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You may have heard that you need a 20% down payment to buy a home, but that isn't the case. In reality, many types of mortgage loans allow for a lot less. One of the most common low-down-payment options is the 3%-down conventional loan, which allows you to put down just 3% of the purchase price when taking out a mortgage.

MORE:ย See our top picks for mortgage lenders accepting low or no down payments.

The 3%-down mortgage is a type of conventional loan called a conforming loan. These are offered by private mortgage lenders, but their rules are set by Fannie Mae and Freddie Mac โ€” the government-sponsored enterprises (GSEs) that keep money flowing into the mortgage market by purchasing loans and selling them later on to investors.

Conventional loans are offered by most mortgage lenders and are the most common type of mortgage in the U.S. According to Home Mortgage Disclosure Data, they accounted for roughly 9.2 million of the 12.2 million mortgage loans issued in 2024.

To qualify for a 3%-down conventional mortgage, you'll first need to have the 3% saved up and ready to go in your bank account. Beyond this, there are some other requirements you'll need to meet.

These can vary by mortgage lender, but at the bare minimum, you must meet the following requirements:

Have a credit score of at least 620

Be buying a primary residence

Have a debt-to-income ratio of 45% or less

Take a homeownership education course

For some types of 3%-down loans, you may also need to fall under a certain income limit. Others may require you to be a first-time home buyer.

When you make a 3% down payment on a conventional loan โ€” or, typically, any amount under 20% โ€” you'll have to pay for private mortgage insurance (PMI).

PMI protects your lender in case you default on your loan and serves as a way of compensating for the extra risk that a low-down-payment loan entails. It's usually included as part of your monthly mortgage payments, though some lenders require you to pay up front at closing (or a combination of the two). Generally speaking, you can expect PMI to add about $30 to $70 to your monthly payment for every $100,000 you borrow.

Fortunately, you can request that your mortgage lender cancel your PMI once you reach 20% equity in your home, or when your loan balance is 80% or less of your home's value. Your lender must automatically cancel your PMI policy once the balance falls under 78% of your home's value.

The big benefit of using a 3%-down mortgage is that you need a lot less cash up front to buy a house. That means less time spent saving, potentially allowing you to purchase a home sooner than expected.

You may also free up cash to put toward other expenses, such as purchasing new furniture or decor, or renovating specific areas of your new house. You could even put the money toward achieving another milestone, such as saving for a wedding or having a baby, alongside buying a house.

On the downside, though, you'll have to pay for PMI, which adds to your monthly mortgage payment. A small down payment also means you'll build equity more slowly, as the bulk of your payments will go toward your interest costs for the first few years of the loan. This could increase the chance of going upside down on your mortgage if your home's value falls.

Last but not least, a smaller down payment means a larger loan balance, which increases your total interest costs over the long haul.

Pros

Cons

Fewer up-front costs

Mandatory private mortgage insurance

Buy a home sooner

Build home equity more slowly

Free up cash for other goals

Higher chance of going upside-down on your mortgage

Increase your long-term interest costs

This map shows how long it takes Americans to save for a 20% vs. 5% down payment.

The 3% conventional loan isn't your only option if you want to avoid making a large down payment. Here are some other common mortgage types to explore:

FHA loans: These are mortgages insured by the Federal Housing Administration. If you have a credit score of at least 580, the FHA only requires a 3.5% down payment. (With a credit score of 500 to 579, you'll need 10% down.) You'll have to pay a mortgage insurance premium, which lasts for the life of your loan in most cases.

VA loans: These are loans backed by the U.S. Department of Veterans Affairs and are available to eligible military members, veterans, and their spouses. They require zero down payment or mortgage insurance.

USDA loans: These are another type of no-down-payment loan. They're guaranteed by the U.S. Department of Agriculture and can only be used for home purchases in designated rural parts of the country. You must also meet certain income requirements.

Down payment assistance programs can also help you buy a house with less up-front cash. These are sometimes offered as grants that do not need to be repaid, low-interest loans, or loans that are eventually forgiven if you meet specific requirements.

Yes, you can get a mortgage with just a 3% down payment, although you will need to pay for private mortgage insurance as a result. You will also need to meet certain credit score, debt-to-income ratio, and, in some cases, homeowner education requirements.

A 3% down payment on a $300,000 house would be $9,000. For a 3%-down mortgage, you'll need to use a conventional loan, a type of mortgage offered by private mortgage lenders.

You'll first need to find a lender that offers conforming, conventional loans. You will then need to meet the lender's credit score, debt-to-income ratio, and other requirements for the loan and pay for mortgage insurance. This is added to your monthly payments until you reach at least 20% equity in the home.

A zero-down mortgage helps you buy a home sooner, but there are trade-offs. Find out if you qualify for zero-down loans or any low-down-payment alternatives.

A 20% down payment helps you avoid PMI, but it can take decades to save that much. Compare the time it would take you to save for a 20% versus a 5% down payment.

USDA and conventional loans differ in many ways, including eligibility requirements, interest rates, and more. Find out which mortgage type is a better fit.

A conforming loan is a type of conventional loan, and the amount borrowed must fall below the FHFA limits. Learn if a conforming mortgage is right for you.

The main differences between FHA vs. conventional loans are credit scores, down payments, and mortgage insurance. Learn which type of mortgage is right for you.

The minimum mortgage amount is typically $150,000 for most lenders, although some may allow you to borrow less. Learn how and where to get small mortgage loans.