SoFi Mortgage will change the way you get a home loan with its low mortgage rates and no fees
SoFi Mortgage, part of SoFi Lending, is best known for its student loan refinancing and personal loans. I’ve recommended their low-rate personal loans for years but was surprised to see how far they’ve come in mortgages as well.
A SoFi loans representative at a recent conference of financial bloggers set me straight on just how SoFi mortgage rates were changing the industry and how the company was setting the standard for no fee loans.
I decided to look into it further by talking to some other lenders as well as SoFi mortgage customers about their experience.
What I found was one more example of how online lending is changing the loan industry. Through its online advantage, SoFi is able to offer competitive mortgage rates with no PMI or lender fees.
That’s a huge cost savings over other home loan lenders but it’s not the only advantage SoFi brings to the table.
What is SoFi Mortgage?
SoFi Mortgage can originate new home loans or refinance the home you live in currently. Loans are available in 37 states and the company has an A+ rating by the Better Business Bureau.
SoFi loans is an Equal Housing Lender, meaning it doesn’t discriminate based on race, color, religion, sex, marital status or age.
Of the 156 reviews on Zillow from home owners that have gotten mortgages through SoFi, nearly all are five-stars. The few negative reviews revolve around the company’s higher credit requirements for loan approval.
I’ve seen the higher credit score requirements in SoFi personal loans as well. The company generally requires a higher FICO for personal loans. That keeps defaults lower and allows the company to offer some of the lowest interest rates in the industry.
I have seen more SoFi loans approved this year which may mean that the company is relaxing its lending standards to include more borrowers. As with its personal loans, it doesn’t hurt your credit score to pre-qualify for a home loan so go online even if you doubt you’ll be approved because it could mean some of the lowest mortgage rates available.
How are SoFi Mortgage Loans Different?
For the most part, there is no difference between getting a home loan through SoFi compared to any other lender. You fill out an application and are offered an interest rate depending on your credit history. Once the mortgage is granted, you make payments each month.
The details are where SoFi Mortgage sets itself apart from traditional mortgage lenders.
Being online means SoFi can speed up the mortgage application process and cut out a lot of costs in a traditional mortgage. I tried out the SoFi mortgage application online. It literally took me less than five minutes to fill out the application and I was pre-qualified for a $350,000 mortgage the next day.
SoFi Mortgage will take into account any public assistance you receive as income for loan approval and can generally give you a pre-qualification answer in less than 48 hours.
The biggest difference between SoFi and other lenders is the fees. SoFi does not require private mortgage insurance (PMI) which is usually between 0.5% and 1.5% of your loan amount. That amounts to savings of $3,000 a year on a $200,000 loan.
SoFi also doesn’t charge lender or origination fees, saving mortgage borrowers thousands more on closing costs. SoFi only requires a 10% down payment, even on jumbo loans up to $3 million.
The reason it can do this is because it’s an online lender and doesn’t have the expensive branch location expenses other lenders have to pay. There’s also no prepayment penalty on SoFi mortgages so you can pay the loan off early to save on interest.
Are SoFi Mortgage Rates Competitive?
The online advantages for SoFi mortgages come out in their low interest rates as well. Morrison Foerster estimates that online lenders can offer discounts on mortgage rates as high as 0.50% versus other lenders because they save on branch location costs.
SoFi mortgage rates ultimately depend on the type of mortgage, loan amount, debt-to-income and other credit factors.
Mortgage rates have been falling for most of 2017 but that isn’t going to last. In fact, as I finish this review, the Federal Reserve is meeting and highly expected to raise interest rates for the second time this year.
SoFi doesn’t charge points on its mortgages. The borrowers I checked with were able to get SoFi mortgage rates as low as 3.3% on 7/1 ARM loans with 10% down and just under 3% on 15-year fixed rate mortgages.
Some borrowers were able to get even lower rates on a larger down payment and fixed mortgage rates are generally between 3.0% and 5.0% for most.
Types of SoFi Mortgages Available
SoFi offers four types of mortgages that vary depending on interest rate and length of the loan.
- 30-year Fixed Mortgage
- 15-year Fixed Mortgage
- 7/1 ARM – Your interest rate is fixed for seven years and then adjusts with a 30-year total loan payoff
- 7/1 Adjustable Interest-Only – Your interest rate is fixed for ten years and you only pay interest, then the interest rate adjusts with a 40-year total loan payoff
Each loan type has its advantages and disadvantages. The 30-year fixed loan will have lower payments compared to the 15-year loan but a slightly higher rate. The shorter 15-year loan offers low mortgage rates and is the fastest way to pay off your home.
The adjustable rate mortgages (ARM) offer the lowest interest rates available but rates may increase after the initial seven- or ten-year period. These loans come with protection on the maximum the interest rate and payment can increase so you don’t have to worry about rates going too high.
The interest only (IO) loan has a special advantage where you only pay interest on the loan amount for ten years. That saves $300 a month on a $250,000 mortgage with a 5% annual rate. After the ten-year interest period, the loan becomes a regular 30-year loan.
SoFi mortgage rates are available on single-family, condos, duplexes, co-ops and planned unit developments. Basically, the company can lend to anything except a multi-family apartment or investment property.
How to Get the Best Rates on SoFi Mortgage
Checking your interest rate for a SoFi mortgage does not affect your credit score. The company does a soft-pull of your credit first to pre-qualify your mortgage. Given the low mortgage rates and no fees on SoFi home loans, I recommend everyone check their rate to compare it against other offers from traditional lenders.
Eligibility for SoFi home loans is standard:
- Age of majority in state (usually 18 years)
- U.S. citizen or permanent resident
- The home you are buying must be owner-occupied, meaning you plan on living there at least a year
When you’re filling out the mortgage application, there are a few things to think about to get the best rates from SoFi.
- You can get a mortgage with just 10% down but going with a higher down payment will get you lower rates
- You need at least 20% equity in your home for refinancing but having more equity will generally mean lower refinancing rates
- Shorter-term loans like the 15-year usually mean lower rates
- Adjustable-rate loans usually offer lower initial rates as well though they may increase after seven or ten years
Applying for a SoFi Mortgage Loan
The SoFi mortgage application process works in five steps though you won’t have to do much in most of the steps.
The online application takes no time at all but it does take about a day for pre-qualification on a mortgage. This isn’t like a quick personal loan. There are more checks and documents in a home loan application but most borrowers get pre-qualified that day or the next.
Your pre-qualification notice will include how much you can borrow and an estimate of the SoFi mortgage rate based on a soft-pull of your credit report.
After verifying your income and uploading other documents, you will be pre-approved for up to a certain amount. This is more formal than just the pre-qualification and will help you in the negotiation process. Home sellers love to see pre-approval letters because they don’t have to worry about buyer financing.
SoFi mortgage rates can come with a 30-day rate lock if requested by the borrower.
When you’ve found a home you like, SoFi uses its automated system to estimate an appraisal value and print out an offer letter. Everything to this point can happen as fast as a week.
After you’ve made an offer on a house, you wait for all the documents to be drawn up and verified. SoFi handles your pre-closing including title, HOA and other docs. This can all take from two to four weeks and you’ll be ready to close on your new home.
What Other Types of Loans Does SoFi Offer?
I’ve reviewed SoFi personal loans and talked to borrowers in the past. The company offers some of the lowest rates in peer lending and is growing every year. Rates currently start at 5.5% on personal loans of up to $100,000 and loan terms up to seven years.
SoFi is best known for its student loan refinancing with rates as low as 2.62% available on both federal and private loans. SoFi is one of the few lenders to offer a pause in your payments if you become unemployed and can even provide job counseling to help you find work.
All of SoFi loan products come with instant pre-approval and special discounts for autopay.
There’s a lot to like about SoFi Mortgage. About the only thing I could find in my review was that the company generally requires a prime credit score for lending. If you’re approved, SoFi mortgage rates are some of the lowest in the industry and they offer several loan types than lower your payments. The company charges no PMI or fees, potentially saving you thousands on your home loan.