A 3% down payment can reduce the amount of time you need to save before buying a home. You would need $7,500 down on a $250,000 home, $9,000 on a $300,000 home or $12,000 on a $400,000 home.
Eligible conventional mortgages backed by Fannie Mae or Freddie Mac may allow 3% down. These options have borrower, property, occupancy and underwriting requirements, so a 3% down payment is not available for every conventional purchase.
Putting 3% down also means financing 97% of the purchase price. The larger loan balance and private mortgage insurance increase the monthly payment compared with making a larger down payment.
You can use our home affordability calculator to estimate a price range using your income, debts and local housing costs.
3% Down Payment Basics
| Home Price |
3% Down Payment |
Starting Loan Amount |
Likely PMI? |
| $150,000 |
$4,500 |
$145,500 |
Yes |
| $200,000 |
$6,000 |
$194,000 |
Yes |
| $250,000 |
$7,500 |
$242,500 |
Yes |
| $300,000 |
$9,000 |
$291,000 |
Yes |
| $400,000 |
$12,000 |
$388,000 |
Yes |
| $500,000 |
$15,000 |
$485,000 |
Yes |
Estimate Assumptions
The estimates on this page assume: A 30-year fixed conventional mortgage at 6.55%, a 3% down payment, annual property taxes equal to 1.1% of the home price, annual homeowners insurance equal to 0.35%, private mortgage insurance equal to 0.60% of the loan balance annually, no homeowners association dues and no other monthly debts.
The illustrative rate is based on Freddie Mac’s 30-year fixed mortgage average reported on July 16, 2026. Actual rates, mortgage insurance costs, taxes, insurance premiums and approval amounts vary.
How Does a 3% Down Payment Work?
A 3% down payment means you contribute 3% of the purchase price and finance the remaining 97% with a mortgage.
Use this formula to calculate the down payment:
Home price × 0.03 = 3% down payment
For a $300,000 home:
$300,000 × 0.03 = $9,000 down
The resulting base loan amount would be $291,000. Closing costs and prepaid expenses would be separate from the $9,000 down payment unless permitted credits, gifts or assistance cover them.
A 3% down payment creates a 97% loan-to-value ratio, or LTV. LTV compares the mortgage amount with the property’s value or purchase price.
A higher LTV generally increases the lender’s risk. That is why conventional loans with less than 20% down typically require private mortgage insurance.
Which Loans Allow 3% Down?
Fannie Mae HomeReady
HomeReady allows down payments as low as 3% for eligible borrowers. The program includes income limits and other requirements.
Permitted funding sources may include personal savings, eligible gifts, grants and approved subordinate financing. HomeReady also requires homeownership education for certain first-time buyers.
Freddie Mac Home Possible
Home Possible also permits down payments as low as 3% for eligible borrowers. Income limits and property requirements apply.
Depending on the transaction, down payment and closing funds may come from eligible savings, gifts, grants or other permitted sources.
Other Conventional 97% Options
Some standard conventional programs allow a 97% loan-to-value ratio for qualifying primary-residence purchases. Requirements may depend on whether one or more borrowers are first-time homebuyers, the property type and the underwriting result.
Fannie Mae and Freddie Mac are government-sponsored enterprises that establish requirements for many conforming conventional mortgages. Lenders may apply additional requirements beyond the agencies’ minimum guidelines.
Is 3% Down Available With an FHA Loan?
No. FHA loans generally require a minimum borrower investment of 3.5% when the borrower meets applicable credit requirements.
The difference between 3% and 3.5% is $1,500 on a $300,000 home. FHA and conventional loans also use different mortgage insurance structures, credit requirements and underwriting standards.
How Much Cash Do You Need for 3% Down?
| Home Price |
3% Down |
97% Mortgage |
| $100,000 |
$3,000 |
$97,000 |
| $150,000 |
$4,500 |
$145,500 |
| $200,000 |
$6,000 |
$194,000 |
| $250,000 |
$7,500 |
$242,500 |
| $300,000 |
$9,000 |
$291,000 |
| $400,000 |
$12,000 |
$388,000 |
| $500,000 |
$15,000 |
$485,000 |
| $600,000 |
$18,000 |
$582,000 |
The down payment is only one part of the cash needed to buy a home. You may also need money for lender fees, title services, appraisal charges, prepaid interest, property tax and insurance deposits, inspections and moving expenses.
A $9,000 down payment on a $300,000 home does not mean the transaction requires only $9,000 in cash. The final amount will appear as cash to close on your Closing Disclosure.
How Much House Can You Afford With 3% Down by Income?
The estimates below limit the monthly housing payment to 28% of gross income. Each calculation includes principal, interest, property taxes, homeowners insurance and estimated PMI.
| Annual Income |
Monthly Housing Budget |
Estimated Home Price |
Estimated 3% Down Payment |
| $50,000 |
$1,167 |
$149,000 |
$4,470 |
| $60,000 |
$1,400 |
$178,000 |
$5,340 |
| $75,000 |
$1,750 |
$223,000 |
$6,690 |
| $90,000 |
$2,100 |
$267,000 |
$8,010 |
| $100,000 |
$2,333 |
$297,000 |
$8,910 |
| $120,000 |
$2,800 |
$356,000 |
$10,680 |
| $150,000 |
$3,500 |
$446,000 |
$13,380 |
| $180,000 |
$4,200 |
$535,000 |
$16,050 |
| $200,000 |
$4,667 |
$594,000 |
$17,820 |
These figures are planning estimates rather than approval amounts. A lender will also consider your credit, assets, employment, property and total debt-to-income ratio.
Auto loans, student loans, personal loans and credit card minimum payments can reduce the amount available for housing. Higher taxes, insurance costs or HOA dues would also lower the estimated home price.
Worked Example: Buying a $300,000 Home With 3% Down
Assume you buy a $300,000 home using a 30-year fixed conventional mortgage and put $9,000 down.
| Payment Component |
Estimated Amount |
| Purchase price |
$300,000 |
| Down payment |
$9,000 |
| Down payment percentage |
3% |
| Loan amount |
$291,000 |
| Interest rate and term |
6.55% for 30 years |
| Principal and interest |
$1,849 per month |
| Property taxes |
$275 per month |
| Homeowners insurance |
$88 per month |
| Estimated PMI |
$146 per month |
| HOA dues |
$0 |
| Estimated monthly housing payment |
$2,358 |
A $2,358 housing payment equals approximately 28% of gross monthly income for a household earning about $101,100 per year.
The estimate assumes no other monthly debts and excludes maintenance, utilities and repairs. The actual PMI premium could be higher or lower based on the borrower’s credit, loan characteristics and insurer.
How Does 3% Down Compare With 20% Down?
A 3% down payment reduces the upfront savings requirement. A 20% down payment reduces the mortgage balance and generally eliminates conventional PMI.
The table below compares both options on a $300,000 home using the same illustrative rate.
| Cost |
3% Down |
20% Down |
| Down payment |
$9,000 |
$60,000 |
| Loan amount |
$291,000 |
$240,000 |
| Principal and interest |
$1,849 |
$1,525 |
| Estimated PMI |
$146 |
$0 |
| Payment Before Taxes and Insurance |
$1,995 |
$1,525 |
In this example, putting 20% down requires an additional $51,000 upfront and reduces the estimated payment before taxes and insurance by about $470 per month.
The 3%-down option allows the buyer to purchase with less cash and retain more savings. The tradeoff is a larger required payment, PMI and less initial equity.
The 20%-down comparison shows how the larger contribution changes affordability across different income levels.
What Are the Advantages of Putting 3% Down?
You May Be Able to Buy Sooner
Saving 3% generally takes less time than saving 10% or 20%. On a $300,000 home, the difference between 3% and 20% is $51,000.
Buying sooner may be useful when you need to move, want a more stable housing arrangement or find a suitable property before reaching a larger savings target.
You Can Keep More Cash Available
A smaller down payment can preserve money for closing costs, repairs, furniture and emergency savings.
Keeping cash outside the home can be valuable because newly purchased properties may require immediate expenses that were not obvious during the initial showing.
You Can Begin Building Equity
Your equity begins with the down payment and changes as you repay the mortgage and the property’s value rises or falls.
A 3% down payment creates less initial equity than a larger contribution, but it allows an eligible buyer to begin owning sooner.
What Are the Drawbacks of Putting 3% Down?
The Monthly Payment Is Higher
Financing 97% of the purchase price produces a larger principal-and-interest payment than financing 90% or 80% at the same rate.
PMI adds another cost until the applicable cancellation or termination requirements are met.
You Begin With Limited Equity
A 3% down payment leaves little room between the home’s value and the mortgage balance. Selling shortly after buying can be difficult because agent commissions, transfer taxes and other selling expenses may exceed the available equity.
Mortgage Pricing May Be Less Favorable
Loan-to-value ratio is one factor used to price conventional mortgages. A 97% LTV loan may have different rate or fee adjustments than a loan with a larger down payment.
Credit score, occupancy, property type and other characteristics also affect pricing.
You May Have Fewer Property Options
Some 3%-down programs are limited to one-unit primary residences. Second homes, investment properties, multifamily homes and certain manufactured homes may require larger down payments or different loan products.
How Long Will You Pay PMI With 3% Down?
The answer depends on how quickly the loan balance falls, whether the home’s value changes and which PMI cancellation method applies.
Under federal law, eligible borrowers may generally request PMI cancellation when the principal balance is scheduled to reach 80% of the home’s original value. Automatic termination generally occurs when the balance is scheduled to reach 78% and the mortgage is current.
Additional requirements may include a satisfactory payment history, no junior liens and evidence that the property has not declined in value.
The PMI calculator can estimate the monthly charge and potential removal timeline using your loan details.
How to Buy With 3% Down
Confirm That the Loan and Property Qualify
A 3%-down mortgage generally requires an eligible conventional program, qualifying borrower and acceptable property. Confirm whether income limits, first-time buyer requirements or homeownership education apply.
Budget for Closing Costs Separately
Set aside money for lender charges, title services, prepaid expenses, inspections and moving costs. Do not assume the down payment is the only cash needed.
Document Your Funding Sources
Eligible funds may include savings, gift funds, grants and approved down payment assistance. The lender will verify the source and transfer of the money.
Account for the Full Monthly Payment
Include principal, interest, property taxes, homeowners insurance, PMI, flood insurance when required and HOA dues.
Maintenance and utilities should also be included in your personal budget even though they are not part of the mortgage payment.
Protect Your Remaining Savings
A low down payment is more useful when it allows you to retain a reasonable emergency fund. Avoid using all available cash merely to reach the minimum contribution.
Bottom Line
A 3% down payment can make a conventional home purchase possible with substantially less upfront cash. It requires $6,000 on a $200,000 home, $9,000 on a $300,000 home and $12,000 on a $400,000 home.
The tradeoff is a larger mortgage, higher monthly payment, PMI and limited initial equity. Your income, debts and complete housing expenses will determine whether the payment is affordable.
Compare the savings required with the payment you would carry after closing. A smaller down payment can help you buy sooner, but it should still leave room in your budget for closing costs, maintenance and emergencies.
Dollar-based examples include purchases with $5,000 down, $20,000 down and $50,000 down.
FAQ
Can You Buy a House With 3% Down?
Yes. Eligible conventional mortgage programs may allow a 3% down payment on qualifying primary-residence purchases. Borrower, income, property and underwriting requirements depend on the specific program.
How Much House Can I Afford With 3% Down?
Your affordable price depends on your income, debts and housing costs. Under the assumptions used here, annual income of $100,000 supports an estimated home price of about $297,000 with approximately $8,910 down.
How Much Is 3% Down on a $300,000 House?
A 3% down payment on a $300,000 home is $9,000. The remaining base mortgage would be $291,000 before accounting for closing costs or other financing arrangements.
Do You Pay PMI With 3% Down?
Yes, a conventional mortgage with 3% down will generally require PMI because the starting loan-to-value ratio is 97%.
Is 3% Down Only for First-Time Homebuyers?
Some 3%-down programs are designed for or limited to first-time buyers, while others may be available to eligible repeat buyers. The requirements depend on the conventional mortgage product.
Is 3% Down Better Than an FHA Loan?
Neither option is universally better. A 3%-down conventional loan and a 3.5%-down FHA loan use different credit, mortgage insurance, income and property requirements. Compare the complete payment and long-term insurance costs.
Can Gift Funds Cover the 3% Down Payment?
Eligible conventional programs may allow gift funds for some or all of the down payment and closing costs. The lender will document the donor, source, transfer and lack of a repayment obligation.
Does 3% Down Include Closing Costs?
No. The down payment is separate from lender fees, title charges, prepaid taxes, homeowners insurance and other closing expenses unless permitted credits or assistance cover them.
Can You Remove PMI After Putting 3% Down?
Yes, after you meet the applicable balance, payment-history, property-value and loan requirements. Federal cancellation and automatic termination rules generally use 80% and 78% of the home’s original value as key thresholds.
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