Thinking about buying a home in Sun Prairie and debating WHEDA versus a conventional loan? You are not alone. Many first-time and move-up buyers compare these options to balance cash-to-close, monthly payment, and long-term flexibility. In this guide, you will learn how each loan works, what to expect in Dane County, and how to compare offers so you can choose with confidence. Let’s dive in.
WHEDA and conventional: what they are
WHEDA is Wisconsin’s state housing agency that partners with participating lenders to offer fixed-rate mortgages and coordinated down payment assistance for eligible buyers. Programs focus on affordability and often pair the first mortgage with a WHEDA down payment or closing cost solution.
Conventional loans follow Fannie Mae and Freddie Mac guidelines. You will see common terms like 30-year fixed and 15-year fixed. If you put less than 20 percent down, you typically have private mortgage insurance until you reach certain equity levels.
Down payment and assistance
WHEDA down payment support
WHEDA is designed to work with low down payments and can pair your first mortgage with a WHEDA-administered down payment assistance option. That assistance may be a second mortgage that is deferred, forgivable, or repayable when you sell or refinance. This structure often helps Sun Prairie first-time buyers cover both down payment and closing costs.
Conventional down payment choices
With conventional financing, minimum down payments are usually 3 to 5 percent for primary residences, depending on the product and lender. There is no built-in down payment assistance in conventional programs, so you either bring funds, combine a qualifying local assistance program, or increase the down payment. A 20 percent down payment removes private mortgage insurance.
Mortgage insurance basics
Conventional PMI
If your conventional loan is above 80 percent loan-to-value, you will usually have PMI. You can pay it monthly, upfront, or as lender-paid with a slightly higher rate. PMI gets cheaper with stronger credit. You can request cancellation at 80 percent loan-to-value and it must end automatically at 78 percent under federal rules.
WHEDA and MI
Many WHEDA setups still involve mortgage insurance on the first mortgage, especially with low down payments. The exact MI structure varies by program. A WHEDA second mortgage can reduce the primary loan-to-value, which may lower the MI on the first mortgage. Always compare the full monthly payment, not just the rate.
Income, limits, and property fit
Income and purchase-price limits
Conventional conforming loans do not impose household income caps. WHEDA programs do. WHEDA eligibility uses county-based income limits, and purchase-price or program limits can apply. In Dane County, those thresholds are set specifically for the area, so check them when you talk with a participating lender.
Loan size and property types
Conventional loans must fit within the Federal Housing Finance Agency’s conforming loan limits. Most Sun Prairie property types are eligible, including single-family homes and condos, but condos may require project approval. WHEDA may also limit property types and purchase prices in some programs. Verify eligibility early if you are considering a condo or manufactured home.
Credit, rates, and total cost
Credit score expectations
Conventional loans typically reward higher credit with better pricing and lower MI costs. Some lenders have minimums starting in the low 600s, and pricing improves with stronger profiles. WHEDA aims to support low to moderate income buyers and can be more flexible on credit history, while still requiring acceptable credit and full underwriting.
Rate, APR, and cash-to-close
Conventional rates are market-driven and vary by credit, loan-to-value, and MI setup. A 20 percent down conventional loan often has the lowest ongoing cost since it avoids monthly MI. WHEDA uses fixed-rate products financed through bond programs and may offer competitive pricing, especially when combined with assistance that lowers cash-to-close. Compare interest rate, APR, MI, second-mortgage terms, and total cash needed on day one.
When each option may fit
When WHEDA can be a smart fit
- You need help with down payment or closing costs.
- Your household income and the home price meet Dane County WHEDA limits.
- You want a structured program that coordinates assistance with the first mortgage.
When conventional may be better
- You can put 20 percent down and want to avoid MI altogether.
- Your income is above WHEDA limits, or you want fewer program rules.
- You have strong credit and want flexible PMI choices with cancelation as you build equity.
A simple plan to compare offers
1) Gather your info
- Recent pay stubs, W-2s, and tax returns for your household.
- Bank statements and sources of down payment funds.
- A current credit score estimate and notes on any credit events.
- An estimated price range and Sun Prairie neighborhoods or condo communities you prefer.
2) Ask each lender these questions
- For WHEDA:
- Which WHEDA product fits my household size and income in Dane County?
- What down payment assistance is available and what are the terms? Is any portion deferred or forgivable?
- Will I have mortgage insurance on the first mortgage? How much per month or upfront?
- Are there limits on seller credits or other contract requirements I should know about?
- For conventional:
- What low-down-payment options do you offer and what credit score is required?
- What PMI choices can I use and what do they cost? When can PMI be canceled?
- Can I combine a local assistance program with this loan? How would that affect timing and underwriting?
- For both:
- What is my rate and APR for the same price and down payment?
- What are total closing costs and allowable seller contributions?
- How long to close and what could delay underwriting?
3) Build side-by-side numbers
Ask for a simple worksheet using the same purchase price:
- Scenario A: WHEDA with down payment assistance. Show first-mortgage principal and interest, MI, second-mortgage terms or payment, total monthly payment, and cash-to-close.
- Scenario B: Conventional with 5 percent down plus PMI. Show principal and interest, PMI, total monthly, and cash-to-close.
- Scenario C: Conventional with 20 percent down. Show principal and interest only and cash-to-close.
Then compare:
- Monthly payment.
- Cash-to-close.
- Five to seven year cost, including PMI cancelation and any DPA repayment or forgiveness schedule.
- Refinancing or sale triggers that affect a WHEDA second mortgage.
Quick fill-in template
Use these placeholders when you review loan estimates:
- Purchase price: ______
- Down payment: ______
- First-mortgage rate and APR: ______ / ______
- Monthly MI or upfront MI: ______
- DPA amount and terms: ______
- Estimated taxes, insurance, HOA: ______
- Total cash-to-close: ______
- Estimated monthly payment (all-in): ______
Local tips for Sun Prairie buyers
Preapproval matters in a competitive market
Sun Prairie sits within the Madison metro. Starter homes and move-in-ready condos can move quickly, so a complete preapproval helps you act fast and shows sellers you are serious.
Check condo and new-construction details
If you are eyeing a condo or a new build, confirm project approvals and homeowners’ association documents early. Both WHEDA and conventional loans can require specific condo project checks, and builder warranties can matter for underwriting.
Work with WHEDA-approved lenders and counselors
WHEDA loans must be originated by participating lenders, and some local lenders have dedicated WHEDA teams. You can also contact HUD-approved housing counseling agencies in Dane County for unbiased education and help comparing loan offers.
Common trade-offs to weigh
- Lower upfront cash with WHEDA plus assistance versus a potentially higher monthly obligation if a second mortgage or MI applies.
- WHEDA income and purchase-price limits versus conventional flexibility for higher earners.
- PMI cancelation on conventional loans as equity builds versus WHEDA assistance that may be deferred, forgivable, or due at sale or refinance.
- Rate differences that can offset MI or assistance costs on one option versus the simplicity of a conventional loan with 20 percent down.
Final thoughts
Both WHEDA and conventional loans can work well in Sun Prairie. The best choice depends on your cash-to-close, credit, income, and how long you plan to keep the home. Build side-by-side scenarios for the same property and ask lenders for clear, written numbers. If you want a local guide to help you align financing with the right neighborhood and home type, reach out to Fred Van Buren. We are here to help you move forward with clarity.
FAQs
What is WHEDA for Sun Prairie homebuyers?
- WHEDA is Wisconsin’s housing agency program that offers fixed-rate mortgages and coordinated down payment assistance through participating lenders, subject to Dane County income and program limits.
How do conventional loans differ from WHEDA loans?
- Conventional loans follow Fannie Mae and Freddie Mac rules, have no household income caps, and typically require PMI with less than 20 percent down, while WHEDA pairs the first mortgage with structured assistance for eligible buyers.
Can I use WHEDA to buy a Sun Prairie condo?
- Often yes, but condo projects must meet program requirements and may need approval; confirm eligibility with a WHEDA-participating lender early in your search.
Will PMI on a conventional loan ever end?
- Yes, you can request PMI cancelation at 80 percent loan-to-value and it must end automatically at 78 percent under federal rules for private mortgage insurance.
Is WHEDA always cheaper than conventional financing?
- It depends; WHEDA can lower upfront cash and may offer competitive rates, but total cost varies with MI and any second-mortgage terms, so compare APR, monthly payment, and cash-to-close.
Can I refinance later if I use WHEDA assistance?
- Often yes, but some assistance is repaid at sale or refinance or forgives over time; review your second-mortgage documents and ask your lender about refinance impacts.
