Conventional Loan Down Payment Guide

A $400,000 home with 5% down means a $20,000 down payment instead of $80,000 at 20%, but it also means a larger loan balance and monthly PMI. On a $380,000 loan at 6.75% for 30 years, principal and interest run about $2,465 per month. On a $320,000 loan after 20% down, that payment is about $2,076 – a difference of roughly $389 per month, or $23,340 over five years before taxes, insurance, and principal reduction. That is why any conventional loan down payment guide should start with one truth: the right down payment is not just about what you can qualify for, it is about how much monthly payment pressure you want.

By Duane Buziak, Mortgage Maestro, NMLS#1110647

What a conventional loan down payment really means
Minimum down payment rules and credit score thresholds
How down payment changes your payment and PMI
What buyers in Virginia should know right now
Conventional vs other low-down-payment options
5-step conventional loan down payment guide
FAQ
Legal disclaimer

What a conventional loan down payment really means

A conventional loan is any mortgage not backed directly by a federal agency like FHA, VA, or USDA. Most conventional loans sold to Fannie Mae or Freddie Mac follow conforming loan limits. In 2025, the baseline conforming loan limit for a one-unit property is $806,500, according to FHFA: https://www.fhfa.gov/data/conforming-loan-limit-cll-values.

For most buyers, the practical question is simple: how little can you put down without creating a payment that feels tight every month? Many owner-occupied conventional loans allow as little as 3% down for qualified first-time or low-down-payment borrowers. More commonly, buyers put down 5%, 10%, or 20%.

The trade-off is straightforward. Lower down payment preserves cash for repairs, reserves, and moving costs. Higher down payment reduces the loan amount, lowers monthly payment, and may eliminate PMI entirely.

Minimum down payment rules and credit score thresholds

The minimum down payment depends on occupancy, property type, and borrower profile. A one-unit primary residence can go as low as 3% down in the right scenario. If you are buying a second home or investment property, the minimum is typically higher. Multi-unit properties usually require more down as well.

Credit matters because it affects both approval and pricing. While some conventional approvals can happen below 700, stronger pricing typically starts with higher scores. A practical way to think about it is this: 620 is often a floor for many conventional loans, 680 opens more options, and 740-plus usually brings the most competitive terms.

| Scenario | Typical minimum down payment | Common credit benchmark | |—|—:|—:| | Primary residence, 1-unit | 3% to 5% | 620+ | | Primary residence, 2-4 units | 15%+ | 680+ | | Second home | 10%+ | 680+ | | Investment property | 15% to 20%+ | 700+ |

Reserve requirements also vary. A standard owner-occupied purchase may require little to no post-closing reserves, while a second home or investment purchase can require two to six months of housing payments in reserve, sometimes more depending on the file.

How down payment changes your payment and PMI

PMI is where many buyers misjudge the math. Private mortgage insurance is usually required when putting down less than 20% on a conventional loan. The cost depends on credit score, down payment, occupancy, and loan type.

A borrower with excellent credit putting 10% down may see materially lower PMI than a borrower with fair credit putting 3% down. PMI is not automatically a bad deal if it helps you buy sooner in a rising market, but it is still a real monthly cost.

| Home price | Down payment | Loan amount | Est. P&I at 6.75% | Est. monthly PMI* | |—|—:|—:|—:|—:| | $350,000 | 3% ($10,500) | $339,500 | $2,201 | $170 to $255 | | $350,000 | 5% ($17,500) | $332,500 | $2,156 | $125 to $210 | | $350,000 | 10% ($35,000) | $315,000 | $2,042 | $70 to $155 | | $350,000 | 20% ($70,000) | $280,000 | $1,816 | $0 |

*Illustrative only. Taxes, insurance, HOA dues, and exact PMI factors are not included.

Closing costs are separate from the down payment. In Virginia, a reasonable purchase estimate is often 2% to 4% of the purchase price, depending on escrows, title charges, lender fees, and prepaid items. On a $400,000 purchase, that can mean roughly $8,000 to $16,000. The CFPB provides a good breakdown of how closing costs work: https://www.consumerfinance.gov/owning-a-home/closing-disclosure/.

What buyers in Virginia should know right now

In Henrico County, including Short Pump and Glen Allen, a buyer deciding between 5% down and 10% down is not making that choice in a vacuum. Inventory, list-price competition, and how quickly homes move all matter. In tighter markets, preserving cash can help you cover appraisal gaps, inspections, or post-close repairs.

Henrico County’s median sold home price has recently been around the low-to-mid $400,000s depending on month and source. Redfin has reported median sale prices in that range for Henrico County: https://www.redfin.com/county/2972/VA/Henrico-County/housing-market. In practical terms, a 5% down payment on a $425,000 purchase is $21,250, while 10% down is $42,500. That extra $21,250 may lower your payment, but it may also be cash you need if you are buying an older home near Richmond or competing in popular Midlothian neighborhoods where updated listings still draw fast attention.

Local market conditions matter. In parts of Richmond, Short Pump, and Midlothian, buyers still face selective competition for well-priced homes, even when overall inventory has improved from earlier lows. When sellers have options, a borrower with stronger reserves and a cleaner financing profile can sometimes compete better than a borrower who empties savings just to hit 20% down.

Conventional vs other low-down-payment options

Conventional is not always the cheapest path upfront or monthly. FHA can be more forgiving on credit, but its mortgage insurance structure can cost more over time. VA can be exceptionally efficient for eligible veterans and service members because no down payment is often allowed. USDA can also allow no down payment in qualifying rural areas.

If your score is around 620 to 660, FHA may produce a better payment than conventional with PMI. If your score is 700-plus and you have stable income, conventional often becomes more attractive. Fannie Mae’s loan-level pricing and mortgage eligibility framework are worth reviewing for baseline conventional standards: https://singlefamily.fanniemae.com.

Compared with some large retail lenders or direct-to-consumer platforms like Rocket, CapCenter, or Movement, a borrower shopping conventional down payment options should focus on total cost, not just a headline rate. The right comparison includes rate, lender fees, PMI structure, closing timeline, and whether the prequalification was done with a soft pull or a hard inquiry.

5-step conventional loan down payment guide

1. Set the payment before you set the down payment

Start with the monthly housing number you can live with comfortably. Include taxes, insurance, HOA dues, and PMI, not just principal and interest.

2. Price the same home at 3%, 5%, 10%, and 20% down

This shows whether the extra cash meaningfully improves your monthly position. Sometimes 10% down is the sweet spot because it reduces PMI without draining reserves.

3. Protect post-closing cash

Do not ignore reserves. A good rule is to keep enough for emergency repairs and at least a few months of housing payments, especially for older homes in Richmond, Glen Allen, or established Midlothian subdivisions.

4. Check your credit before locking strategy

A borrower at 679 and a borrower at 701 can price very differently. Small score improvements can change PMI and rate enough to justify a different down payment plan.

5. Compare seller concessions against cash to close

If the seller can cover part of your closing costs, you may be able to keep more cash available for the down payment or reserves. That changes the real math.

FAQ

Can you get a conventional loan with 3% down?

Yes, some owner-occupied one-unit primary residence programs allow 3% down for qualified borrowers.

Is 20% down required on a conventional loan?

No. Twenty percent avoids PMI, but many buyers qualify with less.

What credit score do you need for conventional financing?

620 is a common minimum benchmark, but stronger pricing often starts higher, especially above 680 and 740.

Is PMI permanent on a conventional loan?

No. PMI can typically be removed once equity reaches the required threshold under the loan’s rules.

Are closing costs included in the down payment?

No. Closing costs are separate and often run about 2% to 4% of the purchase price.

Should you put 20% down if you can?

It depends. If putting down 20% leaves you cash-poor, 5% or 10% down may be the healthier move.

Are reserve requirements strict on conventional loans?

They can be modest for a primary home but stricter for second homes, investment properties, or layered-risk files.

Legal disclaimer

This article is for educational purposes only and does not constitute financial or legal advice.

A strong conventional loan decision is rarely about chasing the lowest possible down payment or forcing 20% at all costs. It is about balancing monthly payment, PMI, cash reserves, and how competitive you need to be in the market you are buying in. If the numbers are run correctly, the best down payment amount usually becomes obvious.