What Is and Isn’t Covered By a Home Loan

A home loan is a loan enabling an individual to purchase a condominium
a shopping cart full of boxes

A home loan is a loan enabling an individual to purchase a condominium or house. These loans have a specific interest rate set by the lender. Unlike loans for automobiles, home loans usually have a longer loan term. Borrowers typically have 15, 25, or 30 years to repay their loans.

You must understand a home loan before determining which lender you want to finance your mortgage. Home loans have conditions about what they can be used for, determining which type of loan you need for your dream property.

Standard home loans cover one cost.


Many lenders focus on home loans that cover the purchase price of the house or condominium. The loan amount doesn’t include the down payment required to qualify for the loan or closing costs. Closing costs cover the cost of application fees, transfer taxes, legal fees, title search costs, and title insurance. The person buying the property usually pays the closing costs unless the seller offered closing cost assistance as part of the terms of the sale. The loan doesn’t cover the cost of inspecting the property before it’s purchased, and it doesn’t cover the cost of repairs.

Some loans cover additional costs.


Some loans do cover additional costs. The Federal Housing Administration (FHA) offers loans that can include the cost of repairs or upgrades to the residence you’re buying. Lenders are required to pay mortgage insurance premiums included in their mortgage monthly payments.

The U.S. Department of Agriculture (USDA) enables people to obtain a mortgage to buy a home in a rural area. Anyone qualifying for a USDA loan doesn’t have to provide a down payment. This loan covers the total cost of the purchase price, excluding closing costs, inspections, and upgrades.

The U.S. Department of Veteran Affairs (VA) guarantees loans for qualifying veterans. These loans are more affordable than conventional loans because they have lower interest rates. The loan covers the cost of the property. Still, individuals who want to borrow money for repairs or improvements may qualify to refinance their VA loan or obtain a different type of VA loan to cover those expenses.

Reviewing loan options before applying for a mortgage will verify loan terms.


A home loan comparison tool makes it easy to identify all loan options available. This tool prompts users to provide information about their mortgage needs, including the approximate cost of the property and the amount of the down payment the user has. It also verifies whether the user qualifies for the First Home Owners Grant (FHOG), which is available for first-time homebuyers in Australia. Users also indicate what type of home they want to buy and whether they’re buying a property, they’ll live in or rent. Once a borrower has filled in all of the requested information, it generates a list of available loan options. The tool provides information about the type of loan, the loan term, and the loan’s interest rate.

Mortgage loans don’t cover the cost of routine maintenance, property taxes, homeowners insurance, or decorations.

Homeowners are responsible for the cost of regular maintenance. This includes the cost of having the heating, ventilation, and air conditioning (HVAC) unit cleaned and inspected, clearing gutters, trimming hedges, cleaning the chimney, and repairing structural damage.

Homeowners are responsible for paying property taxes. Your mortgage loan doesn’t cover property taxes. Home loans also don’t cover homeowners insurance costs. Homeowners insurance is property insurance. If a fire damages the house or condo, the homeowner’s insurance will cover the cost of repairs.

Homeowners may opt to invest in items to alter the appearance of their home, such as commercial Christmas decorations. Beautiful fiberglass display pieces, ornaments, garlands, decorative candy canes, and Christmas trees can transform your property and spread holiday cheer. You may also opt to install holiday lights as part of your display. The costs of these items, and the cost of the electricity to power holiday lights and other electronic decorations, aren’t covered by your mortgage loan either.

Terms of sale can impact what the loan covers.


Some sellers offer enticements to sell their property quickly, such as closing cost assistance. Sellers may also offer allowances to make changes to the property, such as a flooring allowance. The new homeowner receives the allotted funds when the sale is finalized. Sellers may opt to allocate allowances to avoid the inconvenience of upgrading the property before they move.

Home loans typically cover the cost of the house or condominium. Some loans may cover additional costs, such as the cost of renovations. The lender sets the loan terms.

Read More