What Down Payment Do You Need for a Conventional Loan?

Most homebuyers need a down payment for a conventional mortgage, but it doesn’t have to be 20%.

For many first-time or qualifying borrowers, the minimum down payment for a conventional loan can be as low as 3%, while 5% is common for standard primary-residence loans.

Your exact minimum depends on conventional loan requirements such as credit score, debt-to-income ratio, property type, and occupancy.

How Much Down Payment Is Typically Needed?

For a primary residence, the minimum down payment for a conventional loan can be as low as 3% for qualifying first-time or low-to-moderate income buyers, while 5% serves as a common baseline under current conventional loan requirements.

Many buyers aim higher: National Association of Realtors data shows first-time buyers often put down roughly 6% to 9% on average.

As you compare minimum down payment conventional loan options in 2026 and beyond, use these common thresholds as a guide:

Who Qualifies for a 3% Down Payment?

A 3% down conventional loan is typically reserved for borrowers who meet specific eligibility guidelines. In most cases, you must be a first-time homebuyer, meaning you have not owned a home in the last three years. You might also qualify through certain low-to-moderate income programs.

Some conventional loan programs, such as Fannie Mae HomeReady or Freddie Mac Home Possible, are designed to make homeownership more accessible with reduced down payment requirements. These programs may include additional rules, such as income limits or homebuyer education courses.

Another thing to keep in mind is that you might not automatically qualify for a 5% down payment. Your unique financial situation, including your credit score, factor into your loan terms and down payment requirements.

Lenders require a minimum credit score around 620 for conventional loans, and higher scores can unlock better pricing and lower PMI.

Lenders also consider:

• Debt-to-income ratio (DTI): Lower DTI may improve terms and program access.
• Source of funds: Gift funds and eligible down payment assistance are often accepted with proper documentation.
• Occupancy: Second homes and investment properties require higher down payments.

Other loan types have different down payment requirements. FHA loans tend to be more flexible, with 3.5% down payment requirements. USDA and VA loans have no down payment requirements, but come with more limited eligibility.

The ‘20% Rule’ and PMI

You’ve probably heard of the “20% rule” when talking about homebuying. That doesn’t have to do with qualifying for a conventional loan, but rather avoiding private mortgage insurance, or PMI.

PMI is an extra cost required by lenders if your down payment is less than 20%. It typically costs between 0.3% and 1.5% of your loan amount annually, and gets broken down in your monthly payment.

Lenders charge PMI because Fannie Mae and Freddie Mac, who set conventional loan guidelines, require it unless you have at least 20% equity in your home. Exactly how much your PMI costs depends on your unique financial situation, loan, and lender.

Here’s how PMI plays out in practice. PMI costs shown below are illustrative estimates only and can vary by lender, credit score, loan-to-value ratio, and loan features.

• Larger down payments reduce risk, which can improve conventional mortgage rates and lower monthly payments.
• On a $300,000 loan with 5% down, monthly PMI might be roughly $125–$375 depending on credit and loan features. That’s based on the common 0.5% to 1.5% annual PMI range.
• You can request to cancel PMI once your loan-to-value (LTV) reaches 80%, and it automatically drops near 78% LTV.

Here’s the effect of down payment on PMI costs:

Keep in mind that mortgage insurance requirements vary by loan type. PMI applies to conventional loans, whereas FHA loans have MIP requirements.

Down Payment Requirements for Second Homes and Investment Properties

Conventional financing tightens for non-primary residences.

Second homes typically require at least 10% down, multi-unit properties often start at 15%, and many investment properties require 20% or more.

Gift funds or assistance can be more restricted on these property types, and underwriting may require stronger reserves and lower DTI.

The following table shows some common down payment requirements. This table is illustrative only, and down payment requirements will depend on your unique situation.

Can I Get a Conventional Loan With Zero Down?

True zero-down options do not exist for standard conventional loans. Only VA and USDA programs offer no down payment for eligible borrowers.

Some private “zero-down” products pair a conventional first mortgage with a second lien to cover the down payment. Those programs can come with a higher risk, like higher blended costs, constraints on refinancing or selling, and potential balloon features.

If you need help with upfront funds, consider legitimate down payment assistance (DPA) programs and compare outcomes side-by-side with FHA and conventional options.

How to Compare Down Payment Options and Mortgage Programs

Here’s a simple, step-by-step approach to comparing down payment options.

1. Get pre-approved and request itemized Loan Estimates from multiple lenders (rate, APR, PMI cost and cancellation terms, fees).
2. Run the numbers with a mortgage calculator to compare monthly payments and total cost of ownership.
3. Ask targeted questions:
• How much can I put down comfortably?
• How will PMI affect my monthly payment and for how long?
• What changes if I save for a larger down payment versus buying now?
4. Review timing to 20% equity and PMI removal paths under different scenarios.
   

Here’s an illustrative comparison on a $400,000 purchase. Keep in mind this doesn't reflect the loan you'll get:

The ranges in this table reflect a 0.3%–1.5% annual PMI estimate divided monthly. Your actual pricing will depend on credit, LTV, and loan features.

The Bottom Line

Down payments are required for conventional loans. Qualifying buyers, including many first-time homebuyers, can get conventional loans with as little as 3% down, but most buyers will be required to have at least a 5% down payment. Putting 20% down is optional, but it allows borrowers to avoid private mortgage insurance and reduce their total monthly housing cost.

Frequently Asked Questions

Is a down payment always required for a conventional loan?

Yes, a down payment is required for a conventional loan—typically as low as 3% for qualified buyers, while 20% down is only needed if you want to avoid PMI.

How does a smaller down payment affect monthly payments and insurance?

A smaller down payment usually raises your monthly payment and requires PMI until you reach approximately 20% equity.

Can gift funds or assistance programs be used for the down payment?

Yes, many conventional programs allow gift funds and down payment assistance if they’re properly documented and meet lender guidelines.

What are the typical credit score requirements for low down payment options?

Many lenders look for a credit score of 620 or higher to qualify for low down payment conventional loans, and higher scores can improve rates and reduce PMI.

How can I decide whether to put down less now or save for a larger down payment?

Compare Loan Estimates for multiple down payment scenarios, factoring in PMI cost and timing for removal, and choose the path that best fits your budget and timeline.