Conventional loans have no federally mandated minimum down payment, but lenders set their own floors

There is no single answer because conventional loans are issued by private banks and mortgage companies, not government agencies. Each lender decides their own minimum. Most lenders will accept 3 percent down, some go as low as 2 percent, and a few require 5 percent or more. The actual minimum you face depends on your credit score, debt-to-income ratio, the property type, and which lender you approach.

The catch: a lower down payment does not mean a lower total cost. When you put down less than 20 percent, lenders require private mortgage insurance (PMI), which is an additional monthly payment that protects the lender if you default. That insurance stays on your loan until you reach 20 percent equity in the home or refinance. A 3 percent down payment means you are borrowing 97 percent of the home's value, which costs more in insurance than a 10 percent down payment would.

Key Takeaways

  • Conventional lenders typically accept down payments as low as 2 to 3 percent, but each lender sets their own minimum based on your financial profile.
  • Any down payment below 20 percent triggers private mortgage insurance, which adds to your monthly payment and continues until you build 20 percent equity.
  • Your credit score, debt-to-income ratio, and the property type all affect which lenders will work with you and what minimum they require.
  • A lower down payment gets you into a home faster but costs more over time due to insurance premiums and a larger loan amount.

How lender minimums vary by credit score and debt load

Lenders use your credit score and debt-to-income ratio to decide whether to accept a low down payment. If your credit score is 740 or higher and your debt-to-income ratio is below 43 percent, most conventional lenders will accept 3 percent down. If your score is between 680 and 739, you may still find lenders willing to go as low as 5 percent. Below 680, conventional lending becomes harder, and down payment minimums often rise to 10 percent or higher.

Your debt-to-income ratio is the percentage of your gross monthly income that goes to debt payments—mortgage, car loans, student loans, credit cards, and child support all count. A ratio above 50 percent makes lenders nervous about a low down payment, because you have less cushion if something goes wrong. Some lenders will not touch a low-down-payment loan if your ratio exceeds 50 percent, regardless of credit score.

What happens when you put down less than 20 percent

Private mortgage insurance is the price of a low down payment. The insurance premium is calculated as a percentage of the loan amount and added to your monthly payment. On a $300,000 home with 5 percent down ($15,000), you are borrowing $285,000. PMI on that loan typically runs between 0.5 and 1.5 percent of the loan amount per year, depending on your credit score and the size of your down payment. That translates to roughly $1,425 to $4,275 per year, or $119 to $356 per month, added to your mortgage payment.

PMI stays in place until you reach 20 percent equity in the home. On a $300,000 purchase with 5 percent down, that means you need to pay down the loan to $240,000—a process that takes years. You can also remove PMI by refinancing once your home appreciates or you pay down the principal enough to hit 20 percent equity, but refinancing costs money and takes time.

Down payment minimums for different property types

Single-family homes are the easiest to finance with a low down payment. Most lenders will accept 3 percent down on a primary residence. Condos are harder—many lenders require 5 to 10 percent down because condo buildings carry more risk in their eyes. Multi-unit properties (duplexes, triplexes, four-plexes) typically require 15 to 25 percent down, even from conventional lenders. Investment properties almost always require 20 to 25 percent down.

The property also has to meet lender standards. If the home needs significant repairs, appraises below the purchase price, or is in a declining neighborhood, lenders may refuse to lend at all, or demand a higher down payment to offset the risk. A home inspection and appraisal happen before closing, so you may discover late in the process that the lender wants more money down than you expected.

How to find lenders offering the lowest minimums

Not all lenders advertise their minimum down payment requirements clearly. Banks often have stricter standards than mortgage brokers or online lenders. Credit unions sometimes offer lower minimums to members. The fastest way to find out what you may have access to for is to get preapproved by multiple lenders—this involves submitting your financial information and getting a written estimate of how much they will lend and at what terms.

Preapproval is free and does not lock you into a lender. You can shop three to five lenders in a week without damaging your credit score, because multiple mortgage inquiries within a 14-day window count as a single inquiry. Ask each lender directly: "What is your minimum down payment for a primary residence with my credit score and debt-to-income ratio?" The answer will vary, and the difference can be thousands of dollars.

The trade-off between down payment size and total cost

Putting down 3 percent instead of 10 percent gets you into a home sooner, but the math matters. On a $300,000 home, 3 percent down is $9,000 and 10 percent is $30,000—a difference of $21,000. But over 30 years, the extra PMI you pay on the 3 percent loan can easily exceed $30,000 to $50,000, depending on rates and your credit score. You are paying for the privilege of borrowing that $21,000 difference, plus interest on it.

If you have the cash for a larger down payment, the math usually favors putting it down. But if you do not, a 3 percent down payment is a real option that lets you build equity while you save more. The key is understanding that PMI is not wasted money—it is insurance that protects the lender, and you pay for it. Knowing the cost upfront helps you decide whether the speed of homeownership is worth the extra expense.

Frequently Asked Questions

Can I get a conventional loan with 2 percent down?

Some lenders offer 2 percent down programs, but they are less common than 3 percent options. You will typically need a credit score above 700 and a debt-to-income ratio below 43 percent. Ask lenders directly, because 2 percent programs are not always advertised on their websites.

Does my down payment affect my interest rate?

Yes. A larger down payment usually means a lower interest rate because you are borrowing less relative to the home's value. The difference is typically 0.25 to 0.5 percent, which adds up significantly over 30 years. Your credit score and market conditions also affect your rate.

Can I use a gift for my down payment?

Most conventional lenders allow down payment gifts from family members, but they require a signed letter from the gift-giver stating the money is a gift, not a loan. You will need to document the gift in your bank account and show proof it came from the stated source. Some lenders limit how much of your down payment can be a gift.

What if I cannot afford PMI?

If PMI payments are too high, you have a few options: save for a larger down payment, look into FHA loans (which have different insurance requirements), or wait until you have more cash. Some first-time buyer programs also offer down payment help that can reduce or eliminate PMI.

When does PMI come off automatically?

Federal law requires lenders to remove PMI automatically once you reach 22 percent equity in the home, based on the original home value. You can request removal earlier once you hit 20 percent equity, but you have to ask—lenders do not remove it automatically at that point.