Conventional loans offer more down payment flexibility than many buyers realize. While 20 percent down is often cited as the standard, you can purchase a home with as little as 3 percent down on certain conventional loan programs. The right down payment amount depends on your savings, income, credit score, and financial goals.
This guide breaks down every conventional loan down payment option available in 2026, explains how private mortgage insurance works at each level, and helps you determine which approach makes sense for your situation. The Sharla Ellis Team works with Utah buyers across all down payment scenarios and can help you run the numbers for your specific case.
A conventional loan is a mortgage that is not backed by a government agency like FHA, VA, or USDA. Instead, conventional loans are originated by private lenders and typically sold to Fannie Mae or Freddie Mac, the two government-sponsored enterprises that set most conventional loan guidelines.
Conventional loans are the most common type of mortgage in the United States. They offer competitive rates, flexible terms, and the ability to cancel mortgage insurance once you reach 20 percent equity.
Conventional loans allow down payments ranging from 3 percent to 20 percent or more. Here is how each option works:
3 percent down: Available through specific programs like Fannie Mae HomeReady, Freddie Mac Home Possible, and the Conventional 97 loan. Requires PMI. Best for first-time buyers and those with limited savings.
5 percent down: The standard minimum for most conventional loans. Requires PMI but typically at lower rates than 3 percent down. A common choice for primary residence purchases.
10 percent down: Lower PMI costs and monthly payments. Required minimum for second home purchases. Provides more equity cushion from day one.
15 percent down: Further reduced PMI. Often results in better interest rates. A middle ground for buyers who want lower costs but cannot reach 20 percent.
20 percent down: No PMI required. Lower monthly payments. Often qualifies for the best available interest rates.
25 percent or more: May qualify for even better rates. Required for some investment property loans.
Three percent down payment conventional loans are available through specific programs designed to help buyers enter the market with minimal upfront costs.
HomeReady is designed for low-to-moderate income borrowers and offers reduced mortgage insurance costs compared to standard conventional loans.
Key requirements:
Minimum credit score of 620
Household income at or below 80 percent of area median income (AMI)
Primary residence only (one-unit properties)
Homebuyer education course required
Debt-to-income ratio up to 50 percent
Cannot own another financed property
Unique benefits: HomeReady allows income from non-borrower household members (such as a parent or roommate) to help you qualify. Boarder income and rental income from accessory dwelling units can also be counted. This flexibility helps more buyers meet debt-to-income requirements.
Home Possible is Freddie Mac's low down payment program with similar benefits to HomeReady but slightly different requirements.
Key requirements:
Minimum credit score of 660
Household income at or below 80 percent of AMI for the property location
Primary residence only
Homebuyer education required
Debt-to-income ratio up to 50 percent
Key difference: Home Possible requires a 660 credit score compared to HomeReady's 620 minimum. If your score falls between 620 and 659, HomeReady is typically the better option.
The Conventional 97 loan allows 3 percent down without the income limits of HomeReady or Home Possible. However, it has slightly higher mortgage insurance costs.
Key requirements:
Minimum credit score of 620
At least one borrower must be a first-time homebuyer (no ownership in the past three years)
One-unit primary residence only
Fixed-rate mortgages only (no adjustable-rate loans)
Loan amount within conforming limits ($832,750 in most areas for 2026)
Homebuyer education required for first-time buyers
When to use it: The Conventional 97 is a good choice for first-time buyers whose income exceeds the HomeReady or Home Possible limits.
Five percent down is the standard minimum for most conventional loans on primary residences. It does not require special program eligibility like the 3 percent options.
Advantages over 3 percent down:
Lower PMI rates in most cases
More equity from day one, providing a small buffer against market fluctuations
No income limits or first-time buyer requirements
Available on a wider range of property types
Example: On a $450,000 home, 5 percent down is $22,500 compared to $13,500 at 3 percent. The extra $9,000 upfront typically results in lower monthly PMI costs and faster equity building.
Ten percent down offers a meaningful reduction in monthly costs compared to lower down payment options. It is also the minimum required for conventional loans on second homes.
Advantages of 10 percent down:
Significantly lower PMI rates than 3 or 5 percent down
Lower monthly payment due to smaller loan amount
Faster path to 20 percent equity and PMI removal
May qualify for better interest rates
Required for second home purchases
Example: On a $400,000 home at 6.5 percent interest, putting 10 percent down instead of 3 percent can save approximately $250 per month in combined principal, interest, and PMI costs.
Twenty percent down is the threshold for avoiding private mortgage insurance entirely. If you can reach this level without depleting your savings, it offers meaningful long-term savings.
Advantages of 20 percent down:
No PMI required, saving hundreds per month
Lower monthly payment due to smaller loan balance
Often qualifies for the best available interest rates
Strong equity position from day one
More attractive to sellers in competitive markets
When 20 percent may not be the best choice: If putting 20 percent down would deplete your savings and leave you without reserves for emergencies, closing costs, moving expenses, or home repairs, a lower down payment may be wiser. We help buyers balance down payment size against overall financial health.
Private mortgage insurance is required on conventional loans with less than 20 percent down. PMI protects the lender if you default on the loan. You pay the premiums, but the lender is the beneficiary.
PMI typically costs between 0.3 percent and 1.5 percent of your loan amount per year, paid monthly. The exact rate depends on:
Your down payment percentage. Lower down payments mean higher PMI rates.
Your credit score. Higher scores qualify for lower PMI rates.
Loan type and term. Fixed-rate loans typically have lower PMI than adjustable-rate loans.
Property type. Single-family homes have lower PMI than condos or multi-unit properties.
Example: On a $400,000 loan with a 0.5 percent PMI rate, you would pay approximately $167 per month in mortgage insurance.
One major advantage of conventional loans over FHA loans is that PMI can be canceled:
At 80 percent LTV: You can request PMI removal when your loan balance reaches 80 percent of your home's original purchase price. You must be current on payments and have a good payment history.
At 78 percent LTV: Your lender must automatically cancel PMI when your loan balance reaches 78 percent of the original value, based on the original amortization schedule.
Earlier with appreciation: If your home has appreciated and you can demonstrate 20 percent equity through a new appraisal, you may be able to request PMI removal sooner.
PMI can be paid in several ways:
Monthly premiums: Most common. Added to your monthly mortgage payment.
Upfront single premium: Pay the entire PMI cost at closing. May be financed into the loan. Does not result in a monthly PMI payment.
Lender-paid PMI (LPMI): The lender pays PMI in exchange for a slightly higher interest rate. Results in no separate PMI payment, but you cannot cancel it later since it is built into your rate.
Conventional loans offer flexibility in where your down payment funds come from:
Personal savings: Funds in your checking, savings, or money market accounts.
Gift funds: Gifts from family members are allowed. A gift letter documenting that no repayment is expected is required.
Down payment assistance programs: Utah Housing Corporation and local programs can provide funds that count toward your down payment.
Retirement accounts: Some buyers withdraw or borrow from 401(k) or IRA accounts. Tax implications and penalties may apply.
Sale of assets: Proceeds from selling stocks, bonds, or other assets can be used.
Employer assistance programs: Some employers offer homebuyer assistance as an employee benefit.
For most 3 percent down programs, the entire down payment can come from gift funds or assistance programs. For higher down payment amounts, lenders may require some funds to come from your own savings.
Buyers with less than 20 percent down often wonder whether conventional or FHA is the better choice. Here is how they compare:
Down payment: FHA requires 3.5 percent minimum. Conventional requires 3 to 5 percent depending on the program. Comparable on this front.
Credit score: FHA accepts scores as low as 580 with 3.5 percent down. Conventional typically requires 620 or higher. FHA is more forgiving for lower credit.
Mortgage insurance: FHA charges 1.75 percent upfront plus 0.55 percent annually for most loans, and the annual premium lasts the life of the loan in most cases. Conventional PMI ranges from 0.3 to 1.5 percent annually and can be canceled at 20 percent equity. For buyers with 680+ credit scores, conventional is often cheaper long-term.
Property standards: FHA has stricter property requirements. Some homes that need repairs may not qualify for FHA but would work for conventional.
We run side-by-side comparisons for every buyer to show which option results in lower total costs for your specific situation.
Conventional loans have maximum loan amounts that vary by location. For 2026, the standard conforming loan limit for a one-unit property is $832,750 in most areas. High-cost areas have higher limits up to $1,249,125.
Most Utah counties fall under the standard limit. Salt Lake County and some mountain resort areas may have higher limits. Loans above these amounts are considered jumbo loans and have different requirements.
Down payment minimums vary based on how you plan to use the property:
Primary residence (one-unit): 3 to 5 percent minimum
Primary residence (two-unit): 15 percent minimum
Primary residence (three to four-unit): 25 percent minimum
Second home: 10 percent minimum
Investment property (one-unit): 15 percent minimum
Investment property (two to four-unit): 25 percent minimum
No. You can get a conventional loan with as little as 3 percent down on certain programs or 5 percent down on standard loans. Twenty percent down is only required if you want to avoid private mortgage insurance.
For HomeReady and Conventional 97 loans, the minimum credit score is 620. For Freddie Mac Home Possible, the minimum is 660. Higher scores qualify for better PMI rates.
Yes. Gift funds from family members are allowed for conventional loan down payments. For 3 percent down programs, the entire down payment can come from a gift. A gift letter documenting that no repayment is expected is required.
PMI typically costs between 0.3 and 1.5 percent of your loan amount annually. The exact rate depends on your down payment percentage, credit score, and loan details. On a $350,000 loan, expect to pay roughly $90 to $440 per month in PMI.
You can request PMI cancellation when your loan balance reaches 80 percent of your home's original purchase price. Your lender must automatically cancel PMI at 78 percent LTV. If your home has appreciated, you may be able to request early cancellation with a new appraisal.
It depends on your savings and goals. Three percent down gets you into a home sooner with less cash, but you will pay higher PMI. Five percent down typically results in lower PMI and faster equity building. We can run the numbers for both scenarios to show you the difference in monthly costs and long-term costs.
For buyers with credit scores of 680 or higher, conventional loans often have lower long-term costs because PMI can be canceled. FHA mortgage insurance typically lasts the life of the loan. For buyers with lower credit scores, FHA may offer better rates and easier approval. We compare both options for every buyer.
The right down payment depends on your savings, credit profile, income, and financial goals. The Sharla Ellis Team helps Utah buyers evaluate all their options and choose the approach that makes the most sense for their situation.
Whether you are putting 3 percent down with HomeReady or 20 percent down to avoid PMI, we will walk you through the numbers and help you understand exactly what each option costs. Reach out for a conversation.
Sharla Ellis
Producing Branch Manager, Senior Loan Advisor
NMLS #209040
Fairway Independent Mortgage Corporation
2150 South 1300 East, Suite 150
Salt Lake City, UT 84106
Phone: (801) 580-1861
Email: [email protected]
Website: sharlaellis.com
This article is for educational purposes and does not constitute a commitment to lend. Loan approval is subject to credit, income, asset, and property eligibility review. Actual interest rates, PMI costs, monthly payments, and closing costs are provided in your individual loan estimate. Program availability and requirements are subject to change. Contact us to verify current options and your individual eligibility. Sharla Ellis, NMLS #209040, Fairway Independent Mortgage Corporation, NMLS #2289. Equal Housing Opportunity.