SoFi jumps from Student Loans to Mortgages - What does it mean for you?

SoFi is into mortgages! Let's see how is it different from other lenders, what are its advantages and disadvantages.

Updated by Chinmoy Dutta on 28th February 2020

Buying a house with a student loan debt impacts the ability to receive a mortgage. Mortgage lenders keep looking for an excuse to deny people with student loans. SoFi, a company created for lending student loans has branched out into mortgages. This actually could be a piece of good news for many borrowers. It does offer hope to a number of people saddled with student loan debts.

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How is this different?

The fact that SoFi is brand new to mortgages makes this a whole lot different. The company was actually created to consolidate and refinance student loans and now they have entered into a totally different field. The point that distinguishes SoFi from other mortgage lenders is SoFi’s knowledge and expertise in student loans. This puts them in a much better position to evaluate the ability of people to afford a home.

SoFi would be in a much better position to understand the amount of student debt a person has, and what is his earning potential and can decide on the amount of mortgage that can be provided to the person

Mortgages for people with student loan debts

SoFi introducing a product to their existing student loan clients seems pretty obvious as to what they want to do. If SoFi can sell its product to the huge number of student loan borrowers that they have, it can lead to an increase in profits for the company.

Keeping in mind their existing student loan customers, SoFi created their mortgage plans with some unique features in them. The features that stand out are listed below

No origination fees

Origination fees must be avoided at any cost. They add an unnecessary 1-2% onto the balance from day one. Unfortunately, the business of mortgages is filled up with closing costs. It is a good indication to find a student loan lender jumping into the mortgage market and removing origination fees from the process.

10% down and no PMI

If you are shopping for a home and you do not have the amount of money to make a huge downpayment right away, what do you do? The mortgage insurance can limit your buying power and might cost you over a hundred dollars each month. Traditional mortgage lenders require you to pay a 20% downpayment in order to avoid having to pay the PMI. SoFi comes to our rescue with only a 10% downpayment without any PMI. So if you are buying a home that costs say $500,000, there is a huge difference while paying $100,000 and $50,000 as a downpayment.

Flexible Debt-to-Income limits

Traditional mortgage lenders are said to be way more strict about the amount of income you need to generate in order to qualify for a certain mortgage. By suggesting that they are flexible, SoFi seems to imply that if there is any indication that you have a high earning potential, you will have better chances of getting the mortgage loans that you want.

However, it is difficult to say how much of practical importance this feature will play.

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What we think

SoFi seems willing to take on student loan borrowers who might otherwise be termed as “too risky” by other mortgage lenders. However, it is important for any borrower to take a look at their finances and be certain that they can afford the home they are buying. It does not mean if you are eligible for the loan, you should buy the house. You must be able to afford it.

As people say, buying a home is no piece of cake. Moreover, if you add student loans to the equation, it becomes really difficult for an individual to cope up with the debts. It seems to be a good thing that at least one company is putting together a mortgage product aimed specifically for people with student loans.