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Information About Home Loans

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Betsalel Cohen
UpdatedJun 12, 2024
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    5 min read
Key Takeaways:
  • Home loans are used to purchase or renovate your house, refinance your mortgage, or take out equity.
  • Interest rates (and fees) vary between lender and types of loans.
  • has some cool tools and calculators to help you the home loan best suited to your needs.

Home Loans from A to Z - Getting the Basics

From Amortization to regulation Z, there are many terms to deal with when shopping for a home loan. There are different types of loans, lenders, payment plans, and terms.

You may want to finance a home purchase or renovation, refinance your mortgage loan, or borrow money against your home. A home loan is used for all of those purposes. A home loan means that you provide real estate as collateral. That means, if you do not make your payments, then the lender can sell the property to recuperate their money.

In order to help you get started on your path to find the right home loan for your situation, you will learn about these important features: 

  • Types of Home Loans
  • Two Key Terms: LTV, DTI
  • Tools to help you find the home loan right for you

Type of Home Loans

The different types of home loans depend on the reason you are taking out a mortgage. The main reasons and types are:

Here are other ways home loans are classified:

Interest Rate: There are two type of home loans based on the type of interest rate:

  • Fixed interest rates (Fixed Rate Mortgages or FRM): Fixed rates offer you a stable constant payment over the entire life of your loan.
  • Adjustable interest rates (Adjustable Rate Mortgage or ARM). An adjustable rate is tied to an index (usually 1 year T-bill or 1 year USD Libor rate) plus a fixed margin. An ARM comes with a low interest rate for then initial period, but carries the risk

Length of the loan: Home loans are generally long-term loans. The most common are: 

Quick tip

Learn about today’s mortgage rates and use mortgage rate table to get customized rates fit to your financial situation.

Two Key Terms: LTV, DTI

Almost all loans require a minimum FICO credit score and/or are priced based on your FICO score. Two special features that relate to home loans are your LTV (relating to your property) and your DTI (relating to your housing expenses), as follows:

LTV (Loan to Value): No matter what type of home loan you look for, the lender evaluates your LTV ratio.

  • Calculate LTV: You can calculate your LTV by dividing your loan balance by the value of your home. Although an online or real estate estimate helps you get a ball park figure, your lender uses an appraised value of your home. (Don’t use your property tax value). For a home purchase loan the lender takes the lower value between the purchase price and the appraised value. For an home equity loan the lender will use an appraised value.
  • LTV Limits: In general, home loans are limited to 80% LTV limits without mortgage insurance and 90-95% with mortgage insurance. FHA home loans go up to 97.5% financing and are an attractive option if you have a small down payment or high LTV ratio. In general, home equity loans have more restrictive LTV limits. There are special refinancing programs for home loans like the HARP refinance and the FHA streamline refinance with unlimited LTV.

DTI (Debt to Income): Lenders evaluate your credit worthiness based on your income level. When applying for a home loan the lender calculates your DTI as follows: 

  • Front-end DTI: Your front end DTI is calculated by dividing your monthly housing expenses (mortgage payment of principal and interest, property tax, property insurance, homeowners fees) by your monthly gross income. 
  • DTI (total or back-end): Your total DTI is calculated by adding all your monthly housing expenses (like you did for your front-end DTI) plus all your reoccurring monthly debt payments (credit cards, student loans, auto loans, installment credit) by your gross monthly income.
  • Acceptable ratios: Underwriting requirements (lenders lending rules) vary and are very technical. FHA loans for example allow for 31% front-end and 43% total DTI ratio. Conventional loans vary with the acceptable limits for top rates at 36% total DTI ratio. Fannie Mae allows for up to a 45% DTI ratio. If you have problems, make sure to work closely with your lender.

Tools to help you find the Home Loan Right for You

Going through A to Z in a few steps is impossible. Learning all about home loans in a brief article is also impossible. offers you many detailed articles about different types of loans, how to qualify for a loan, mortgage rates and many other subjects. also offers you some cool calculators and tools to help you find the best home loan, including:

  • Mortgage Affordability Calculator: This calculator helps you determine how much house you can afford to buy based on your income, debt payments (house related and non-house related), and available down payments. The calculator shows you the maximum payments on a 30-year FRM home loan, based on current mortgage rates.
  • Refinance Calculator: This is a great tool to aid you in deciding if refinancing is a good idea. The calculator evaluates your refinancing choices based on your goal (save money, lower payment) and different loan options using current mortgage rates. 
  • Mortgage Payment Calculator: This is a simple tool to help you calculate how much your monthly payment will be based on different interest rates, loan amounts, and repayment periods.

Purchasing a home and financing a home is a major financial event. You don’t have to know the whole dictionary from A to Z, but take the time to learn about your options and find the home loan best suited to your needs.

Quick tip

  whether you are looking for a home loan for a purchase or refinance, get a free, no-hassle mortgage quote from a mortgage provider.

Mortgage market update: the latest

It is expected that mortgage rates are subject to change. Homebuyers and those refinancing their mortgages should pay close attention to the latest mortgage rate

Mortgage rates April 10, 2024
According to Freddie Mac, the 30-year mortgage rate for the week of April 10, 2024 stands at 6.88%. This reflects a 6 basis points increase from the previous week's rate.
Note: A basis point is equal to one-hundredth of one percent (0.01%). In numerical terms, if the mortgage rate changes by 20 basis points, it means the rate has changed by 0.20%.
Additionally, Freddie Mac reports that the 15-year mortgage rate for April 10, 2024 is 6.16%, indicating a 10 basis points increase from last week’s rates.

What does the mortgage rate mean for you?
Mortgage rates are one of the key factors that determine your monthly payment. Here are avergage interest rates (APR) for April 14, 2024 based on Zillow date for borrowers with a high credit score (680-740) in the United States:

  • 30-year conventional loan is 7.09%
  • 15-year conventional loan is 6.29%
    Using the rates mentioned above, the monthly payment for a $279,082 30-year-year mortgage would be $1,874. A 15-year mortgage would require a monthly payment of around $2,399.

Experience a smooth mortgage process: Shop around and get pre-approved today!
Shopping around for mortgages and getting pre-approved can make your home-buying or refinancing process easier. Ready to take the plunge? Check Out mortgage rates now for the best options available.



BBill, Nov, 2009
Ask lenders by working with a mortgage broker. Each lender will have a different policy, and will depend on how much you are contributing as a down payment, your credit rating, the area the property is situated, and other factors.
JJoel, Oct, 2009
Can I get a loan for a homes appraised value even though the purchase price is below that amount?
BBill, Jul, 2009
You are facing an uphill climb until you re-establish your credit score. The circumstances behind every bankruptcy are unique, so it's impossible for anyone to answer your question without examining the entire situation. Talk with some lenders. To get free, online quotes from up to four lenders who match your profile, go to
JJay Kitchens, Jul, 2009
I have a recently discharged bankruptcy (3/09). Are there any lender who will lend me money for a home loan. Where can I contact them?
SSamuel T., Apr, 2009
Thanks for the Good and free information. You're really helpful.