Conventional Loan Down Payment Requirements
Key Takeaways
- Many first-time homebuyers can secure a conventional loan by putting just 3% down.
- Putting down less than 20% may come with increased monthly payments.
- A strong financial profile can help buyers qualify for more favorable financing options.
- Down payment requirements can vary based on property type, price, and loan program.
Saving for a down payment can be one of the most difficult parts of buying a home, and many prospective buyers think they need to put at least 20% down to qualify for a conventional loan. In reality, minimum down payment requirements are often much more forgiving and can vary based on a number of factors specific to your financial situation. Here, we’ll dive into what you can expect to save for a down payment, what might influence how much money you put down, and how to arrive at a percentage that suits your current and future goals.
What Is the Minimum Down Payment for a Conventional Loan?
It’s a common misconception that you need to put at least 20% down on a new home; yet many conforming conventional loans allow down payments as low as 3%. Fannie Mae and Freddie Mac establish eligibility guidelines such as minimum credit scores and maximum debt-to-income ratios and available programs can vary for first-time and repeat buyers.
In fact, most first-time buyers put down much less than 20% when buying a home. According to the National Association of REALTORS®, the median down payment among first-time buyers has ranged from 6%–9% since 2019, with repeat buyers putting down an average of 23% in 2024. Although putting 20% or more down is not required, it can come with benefits like lower monthly payments and more favorable interest rates.
Why a 20% Down Payment Isn’t Always Required
The “20% myth” originated during the Great Depression, when many home loans were unregulated and access to credit tightened up (or froze) nationwide. Many lenders required minimum down payments ranging from 20%–40% (or higher) before the Federal Housing Administration (FHA) was created in 1934.
While the idea of 20% down remains today, it’s not a requirement in order to buy a home. However, it’s a factor because down payments less than 20% typically result in buyers paying Private Mortgage Insurance (PMI). Avoiding PMI is one benefit of putting 20% down, while a larger down payment also means starting your homeownership journey with more equity in your home and more affordable monthly payments.
To get an idea of how down payments affect mortgage payment affordability, use our down payment calculator to estimate how different amounts may affect your monthly payment.
How Conventional Loan Down Payment Requirements Differ
Here are some situations that can determine how much you choose to put down, and how they compare with one another.
| Situation | Possible Down Payment Requirement |
|---|---|
| First-time homebuyer purchasing a primary residence | As low as 3% depending on loan program and borrower qualifications |
| Repeat homebuyer purchasing a primary residence | As low as 5% depending on loan program and borrower qualifications |
| 2—4 owner-occupied property | May require a higher down payment |
| Second home | Often higher than a primary residence |
| Investment property | Typically higher than owner-occupied properties |
Factors That Affect Conventional Loan Down Payment Amounts
The right down payment for a buyer can depend on things like the loan program, type of residence, and borrowers’ financial profile. Although these factors can impact standard conventional mortgage requirements, minimum down payment amounts can still vary by lender and loan program.
Property Type
The type of home you’re looking to purchase—whether a permanent residence, or a vacation/investment property—can impact how much you’ll have to put down.
- Primary residence: Requirements can vary by program, borrower, and lender, but conventional loans typically allow down payments as low as 3%.
- Second home: Since second homes can be riskier transactions for lenders, minimum down payment requirements can be a bit higher; usually starting at 10%.
- Investment property: Investment properties pose the highest risk for both buyers and lenders, making minimum down payment requirements anywhere from 15%-25% or more; noting that these figures can vary based on the property’s number of units.
Home Price and Loan Size
A home’s purchase price directly influences your down payment. Higher priced homes require buyers to set aside more cash for a down payment, even when using the same down payment percentage. Larger borrowing amounts can also impact the types of homes a prospective homeowner can affordably purchase. Check out our Home Affordability Calculator to get an idea of what you can comfortably afford based on your circumstances.
Credit and Personal Finances
When you apply for a loan, your lender will review your financial information to verify that you qualify for the loan amount you’ve requested. They’ll consider your credit score, credit history, debt-to-income (DTI) ratio, and income history among other factors. Meeting a loan's minimum credit score requirement and having a strong financial profile can help buyers qualify for more favorable rates, including loans with lower down payment programs.
It’s a good idea to explore available financing options, and consider a free credit check online to see what options could be available to you when you choose to move forward with a conventional loan. If you are further along than just wanting to know your credit score, consider getting prequalified with Freedom Mortgage. We will explain all of your best money-saving mortgage options.
How Much Home Can You Afford?
Getting prequalified is a great way to estimate home prices you can afford. Begin your journey toward buying a new home today.
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How to Choose Your Mortgage Down Payment Amount
With a down payment being one of the biggest financial hurdles for buyers, you’ll want to go with the amount that suits your personal financial goals. Here’s a list of some of the factors you should consider to make the most informed decision possible.
1. Understand Your Minimum Down Payment Requirement
Before deciding on a down payment percentage, you’ll want to make sure you’re aware of the minimum down payment requirements for the conventional loan you chose to move forward with. This gives you a good starting point of how much cash you’ll need to have for upfront costs. Remember, minimum down payment requirements can vary by property type, loan program, and a borrower's financial situation.
2. Consider Whether You Want to Avoid PMI
PMI typically costs 0.5%–1.5% of the loan amount each month, or between $42 and $125 for every $100,000 borrowed. While that might seem affordable, homeownership costs can add up quickly, and you might want to avoid it. You’ll need to pay PMI each month until you’ve built up at least 20% equity in your home. While putting as much as 20% down can be a big undertaking, it can ultimately save you money in the long run.
3. Evaluate Your Monthly Budget
Your down payment directly impacts your monthly mortgage payments. By putting more money down upfront, you’ll reduce your monthly payment and save on long-term expenses. Also, by putting at least 20% down, you’ll likely benefit from slightly lower mortgage rates.
4. Balance Your Down Payment Against Other Financial Goals
Make sure your down payment is affordable for your budget. More money going toward a down payment could mean less money in your pocket or savings account. Homebuyers should always have available funds for emergency expenses and unexpected repairs. Keep that in mind when determining your ideal down payment amount. We are always available to help you figure this out.
5. Consider Your Long-Term Homeownership Plans
Choosing how much to put down can depend on a number of factors, and buyers should consider how their down payment fits into their long-term financial goals. Whether you prioritize low monthly payments or building home equity, and how long you plan to stay in the home can also determine a down payment amount that makes the most financial sense.
There’s no single down payment percentage that’s right for every homebuyer. Each prospective homeowner has their own unique financial qualifications and long-term plans, so selecting a down payment means finding a number that supports your current financial situation, and future goals.
Conventional Loan Down Payment FAQs
Here are some additional frequently asked questions about conventional loan down payments.
Can You Get a Conventional Loan With 3% Down?
Yes, many homebuyers can get a conventional loan with just 3% down. Loan programs that allow down payments this low are geared toward first-time homebuyers at all income levels who have a good credit history, a good credit score, but who may not have sufficient resources for a larger down payment.
Is It Better to Put 5% or 20% Down on a Conventional Loan?
While it’s acceptable to put down less than 20% on conventional loans, a larger down payment amount is generally encouraged to minimize long term expenses for buyers. Putting at least 20% down can help buyers build equity in their home and avoid paying monthly PMI.
Can Down Payment Assistance Be Used with a Conventional Loan?
Buyers can use their personal savings, gift funds, or available down payment assistance programs with conventional loans. Once a donor signs what’s known as a “gift letter,” borrowers can accept gift funds from close relatives. Depending on your conventional loan program, you may qualify for additional assistance in the form of grants, deferred loans, or even forgivable loans.
How Much Down Payment Do First-Time Homebuyers Need for a Conventional Loan?
Determining a down payment is different for everyone and relies on an applicants’ unique credentials. First, buyers will want to determine the minimum down payment requirement for their loan program, establish long-term financial goals, and consider factors like their financial situation, how long they plan to live in the property, and how much they’re willing to pay monthly. Luckily, many first-time buyers have access to conventional loan programs that accept down payments as low as 3%.
Final Thoughts: Understanding Your Conventional Loan Down Payment Options
A 20% down payment does come with strong benefits, but realistically that’s not always feasible in today’s housing market. Some buyers might put 20% down to prioritize building equity and lower monthly payments, while others may opt to spend less money upfront and save for future expenses. The “right” amount of money to put down is unique to you, your goals, and financial capacity.
Reviewing your loan options and understanding how different down payment amounts can impact your overall costs will help you make a more informed decision when saving for your home. Think you’re ready to take the next step toward homeownership? Get prequalified online today to start planning for your homeownership journey.
Angelica Victor is a writer and current senior at Hampton University, where she is pursuing a B.A. in English with a concentration in creative writing. Angelica has completed four internships across three different companies, where she’s held writing, communication, and marketing positions, garnering experience in writing client-facing publications and internal communications. She specializes in homebuying, real estate, and finance-related topics. Angelica always strives to communicate complex, nuanced topics clearly and effectively.
When she’s not working, Angelica serves as the president and senior editor of Hampton University’s campus literary magazine, where she leads editorial directions and oversees annual publications. Additionally, she’s the vice president of the Alpha Beta Zeta chapter of the National English Honor Society, where her leadership informs an attention to language, which she carries beyond academic settings. Angelica focuses on creating content that helps readers understand their options and make informed financial decisions.
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