"Can I get a conventional loan with 5% down" and "can I get one with 10% down" are two of the most common conventional-loan searches there are, and the honest answer to both is yes — the real question isn't whether a lower down payment is possible, it's which percentage actually makes sense for your specific numbers. Conventional financing isn't a single fixed-down-payment program; it's a range, and where you land in that range changes your monthly payment, your mortgage insurance, and how much cash you need at closing. Here's how the 3%, 5%, and 10% down-payment tiers actually differ.
Conventional loan down payment requirements: the range
Conventional financing follows guidelines set by Fannie Mae and Freddie Mac, and both agencies publish low-down-payment options well below the 20% many buyers still assume is required:
- 3% down is the published minimum on specific Fannie Mae and Freddie Mac low-down-payment programs, generally aimed at first-time homebuyers (defined as not having owned a home in the prior three years) and subject to income limits and other program-specific eligibility rules that vary by which agency's program a lender uses.
- 5% down is a common tier for buyers who don't fit the first-time-buyer program criteria, or who simply have more to put down than the 3% minimum but less than 20%.
- 10% down is another common tier, often associated with somewhat better pricing and mortgage-insurance terms than 5% down, though the exact difference depends on the lender and the specific loan program.
- 20% down avoids private mortgage insurance (PMI) entirely from day one.
Whether a specific borrower qualifies for the 3% minimum, or where they'd actually land between 5% and 20%, depends on the full file — credit score, debt-to-income ratio, loan amount, property type, and which specific Fannie Mae or Freddie Mac program a lender is using. Many lenders set their own overlays on top of the published minimums, so the 3% floor being publicly documented doesn't mean every lender offers it on every file. None of the figures above are a Choice Home Mortgage rate quote or a promise of approval at any specific percentage.
3% down: who it's actually built for
The 3%-down conventional programs (Fannie Mae's HomeReady and Freddie Mac's Home Possible, among others) are structured around specific eligibility criteria that go beyond the down payment number itself — commonly including first-time-buyer status, income limits tied to the area's median income, and sometimes a homebuyer education requirement. Because eligibility varies by program and by lender, the honest first step isn't assuming you qualify or don't — it's finding out which programs your specific income, credit, and buyer history actually fit. If 3% down doesn't pencil for your file for any reason, that doesn't mean conventional financing is off the table; it usually means a different down-payment tier within the same conventional category.
5% and 10% down: the middle tiers
Buyers who don't fit the first-time-buyer program criteria, or who have more available cash than the 3% minimum, often land at 5% or 10% down instead. The practical differences between these tiers — and between them and 20% down — generally come down to a few factors that vary by lender and loan scenario:
- Monthly PMI cost. A higher down payment generally means a lower loan-to-value ratio, which generally means a lower PMI premium as a percentage of the loan — but the exact premium depends on credit score, loan amount, and the specific mortgage insurer's rate card, so it isn't a fixed formula that applies identically to every borrower.
- Loan-to-value pricing tiers. Many conventional loan pricing models step down in tiers at certain LTV thresholds (commonly around 95%, 90%, 85%, and 80%), meaning crossing from 5% down (95% LTV) to 10% down (90% LTV) can sometimes improve pricing more than the percentage difference alone would suggest — this varies by lender and by the specific loan scenario, and isn't guaranteed to apply the same way on every file.
- Cash reserves after closing. Putting down more money reduces what's left in reserves, and reserves themselves can factor into a lender's underwriting decision on some files.
There's no universally "right" answer between 5% and 10% down — it depends on what you have available, what you'd rather keep in reserve, and how the PMI cost difference actually pencils against your specific loan amount. That's a real calculation, not a rule of thumb, and it changes with your numbers.
Where the down payment can come from
Conventional guidelines are more particular than FHA about down payment sourcing, though they're still workable for most buyers. Depending on the specific program and how much you're putting down, funds can come from your own savings, a documented gift from a family member, or a combination of both — some conventional programs cap how much of the down payment can come from gift funds versus a borrower's own money, particularly at lower down-payment tiers on certain property types (a second home or investment property, for instance, often has stricter gift-fund rules than a primary residence). Whatever the source, Fannie Mae and Freddie Mac both require the funds to be documented with a signed gift letter and a paper trail showing the money actually moved from the donor's account — the same standard as FHA, just applied with somewhat more particularity depending on the specific program and property type. Down payment assistance programs, common in California, can also be layered onto some conventional loans, though eligibility and stacking rules vary by both the assistance program and the specific conventional loan program being used.
Down payment and credit score: how they interact
Down payment and credit score aren't independent variables in conventional underwriting — they interact, sometimes in ways that surprise borrowers. A stronger credit score can sometimes offset a lower down payment in terms of pricing, and a larger down payment can sometimes offset a thinner credit file, though neither substitutes entirely for the other on every program. This is part of why the "right" down payment tier isn't just a function of how much cash you have available — it's a function of how your specific credit profile interacts with each tier's pricing. A borrower with excellent credit might find the pricing difference between 5% and 10% down smaller than expected; a borrower with a credit score closer to the 620 conventional floor might find that same gap considerably larger. See our companion piece, conventional loan credit score and property condition requirements, for how credit factors into conventional qualification more broadly.
Down payment vs. closing costs: two separate cash needs
A down payment isn't the only cash a conventional purchase requires, and conflating the two is a common miscalculation. Closing costs — lender fees, title and escrow charges, appraisal, prepaid property tax and insurance reserves — typically run as a separate percentage of the purchase price on top of the down payment itself, and the exact figure varies by loan amount, property location, and the specific transaction. Some of that can potentially be offset through a seller credit negotiated into the purchase offer, and some conventional programs allow limited interested-party contributions toward closing costs, with the allowable percentage varying by down payment tier and occupancy type. Before settling on a down payment percentage, it's worth mapping the total cash needed at closing — down payment plus closing costs minus any credits — rather than budgeting the down payment number in isolation.
How and when PMI comes off
The reason the down payment conversation matters beyond closing day is what happens to mortgage insurance afterward. Under the federal Homeowners Protection Act (HPA), a borrower can request PMI cancellation once the loan balance reaches 80% of the original property value, and the servicer is required to automatically cancel PMI once the balance reaches 78% of the original value, provided the borrower is current on payments. This is a meaningful structural difference from FHA's mortgage insurance, which under HUD's current rules can last the life of the loan on a low-down-payment purchase — see our FHA loan requirements piece for that comparison. Fannie Mae and Freddie Mac guidelines can offer additional paths beyond the HPA floor (some servicers allow removal based on a new appraisal once a loan reaches a certain age), but those additional paths vary by servicer and loan, and aren't guaranteed on every file.
Refinancing later to remove PMI faster
A borrower who puts down less than 20% and pays PMI isn't necessarily locked into the original schedule for reaching the 78% automatic-cancellation threshold. Extra principal payments, applied specifically to reduce the loan balance faster than the standard amortization schedule, can accelerate reaching that threshold, since the HPA's 78% test is based on the original amortization schedule but many servicers will also act on a documented lower balance reached through extra payments. Separately, if a property's value has risen meaningfully since purchase — not uncommon in many California markets — a new appraisal showing a lower loan-to-value than the original purchase price implies can sometimes qualify a borrower for earlier PMI removal under Fannie Mae or Freddie Mac's guidelines, distinct from the HPA's automatic 78% floor. Both paths are worth asking your servicer about directly rather than assuming PMI removal only happens on the original schedule.
A worked illustration
As a purely illustrative example with round, hypothetical numbers — not a real quote, not a program minimum for any specific borrower — consider a $700,000 purchase. At 5% down, that's $35,000 down and a $665,000 loan; at 10% down, that's $70,000 down and a $630,000 loan. The $35,000 difference in upfront cash is the most visible tradeoff, but the ongoing PMI cost on the smaller down payment, and how quickly the loan balance would reach the 80%/78% cancellation thresholds under each scenario, is the piece that's easy to overlook when comparing purely on the down-payment number. Running both scenarios against your actual loan amount and credit profile is the only way to see which one is genuinely cheaper over the time you expect to hold the loan.
Down payment and the second-home or investment-property question
Everything above describes a primary-residence purchase. Down payment minimums are generally higher for a second home and higher still for an investment property under conventional guidelines, since the lender's risk profile changes with occupancy — a borrower is statistically more likely to prioritize payments on a home they live in than one they don't. If you're buying a property specifically as a rental and traditional income documentation doesn't tell the full story of what the property itself can support, our DSCR loan program qualifies based on the property's rental income rather than your personal income and debt profile, and carries its own separate down payment structure worth comparing directly against conventional financing for an investment purchase.
What if a program limit or the county limit gets in the way?
Conventional loans that meet Fannie Mae and Freddie Mac's size guidelines are called conforming loans, and there's a maximum conforming loan amount that varies by county — higher in high-cost counties across much of California than the national baseline. Rather than restate a figure here that changes annually, check the current conforming limit for your county on our California loan limits page. If your loan amount is above that limit, you're into jumbo territory, which follows its own down-payment and credit guidelines rather than the conventional-conforming rules described above.
Rate and pricing myths around down payment tiers
One persistent misconception is worth addressing directly: a lower down payment doesn't automatically mean a meaningfully worse interest rate on a conventional loan the way it might affect PMI. Pricing is driven by a combination of factors — credit score, loan-to-value, loan amount, occupancy, and property type among them — and loan-to-value is one input, not the whole picture. A borrower with excellent credit at 90% loan-to-value can sometimes price better than a borrower with a thinner credit file at 80% loan-to-value. This is exactly why running your specific numbers matters more than defaulting to "put down as much as possible" or "put down as little as possible" as a blanket rule — neither is universally right, and no rate or pricing outcome should be assumed without an actual lender pulling your file.
Down payment sources people forget to plan for
Beyond savings and gifts, a few less-obvious sources sometimes factor into a conventional down payment, each with its own documentation trail a lender will want to see: proceeds from selling another property (with the sale closing before or concurrently with the new purchase), a documented withdrawal or loan against a retirement account under that account's specific rules, or funds from a bonus or commission that need to be seasoned in a bank account for a period before a lender will count them as verified funds. None of these are unusual, but each needs to be sourced and paper-trailed the same way a straightforward savings-account down payment would be — a large, unexplained deposit close to closing is one of the more common things that slows down an otherwise straightforward file.
The short version
Conventional financing genuinely runs from 3% up through 20%+ down, and the right tier for you depends on program eligibility, your available cash, how the PMI math pencils at each level, and how quickly you expect to reach the 78–80% equity threshold where PMI comes off. None of that is a single universal answer — it's a real comparison run against your actual numbers.
At Choice Home Mortgage, owner Esther Buede will run all three tiers against your specific file — income, credit, and the property itself — and tell you honestly which one makes the most sense, not just which one has the lowest number. Start with the full program details on our conventional loan page, or call (949) 522-7310.