November 11, 2016

SoFi Mortgage Review: Is It Good Legitimate Lender?

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Thinking about buying a home or refinancing your existing mortgage? Is SoFi a good online lender or should you stick with a traditional bank? Read on for the pros and cons.

Is SoFi, which started out focusing on student loans, the right one to handle your mortgage? Choose the wrong one and you could end up with pricey loan terms that drag your financial self down.

Read on to find out what advantages SoFi offers compared to other lenders, along with its potential downsides.

10 Reasons to Get a SoFi Mortgage

Borrowing from SoFi versus other lenders comes with certain benefits. We’ve put together a list of the 10 best reasons to consider it for your mortgage needs.

  1. You can apply, get approved and get going online. Most people still schlep over to their local bank and get stuck in a cycle of watching a banker type in their information, walk away and come back to the desk a couple of times before getting a yes or no on a loan. With SoFi, you can do everything online, on your own time.

  2. You won’t pay any lender fees. The cost of buying a home is more than just the mortgage. There are also lots of fees that go along with it, some of which you’d normally pay to the lender. Fortunately, SoFi waives all lender fees, but you’ll still have to pay third-party closing costs to seal the deal.

  3. You can avoid PMI. Private mortgage insurance is typically required if you’re putting less than 20% down on a home, and it can drive up the cost of your mortgage over the long term. SoFi doesn’t require PMI on any of its home loans (but they will expect you to put at least 10% down).

  4. You can choose a fixed or adjustable rate. An adjustable rate mortgage (ARM) is riskier since the rate can increase over time, but some buyers may prefer it to a fixed rate loan. SoFi gives you a choice between a 15- or 30-year fixed rate and a 7/1 ARM (the first 7 years of the loan will have a fixed interest rate), so you have control over what kind of loan you end up with.

  5. You can lock in your rate immediately. If you’re worried about your rate going up between now and your closing, SoFi may give you a 30-day rate lock once you get a signed purchase contract.

  6. You can pay the loan off early, penalty free. Lenders make money by charging you interest on your mortgage, but when you pay it off ahead of schedule, you’re cutting into their profits. Some lenders will add on a prepayment penalty to compensate for the loss, but SoFi won’t punish you for clearing your loan early.

  7. You won’t get a dirty look for a smaller down payment. Bankers really want you to put 20% down — they’ll be more confident in your ability to pay them back if you have so much cash on hand. SoFi cuts you some slack. As long as you can pony up at least 10% of the home’s purchase price, your application will be considered.

  8. Your student loans won’t count against you. The amount of debt you have impacts whether you can get a mortgage. Paying out big bucks each month for student loans can work against you when you’re trying to get a mortgage through a traditional lender. SoFi, however, is a little more flexible; if you’ve got a boatload of student loans, it’s still possible to qualify for a home loan.

  9. You’re could get a jumbo loan (if you can actually afford it). If you plan to buy in an expensive housing market, a conventional mortgage just won’t do. A mortgage of over $417,000 is the cutoff in most counties, so if you’re borrowing more than that, you’ll need a jumbo loan. With SoFi, you can borrow up to $3 million towards a home (depending on your ability to pay it back, of course).

  10. You can save time. When you’re buying a home through a traditional lender, the process can take longer than expected. According to the SoFi website, typical applications take 30 days or less to complete — which is great if you want to be able to move into your new home without delay.

3 Reasons to Consider Another Mortgage Lender

SoFi might seem like a dream lender for some homebuyers, but that won’t be the case for everyone. Check out these potential drawbacks that could make getting a loan elsewhere the better option.

  • 10% is the lowest you can go on the down payment. Ideally, you want to put a lot more than 10% down on a home, but if you can’t come up with at least that amount, you’ll need to look into low down payment options (like an FHA loan instead).

  • SoFi mortgage loans aren’t available everywhere. SoFi is only licensed to originate mortgages in certain states, which we’ve included below. If your state isn’t on the list, you’ll have to take your business to another lender.

  • Mortgage loans can’t be used for investment properties. If you’ve got your eye on buying a rental property, SoFi won’t be able to help you. SoFi mortgages are reserved for the purchase of a first home or a second home that you plan to use as a residence.

SoFi Mortgage Rates

SoFi’s mortgage rates are on par with what you’d expect from lenders. The APR you’ll pay ultimately depends on what kind of loan you’re getting, how much money you’re putting down, and how solid your credit is.

You have three loans to choose from:

  • a 30-year fixed,
  • a 15-year fixed and
  • a 7/1 ARM.

SoFi only posts sample rates on its website, so you’ll need to do the online quote to get an idea of what kind of rates you’d get.

The sample quote also breaks down the payments for the different loan types, so you can estimate what your mortgage will cost you each month. SoFi points out, however, that those payments don’t include property taxes, insurance or condo fees, so you’ll have to add those numbers on to get a more accurate picture of your total expense.

SoFi reminds borrowers that rates can change daily, and if you’re considering an adjustable rate loan, you need to be extra cautious. The rates for the 7/1 ARM option are based on the 1-year Libor index; the APR can go up or down every year once the initial 7-year period is over.

The annual rate increase is capped at 2%, and the most the APR can increase over the life of the loan is 6%. If you decide to go with an ARM, you need to be aware of the additional cost if the rate goes up.

SoFi Mortgage Fees

One of the most appealing things about getting a mortgage through SoFi is not getting buried in fees. It’s common for mortgage lenders to charge you an application fee, a loan origination fee, mailing fees, and so on, but SoFi doesn’t do that. In fact, you won’t pay any lender fees at all for your loan.

Keep in mind: that doesn’t mean, however, that you won’t have to fork over more than few bucks to third parties for the closing costs. Some of the things that fall under this umbrella include the appraisal fee, title insurance, pest inspection, government recording fees, and attorneys’ fees.

SoFi Mortgage States

Getting a mortgage is a big deal, and SoFi has some strict guidelines on who can apply. For starters, you have to be at least 18 or 21 years old, depending on your state rules, and a U.S. citizen or a permanent resident. The same deal applies to a co-signer or co-borrower, if you have one.

Note: SoFi will consider your employment history, income, current debt load, credit history and assets as part of the approval process. There’s no minimum credit score listed on SoFi’s website, but it’s safe to assume that you’ll need a solid credit history to get a mortgage at the lowest rates.

One important consideration you can’t afford to overlook is residency. SoFi is only licensed to issue mortgage loans in the District of Columbia and the following states:

  • Alabama
  • Arizona
  • California
  • Colorado
  • Connecticut
  • Delaware
  • Florida
  • Georgia
  • Idaho
  • Illinois
  • Indiana
  • Maryland
  • Minnesota
  • Montana
  • New Jersey
  • North Carolina
  • North Dakota
  • Pennsylvania
  • Rhode Island
  • Texas
  • Vermont
  • Washington
  • Wisconsin
  • Wyoming

Mortgage Refinance

Refinancing a Mortgage Through SoFi: If you already have a mortgage, you might be able to get a better deal on it by refinancing with SoFi. The same requirements apply: you’ll need to have a steady income and employment history and live in one of the above states. Borrowers will also need excellent credit, although the site doesn’t specify the minimum score you’ll need to have.

To find out what kind of rates you’re pre-qualified for, you need to go through the rate quote process. This doesn’t hurt your credit history (it will not involve a “hard pull”), so it’s worth it to see how the rates SoFi offers compare to what you might be able to get with another lender.

Bottom Line

SoFi’s mortgage loans are worth exploring if you can put at least 10% down, you have a strong credit score, and you have a high amount of income coming in. The worst that can happen is a rejection, and the best that can happen is you get a lower rate than you may find elsewhere. Mortgages are worth shopping around for, as you’ll be stuck with the one you get for a while — unless you’re willing to go through the process again and refinance.

Being able to get through the closing process at a quicker pace and not having to pay any extra lender fees are nice perks that you might miss out on with a traditional bank. Just be sure to compare SoFi’s rates to what other lenders are offering to see where you can get the most favorable loan terms.

Rebecca Lake is a journalist at CreditDonkey, a mortgage comparison and financial education website. Write to Rebecca Lake at rebecca@creditdonkey.com. Our data-driven analysis has been recognized by major news outlets across the country and has helped consumers make savvy financial and lifestyle decisions. (read more)

Disclaimer: Opinions expressed here are those of the author's alone. Please support CreditDonkey on our mission to help you make savvy financial decisions. Our free online service is made possible through financial relationships with some of the products and services mentioned on this site. We may receive compensation if you shop through links in our content.

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