A family was looking for a home in Madison with a budget of around $400,000. Following their experience with three different lenders offering various products reveals what types of loans are actually used in the Madison market.

The median home price in Madison, according to Redfin, is projected to be $445,000 for the three months leading up to June 2026, which is a 2.4% increase from a year ago, while Zillow reports the average home value at $435,430, up 2.1%. The family's budget was not significantly different from the current market prices.

The first lender offered a conventional loan. With a credit score over 700 and a 10% down payment, they could reduce PMI costs while securing a favorable interest rate.

The second lender proposed an FHA loan. This option allowed for a down payment as low as 3.5%, reducing initial cash outlay and leaving extra funds for moving costs or reserves, but it was important to note that mortgage insurance premiums (MIP) could remain for the life of the loan.

This ultimately comes down to a choice between saving initial cash or reducing insurance costs in the long term. Since the family could prepare a down payment of over 10%, they opted for the conventional loan and planned to eliminate PMI once their equity exceeded 20%.

In terms of loan limits, Dane County is not designated as a high-cost area by FHFA, so the core loan limit for 2026 is the same as the national standard at $832,750. Most transactions at the current median price level fall within this limit, and there is generally little need to resort to jumbo loans.

Some families are curious about USDA loans, and many areas outside Madison city limits, such as Wanakee, DeForest, Cottage Grove, and McFarland, remain eligible. The city of Madison itself is often excluded due to its dense population.

The third lender made a slightly different suggestion. If the family could manage a 20% down payment, they could avoid PMI altogether, so delaying the move by a few months to save more funds could be beneficial in the long run. Comparing the three offers, it became clear that the family's priority was between the timing of their move and their initial cash availability.

Due to its college town nature, Madison tends to see a surge in competition for listings around the start of the semester. Obtaining pre-approval in advance can provide an advantage when making offers, regardless of the type of loan, so if a move date is set, it's practical to complete pre-consultation with lenders at least a month prior.

When looking at school districts preferred by Korean families, it's advisable to refer to ratings from GreatSchools or Niche. School district boundaries change frequently, so it's wise to verify assigned schools before finalizing a property.

Dane County also has steady rental demand, leading to inquiries about investment properties. However, investment loans often require higher down payment ratios than owner-occupied loans, and the risk of not securing tenants during vacancies must also be considered.

Wisconsin has a property tax rate that is higher than the national average, so when calculating monthly payments, it's realistic to include not just principal and interest but also property taxes and insurance to gauge the overall burden. Families moving from other states may budget based on their previous property tax experiences and be surprised when they receive actual bills, so checking recent property tax payment records before finalizing a property is advisable.

In summary, in Madison, the choice between conventional and FHA loans often depends on down payment capacity and initial cash plans, and since different lenders may emphasize different points, comparing two or three options can be helpful. This article does not constitute investment or legal advice, and it is recommended to consult with lenders and professionals before finalizing any contracts.