Who it is for
- First-time buyers with strong income but limited savings
- Buyers in high-cost markets where 20% is out of reach
- Borrowers with good credit who want conventional (no upfront MIP)
- FHA buyers with lower credit scores
Typical 3% Down Payment Loans requirements
| Conventional 97 | 3% down; typically 620+ credit; first-time buyer or income limits |
|---|---|
| FHA | 3.5% down with 580+ credit; 10% below 580 |
| Mortgage insurance (conventional) | Private mortgage insurance (PMI), cancellable at 20% equity |
| Mortgage insurance (FHA) | Upfront MIP plus monthly MIP, typically for the life of the loan |
| HomeReady / Home Possible | Fannie/Freddie 3% programs with income limits and reduced PMI |
| Minimum credit | Typically 620+ conventional, 580+ FHA |
| Down payment assistance | Can layer DPA on top for closing costs |
Figures are typical market ranges as of October 2026. Actual terms depend on the lender, your credit, the property and the program, and are confirmed on your Loan Estimate or term sheet.
How it works
- Check eligibility: Conventional 97 and HomeReady/Home Possible have income limits; FHA does not.
- Compare the real cost: 3% down plus PMI vs waiting to save 10–20%.
- Get pre-approved with the program that fits your credit and income.
- Budget for closing costs too, the down payment is only part of the cash to close.
- Close, then track equity so you can cancel PMI as soon as the loan allows.
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Pros and cons
Advantages
- Buys years sooner than saving 20%
- Conventional PMI can be cancelled; FHA MIP usually cannot
- HomeReady/Home Possible reduce PMI for eligible buyers
Trade-offs
- Mortgage insurance adds to the monthly payment
- Smaller equity cushion if prices dip
- FHA monthly MIP lasts for the life of the loan in most cases
Documents you’ll need
- Standard purchase documentation: ID, income, assets, tax returns
- First-time buyer education certificate if your program requires it
- Down payment assistance approval letter if layering DPA
3% Down Payment Loans FAQ
What is the difference between 3% conventional and FHA 3.5%?
Conventional 97 usually needs 620+ credit but has cancellable PMI and no upfront fee. FHA accepts 580+ credit but charges upfront and monthly MIP that typically lasts the life of the loan. Better credit usually favors conventional.
Can I put 3% down on any home?
Conventional 97 and HomeReady/Home Possible have income limits and are generally for primary residences. FHA has no income limit but caps loan amounts by county.
How do I get rid of PMI?
On conventional loans, PMI is cancelled automatically at 78% of the original value and can be requested at 80%. FHA monthly MIP usually cannot be removed without refinancing into a conventional loan.
Is 3% down risky if home prices fall?
It leaves a thin equity cushion, which matters if you might sell within a few years. Buyers planning to stay 5+ years are less exposed to short-term price moves.
Can I use a gift for the 3% down payment?
Yes. Conventional allows gifts from family; FHA also allows gifts and employer or labor-union assistance. The donor signs a gift letter.
Does 3% down work on condos?
Yes, on warrantable condos. Non-warrantable condos usually need larger down payments and different programs.
What are HomeReady and Home Possible?
Fannie Mae and Freddie Mac’s 3% programs for low-to-moderate income buyers. They offer reduced PMI and allow income from non-borrower household members to count.
How much are closing costs on top of the 3%?
Typically 2-5% of the purchase price. On a $350,000 home with 3% down, plan for $7,000-$17,500 in closing costs on top of the $10,500 down payment.
Can I put 3% down on a multi-unit property?
Conventional 97 is single-unit only. FHA allows 3.5% on 2-4 units for owner-occupants, subject to the self-sufficiency test on 3-4 units.
Official sources
How 3% Down Payment Loans compare
| 3% Down Payment Loans | No Money Down / Zero-Down Mortgages | Conventional Loans | FHA Loans | |
|---|---|---|---|---|
| Best for | First-time buyers with strong income but limited savings | Eligible veterans and active-duty service members (VA) | Buyers with good credit and steady income | First-time buyers |
| Down payment | Can layer DPA on top for closing costs | , | 3% (eligible first-time buyers), 5%+ otherwise; 15–25% on investment property | , |
| Credit | Typically 620+ conventional, 580+ FHA | Typically 620+ VA/USDA; DPA programs vary, often 620–640 | 620 | 580 for 3.5% down; 500–579 with 10% down |
| Income docs | , | , | , | , |
Typical ranges, your Loan Estimate or term sheet confirms actual terms.
Coming soon: a 2-minute walkthrough from our loan team.
Related programs
No Money Down / Zero-Down Mortgages
A zero-down mortgage finances 100% of the purchase price, offered through our lender network where available.
Conventional Loans
A conventional loan is a mortgage not insured by the government that follows Fannie Mae or Freddie Mac guidelines.
FHA Loans
An FHA loan is a government-insured mortgage that allows 3.5% down with a credit score of 580 or higher, or 10% down with a score from 500 to 579.
First-Time Homebuyer Loans
First-time homebuyer loans are mortgage options with low down payments, typically 3% conventional, 3.5% FHA or $0 VA, often paired with state or local down payment assistance.