Conventional Loan Down Payment Options
You can buy with a conventional loan with as little as 3% down on certain first-time and low-to-moderate-income programs. Five percent is common, 10% is often needed for a second home, and 20% avoids private mortgage insurance. The right amount depends on your savings, your monthly budget and how much cash you want left after closing.
Key Takeaways
- 3% down is available on programs such as HomeReady, Home Possible and standard 97% options. Most conventional loans require a 620 score.
- Putting 20% down avoids PMI. Less than 20% means PMI, which can be removed later.
- Second homes often need about 10% down. Investment properties commonly need 15% to 25%.
- Gift funds, seller concessions and assistance programs can help, within program rules.
How much down payment does a conventional loan need?
The minimum depends on how you will use the property and which program you qualify for.
| Use of property | Typical down payment |
|---|---|
| Primary home, eligible first-time or income-limited buyer | 3% |
| Primary home, standard | 5% is common |
| Second home | Often 10% |
| Investment property | Commonly 15% to 25% |
For the full rundown, see how much down payment you need for a conventional loan.
What do 3%, 5%, 10% and 20% down look like?
| Down payment | Amount down | Loan amount |
|---|---|---|
| 3% | $25,500 | $824,500 |
| 5% | $42,500 | $807,500 |
| 10% | $85,000 | $765,000 |
| 20% | $170,000 | $680,000 |
The difference between 3% and 20% down is $144,500 in cash up front, and $144,500 less to borrow.
How does the down payment change PMI and the payment?
| Down payment | PMI | Monthly payment effect | Cash needed |
|---|---|---|---|
| 3% | Yes, and usually the highest | Highest loan balance and PMI add to the payment | Lowest |
| 5% | Yes | Somewhat lower PMI than 3% down | Low |
| 10% | Yes, often modest with good credit | Lower loan balance, lower PMI | Moderate |
| 20% | No | Lowest loan balance and no PMI | Highest |
PMI cost varies with credit score and down payment, typically roughly 0.3% to 1.5% of the loan per year. We don’t quote rates here because they change. A loan officer can show current numbers for each scenario. Learn how PMI comes off in Conventional Loans And Mortgage Insurance.
Is putting 20% down always the best idea?
No. A bigger down payment lowers your payment and removes PMI, but it also drains savings. Keeping money for reserves, moving costs and repairs can matter more, especially in California where closing costs often run roughly 2% to 4% of the price. See closing costs in California. If PMI is the concern, remember it can be removed once you reach 80% of the original value.
Can gift funds cover my down payment?
Often, yes. Family members can generally give gift funds for a conventional primary home, with a signed gift letter and a paper trail showing where the money came from. Rules vary by occupancy and down payment size, and second homes and investment properties are stricter. See gift funds on a conventional loan.
What other ways can I reduce the cash I need?
- Seller concessions. On a primary residence, sellers can contribute 3% if you put down less than 10%, 6% with 10% to 25% down, and 9% with over 25% down. Investment property is 2%. See seller concessions.
- Down payment assistance. California offers state and local programs, including CalHFA. Availability, income limits and terms change, so check current availability. See combining assistance with conventional and first-time buyer help in California.
- Community seconds. Some programs fund part of the down payment. See community seconds.
What about second homes and investment properties?
A second home usually must be a place you will occupy part of the year, and lenders often ask for around 10% down. An investment property commonly needs 15% to 25% down and more reserves. Pricing is also higher. See investment property with a conventional loan.
How do I choose between 5% and 10% down?
Ask three questions. How much cash will remain after closing? How much does PMI drop when the down payment rises? And how long will you keep the loan? If the extra 5% lowers PMI substantially and still leaves you comfortable reserves, it can be worth it. If it leaves you thin, keep the cash. We run both scenarios so you can compare payment, PMI and cash to close side by side.
How does this compare with FHA?
FHA allows 3.5% down with a 580 score, but its mortgage insurance may last for the life of the loan with under 10% down. Read FHA vs. conventional. Return to Conventional Loans or see conventional loan requirements.
At Lendia, we build the plan around your cash
At Lendia, we compare options from multiple lenders and show your payment at several down payment levels. Contact us or get a rate quote now.
Frequently Asked Questions
Can I really buy with 3% down?
Yes, if you qualify for a 3% program and meet its credit, income and property rules.
Do I need 20% down to avoid PMI?
Generally yes. PMI is required when your down payment is below 20%. Lender-paid PMI changes who writes the check, but you still pay for it through a higher rate.
Can the entire down payment be a gift?
Often for a primary home, with documentation. Rules vary by occupancy and loan-to-value.
Is earnest money part of my down payment?
Yes, it is credited toward your cash to close. It commonly runs about 1% to 3% of the price.
Do I need more down for a condo?
Not necessarily, but the condo project must meet program requirements.
Will I get the same rate at every down payment level?
Not necessarily. Rates and terms depend on your situation; approval requires qualification.
Talk to a Licensed Lendia California Loan Officer
At Lendia, we review your situation and show you the programs you qualify for.