Conventional loan down payment: How much do I need?

Man hanging up a photograph in his new homeImage: Man hanging up a photograph in his new home

In a Nutshell

Conventional loan down payments can vary by lender and loan program. The traditional down payment on a conventional loan is 20%, but some loan programs let you put down as little as 3%.
Editorial Note: Intuit Credit Karma receives compensation from third-party advertisers, but that doesn’t affect our editors’ opinions. Our third-party advertisers don’t review, approve or endorse our editorial content. Information about financial products not offered on Credit Karma is collected independently. Our content is accurate to the best of our knowledge when posted.

Traditionally, financial experts recommend putting 20% toward a conventional loan down payment — but in some cases you may be approved with a significantly smaller percentage.

A conventional loan is a mortgage that’s not backed by a particular government program. Requirements for conventional loans vary by program and lender. While putting 20% down is often suggested, some conventional loans require as little as 3% down.

The trade-off is that putting down a smaller sum can drive up your monthly costs because of private mortgage insurance, or PMI.

We’ll review common down payment requirements for conventional loans, the role PMI plays in the cost and down payment assistance options in case you need them.

What is the down payment on a conventional loan?

The down payment for a conventional loan usually ranges between 3% and 20%. While 20% is considered the recommended amount to put down on a house, many people don’t pay that much upfront.

First-time homebuyers typically put down 6%, and repeat buyers put down 17%, according to a 2022 report from the National Association of REALTORS®.

The benefit of putting down less money is that you may be able to buy a home sooner — but that convenience comes at a cost. The less you put down, the higher your monthly loan payment will be.

In addition to PMI costs, you’ll likely pay more interest over time because you’re borrowing more.

What is the minimum down payment for a conventional loan?

First-time homebuyers may qualify for a conventional mortgage with a down payment as low as 3%. Just be aware that when you put down less than 20%, you’re often required to purchase PMI.

The minimum down payment for a conventional loan is 3% with the following Fannie Mae and Freddie Mac mortgage types:

  • Standard 97% Loan-to-Value Mortgage — Standard 97% LTV loans are a Conventional 97 loan that allow you buy a home with a loan-to-value of 97%, which means 97% of the home purchase would be covered by a mortgage while the remaining 3% would be paid by your down payment. There are no income limits for Standard 97% LTV mortgages, but at least one borrower has to be a first-time homebuyer. Homebuyers must have credit scores of at least 620 for a Conventional 97 loan.
  • Fannie Mae HomeReady® Mortgage — Fannie Mae’s HomeReady program is open to all borrowers who meet income and credit requirements — not just first-time homebuyers — and the minimum down payment is 3%. You may qualify with credit scores as low as 620.
  • Freddie Mac HomePossible® — Freddie Mac’s HomePossible program accepts down payments of as low as 3% for low- to moderate-income homebuyers. For a home purchase, you can qualify with credit scores as low as 660.
  • Freddie Mac HomeOne® — Freddie Mac’s HomeOne program lets first-time homebuyers put down a minimum of 3%, and there’s no income limit. You may qualify with minimum credit scores of 620.

Do you have to put 20% down for a conventional loan?

You don’t have to save up a full 20% to get a conventional loan since some lenders will accept a lower down payment. But if you can put down 20% upfront, you can lower your monthly payment and avoid paying private mortgage insurance.

PMI is designed to protect the lender in case you stop making payments on your loan. The cost of PMI varies, but you can expect to pay about $30 to $70 per month for each $100,000 you borrow, according to Freddie Mac.

That means if you borrow $300,000 for a home with less than 20% down, you’re looking at $90 to $210 per month in PMI. The good news is that PMI can be removed once you build 20% home equity.

Below is an illustration of how payments and total interest paid over 30 years can differ based on the amount of the down payment.

We used the Credit Karma Mortgage Calculator to show the differences.

20% down payment3% down payment
Purchase price$225,000$225,000
Down payment$45,000 (20% down)$6,750 (3% down)
Term30 years30 years
Interest rate7%7%
Property taxes$1,400$1,400
Monthly payment (principal + interest + taxes + insurance + HOA fees + PMI)$1,314.21    $1,777.85
Total interest paid over 30 years$251,116.02$304,478.17

Ultimately, how much you should put down depends on the cash you have available and your financial goals. If you have the means to put more money down to buy your next home, the long-term savings can be substantial.

Down payment assistance options

If your personal savings fall short of the 20% you’d like for a down payment, there are ways to help bridge the gap. Here are several options to consider.

Look into down payment assistance options

State and local governments may have down payment assistance programs that provide money or loans to cover part of the down payment. For example, Maryland has the Maryland Mortgage Program Flex plan, which can offer a zero-interest loan for a down payment. The loan is due when you pay off the mortgage, sell the home or refinance.

Alaska’s Affordable Housing Enhanced Loan program is another initiative that offers down payment assistance through grants and forgivable loans.

Consider checking with your state and local housing authority to see what assistance might be available.

Check if your lender offers assistance

Some banks offer their own down payment programs to qualified homebuyers.

U.S. Bank has the American Dream loan that may provide homebuyers up to $5,500 or 3% of the purchase price (limited to $10,000), whichever is greater. This money can be used for a down payment, closing costs or home repairs.

Bank of America’s Down Payment Grant program may offer grants that equal up to 3% of the purchase price (limited to $10,000) to help you cover upfront costs. But the down payment program is limited to certain locations.

Use gift funds

Lenders may accept funds given to you as a gift from someone you know. If you receive gift funds from a family member or friend, the lender will likely ask for a gift letter from the person giving you the money that says how much they’re giving you and confirming that the money doesn’t have to be repaid.

Next steps

The lack of a large down payment doesn’t have to keep you from becoming a homeowner. Besides government-backed loans, such as FHA loans or VA loans, you may be able to qualify for a conventional loan with as little as 3% down.

The first step of homebuying is figuring out how much personal savings you have for a down payment.

With that number in mind, you can get an idea of how much home you can afford using Credit Karma’s Home Affordability Calculator.

When you’re ready to start looking for home financing, it’ll pay to shop around so you can choose the best mortgage lender for your situation.

About the author: Taylor Medine is a freelance writer who’s covered all things personal finance for the past seven years. She enjoys writing financial product reviews and guides on budgeting, saving, repaying debt and building credit. … Read more.