Recently, in consultations, many people believe that since they put down a 10% down payment, their mortgage insurance will automatically disappear after a few years. However, it is often overlooked that this calculation applies differently between conventional loans and FHA loans. A recent inquiry from Chattanooga highlighted this confusion exactly at this point.

According to Zillow data, as of June 30, 2026, the average home value in Chattanooga is $324,364, which is a 1.1% decrease from a year ago. In contrast, the median sale price reported by Redfin for the three months ending in May 2026 is $356,000, which is a 4.0% increase from a year ago. The differing directions of these two figures are due to differences in sampling and aggregation methods, but both indicate that the mid-$300,000 range is the current market center.

In this price range, most people choose between conventional loans and FHA loans based on their down payment capacity. If a credit score exceeds 680 and a down payment of more than 10% can be made, conventional loans are often more advantageous. Conversely, if the credit score is between 580 and 660 or if only a 3.5% down payment can be prepared, FHA loans appear to be a more realistic option.

This is where the aforementioned confusion arises. For conventional loans, if the down payment is less than 20%, PMI is required, but once the home equity exceeds 20%, it can be canceled upon request. The mortgage insurance premium (MIP) for FHA loans is calculated differently. If a down payment of less than 10% is made, the MIP remains for the entire loan term, and it can only be canceled after 11 years if a down payment of more than 10% is made. Expecting that the insurance premium will automatically disappear after a few years while considering both systems as the same can lead to discrepancies in actual repayment plans.

From the perspective of loan limits, Hamilton County is not classified as a high-cost area designated by the FHFA. As of 2026, the core loan limit is the same as the national standard at $832,750, and given the current median price level, there is little need to consider jumbo loans. The amount of down payment and credit score that can be prepared becomes the practical criteria for determining the type of loan.

Downtown Chattanooga is classified as a densely populated area and is excluded from USDA loan eligible areas. However, nearby small towns outside the city still have areas where USDA loans are possible, so if you can slightly increase your commuting distance to fit your budget, it can be an option to access without a down payment. The exact eligibility needs to be checked at the address level.

Many also inquire about school districts preferred by Korean families, and it is safer to refer to school evaluations based on ratings from GreatSchools or Niche. However, school district boundaries change frequently, so when selecting properties, it is advisable to verify which school is actually assigned to that address.

If you are moving from another state, the fact that Tennessee has no state income tax is attractive, but property tax rates and homeowners insurance may differ from the state you previously lived in, so it is wise to check separately before closing.

Knowing the procedure to eliminate PMI in advance can also be helpful. For conventional loans, once equity exceeds 20%, it is common to request a re-evaluation in writing from the lending institution, and if you request it before reaching the automatic cancellation point of 22% equity, you can save several months' worth of insurance premiums. In contrast, the MIP for FHA loans cannot be eliminated by request, so it is better to consider this difference when initially determining the down payment ratio.

When determining the down payment ratio, it is practical to not only compare monthly repayment amounts but also to calculate how long the mortgage insurance will be in effect. Especially for first-time homebuyers, it helps to clarify in advance whether to prioritize initial cash burden or long-term insurance premium burden to avoid wavering during the contract process.

Ultimately, in the Chattanooga market, most people choose between conventional loans and FHA loans based on their credit score and down payment capacity, and it seems that accurately confirming the timing of PMI cancellation between the two systems before signing a contract will be practically helpful. This article is not investment or legal advice, and it is recommended to consult with lending institutions and professionals before making any actual contracts.