Home Financing FAQs

The questions we hear most from homebuyers have short answers: government-backed loans trade easier qualification for insurance costs, down payments run anywhere from 0% (VA, USDA) to 3% (conventional) and up, mortgage insurance protects the lender rather than you, and renting is not automatically cheaper once equity enters the math. Here are the full answers, whether you are buying your first home or your tenth — and if your question is not here, ask us directly; free quotes and prequalification are the easy first step.

What’s the difference between a conventional and nonconventional loan?

Nonconventional loans are insured by various divisions of the federal government such as the Federal Housing Administration. Conventional loans, instead, are fully funded and insured by private lenders. Conventional loans have more stringent approval requirements than nonconventional loans, but they typically carry slightly lower interest rates.

How much do I need to save for a down payment?

That depends on the loan. Some nonconventional loans have no down payment requirement at all, including those backed by the VA and the USDA. Conventional loans start as low as 3% down for qualified first-time buyers, though putting less than 20% down usually means paying private mortgage insurance, and some portfolio loans like hard money loans may require considerably more. Each case is unique, but as a general rule, the larger the down payment, the lower your interest rate.

What is mortgage insurance?

Mortgage insurance is required for most conventional loans until a borrower achieves at least 20% equity in their home. Importantly, mortgage insurance offers you no protection as a borrower — do not confuse it with homeowners insurance. It gives your lender an extra level of security in case you default on your mortgage payments.

What is a jumbo loan?

Jumbo loans are a nonconforming type of conventional loan. They are conventional because they are not backed by the federal government, and nonconforming because they exceed the guidelines set by Fannie Mae and Freddie Mac. Those companies purchase conforming mortgages in bulk and repackage them for sale on the public market, but they will not purchase mortgages above certain limits that vary by county. Mortgages exceeding the limit are jumbo loans, which typically carry higher down payment requirements and somewhat higher rates than conforming loans.

Isn’t it cheaper to rent?

Not necessarily. With a good interest rate, your monthly mortgage payment may run below your rent. Homeownership does add costs — homeowners insurance, possibly mortgage insurance, and every repair and improvement is yours to fund, where a landlord typically covers upkeep for renters. But each mortgage payment builds equity you get back when you sell, while rent builds nothing. Our post on buying vs renting walks the full comparison.