Home loans help you buy a new home or to get a loan against a home you own. While getting a home loan, you should consider important factors like the size of the loan, interest rate, costs like taxes and fees, loan duration, and other features like penalties and clauses stipulated by the lender. A home loan is usually the biggest borrowing you can choose, so it requires careful consideration and research.

Types
Loan companies or financial institutions offer and underwrite home loans. The terms of a loan vary based on the lender, type of loan, and eligibility. The main types of home loans are:

Conventional loans: These are ideal for borrowers with good credit scores and are the most popular type of mortgage.

Government-insured loans: These are ideal for borrowers with lower credit scores and who can only afford a minimum down payment.

Jumbo home loan: This exceeds the limits set by the Federal Housing Finance Agency (FHFA). It is suitable for high-cost markets and has higher down payments than conventional loans.

Other types are USDA loans meant for rural areas, VA loans for veterans, and FHA loans for families with low to moderate income.

Factors determining eligibility
The eligibility criteria for a home loan vary depending on the type of loan. However, it is usually determined by the following factors:

• Type of property
• Credit score
• Debt-to-income ratio

Further, you should be able to make the down payment. For example, the down payment for securing a conventional loan is around 3%, which can go up to 20% for a jumbo loan. The limits can change regularly, so you must follow mortgage-related announcements to know the current minimum requirements.

How does interest work?
Low home loan interest rates can significantly reduce the overall cost, including that of monthly payments. Mortgage rates can change regularly. You can choose to lock your interest rate at the time of application, processing, or mortgage approval. Locking the rate, usually at a fee, ensures you get the same rate when you get the mortgage. The two main types of home loans based on the interest rate are fixed-rate mortgages, where the rate stays the same throughout the loan period, and adjustable-rate mortgages, where you pay a smaller interest for some time. The rates are adjusted periodically based on the market conditions.

Home loan calculator
You can use an online home loan calculator to understand how the duration, interest rates, and down payment requirements affect your costs. Work out estimates for different loans to determine principal, interest, monthly payments, property taxes, and home insurance costs. Once you have multiple estimates, you can compare them and talk to experts to choose the most suitable home loan. You can enter the following details: house price or loan amount, down payment, loan duration, and zip code.

How to get a loan with a low credit score?
A credit score is a basic metric through which a lender decides if you can repay the loan on time. Many lenders do not offer loans for low or bad credit as the risk of default is high. Some may make exceptions but insist on a higher down payment and interest. So, here are some of the best companies to consider if you have a bad credit score:

– Prosperity Home Mortgage
– Cherry Creek Mortgage
– Better.com
– SWBC
– Carrington Mortgage Services