homes

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Many people mistakenly believe they can’t afford to buy a home because they don’t really know what their options are. Fortunately, home loans are not one-size-fits-all. There are various mortgages available to suit your budget and preferences.

So, before you start visiting open houses, take some time to familiarize yourself with the different home loans that are available. Going into the home buying process informed could help you save a lot of money on your down payment, interest, and fees.

The 8 Types of Mortgage Loans Available

Understanding the different types of mortgage loans will help you choose the option that’s best suited for you. Let’s look at a brief overview of the eight types of mortgages available in 2024.

1. Conventional Loans

A conventional loan is a mortgage that’s not issued by the federal government. There are two different types of conventional mortgages you can choose from: conforming and non-conforming loans.

A conforming loan falls within the guidelines laid out by Fannie Mae and Freddie Mac. You’ll take out a conforming loan through a private lender like a bank, credit union, or mortgage company. Since the government doesn’t guarantee the loan, conventional mortgages typically come with more stringent lending requirements.

According to the CFPB, the maximum loan amount for a conventional loan is $484,350. However, it may be as high as $726,525 in counties with a high cost of living. You’ll have to take out private mortgage insurance (PMI) if you don’t have a 20% down payment.

Conventional loans are fixed-rate mortgages, which means your monthly mortgage payment remains the same throughout the entire life of the mortgage loan. The terms typically range from 10 to 30 years:

  • 30-year fixed-rate mortgage
  • 20-year fixed-rate mortgage
  • 15-year fixed-rate mortgage
  • 10-year fixed rate mortgage

Pros:

  • It can be used to purchase a primary home or an investment property
  • Tends to cost less than other types of loans
  • You can cancel your private mortgage insurance (PMI) once you reach 20% equity in your home

Cons:

  • Must have a minimum FICO score of 620 or higher
  • Harder to qualify for than government-backed loans
  • You’ll need to have a low debt-to-income ratio to qualify

2. Conventional 97 Mortgage

A conventional 97 mortgage is similar to a conventional loan in that it’s widely available to various borrowers. The main difference is that with this type of home loan, you only have to pay a 3% down payment.

The program is available for first-time and repeat home buyers. However, it must be your primary place of residence, and the maximum loan amount is $510,400.

Pros:

  • Widely available to most borrowers
  • Only requires a 3% down payment
  • Available for first-time and repeat homebuyers

Cons:

  • Cannot be used to purchase investment properties
  • The maximum loan amount is $510,400
  • Requires a minimum FICO score of 660 or higher

3. FHA Loans

FHA loans are backed by the Federal Housing Administration and are a popular option for first-time home buyers. To qualify, you need to have a 3.5% down payment and a minimum credit score of 580.

If you have a credit score of 500 or higher, you can qualify for an FHA loan with a 10% down payment. These flexible requirements make FHA loans a suitable option for borrowers with bad credit.

To qualify for an FHA home loan, you must have a debt-to-income ratio of 43% or less. These loans can’t be used to purchase investment properties, and your home must meet the FHA’s lending limits.

These limits vary by state, so you’ll need to check the FHA’s website to see what the guidelines are for your area.

Pros:

  • Loans come with low down payment options
  • A viable option for borrowers with bad credit
  • Available for first-time and repeat homeowners

Cons:

  • Loans can’t be taken out for investment properties
  • If your credit score is below 580, a 10% down payment is required
  • You must have a debt-to-income ratio below 43%
  • Mandatory mortgage insurance premiums

4. FHA 203(k) Rehab Loans

An FHA 203(k) rehab loan is sometimes referred to as a renovation loan. It allows home buyers to finance the purchase of their home and any necessary renovations with a single loan.

Many people purchase older homes to fix them up. Instead of taking out a mortgage and then applying for a home renovation loan, you can accomplish both within a single mortgage.

A rehab loan is similar to an FHA loan in that you’ll need a 3.5% down payment. However, the credit requirements are stricter, and you’ll need a minimum credit score of 640 to qualify.

Pros:

  • Allows you to buy a home and finance the remodel within one mortgage
  • Requires a minimum 3.5% down payment
  • Easier to qualify since the FHA backs your loan

Cons:

  • Credit requirements are more stringent than typical FHA loans
  • You must hire approved contractors and cannot DIY the renovations
  • The closing process takes longer than other types of mortgages

5. VA Loans

The Department of Veteran Affairs guarantees VA loans. These loans are designed to make it easier for veterans and service members to qualify for affordable mortgages.

One of the biggest advantages of taking out a VA loan is that it doesn’t require a down payment or mortgage insurance premium (MIP). And there are no listed credit requirements, though the lender can set their own minimum credit requirements. VA loans typically come with a lower interest rate than FHA and conventional loans.

To qualify for a VA loan, you must either be active duty military, a veteran or honorably discharged. You’ll need to apply for your mortgage through an approved VA lender.

Pros:

  • No down payment required
  • No PMI required
  • Flexible credit requirements

Cons:

  • Must be a veteran to qualify
  • Some sellers will not want to deal with a VA loan

6. USDA Loans

A USDA loan is a type of mortgage that’s available for rural and suburban home buyers. It’s a viable option for borrowers with lower credit scores that are having a hard time qualifying for a traditional mortgage.

USDA loans are backed by the U.S. Department of Agriculture, and they help low-income borrowers find housing in rural areas. USDA loans do not require a down payment, but you will need a minimum credit score of 640 to qualify.

You will need to meet the USDA’s eligibility requirements to qualify for the loan. But according to the department’s property eligibility map, over 95% of the U.S. is eligible.

Pros:

  • No down payment required
  • A practical option for low-income borrowers
  • Available to first-time and repeat home buyers

Cons:

  • A minimum credit score of 640 is required
  • Housing is limited to rural and suburban areas

7. Jumbo Loans

A jumbo loan is a mortgage that exceeds the financing guidelines laid out by the Federal Housing Finance Agency. These loans are unable to be purchased or guaranteed by Fannie Mae or Freddie Mac.

A jumbo mortgage is financing for luxury homes in competitive real estate markets, and the limits vary by state. In 2024, the FHFA raised the limits for a one-unit property to $766,550, increasing from $726,200 in 2023. In certain high-cost areas, the limits for jumbo loans vary, reaching up to $1,149,825. These jumbo loans are for mortgages that exceed the set limits in their respective counties.

If you’re hoping to buy a home that costs more than $1 million, you’ll need to take out a super jumbo loan. These loans provide up to $3 million to purchase your home. Both jumbo and super jumbo mortgages can be difficult to qualify for and require excellent credit.

Pros:

  • These loans make it possible to purchase large homes in expensive areas
  • Typically comes with flexible loan terms

Cons:

  • Jumbo loans and super jumbo loans come with higher interest rates
  • You’ll need a good credit history to qualify

8. Adjustable Rate Mortgages (ARMs)

Unlike a fixed-rate mortgage, where the interest rate is set for the life of the loan, an adjustable-rate mortgage (ARM) comes with interest rates that fluctuate. Your interest rate depends on the current market conditions.

When you first take out an ARM, you will typically start with a fixed rate for a set period of time. Once that introductory period is up, your interest rate will adjust on a monthly or annual basis.

An ARM can be a suitable option for some borrowers because your interest rate will likely be low for the first couple of years you own the home. But you need to be comfortable with a certain level of risk.

And if you choose to go this route, you should look for an ARM that caps the amount of interest you pay. That way, you won’t find yourself unable to afford your monthly payments when the interest rates reset.

4 Types of ARMs

There are 4 different types of adjustable-rate mortgages typically offered:

  • One Year ARM – The one-year adjustable-rate mortgage interest rate changes every year on the anniversary of the loan.
  • 10/1 ARM – The 10/1 ARM has an initial fixed interest rate for the first ten years of the mortgage. After 10 years is up, the rate then adjusts each year for the remainder of the mortgage.
  • 5/5 and 5/1 ARMs – ARMs that have an initial fixed rate for the first five years of the mortgage. After 5 years is up, for the 5/5 ARM, the interest rate changes every 5 years. For the 5/1 ARM, the interest changes every year.
  • 3/3 and 3/1 ARMs – Similar to the 5/5 and 5/1 ARMs, except the initial fixed-rate changes after 3 years. For the 3/3 ARM, the interest rate changes every 3 years and for the 3/1 ARM, it changes every year.

Pros:

  • Interest rates will likely be low in the beginning.
  • If you pay the loan off quickly, you could pay a lot less money in interest.

Cons:

  • Your monthly mortgage payments will fluctuate.
  • Many borrowers have gotten into financial trouble after taking out an ARM.

Choosing the Right Home Loan

When it comes to choosing a home loan, you need to consider a few key factors. First, you’ll want to think about the type of loan that is best suited to your needs.

Fixed-rate mortgages offer stability and predictability, while adjustable-rate mortgages (ARMs) can be a viable option for those who expect their income to increase significantly over time. You’ll also want to consider your budget and how much you can afford to borrow, as well as the size of your down payment and the length of the loan term.

It’s also crucial to shop around and compare offers from multiple mortgage lenders. While it’s tempting to go with the first lender you find, it pays to do your homework and see what other options are available.

This can help you get a better rate and more favorable terms on your loan. It’s a good idea to get quotes from at least three different lenders, and to consider both traditional banks and online lenders.

Tips for Getting the Best Rates and Terms

One of the most effective strategies is to improve your credit score. Lenders look closely at credit scores when deciding whether to approve a loan. Those with higher scores are typically offered better terms. You can improve your credit score by paying your bills on time, reducing your debt, and correcting any errors on your credit report.

Another tip is to make a larger down payment, which can help you secure a lower interest rate and reduce the size of your monthly payments. Finally, consider working with a mortgage broker, who can help you shop around and find the best deal.

Bottom Line

As you can see, there are many home loans for you to choose from. The type of mortgage that’s best for you will depend on your current income and financial situation.

If you’re not sure where to start, consider working with a qualified loan officer. They can assess your situation and recommend the option that will be best for you.

Source: crediful.com

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Traditionally, one third of all homes get a price cut before they sell and when demand gets weaker, this percentage increases, which we saw in 2022 when prices were falling in the second half of the year. However, as home sales stabilized in 2023, so did this data line. While the percentage of price cuts is still much higher than 2021 levels, this explains why prices were stable in the second half of 2023 versus the second half of 2022.

Now that mortgage rates have fallen and as we start the brand new year, we need to focus on this data line more. I believe we should get more sellers in 2024 than in 2023, but that doesn’t necessarily mean home prices will fall. 

Price cut percentages

As you can see in the chart below, if we continue the current seasonal trend, we are going to surpass the price-cut percentage lows of 2023 by this spring. This is why following the housing market tracker tied to the 10-year yield, mortgage rates, and purchase application data will be as critical as last year to tell you what’s going on in the housing market. That way you don’t need to wait for stale sales data. If mortgage rates increase or supply grows faster than expected, this data line is critical to telling the truth.

Here are the year-over-year price-cut percentages from the first week of the year:

  • 2024 32.8%
  • 2023 36.5%
  • 2022 22.6%

It’s 2024! Time to get this party started!

Of course, my main wish during the crazy COVID-19 period was to try to get total active listings back to pre-COVID-19 levels, which was a functioning marketplace with more choices. It’s been challenging as only a few parts of the U.S. have returned to pre-COVID-19 levels. However, one key for 2024 is finding the seasonal bottom in housing inventory sooner rather than later. We want to see active inventory bottom out in January and February — not March and April. 

Weekly housing inventory data

Here is a look at the first week of the year:

  • Weekly inventory change (Dec. 29-Jan. 5): Inventory fell from 513,240 to 499,143
  • Same week last year (Dec. 30-Jan. 6): Inventory fell from 490,809 to 471,349
  • The inventory bottom for 2022 was 240,194
  • The inventory peak for 2023 is 569,898
  • For context, active listings for this week in 2015 were 959,028

New listings data

This is the year we should all be rooting for new listings data to grow. Last year, It was great to see that new listing data didn’t take a new dive lower no matter how high mortgage rates got. While working from the lowest levels, 2024 should show year-over-year growth: I’d like to see new listings data get back to 2021 and 2022 levels. Both these years were the lowest new listing levels before rates rose, so it’s not asking for much. I talked about this on CNBC a few months ago.

The year-over-year data is meaningless late in the year or very early: we need to get back to 2021 and 2022 levels during the spring period entering the summer. Hopefully, this will occur in 2024.

Mortgage rates and the 10-year yield

In my 2024 forecast, the 10-year yield range is between 4.25%-3.21%, with a critical line in the sand at 3.37%. If the economic data stays firm, we shouldn’t break below 3.21%, but if the labor data gets weaker, that line in the sand — which I call the Gandalf line, as in “you shall not pass,” will be tested. This 10-year yield range means mortgage rates between 7.25%-5.75%. If the spreads get better, mortgage rates can be lower than this.

Last week was jobs week, and some of the data was good, while some showed softness. Starting from Tuesday, mortgage rates starting didn’t move too much even though the bond market had some wild swings.

However, from the previous week, we went from mortgage rates of 6.61% to a high of 6.76%. Right now, I am watching for 3.80% on the 10-year yield, and if the economic data gets better and the Federal Reserve makes another mistake by getting too hawkish, 4.40% on the upside. However, one big positive now is that the spreads are improving. We have the CPI inflation report coming up this week, so that should be a market mover. Always remember, the Fed presidents can say something hawkish and mess things up daily.

Purchase application data

I will keep this very short and sweet: we never care about the last two weeks of the year with purchase applications because nothing happens during Christmas and New Year’s Eve. Traditionally don’t track the first week of the year either, but for the tracker purposes, starting next week, I will.

The truth is that mortgage demand has collapsed, and it has a tough time growing with rates above 6%. With that said, last year, we had 23 positive and 24 negative prints, and two flat prints for the year. Before Christmas came, we had an excellent six-week positive growth trend as mortgage rates fell almost 1.5% from 8%.

Purchase apps are seasonal; we focus on the second week of January to the first week of May. Traditionally, volumes always fall after May, so we will get a good idea of how the year will look soon. Remember, context is vital we are working from the lowest levels ever, so it doesn’t take much to move the needle higher, but we want to see real growth, not a low-level bounce. A sub-6% mortgage rate with duration should do the trick, but we aren’t there yet. So, for now, we will be very mindful of the weekly data.

The week ahead

We have two inflation reports coming out this week: The all-important CPI report on Thursday and the PPI report on Friday. The growth rate of inflation has cooled down enough to stop the rate hike cycle and now we want to see rate cuts. The one good thing about the CPI report is that the most significant component of CPI, shelter inflation, hasn’t had its big move lower yet. Also, it’s impossible to have core CPI accelerate higher without shelter inflation taking off again since it’s 44.4% of the index.

Source: housingwire.com

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Homebuyers looking to escape the hustle and bustle of city life may long for a quieter life in the country. But anytime you’re considering making a major lifestyle change, finances can become an issue.

If this sounds like you, you may be able to qualify for a USDA loan. This government-sponsored loan program focuses on houses located in designated rural and suburban areas.

What is a USDA home loan?

A USDA home loan is a type of mortgage for eligible rural and suburban homebuyers. It’s offered by the United States Department of Agriculture. USDA loans are issued through the USDA Rural Development Guaranteed Housing Loan Program.

One of the biggest draws of the Rural Development program is that it doesn’t require any down payment. So, you can purchase your own home with a minimal amount of cash.

If you think this sounds like a good opportunity, you may be right. Keep reading to find out the benefits of applying for a USDA loan.

What are the different types of USDA loans?

The USDA offers three main mortgage programs for people who want to buy or repair a single-family home in a rural area:

  • USDA Direct Loans: Also known as Section 502 direct loans, these loans are issued to qualifying low-income borrowers with interest rates as low as 1% with certain subsidies and no down payment is typically required.
  • USDA Guaranteed Loans: Also known as the Section 502 Guaranteed Loan Program, these loans are issued by USDA-approved lenders and offer 100% financing, low interest rates, and minimal down payments to eligible buyers.
  • USDA Home Improvement Loans: Also known as the Section 504 Home Repair program, these loans are given to qualified homeowners to repair, improve, or modernize their homes. They’re also given to low-income elderly homeowners to remove health and safety hazards. The home improvement loan is up to $$40,000 and grants are also available up to $10,000. Additionally, loans and grants can now be combined for up to $50,000 in assistance.
  • USDA Streamline Refinance: Those with an existing USDA loan may be able to take advantage of lower rates with a USDA refinance loan. For those who qualify, the USDA streamline refinance is an attractive option as it does not require a home appraisal or income documentation. However, to be eligible, you must already have a USDA loan.

How much can I borrow with a USDA loan?

The majority of loans offered by the U.S. Department of Agriculture (USDA) do not feature loan limits. Direct Loans are the only type of USDA loans with specific limits, but they are a small portion of all USDA loans. Therefore, it is unlikely that you will find any limits on your USDA loan.

For the USDA Direct Loan program in 2024, the loan limit is 766,550 in most parts of the country. However, in more expensive high-cost areas, the loan limits are higher.

4 Benefits of a USDA Loan

Listed below are the four biggest advantages of taking out a USDA loan.

1. No down payment

For many people, the thought of scraping together a down payment is the most significant barrier to buying a home. But with a USDA loan, there’s no down payment required. In comparison, you’ll need a 3.5% down payment for FHA loans and a minimum 5% down payment for conventional loans.

2. Low private mortgage insurance (PMI)

Anyone who buys a home with no down payment must purchase private mortgage insurance (PMI). The costs vary, but PMI generally costs between 0.5% to 1.0% of the total loan amount.

With the USDA mortgage program, you still have to purchase PMI, but the rates are lower than they are with a conventional loan.

3. Low credit requirements

USDA loans also come with more flexible credit requirements than what other lenders look for. If your credit score is at least 640, your application should be approved pretty quickly. And the program is available for borrowers that are short on credit history.

4. Finance your closing costs

When you buy a home, the lender charges closing costs for issuing the loan. The closing costs usually fall between 2% and 5% of the total loan amount. So if you buy a $200,000 home, you can expect to pay at least $4,000 in closing costs.

When you take out a USDA loan, you can roll your closing costs into the loan financing. This means you can finance your closing costs instead of paying them out of pocket.

How do you qualify for a USDA loan?

Taking out a USDA loan doesn’t mean you have to move to the middle of nowhere. There are a wide variety of properties eligible for purchase through the USDA loan program.

While you won’t find any homes located in a major metropolitan area, you may be able to find some in certain suburban areas. But, of course, the most extensive selection is available in rural areas since the purpose of the program is to strengthen these communities.

To find out if a home you’re interested in qualifies, simply input the address into the USDA website. The USDA does have strict requirements the home must meet to be eligible for the program, which we’ll discuss in more detail below.

See also: First-Time Home Buyer Grants and Programs

USDA Loan Requirements

If you can’t qualify for a conventional loan, you may be eligible for either a USDA guaranteed loan or a USDA direct loan. Here is an overview of the borrower requirements for USDA home loan programs:

  • You must be a U.S. citizen, non-citizen national, or qualified alien.
  • The home must be located in an eligible location.
  • You must be purchasing the home as your primary residence.
  • The loan must be taken out through a USDA-approved lender.
  • You must be able to meet the minimum credit requirements.

Income limits

USDA loan programs are designed to help low to middle-income families, so borrowers must meet certain income limitations. To qualify, your household income cannot exceed 115% of the median income in your area.

The income requirements for USDA loans are determined by county, so you can check the USDA’s website to determine the requirements in your area. You can also work with a USDA-approved lender to determine your eligibility.

Property Eligibility

The U.S. Department of Agriculture also puts certain restrictions on the type of property you can buy with a USDA loan. Here are the types of properties that are eligible for a USDA mortgage loan:

  • Single-family homes
  • New construction homes
  • Townhomes and approved condos
  • Planned Unit Developments
  • Approved modular homes

What credit score do you need for a USDA loan?

If you’re applying for a guaranteed USDA loan, there are a few basic credit requirements you’ll need to meet. The USDA doesn’t set a minimum credit score requirement, but your application will get processed much faster if your credit score is at least 640.

A credit score below 640 doesn’t automatically rule you out, but your application will go through stricter underwriting guidelines. This is to ensure you can handle the monthly payments.

And you’re less likely to be approved if you have any collections on your credit report in the past 12 months. However, you may be granted an exception if you can prove that your credit was damaged because of a medical issue or something outside your control.

And finally, a USDA loan may be a viable option for you if you’re still in the process of building your credit scores. Your application may be approved even if you have a limited credit history if you can supply other credit references, like utility payments or rent payments.

USDA Income Limits

Income limits are set on all USDA loans to ensure the USDA loan program benefits low to middle-income families. These income restrictions are determined by various factors, including the median income for your local city or county. You can check your income eligibility to find out if you qualify.

The size of your family also helps determine your eligibility. If you have a large family, then it’s expected you’ll need a more substantial income to live on, and you’ll receive more leeway.

There are also different tiers of eligibility, depending on the type of USDA loan you’re taking out. For example, USDA guaranteed loans call for a moderate income, whereas USDA direct loans require applicants to fall in the low-income category.

Stable Income

Finally, you must have a stable monthly income to be eligible for a USDA loan. Usually, you need to show a history of stable employment for at least 24 months.

If you have questions about your eligibility, you can contact a mortgage lender that specializes in USDA loans. Just be sure to ask so you don’t waste your time working with a lender who doesn’t understand the nuances of USDA loans.

Real estate agents that work in a rural area may also be able to point you in the right direction, since they’re likely to have more experience with clients utilizing these programs.

Are there any other eligibility requirements?

This article is mainly focused on the USDA’s requirements, but keep in mind, the USDA isn’t lending you any money. Each lender can apply its own requirements as long as they meet the USDA’s basic guidelines. Your lender will want a complete financial picture, as well as your credit history and current employment status.

And one of the guidelines surrounds PITI, which stands for principal, interest, taxes, and insurance. Each of these things are combined to form your total monthly mortgage payment.

This amount can’t be more than 29% of your pre-tax monthly income. So if you make $3,000 per month, your total monthly payment would have to be less than $900.

Debt-to-Income Ratio

Another common requirement is known as your debt-to-income ratio. This is when the lender looks at compares your income to your total monthly debt payments. Ideally, your debt-to-income ratio shouldn’t be higher than 41%.

So if your income is $3,000 per month, your total monthly debt payments should be less than $1,230. And remember, your mortgage will be included in the total debt payments. But you may qualify for a higher debt ratio if your credit score is higher than 680.

Bottom Line

With a USDA mortgage, you can purchase your dream home without having to save up for a down payment. However, not everyone will qualify for this program.

If you’re interested in taking out a USDA loan, you should start by finding out if you meet the income restrictions in your county. And you might consider working with an experienced USDA lender to find out if you’re a suitable candidate for the program.

USDA Loan FAQs

How does a USDA loan work?

USDA loans provide low-interest home mortgages to qualified borrowers. These loans are issued by the United States Department of Agriculture, and are designed to help eligible borrowers purchase homes in rural areas and some suburban areas.

To qualify for a USDA loan, borrowers must typically meet certain income and credit requirements, as well as have a debt-to-income ratio that is lower than the national average. Once approved, the loan is typically issued in the form of a 30-year fixed-rate mortgage, with the interest rate set by the USDA. Borrowers can then use the funds to purchase a home and make mortgage payments over time.

What’s the difference between FHA, VA, and USDA Loans?

FHA loans are mortgage loans insured by the Federal Housing Administration that are available to homebuyers with less-than-perfect credit and relatively low down payments.

VA loans are mortgage loans guaranteed by the U.S. Department of Veterans Affairs that are available to qualifying veterans and military members with competitive terms and no down payment.

USDA loans are mortgage loans offered by the U.S. Department of Agriculture that are available to low-income borrowers in rural areas.

All three loan types require mortgage insurance, but the payment requirements vary.

What is the interest rate on USDA loans?

The interest rate on a USDA loan varies depending on the type of loan, the lender, the borrower’s credit score and other factors. Generally, USDA loan interest rates range from 1.00% to 4.00%.

The current interest rate for Single Family Housing Direct home loans is 3.75%. This fixed rate is based on current market rates at loan approval or loan closing, whichever is lower.

If payment assistance is applied, the interest rate can be as low as 1%. The payback period can be up to 33 years, or 38 years for very low-income applicants who can’t afford the 33-year loan term.

What are the fees associated with a USDA loan?

The upfront guarantee fee is 1% of the amount of the loan, and this fee must be paid at closing. This fee is non-refundable and is not included in the loan amount.

In addition to the upfront fee, there is an annual fee, which ranges from 0.35% to 0.50%. This fee is calculated as a percentage of the loan amount and is generally due each year.

USDA home loans also have other typical closing costs associated with them, such as appraisal fees, title fees, and recording fees.

Source: crediful.com

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Even though it’s a large city, San Francisco still retains a very welcoming and neighborly vibe, and much like San Diego, New York and Los Angeles, there’s a certain charm here that draws in many new residents each year. The cost of living in San Francisco scares many off, but there are plenty of secrets to discover within this picturesque city.

All of these incredible amenities come with a steep monetary price. Even in the area’s most affordable neighborhoods, estimated monthly costs are high. In fact, the cost of living in San Francisco is a whopping 84.2 percent higher than the national average.

This is how San Francisco’s cost, as a whole, all breaks down.

San Francisco housing prices

When searching for apartments in San Francisco, you’ll face a lot of competition, even where the median rent is high. Despite the infamous San Francisco cost of living, though, people still want a San Francisco home.

As one of the hottest markets in the country, San Francisco housing is 242.3 percent above the national average. Although there are some affordable neighborhoods, many properties have an average apartment rent that’s sky-high. Not surprisingly, this greatly affects your estimated monthly costs and raises your living index. It’s also the primary reason this is such an expensive city.

To break down what this cost means, the average monthly rent for a one-bedroom in San Francisco is $3,554, up 4 percent over last year. For a two-bedroom, rent averages out to $5,007, an increase of 10 percent over last year. This is mind-boggling when you look at nearby cities like San Jose, where the average monthly rent is almost $1,000 less for both one- and two-bedroom units.

For those looking to buy, home prices vary widely depending on the neighborhood, but the median sale price in San Francisco is $1.525 million. This is up only 1.2 percent over last year, but homes often sell quickly. The median days on the market is less than three weeks.

Apartment hunting in San Francisco

Whether living a life of luxury or trying to keep things affordable in San Francisco, there’s a neighborhood for you. Even in expensive cities, you can find those hidden gems if you’re willing to look.

If you want to live in one of the more popular downtown neighborhoods like Rincon Hill and Nob Hill, prepare to pay (or find a roommate.) The average rent for a one-bedroom apartment is between $3,595 and $4,505.

For a neighborhood geared more toward young families, the average rent for a two-bed in Bernal Heights is only $2,800. For those wanting to live in California on a budget and still stay safe, the average rent for a two-bed in Outer Richmond is only $3,195.

San Francisco food prices

San Francisco is the epicenter of delicious food — more than 30 restaurants have garnered 44 Michelin stars. But, having such fantastic options does not often come cheap. Thankfully, when you’re on a budget, just go for that bread bowl, whatever is in it. In fact, you can get an entire meal at an inexpensive restaurant for $20.

For those who like to cook at home, San Francisco grocery costs are 29.8 percent higher than the national average. The data isn’t all bad, though, as this total is down by 0.6 percent compared to the past year.

Although there’s obviously variation by brand and store, there are some standard product prices that shed a light on grocery costs. For example, a dozen eggs will cost you $3.47, and a half-gallon of milk rings up at $3.55. For those who can’t get enough of that sourdough (or any kind of bread,) the average loaf will run you $4.81.

While there are plenty of locally-crafted, small-batch breweries, you’ll pay a premium price for your lager — the average six-pack is $10.19.

San Francisco utility prices

Utility rates in San Francisco neighborhoods won’t help keep your cost of living index low. While they’re 33.8 percent higher here than the national average, the saving grace is the year-round mild Bay Area weather.

As a result of the mild temperatures, there’s little need to turn on the apartment air conditioner during the summer. And during the wet winter months, a sweatshirt indoors will usually suffice. That said, the average energy bill is still high, at $275.58.

This makes utilities in San Francisco a cost of living concern, compared with most other cities. Even the companion California cities of Los Angeles and San Diego have lower utility averages.

San Francisco transportation prices

Transportation costs in San Francisco are 41.6 percent higher than the national average, which is actually 3.4 percent less than last year. The most expensive city for transportation in California behind San Fran is Oakland, San Francisco’s next-door neighbor, which has an average that’s 39.2 percent above.

What’s great about San Francisco is that the city comes with the advantage of multiple public transit options. There are the famous cable cars, the bus and rail systems and an abundance of ride-share services.

To travel in style, an iconic cable car is a great way to experience the city. Offered through San Francisco Municipal Railway (MUNI), riders can pay $8 per ride. The MUNI buses take your transportation expenses down a notch with single-ride fares at only $2.50. You can also purchase a monthly pass, which includes busses and cable car rides, for $81.

To take the train in, out and around the city, use BART (Bay Area Rapid Transport). Stops include the airport, as well as an assortment of East Bay cities. Six lines are available, with easy color-coded routes. The best way to verify the price of your one-way fare is to use the BART fare calculator. To save a little, get a Clipper Card and buy in bulk.

Thanks to its extensive public transit network, San Francisco leaves you with plenty of ways to explore where you don’t have to own a car.

Biking and walking

Biking, a popular way to get around the city, is cheap but arduous thanks to the many famously steep hills that San Francisco neighborhoods are known for. With a bike score of 77, you’ll often see bright green, bike-only lanes running next to busy streets — plus, plenty of bike-share stalls located throughout the city.

San Francisco is also ideal for walking, especially for renters in city-centric apartments. With so many amenities in proximity to area housing, this city earned itself a walk score of 93.

San Francisco healthcare prices

At 33.9 percent higher than the national average, the data says that San Francisco is an expensive market when it comes to healthcare. However, the upside to living in San Francisco is that renters do have access to some of the nation’s top doctors and treatment facilities.

It’s difficult to calculate an average for healthcare expenses, as prices are dependent on personal needs and other factors. That being said, the price for healthcare issues in San Francisco is more than in most places. Overall prices are 18.9 percent more than in Los Angeles and 26.7 percent more than in San Diego, and these other cities have their own reputations for being high-end.

Looking at medical costs in the Bay Area, a routine visit with your doctor averages out to $177.33. For an eye exam, you’ll see an average bill of $156.75 from your optometrist, while a trip to the dentist will set you back $150. These prices are without medical insurance, so the total cost could be very different depending on your plan.

San Francisco goods and services prices

Whenever your cost of living includes something you want more than you need, it’s most likely a good or service. Many of these expenses are optional, unlike housing costs, so it’s easier to keep them in check.

That said, this is an expensive item on the list. The cost of goods and services in San Francisco is 24.3 percent higher than the national average, up 2.4 percent over last year. This means you’ll most likely spend more for that movie ticket ($15), yoga class ($24.17) or a trip to the salon ($85.71) than friends in other cities.

Taxes in San Francisco

California has the highest state sales tax in the nation at 7.25 percent, and localities can add an additional tax on top of it. This makes the minimum combined sales tax rate for San Francisco 8.625 percent.

What this means is when you purchase $1,000 worth of clothing and home goods, as you browse around Union Square, you would pay $86.25 of that in sales tax.

California also has a progressive income tax, with rates between 1 percent and 13.3 percent, separated into nine brackets. Making less money means paying lower income taxes while those with a higher salary should expect to sit in the upper end of the tax bracket.

How much do I need to earn to live in San Francisco?

The price to rent a San Francisco apartment is not cheap, but it’s a huge factor in working out your own cost of living. If you’re not sure how much apartment you can afford on your annual salary, you can figure it out using our rent calculator.

You can also do a little estimating using the current standard cost of a one-bedroom apartment. The monthly rent for this unit is $3,621. If you apply 30 percent of your annual income to rent, as many experts suggest, you’d need a job that pays at least $134,720 to live on your own.

This isn’t always possible, given that the median household income in the city is $119,136. You may have to spend a little more than that 30 percent of a more average salary to live alone or consider other options. This may mean finding a monthly rent that’s lower, spending less money on those goods and services or even living with roommates. All of these options can bring San Francisco costs down and improve your own cost of living in this expensive city.

Living in San Francisco

San Francisco is full of unique beauty and charm. With its many parks, perks, great schools and happy people, this is a city for dreamers and doers — one of the best in all of California. The trick is to not let the high cost of living deter you from calling this great city home. You can do it if you watch costs carefully and budget well.

The Cost of Living Index comes from coli.org.
The rent information included in this summary is based on a calculation of multifamily rental property inventory on Rent. as of August 2022.
Rent prices are for illustrative purposes only. This information does not constitute a pricing guarantee or financial advice related to the rental market.

Source: rent.com

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Total mortgage production is expected to fall 16 percent to $1.96 trillion this year, down from an estimated $2.34 trillion in 2007, the Mortgage Bankers Association reported today.

“This would mark the first time since 2000 that total mortgage originations fall below $2 trillion,” the report noted.

The report said total loan origination is expected to fall another four percent to $1.88 trillion in 2009.

The MBA reported that residential purchase mortgage originations will drop by roughly 18 percent in 2008 to $955 billion from an estimated $1.16 trillion last year.

And said that because of tighter underwriting guidelines and falling home prices, refinance originations will decline about 14 percent to $1.01 trillion in 2008 from a projected $1.17 trillion in 2007, and fall a further 13 percent to $883 billion in 2009.

Regarding housing data, the report said total existing home sales for the year will decline by about 13 percent from 2007 to 4.94 million units, but should rise by about four percent in 2009.

Median home prices for new and existing homes are also expected to fall by about two percent this year, but rise between one and two percent in 2009.

The MBA’s Chief Economist Doug Duncan addressed recent capital worries rocking banks, mortgage lenders, and government financiers Fannie and Freddie, but noted that a further credit downturn was unlikely.

“The principal concern of the current credit crisis lies in the possibility that banks will eventually run out of capital. Banks are running up against capital limits as they write down the value of assets at the same time they are putting loans on their balance sheets because the markets for securitized products are essentially closed,” said Duncan.

“Fortunately, the banking system entered the current credit crunch well capitalized, so the danger of a sharp and widespread contraction of credit availability does not seem imminent. The recovery period in financial markets may take longer this time than it has in past financial crises, but a turn for the better still appears to be a good bet later in the year.”

Duncan added that he believes the fed funds rate will be cut at the Federal Open Market Committee meeting later this month, and expects the Fed to focus less on inflationary worries to address concerns about a recession.

He also noted that mortgage rates should continue to remain relatively low, but move slightly higher into 2009.

“The 30-year fixed-rate mortgage yield should trend up only modestly higher over the second half of the year, reaching 6.2 percent by the fourth quarter and edging up just slightly through 2009. Thus, interest rates will still be quite low by historical standards,” said Duncan.

Source: thetruthaboutmortgage.com

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The seniors who are often the parents of Generation X and Generation Y (millennials) could become a pronounced expense for their kids in the coming years, but adult children also want to see their parents successfully age in place.

This is according to a commentary from Sarita Mohanty, president and CEO of elder financial advocacy organization The SCAN Foundation in a commentary published by Fortune.

There will be 16 million “middle-income” seniors in the U.S. by 2033, Mohanty said, citing a 2022 study from the National Opinion Research Center (NORC) at the University of Chicago.

“As NORC’s research summary explains: ‘Many will struggle to pay for the health, personal care, and housing services they need. […] Even with home equity, nearly 40% will not be able to afford assisted living,’” she cited.

These kinds of expenses have only become more burdensome over time, Mohanty said.

“In 2002, adults over 65 spent $48,000 (adjusted for inflation) a year on average, according to data from the Bureau of Labor Statistics,” she wrote. “Today, the average is $58,000, a more than 20% increase. The average rent and medical costs for those in assisted living currently stand at $65,000 a year.”

The far and away preference for both U.S. seniors and their children is for the seniors to age in place in their own homes, Mohanty said. Citing a survey from Today’s Homeowner, 89% of Americans at or over the age of 55 want to remain in their homes.

But a late 2023 survey by CNBC found that nearly 60% of Americans feel they are not on track to retire comfortably, Mohanty pointed out, and that lack of assurance in their own retirement security means the younger generations are often unprepared to assume any support position for their parents.

“Something has to give,” she said. “If you’re in the sandwich generation – Gen X and older millennials – and want to share in the responsibility for their parents’ retirement, you should begin by thinking of your parents’ retirement plans in the context of your own.”

In December, the U.S. Department of Housing and Urban Development (HUD) announced a $40 million notice of funding opportunity to connect seniors in affordable housing with resources that could help them age in place.

The reverse mortgage industry often describes its product as a vehicle that can help older Americans remain in their homes since a core requirement of any reverse mortgage is for the borrower to remain in the property as their primary residence.

Source: housingwire.com

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If you’re looking to buy a condo or townhome, understanding the distinctions may help you home in on the choice that better suits your lifestyle and needs. Read on to learn the major differences between these two kinds of property.

What Is a Condo?

A condominium is a private property within a larger property, whether that be a single building or a complex. Residents share amenities like clubhouses, gyms, pools, parking, and the common grounds, and pay homeowners association (HOA) dues to support those shared assets. If you buy a condo, you’ll own your interior space only.

What Is a Townhouse?

A townhouse is a single-family unit that shares one or more walls with another home, usually has two or more floors, and may have a small backyard or patio. If you buy a townhouse, you’ll own the interior and exterior of the unit and the land on which it sits. Upkeep of the exterior could be split between you and the homeowners association (HOA).
💡 Quick Tip: When house hunting, don’t forget to lock in your home mortgage loan rate so there are no surprises if your offer is accepted.

Condo vs Townhouse: Differences

Both are part of a larger structure, unlike some other house types, and both usually share one or more walls, but some similarities end there. Here are the key differences.

1. Construction

In the condo vs. townhouse debate, construction differs. A townhouse will share at least one wall with a property next door. A condo could have another unit below and above it, in addition to neighbors on either side. That could mean sharing all surrounding walls and floors/ceilings.

2. Actual Ownership

If you’re considering townhouse vs. condo, what would you actually own? With townhomes, the buyer owns the land and the structure. That could mean some creativity with decorating the lot or the home’s exterior. With condos, the buyer owns the interior of the unit and an “interest” (along with all of the other owners) in the common elements of the condominium project.

3. Community

With both condos and townhouses, residents will have fairly close contact with their neighbors. With shared walls and spaces, residents may have more social relationships with their community than they would with a single-family home. That means it’s important for buyers to research the community when condo shopping. Is the condo social? Does it plan a lot of events, or do people generally keep to themselves? Since there are many shared spaces, understanding how the community functions could directly affect living there.

If a townhome isn’t part of an HOA, living in the complex could feel similar to living in a single-family home. In that case, it could be up to the buyer to create a sense of community.

4. Homeowners Associations

Condos come with an HOA, a resident-led board that collects ongoing fees that can range from $200 to thousands of dollars, and mandates any special assessments. The HOA also enforces its covenants, conditions, and restrictions (CC&Rs).

Not all townhouse communities have an HOA, but if they do, townhouse owners usually pay lower monthly fees than condo owners because they pay for much of their own upkeep.

5. Obligations and Regulations

What’s the difference between a townhouse and a condo when it comes to rules and regulations? Condo owners will be required to meet all HOA standards. That could dictate anything from what residents want to hang on their front door to whether they can have pets, how many, and whether Biff needs to be registered as a service animal or emotional support animal. If an owner wants to renovate their condo, they may have to get the work approved by the HOA.

If a townhome is part of an HOA, many of the above restrictions could apply. However, if it’s not an HOA community, townhouse owners have more freedom to decorate the exterior of their home or maintain their landscape as they see fit.

6. Insurance

Condos have their own form of property insurance. HO-6 provides coverage for the interior of a condo and the owner’s personal belongings. In addition, the entire building needs to be insured, which is paid for with HOA dues.

If a townhouse is part of an HOA community, each property requires HO-6 insurance and coverage for the community through HOA dues. When a townhouse isn’t part of an HOA, buyers are typically required to have homeowners insurance.

7. Fees and Expenses

HOA fees for condos are usually higher than for townhouses because they cover exterior maintenance and shared amenities. If townhouse owners are part of an HOA, they’ll usually pay lower monthly fees because they pay for much of their own upkeep.

Condo owners don’t have to worry about repairing the roof or replacing siding. Everything exterior-facing is managed collectively and paid for with HOA dues, but those fees may be high and are periodically reevaluated, and so may rise over time.

8. Financing

It can be harder to obtain financing for a condo than for a townhouse. Condos may be eligible for conventional mortgage loans and government-insured loans. (Study the mortgage basics to learn more about the difference between these types.) Lenders of conventional loans will review the financial health of an HOA, whether most of the units are owner-occupied, and ownership distribution. Interested in an FHA loan or a VA loan? Both agencies maintain respective lists of approved condos.

In the case of a townhouse, the financing process is similar to that of a traditional mortgage because a townhouse includes the land it’s built on. Its value is factored into the process.

9. Resale Value

A large factor in a condo holding value is the management, which isn’t always in the hands of the owner. Strong management can help a condo maintain or grow in value. Additionally, where the condo is located will influence resale value. Condos generally hold value but don’t see the boost in resale expected with single-family homes. Similarly, buying a townhouse may not usher in the appreciation of most single-family homes.
💡 Quick Tip: Your parents or grandparents probably got mortgages for 30 years. But these days, you can get them for 20, 15, or 10 years — and pay less interest over the life of the loan.

Condo vs Townhouse: Which May Be Right for You?

Condos and townhomes have their fair share of differences, as well as some similarities. Overall, condos can offer a low-maintenance property where owners simply look after their condo interior. With condo ownership comes the added perk of shared amenities. But condos come with monthly HOA fees, which must be factored into any purchase. Additionally, the community association and its management of the property will likely have a large impact on what life is like in a particular condo complex. Condo buyers may be more community-minded, as they share space with their neighbors. (If a condo feels like the right choice, read a guide to buying a condo as you embark on your search.)

Townhouses offer more freedom and privacy than condos. Owners may have the option of personalizing their exterior and enjoying outdoor space if the property has a patio or backyard. Townhomes generally require more responsibility and upkeep than a condo, even if there’s an HOA involved. Exterior maintenance will be required. If this sounds like a good fit, dig deeper by reading a guide to buying a townhouse.

Of course, you may be better suited to a different living situation altogether. House or condo? Take a quiz to learn which of these options might be best for you.

The Takeaway

When it comes to finding a home, the perfect fit is up to the individual, but buyers may want to take a hard look at monthly fees, community rules, how social they intend to be, and precisely what they own and must maintain.

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

SoFi Mortgages: simple, smart, and so affordable.

FAQ

Between condos and townhouses, which is cheaper to buy?

The cost of a condo and townhome will vary based on location and size, but condos are often less expensive than townhouses because they come with no land.

Do you own the land around a condo if you buy it?

No. The purchase of a condo only includes the interior.

Is the resale value higher for a condo or townhouse?

In general, condos and townhomes don’t appreciate as quickly as single-family homes. The value will vary based on area, upkeep, and other conditions.

Between condos and townhouses, which has better financing options?

Financing a townhome is like financing a single-family home. A buyer can choose from multiple types of mortgages.

Financing a condo, on the other hand, involves a lender review of the community or inclusion on a list of approved condominium communities. Because a private lender could see a condo as a riskier purchase, the interest rate could be higher unless a large down payment was made.

Photo credit: iStock/Inhabitant

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

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

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

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

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Source: sofi.com

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With its rich historical background and sharp, nearly 90-degree turn — an unusual bend that aligns with similar curves in other nearby streets that follow an old property line established in 1633 — West Village’s Commerce Street is a unique piece of New York City history.

And the many historically significant buildings that surround it are proof of that.

The nearby Isaacs-Hendricks House at 77 Bedford Street is one of the few remaining 18th-century buildings in Manhattan, dating back to 1799. Neighboring it at 75-1/2 Bedford Street is a narrow 9-1/2 feet wide house built in 1873, once home to poet Edna St. Vincent Millay.

On Commerce Street proper, we find the Cherry Lane Theatre, the oldest continuously running off-Broadway theater in New York City.

And the buildings at numbers 41 and 39, built in 1831, are known for their mansard roofs added in 1873, but also for the folk tales that surround them. The twin houses are said to have been built by a sea captain who had two feuding daughters, so he built them identical, separate homes with a shared garden.

At 48 Commerce Street, we find another West Village gem — one that’s currently on the market and looking for an architecturally inclined or history-loving owner.

48 Commerce Street, New York. Photo credit: Carli Biryla courtesy of The Agency

Originally built in 1844, the 5-story townhouse was built on land once owned by Queen Anne, the younger daughter of James II, who reigned over Great Britain and Ireland at the dawn of the 18th century.

According to our sources, Queen Anne later sold it to Trinity Church, after which architect Alexander T. Stewart — an Irish immigrant who created one of the first department stores in America, The Marble Dry-Good Palace — bought it and built the 5-story structure at 48 Commerce Street.

The West Village townhouse, now listed for $10,000,000, sits on an expansive lot with almost 5,000 square feet of living space and a width of 20 feet — and can accommodate at least 6 bedrooms, each with its own office and walk-in closet.

With 8 full baths, future residents and guests will get to enjoy comfort and privacy in one of the city’s most desirable locations. Features include 9 wood-burning fireplaces, a rear patio, a front garden, and rooftop space that allows for a deck with skyline views.

Photo credit: Carli Biryla courtesy of The Agency
Photo credit: Carli Biryla courtesy of The Agency
Photo credit: Carli Biryla courtesy of The Agency
Photo credit: Carli Biryla courtesy of The Agency
Photo credit: Carli Biryla courtesy of The Agency
Photo credit: Carli Biryla courtesy of The Agency
Photo credit: Carli Biryla courtesy of The Agency

Norman L. Steele, the current owner of the property — who’s also a former real estate mogul that once worked for IBM — restored the building in 1994.

He’s now ready to part ways with his West Village townhouse, offering one lucky buyer the opportunity to create a one-of-a-kind dream home in a beloved Manhattan location or to split it into several units and maximize their investment.

48 Commerce Street is listed for $10 million with Michael Biryla of The Agency New York.

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Source: fancypantshomes.com