Minimum Down Payment for a Conventional Loan: What You Need to Know

Introduction

Awareness of the minimum down payment for a conventional loan is essential for first-time or repeat borrowers. Through this blog, we want to provide insight into strategizing your savings or avoiding PMI, as well as information on how much is needed, who can qualify, and how it compares to other loan types.

Many common buyer concerns center around eligibility, affordability, and the financial planning involved in purchasing a home with a conventional loan.

What Is a Conventional Loan?

Let's start with the basics.

Definition & Overview:

A Conventional Loan is a mortgage loan not backed by a government agency (such as FHA, VA, or USDA). Typically, private lenders offer conventional loans; those who borrow usually need a strong credit score and steady income.

Conventional Loans fall into two different categories: conforming and nonconforming.

A conforming loan meets the guidelines established by Fannie Mae or Freddie Mac, the government-backed housing finance giants. These government-sponsored enterprises buy mortgages from lenders and sell them to investors.

A nonconforming loan is a mortgage that doesn't meet conforming guidelines; the lenders are free to create their own rules and regulations, without violating any lending guidelines.

Why It Matters for Down Payment Planning:

Depending on your loan type, you will need to provide a certain amount of money up front.

Pro Tip:
Even though you can get a conventional loan with as little as 3% down, putting 20% down can save you thousands in the long run by eliminating PMI and lowering your monthly payment. Run the numbers for both options to see which works best for your budget and goals.

What Is the Minimum Down Payment for a Conventional Loan?

Standard 3% Minimum for First-Time Buyers:

first-time buyers may qualify with just 3% down, via programs like Conventional 97, HomeReady, Home Possible.

5% Minimum for Other Buyers

Many lenders set a 5% minimum for non-first-timers.

Conventional 97 & Other Low-Down Financing Programs

Detail eligibility: LTV up to 97%, credit score ~620+, DTI ≤ 50%, and first-time buyer status for some programs.

When Might You Need More Than the Minimum?

Loans for Second Homes, Investment or Multi-Family Properties

Minimums typically jump: ~10% for second/vacation homes, ~15% for investment or multi-family units.

Pros & Cons of Paying Just the Minimum

Pros: Lower upfront cost means faster homeownership
Cons: Pay Private Mortgage Insurance (PMI) unless you hit 20% equity, Higher monthly costs, interest, slower equity build-up.

Choosing Modern Lending as a Loan Consultant and Provider Near You

When it comes to conventional loans, Modern Lending makes the process clear and accessible:

3% minimum down payment for qualified first-time buyers.
5% minimum for most other borrowers.
Higher down payment requirements for second homes or investment properties.

Ready to take the next step? Explore Conventional Loan Options with Modern Loans to compare programs and find the best fit.

Contact Modern Lending today to see which down payment program fits your financial profile and start your path to homeownership with confidence.