Conventional loans typically require 3% to 20% down, depending on your credit score, debt level, and the lender's rules
A conventional loan is a mortgage that is not backed by a government agency like the FHA or VA. The down payment you need depends on three things: how strong your financial profile is, what the lender decides to require, and whether you are willing to pay private mortgage insurance (PMI) if you put down less than 20%.
The most common down payment amounts are 5%, 10%, 15%, and 20%. A 20% down payment means you avoid PMI entirely. Anything below 20% triggers PMI, which is an extra monthly cost that protects the lender if you stop paying. The lower your down payment, the higher your PMI premium will be.
Lenders set their own minimum down payment requirements. Some will go as low as 3% for borrowers with a credit score above 680 and a debt-to-income ratio below 43%. Others require 5% or 10% as a baseline. A few lenders have stopped offering 3% down products altogether, so you may need to shop around if that is your target.
Key Takeaways
- Conventional loans require between 3% and 20% down, with 20% being the threshold where private mortgage insurance stops being required.
- Down payments below 20% trigger PMI, which adds to your monthly payment and varies based on your down payment size, credit score, and loan amount.
- Your credit score, debt-to-income ratio, and savings reserves all affect whether a lender will accept a 3% down payment or require 5% or more.
- The total cost of a loan with PMI can be significantly higher than one with 20% down, so comparing the full monthly payment—not just the down payment—matters.
How down payment size affects your monthly cost
The down payment itself is only part of the picture. PMI can add $100 to $300 or more to your monthly payment, depending on the loan size and your credit profile. A borrower with a 620 credit score putting 5% down will pay more in PMI than a borrower with a 740 score putting 5% down on the same house.
PMI typically stays on your loan until you have paid down the principal to 80% of the original home value, or until you reach 20% equity through a combination of payments and home appreciation. On a 30-year mortgage, this can take 7 to 10 years or longer. Some lenders allow you to request PMI removal once you hit 20% equity; others remove it automatically at that point.
The trade-off is real: putting down 3% instead of 20% on a $300,000 home means you borrow an extra $51,000, and you will pay PMI on top of that larger loan balance. Over the life of the loan, the total interest and insurance costs can exceed $100,000 more than a 20% down scenario. However, if you do not have $60,000 in savings and the alternative is renting, a 3% down loan may still be the right choice for your situation.
What lenders look at when setting down payment requirements
Credit score is the first filter. Lenders offering 3% down products typically require a score of 680 or higher. Scores between 620 and 679 may may have access to for 5% or 10% down programs. Scores below 620 are much harder to place in a conventional loan; FHA loans become the more realistic option at that point.
Debt-to-income ratio (DTI) is your total monthly debt payments divided by your gross monthly income. Lenders usually cap this at 43% to 50%, depending on the down payment size and your credit score. A lower DTI gives you more flexibility on down payment options. If your DTI is already at 40%, a lender may require 10% or 15% down instead of 3% to offset the risk.
Savings and reserves matter too. Lenders want to see that you have cash left over after closing. If you are putting down 3% and have no reserves, some lenders will decline you or require a larger down payment. Reserves are typically measured in months of mortgage payments—two to six months is common. The lower your down payment, the more reserves a lender may ask for.
Employment history and income stability also factor in. A recent job change or gaps in employment can push a lender to require a larger down payment, even if your credit score is strong. Self-employed borrowers often face the same pressure.
Down payment options across different credit profiles
| Credit Score | Typical Down Payment Range | PMI Required? | Other Requirements |
|---|---|---|---|
| 740+ | 3% to 20% | Yes, below 20% | DTI under 43%; minimal reserves often acceptable |
| 700–739 | 5% to 20% | Yes, below 20% | DTI under 45%; some lenders may require reserves |
| 680–699 | 5% to 20% | Yes, below 20% | DTI under 45%; reserves often required; fewer lenders available |
| 620–679 | 10% to 20% | Yes, below 20% | DTI under 45%; reserves required; FHA may be cheaper option |
| Below 620 | Not typical | N/A | FHA loans are the standard alternative |
Comparing conventional loans to FHA and VA alternatives
If you cannot meet a conventional lender's down payment requirement, FHA loans allow down payments as low as 3.5% and accept credit scores as low as 580. However, FHA loans require mortgage insurance for the life of the loan (if you put down less than 10%), which can cost more over time than conventional PMI. FHA also has stricter property and appraisal rules.
VA loans (for military members, veterans, and surviving spouses) require zero down payment and no PMI. If you are VA-may be able to access, this is almost always the cheapest option. USDA loans for rural properties also require zero down and no PMI, but they have income and property location limits.
The choice between conventional, FHA, and VA depends on your may be able to access, credit score, and the total cost over the life of the loan—not just the down payment size. A conventional loan with 5% down and PMI can sometimes cost less than an FHA loan with 3.5% down and lifetime mortgage insurance, even though the FHA down payment is smaller.
How to prepare if you do not have the down payment yet
If you are short on savings, you have several paths forward. Down payment information programs exist in many states and counties; these are grants or forgivable loans that help you cover part or all of the down payment. They typically have income limits and are tied to first-time homebuyer status, though some are open to repeat buyers. Your local housing authority or a nonprofit housing counselor can tell you what is available in your area.
Gift funds from family members are allowed on conventional loans, though lenders require a signed gift letter stating the money does not need to be repaid. Some lenders limit how much of your down payment can be a gift; others allow 100% gift funds.
Saving aggressively is still the most straightforward route. Even reaching 5% down instead of 3% can lower your PMI costs and improve your approval odds. If you are renting now, every month you delay is a month of rent that could have gone toward savings—but it is also a month of potential home price appreciation or interest rate changes, so the math is not always straightforward.
What happens after you choose your down payment amount
Once you decide on a down payment, you will move into the mortgage process process. The lender will order an appraisal to confirm the home is worth what you are paying. If the appraisal comes in low, you may need to renegotiate the price, increase your down payment, or walk away. This is why down payment size matters: a larger down payment gives you more cushion if the appraisal is lower than expected.
You will also lock in an interest rate, which is separate from your down payment. A lower down payment does not automatically mean a higher interest rate, but borrowers with lower credit scores or smaller down payments sometimes face slightly higher rates. Shop with multiple lenders to compare both the rate and the total monthly payment, including PMI.
Closing typically happens 30 to 45 days after you explore. At closing, you will pay your down payment in full (usually via wire transfer), plus closing costs, which typically run 2% to 5% of the loan amount. Many borrowers forget that closing costs are separate from the down payment and are due at the same time.
Frequently Asked Questions
Can I use a gift for my entire down payment?
Yes, on conventional loans. The lender will require a signed gift letter from the person giving you the money, stating it is a gift and does not need to be repaid. Some lenders have limits on how much can be a gift versus your own funds, so ask before you accept the money.
What if my down payment is less than 20% but I want to avoid PMI?
You cannot avoid PMI with a conventional loan if you put down less than 20%. Some borrowers use a piggyback loan (a second mortgage for 10% of the home value) to reach 20% equity without PMI, but this is rare now and usually costs more than PMI itself.
Does a larger down payment lower my interest rate?
Not automatically. Interest rates are set based on market conditions, your credit score, and the loan term—not the down payment size. However, borrowers with larger down payments and higher credit scores sometimes negotiate better rates because they represent lower risk to the lender.
Can I remove PMI before I reach 20% equity?
Some lenders allow you to request PMI removal once you have paid the loan down to 80% of the original home value, usually after five to seven years. Others remove it automatically at that point. Check your loan documents or ask your lender about their PMI removal policy.
What if I cannot afford the down payment and closing costs together?
Down payment information programs in your state or county may cover both. Some lenders also allow you to roll closing costs into the loan amount, though this increases what you borrow and the total interest you pay. A housing counselor can review your options without cost.