How Much Down Payment Do You Need for a Conventional Loan?
The short answer: as little as 3%. But the down payment you choose affects your rate, your monthly payment, and whether you pay private mortgage insurance. Here is how each tier works, sourced directly from agency guidelines.
Down payment requirements by property type
| Property Type | Minimum Down Payment | Notes |
|---|---|---|
| Primary residence (1 unit) | 3% | First-time buyer required at 97% LTV; 5% for repeat buyers |
| Primary residence (2–4 units) | 15–25% | Per AUS findings |
| Second home | 10% | PMI required below 20% |
| Investment property (1 unit) | 15% | No gift funds permitted |
| Investment property (2–4 units) | 25% | No gift funds permitted |
The 3% down option — what you need to know
Putting 3% down is real, but it comes with specific conditions. When the LTV exceeds 95%, Fannie Mae requires a fixed-rate mortgage with a term up to 30 years. Adjustable-rate mortgages and high-balance loan amounts are not permitted at this tier. The property must be a one-unit primary residence, and at least one borrower must be a first-time homebuyer (no ownership interest in a primary residence in the past three years).
The PMI trade-off
Any down payment below 20% requires private mortgage insurance (PMI). PMI is not permanent on conventional loans — under the Homeowners Protection Act, you can request cancellation once your balance reaches 80% of the original value, and it automatically terminates at 78%. This is a key advantage over FHA, where MIP with less than 10% down stays for the life of the loan.
Down payment and your rate
A lower down payment means a higher LTV, which increases the loan-level price adjustment (LLPA) on your rate. Run the full monthly cost comparison — rate plus PMI — before deciding how much to put down.
Key takeaways
- Primary residence: 3% minimum for first-time buyers; 5% for repeat buyers.
- Second homes require at least 10% down.
- Investment properties require 15% (1 unit) to 25% (2–4 units) — no gift funds.
- Down payments below 20% require PMI, but PMI can be cancelled at 80% LTV.
- The 3% tier requires a fixed-rate loan, 1-unit primary, and at least one first-time homebuyer.
- The full down payment on a one-unit primary residence can come from gift funds from family.
Ready to explore your conventional loan options? Lendia can walk you through what you qualify for and find the right program for your goals.