How Much Down Payment Do I Need for a Conventional Mortgage?
Saving for a home can feel frustrating when you’re not sure if the down payment target is 3%, 5%, or 20%.
A conventional mortgage may require as little as 3% down for eligible borrowers, although 5% or more is common and putting 20% down will typically eliminate private mortgage insurance.
Here’s what each down payment level means, how private mortgage insurance works, and how to choose an amount that fits your full financial picture.
Key Takeaways
- Minimum Down Payment: Some conventional programs allow 3% down, while others commonly start at 5%.
- Mortgage Insurance: Putting less than 20% down will usually mean paying private mortgage insurance, or PMI.
- Cash Needed: Your down payment is separate from closing costs, prepaid taxes, insurance, and required reserves.
- Best Amount: The right down payment depends on your payment goal, available cash, credit profile, property, and loan program.
I’m Matt Jolivette (NMLS# 90661), and I help buyers compare conventional loan options throughout Portland, the Portland-Vancouver-Hillsboro metro area, and communities across Oregon, Washington, and Idaho. Here’s the straight talk: 20% down can be helpful, but it isn’t the entry fee for getting a conventional mortgage.
Quick Answers About Conventional Down Payments
- What is the minimum down payment? Eligible borrowers may qualify for certain conventional programs with 3% down. Other conventional loans commonly require at least 5%.
- Do I have to put 20% down? No. The main advantage of 20% down is that it will typically eliminate PMI from the start.
- Can my down payment be a gift? Often, yes. Conventional guidelines may allow gift funds from an acceptable donor, but the source and transfer must be documented.
- Can the seller pay my down payment? Generally, no. Seller credits can often cover eligible closing costs, but they cannot normally replace your required down payment.
Conventional Mortgage Down Payment Options
Your down payment affects more than the amount you bring to closing. It changes the loan amount, monthly principal and interest payment, PMI cost, and cash you have left after the purchase.
Here’s what that looks like side by side:
| Down Payment | Typical Situation | Main Tradeoff |
|---|---|---|
| 3% | Available through certain programs for eligible borrowers purchasing an allowable property type. | Keeps the initial down payment lower, but usually comes with PMI and tighter program rules. |
| 5% | A common starting point for a standard primary-residence conventional purchase. | Requires more cash than 3%, but may offer more program flexibility. |
| 10% to 15% | Used when a buyer wants a smaller loan and lower PMI without putting 20% down. | More cash goes into the property, leaving less available for repairs, reserves, or other goals. |
| 20% or more | Often chosen to avoid PMI and reduce the monthly payment. | Creates a larger upfront cash requirement and does not automatically produce the right financial outcome for every buyer. |
These are common examples, not universal approvals. Occupancy, property type, loan size, credit, income, debt, and automated underwriting findings can all change the required amount.
When Is 3% Down Available on a Conventional Loan?
A 3% down conventional mortgage is generally limited to specific programs and eligible borrower situations. Some programs are designed for first-time homebuyers, while others may have income limits, homebuyer education requirements, or property restrictions.
A first-time homebuyer usually means someone who hasn’t had an ownership interest in a primary residence during the applicable lookback period. That definition is tied to program guidelines, not someone’s age.
Approval may also depend on:
- The home being used as a primary residence
- The number of units in the property
- Current program income limits, where applicable
- Credit history and overall risk profile
- Debt-to-income ratio and documented income
- Automated underwriting findings
- Available funds for closing costs and reserves
Agency guidelines establish the broad program rules. An individual lender may add its own requirements, called overlays. One lender asking for more cash or a higher credit score doesn’t always mean every conventional lender has the same rule.
If the main concern is keeping the upfront investment down, I’ll usually compare conventional financing with other low down payment purchase options. The payment, mortgage insurance, property rules, and long-term cost can differ quite a bit.
How PMI Changes the Down Payment Decision
Private mortgage insurance protects the lender if a borrower defaults; it does not insure the borrower against a missed payment. PMI is commonly required when a conventional loan starts above an 80% loan-to-value ratio.
The cost varies based on factors such as:
- Credit profile
- Down payment amount
- Loan term
- Occupancy
- Property type
- Number of borrowers
- Mortgage insurance structure
Putting more down can reduce PMI, but that doesn’t automatically mean emptying your savings is the right move. If an extra down payment leaves you without cash for moving, repairs, or an emergency reserve, the lower payment may not be worth the tradeoff.
PMI can often be removed later after the loan reaches the required equity level, subject to federal law, investor rules, payment history, property value requirements, and loan servicing procedures. Depending on the loan, cancellation may require a written request or proof of the home’s current value.
Your Down Payment Is Not the Full Cash-to-Close Number
This is where buyers can get caught off guard. The down payment is only one part of the money due at closing.
Your total cash requirement may include:
- Down payment: The portion of the purchase price you’re paying rather than financing.
- Closing costs: Lender, title, escrow, recording, appraisal, and other transaction charges.
- Prepaid expenses: Items such as property taxes, homeowners insurance, and daily interest.
- Initial escrow funding: Money placed into an account for future tax and insurance payments, when applicable.
- Reserves: Funds remaining after closing if the loan program or underwriting findings require them.
Seller credits may cover some eligible closing costs, subject to conventional contribution limits and the actual charges. Lender credits may also reduce upfront costs in exchange for different loan pricing. Neither option normally counts as the borrower’s required down payment.
Closing costs vary by property, location, loan size, and closing date. A purchase in Multnomah County may have a different tax and escrow setup than one in Clackamas County, Washington County, or Clark County. I want those items estimated early so there are no surprises later.
Is It Better to Put More Money Down?
Sometimes. A larger down payment can lower the loan balance, monthly principal and interest payment, and PMI cost. It may also improve the loan’s overall risk profile.
But more isn’t always better. Before adding another dollar to the down payment, compare what that cash could do elsewhere.
A Larger Down Payment May Make Sense If:
- You want to reduce or eliminate PMI
- The lower monthly payment fits your budget better
- You’ll still have solid reserves after closing
- The lower loan amount improves your qualification
- You’re trying to stay within the current conforming loan limit for the county
A Smaller Down Payment May Make Sense If:
- You need funds for repairs, furnishings, or moving costs
- You want to keep a stronger emergency reserve
- The PMI cost is manageable compared with using more cash upfront
- You’re buying before selling another property
- You have other financial obligations that need available cash
Here’s my honest take. Don’t choose a down payment just because it produces the smallest loan. Choose it after reviewing the payment, PMI, closing costs, and remaining reserves together.
How Credit and Debt Affect the Required Down Payment
A program may advertise a low minimum down payment, but that doesn’t mean every application will receive that structure. **Borrower eligibility and loan approval are separate from the advertised program minimum.**
A lender will typically review:
- Credit scores and recent credit history
- Monthly debts compared with qualifying income
- Employment and income stability
- Source of down payment and closing funds
- Post-closing reserves
- Loan-to-value ratio
- Property type and occupancy
For example, automated underwriting might call for reserves or a different loan structure based on the full file. A second home, investment property, or multi-unit property can also require more down than a one-unit primary residence.
Conventional vs. FHA for a Lower Down Payment
Conventional financing isn’t the only low-down-payment choice. FHA financing has a well-established 3.5% minimum down payment for eligible borrowers, but it uses its own mortgage insurance structure and property standards.
| Feature | Conventional | FHA |
|---|---|---|
| Minimum Down Payment | As little as 3% through eligible programs | 3.5% for eligible borrowers |
| Mortgage Insurance | PMI cost varies and may be removable later | Upfront and annual mortgage insurance generally apply |
| Credit Pricing | Can be more sensitive to credit and loan structure | May be more forgiving in some credit scenarios |
| Property Review | Must meet conventional appraisal and property standards | Must meet FHA appraisal and minimum property requirements |
The better fit depends on the full cost, not just the minimum down payment. You can review the broader FHA home loan program before comparing it with conventional financing.
Eligible veterans and service members may also want to compare VA financing, which can allow 0% down subject to entitlement, occupancy, credit, income, and property requirements. Oregon veterans may have an additional state option through the ODVA loan program.
How to Choose Your Down Payment Before Making an Offer
Let’s run the numbers before you lock yourself into a single target. I’d compare at least three structures: the minimum available down payment, a middle option, and 20% down if that amount is realistic.
For each option, review:
- Total estimated cash to close
- Monthly principal and interest
- Estimated PMI
- Property taxes and homeowners insurance
- Funds left after closing
- Loan pricing and current market rates
That gives you real math in front of you instead of a rule of thumb. Rates, fees, mortgage insurance, loan limits, and guidelines change, so verify current information for your property and application.
Review Your Conventional Down Payment Options
If you’re buying in Portland, Lake Oswego, Tigard, Beaverton, Tualatin, Wilsonville, West Linn, Vancouver, or Boise, I can help you compare the available structures. Call, text, or email Matt Jolivette – Associated Mortgage Brokers to review your down payment, estimated cash to close, and monthly payment options.
We can also handle the pre-approval planning before you make an offer. No pressure either way. The goal is to know what the numbers look like before you commit your cash.
Frequently Asked Questions
How much down do I need for a conventional loan on a second home?
Second homes generally require more down than a primary residence, and the exact minimum depends on current agency guidelines, credit, reserves, and automated underwriting. The property must also meet second-home occupancy and use requirements.
Does a multi-unit property require a larger conventional down payment?
It may. Down payment rules for two- to four-unit properties depend on occupancy, unit count, program guidelines, and underwriting findings, so they should be checked before making an offer.
Can I use a low down payment conventional loan to buy a condominium?
Potentially, but both the borrower and condominium project must meet applicable guidelines. Project insurance, finances, ownership concentration, litigation, and other review items can affect eligibility.
Can conventional PMI be removed after closing?
Often, yes, once the loan meets applicable equity, payment history, seasoning, and property value requirements. The process varies by loan owner and servicer, so request the current cancellation rules directly from the company servicing the mortgage.
Are closing costs included in the conventional down payment?
No. The down payment is separate from closing costs, prepaid expenses, escrow funding, and any required reserves, although allowable seller or lender credits may offset some eligible charges.
Matt Jolivette
Matt Jolivette, NMLS #90661, is a mortgage broker and co-owner of Associated Mortgage Brokers, company NMLS #86136. He began at the company as a loan processor in 2000, became a loan originator in 2001 and became a co-owner in 2011. He earned a Bachelor of Science degree in Finance from Portland State University in 2005.
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