How to get a 3%-down mortgage
How to get a 3%-down mortgage.
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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: 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 — 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:
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 — or, typically, any amount under 20% — 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.
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.
