaska offers prime viewing opportunities for the mesmerizing aurora borealis, or northern lights, thanks to its proximity to the Earth’s magnetic pole. Visitors and residents alike can witness the dancing ribbons of colorful light illuminating the night sky, especially during the winter months. Popular viewing spots include Fairbanks, Denali National Park, and remote areas away from city lights.
6. Con: Harsh driving conditions
Alaska’s harsh winter conditions create challenging driving environments, with icy roads and snowstorms posing significant hazards to motorists. Drivers must navigate treacherous conditions, particularly in rural and remote areas where road maintenance may be limited.
7. Pro: No state income or sales tax
Alaska stands out as one of the few states in the U.S. with no state income or sales tax, offering residents significant financial savings. This unique tax structure allows Alaskans to keep more of their income and enjoy lower overall tax burdens compared to residents of other states.
8. Con: High cost of living
Despite the absence of state income and sales tax, the cost of living in Alaska is high due to the expense of transporting goods to the state. This affects prices for groceries, utilities, and other essentials, making daily life more expensive. To take this into perspective, Alaska has the highest food prices in the nation as well as healthcare costs. If you’re planning a move to this state, you’ll want to make sure to budget in these factors.
9. Pro: Vibrant indigenous cultures
Alaska is rich in indigenous cultures, with a significant portion of its population belonging to Native Alaskan communities. This cultural diversity is celebrated through various festivals, arts, and traditional practices, enriching the state’s cultural landscape. The Festival of Native Arts in Fairbanks is a great example as it provides cultural education through traditional dance, art and music.
10. Con: Limited job opportunities
The job market in Alaska is heavily dependent on industries like oil, fishing, and tourism, which can be susceptible to economic fluctuations. This can lead to limited job opportunities in other sectors, affecting employment prospects for residents.
11. Pro: Outdoor recreational opportunities
Alaska’s vast and varied landscapes provide unparalleled outdoor recreational opportunities for adventurers of all kinds. Whether it’s hiking through Denali National Park, fishing in world-class rivers, or skiing down pristine slopes, Alaska offers endless possibilities for outdoor enthusiasts.
12. Con: Winter darkness
Alaska experiences long periods of darkness during the winter months, especially in northern towns such as Utqiaġvik, which can be challenging for residents adjusting to reduced daylight hours. The lack of sunlight can affect mood and energy levels, potentially leading to feelings of seasonal affective disorder (SAD) for some individuals. Additionally, the prolonged darkness can impact daily activities and outdoor recreation, requiring adaptation and resilience during the winter season.
Methodology : The population data is from the United States Census Bureau, walkable cities are from Walk Score, and rental data is from ApartmentGuide.
Series I Savings Bond rates are set to change on May 1, 2024, when the new rates will be announced. To give some perspective, for Series I Bonds issued from November 2023 through April 2024, the yield (composite rate) was 5.27% for six months after the issue date. So, is now a good time to buy I bonds?
Investors with a long-term savings outlook who are looking for a safe investment may want to consider investing in Series I Savings Bonds, commonly known as I Bonds. I Bonds are similar to most bonds in that they are essentially a loan to an entity (in this case the U.S. government), with the promise to return your money with interest. I Bonds are different in that they may offer some tax breaks as well. Here are nine important things to know before you invest in I Bonds.
9 Important Things to Know Before You Invest in I Bonds
1. I Bonds May Offer a Higher Rate, But Not a Fixed Rate
For those looking for low-risk investment returns, I Bonds may be a good option, but they are not traditional fixed-income securities. I Bonds are a type of savings bond offered by the U.S. Treasury and backed by the full faith and credit of the U.S. government. They are unique in that they offer two types of interest payments: a fixed rate and a variable rate, which together provide the bond’s composite rate.
The fixed-rate portion is determined when the bond is purchased, and remains the same for the life of the bond. The variable rate gets adjusted twice a year (i.e., May and November), based on inflation rates. Investors may hold I Bonds for up to 30 years.
In May 2022, when inflation was high, I Bonds paid up to 9.62%. But as inflation cooled, the variable rate dropped. As mentioned, I Bonds issued from November 2023 through April 2024 have a composite rate of 5.27% for six months after the issue date, until the variable rate changes again.
💡 Quick Tip: Help your money earn more money! Opening a bank account online often gets you higher-than-average rates.
2. Your I Bond Principal Is Guaranteed
Because I Bonds are backed by the U.S. government they have a low risk of default and offer tax-advantaged interest income. Furthermore, the principal is guaranteed. This means (unlike traditional, non-government bonds) that the redemption value will never decrease. This is one of the advantages of savings bonds as a whole. As a result, I Bonds are considered low-risk investments.
3. I Bonds Offer Some Tax Breaks
Tax-efficient investors may want to consider certain I Bond features. Because I Bonds are exempt from municipal or state taxes, this can be a boon for some investors. That said, while federal taxes usually apply, they could be deferred until the bond is ultimately sold or matures; whichever happens first.
Additionally, I Bond investors may use the interest payments for qualified higher education expenses, and receive a 100% deduction (this is called the education exclusion). Some restrictions apply, including:
• You must cash out your I Bonds the year that you want to claim the education exclusion.
• You must use the interest paid to cover qualified higher education expenses for you, your spouse, or your dependent children the same year.
• You cannot be married, filing separately.
4. I Bonds Are Similar to E Bonds & EE Bonds
Investors who are familiar with the Series E Bond may also find I Bonds appealing. While Series E Bonds are no longer available from the Treasury, they can still be purchased from other investors who currently hold them. Historically, Series E bonds were also known as defense or war bonds.
Series E bonds were replaced by Series EE bonds (aka “Patriot Bonds”) in 1980. Today, like Series I Bonds, investors can buy EE Savings Bonds from TreasuryDirect .
An interesting feature of Series EE Savings Bonds is that, over a 20-year period, these bonds are guaranteed to double in value. And should the interest not be enough to double the value, the U.S. Treasury will top it up, giving the bond an effective interest rate of 3.5% per year during that period.
While I Bonds don’t offer the same guarantee, your principal is guaranteed and the bonds are designed to keep pace with inflation.
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5. I Bonds Are Easy to Purchase
Investors can purchase electronic I Bonds online through TreasuryDirect in denominations over $25. The maximum amount of electronic I Bonds someone can purchase is $10,000 per calendar year.
In paper format, investors may use their tax refund to purchase up to $5,000 a year.
6. I Bonds Are a Long-Term Investment
In general, the primary risks in buying bonds revolve around redemption. What if you need your money before maturity?
I Bonds are generally a long-term investment. To start with, investors must understand that they have their money locked up for one year. After that, investors who redeem their I Bonds before they’ve held the bond for five years will forfeit the last three months of interest. (You can redeem an I Bond after five years with no penalty.)
As a result, those looking for a shorter-term investment may want to consider investing in Treasury bills.
💡 Quick Tip: If you’re saving for a short-term goal — whether it’s a vacation, a wedding, or the down payment on a house — consider opening a high-yield savings account. The higher APY that you’ll earn will help your money grow faster, but the funds stay liquid, so they are easy to access when you reach your goal.
7. Other Investments Might Offer Better Returns
One possible advantage of investing in stocks, mutual funds, and ETFs is that investors could potentially make a profit if the stock or fund does well. For instance, historically, stocks have been shown to be one of the best ways to build wealth over time. However, there is also risk involved, and you could lose money if the investment performs poorly.
TIPS, or Treasury Inflation-Protected Securities, are also a type of government bond designed to protect investors from inflation. The principal amount of a TIPS bond will increase with inflation, while the interest payments remain fixed. I Bonds are similar to TIPS but offer additional protection against deflation.
8. It’s Hard to Predict an I Bond’s Return Over Time
To maximize your return on investment when purchasing I Bonds, it is essential to understand the differences between the two interest rate components of the bond, and how they can play out over time.
I Bonds offer a fixed interest rate, which remains the same for the life of the bond, and the inflation-protection component, which adjusts with changes in inflation rates twice per year.
So if you buy an I Bond, the composite rate would be the same for the first six months after the issue date. After that, your rate would adjust with the current inflation rate. If inflation goes up, so would the rate of return. If inflation goes down, the bond’s inflation rate would likewise decrease.
And if you hold onto your I Bond for 10, 20, or 30 years, you would likely see some years with higher inflation rates and some years with lower inflation rates.
9. You Must Meet Certain Criteria to Buy an I Bond
To be eligible to buy I Bonds you must be:
• A United States citizen, no matter where you live,
• A United States resident, or
• A civilian employee of the United States, no matter where you live.
Also, investors can only purchase I Bonds with U.S. funds. You cannot buy them with foreign currency.
The Takeaway
If you’re looking for a generally safe and reliable investment option, I Bonds may be worth considering. They offer tax breaks and other benefits that can make them a low- risk choice for your long-term savings goals. That said, because I Bonds come with a composite rate of return, it’s hard to predict how much your money will actually earn over time.
With I Bonds, your principal is guaranteed. If you buy a $1,000 I Bond, no matter what happens, you will get your $1,000 back.
If you’re interested in savings vehicles, there are alternatives to government bonds, including savings accounts with a higher APY (annual percentage yield). By exploring your options, you can choose the best option — or options — for you.
Interested in opening an online bank account? When you sign up for a SoFi Checking and Savings account with direct deposit, you’ll get a competitive annual percentage yield (APY), pay zero account fees, and enjoy an array of rewards, such as access to the Allpoint Network of 55,000+ fee-free ATMs globally. Qualifying accounts can even access their paycheck up to two days early.
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4.60% APY SoFi members with direct deposit activity can earn 4.60% annual percentage yield (APY) on savings balances (including Vaults) and 0.50% APY on checking balances. Direct Deposit means a deposit to an account holder’s SoFi Checking or Savings account, including payroll, pension, or government payments (e.g., Social Security), made by the account holder’s employer, payroll or benefits provider or government agency (“Direct Deposit”) via the Automated Clearing House (“ACH”) Network during a 30-day Evaluation Period (as defined below). Deposits that are not from an employer or government agency, including but not limited to check deposits, peer-to-peer transfers (e.g., transfers from PayPal, Venmo, etc.), merchant transactions (e.g., transactions from PayPal, Stripe, Square, etc.), and bank ACH funds transfers and wire transfers from external accounts, do not constitute Direct Deposit activity. There is no minimum Direct Deposit amount required to qualify for the stated interest rate.
SoFi members with Qualifying Deposits can earn 4.60% APY on savings balances (including Vaults) and 0.50% APY on checking balances. Qualifying Deposits means one or more deposits that, in the aggregate, are equal to or greater than $5,000 to an account holder’s SoFi Checking and Savings account (“Qualifying Deposits”) during a 30-day Evaluation Period (as defined below). Qualifying Deposits only include those deposits from the following eligible sources: (i) ACH transfers, (ii) inbound wire transfers, (iii) peer-to-peer transfers (i.e., external transfers from PayPal, Venmo, etc. and internal peer-to-peer transfers from a SoFi account belonging to another account holder), (iv) check deposits, (v) instant funding to your SoFi Bank Debit Card, (vi) push payments to your SoFi Bank Debit Card, and (vii) cash deposits. Qualifying Deposits do not include: (i) transfers between an account holder’s Checking account, Savings account, and/or Vaults; (ii) interest payments; (iii) bonuses issued by SoFi Bank or its affiliates; or (iv) credits, reversals, and refunds from SoFi Bank, N.A. (“SoFi Bank”) or from a merchant.
SoFi Bank shall, in its sole discretion, assess each account holder’s Direct Deposit activity and Qualifying Deposits throughout each 30-Day Evaluation Period to determine the applicability of rates and may request additional documentation for verification of eligibility. The 30-Day Evaluation Period refers to the “Start Date” and “End Date” set forth on the APY Details page of your account, which comprises a period of 30 calendar days (the “30-Day Evaluation Period”). You can access the APY Details page at any time by logging into your SoFi account on the SoFi mobile app or SoFi website and selecting either (i) Banking > Savings > Current APY or (ii) Banking > Checking > Current APY. Upon receiving a Direct Deposit or $5,000 in Qualifying Deposits to your account, you will begin earning 4.60% APY on savings balances (including Vaults) and 0.50% on checking balances on or before the following calendar day. You will continue to earn these APYs for (i) the remainder of the current 30-Day Evaluation Period and through the end of the subsequent 30-Day Evaluation Period and (ii) any following 30-day Evaluation Periods during which SoFi Bank determines you to have Direct Deposit activity or $5,000 in Qualifying Deposits without interruption.
SoFi Bank reserves the right to grant a grace period to account holders following a change in Direct Deposit activity or Qualifying Deposits activity before adjusting rates. If SoFi Bank grants you a grace period, the dates for such grace period will be reflected on the APY Details page of your account. If SoFi Bank determines that you did not have Direct Deposit activity or $5,000 in Qualifying Deposits during the current 30-day Evaluation Period and, if applicable, the grace period, then you will begin earning the rates earned by account holders without either Direct Deposit or Qualifying Deposits until you have Direct Deposit activity or $5,000 in Qualifying Deposits in a subsequent 30-Day Evaluation Period. For the avoidance of doubt, an account holder with both Direct Deposit activity and Qualifying Deposits will earn the rates earned by account holders with Direct Deposit.
Members without either Direct Deposit activity or Qualifying Deposits, as determined by SoFi Bank, during a 30-Day Evaluation Period and, if applicable, the grace period, will earn 1.20% APY on savings balances (including Vaults) and 0.50% APY on checking balances.
Interest rates are variable and subject to change at any time. These rates are current as of 10/24/2023. There is no minimum balance requirement. Additional information can be found at https://www.sofi.com/legal/banking-rate-sheet.