Loan programs come in many forms and come from many sources. Just as the loan structure, like a 30 year fixed rate mortgage, can affect your interest rate and monthly payments, the source of funding for your loan can also affect your rate and payments. The source of funding can also affect the amount of your down payment and closing costs.
If you have at least 3% of the loan amount to use as a down payment, you may consider the most common type of loan, a conventional loan. These loans consist of conforming loans, which are secured by government sponsored entities (GSE) such as Fannie Mae and Freddie Mac, and jumbo loans, which are funded by private investors for loan amounts higher than the limits set by the GSE's.

It is common for borrowers to shop the loan they think they want, then change their mind later in the process. For example:

• They begin thinking they want a fixed-rate loan, then switch to an adjustable.
• They begin thinking they want a 30-year term, then switch to 15-years.
• They begin thinking they want a zero-point loan, then switch to 3 points.

Such switches may invalidate their shopping because the loan provider with the best price in one loan category may not have the best price in another.

Conforming loans are funded by Fannie Mae (FNMA) and Freddie Mac (FHLMC). These companies do not lend money directly to you, but work with lenders across the country to offer mortgage loans to meet your needs. As a secondary market for mortgage loans, they purchase mortgages from lenders and package them into securities that can be sold to investors. If you are looking for a large loan amount to purchase or refinance your home, you could consider a jumbo loan, which has a higher loan amount limit than the limits set by Fannie Mae and Freddie Mac. Because jumbo loans cannot be funded by these two agencies, they usually carry a higher interest rate

Mortgage Insurance
Simply put, mortgage insurance protects the mortgage company against financial loss if a homeowner stops making mortgage payments. Mortgage companies usually require insurance on low down payment loans for protection in the event that the homeowner fails to make his or her payments. When a homeowner fails to make the mortgage payments, a default occurs and the home goes into foreclosure. Both the homeowner and the mortgage insurer lose in a foreclosure. The homeowner loses the house and all of the money put into it. The mortgage insurer will then have to pay the mortgage company's claim on the defaulted loan.