How much do you really need to put down on a conventional loan?
Twenty percent down is a goal, not a rule. Here is the trade you make at every step below it.
The 20% myth
Conventional loans — the ones not insured by FHA, VA or USDA — can be made with far less than 20% down. Some conventional programs for first-time and moderate-income buyers allow as little as 3%, and 5% down is common for everyone else.
What 20% buys you is the absence of private mortgage insurance (PMI). Below 20%, the lender requires PMI to protect itself, and you pay for it monthly until you build enough equity to remove it. See PMI explained.
The trade at each level
The exact PMI cost depends on your credit score, down payment and the insurer, so get quotes at two or three down payment levels and compare the monthly payment, not just the rate.
| Down payment | What it means |
|---|---|
| 3% | Available on certain programs, often with income limits or first-time-buyer rules. Highest PMI and largest loan. |
| 5% | Widely available. PMI still meaningful. Keeps cash in your pocket for repairs and reserves. |
| 10% | PMI noticeably cheaper; rate may improve. |
| 15% | PMI lighter still; often a sweet spot if you have the cash without draining savings. |
| 20%+ | No PMI. Lowest loan amount. Strongest offer on paper. |
A worked example
On a $350,000 home: 3% down is $10,500, 5% is $17,500, 10% is $35,000 and 20% is $70,000. Saving the difference between 5% and 20% — $52,500 — takes most households years, during which prices and rents keep moving.
For many buyers the better question is not "can I reach 20%" but "what down payment leaves me with an emergency fund after closing". Remember that Georgia closing costs come on top — see Georgia closing costs for buyers.
Where the down payment can come from
- Savings and checking — lenders want to see the money "seasoned" (in your account for a couple of months) or its source documented.
- Gifts from family, with a signed gift letter and a paper trail.
- Retirement accounts — a 401(k) loan or withdrawal is possible, but understand the tax and repayment consequences first.
- Down payment assistance, where the program allows conventional loans.
- Proceeds from selling your current home.
Conventional vs. FHA for a small down payment
With strong credit, a conventional loan with 3–5% down is often cheaper than FHA, mainly because PMI can be removed later while FHA's premium usually stays. With weaker credit, FHA's pricing can win. Ask a lender to price both side by side on the same house — compare lenders here.
Conventional loans also have a maximum size (the conforming loan limit), set each year. Loans above it are "jumbo" loans with their own, usually stricter, rules.
How to decide your down payment, step by step
- Add up the cash you have that is not your emergency fund — a common rule of thumb is to keep several months of expenses in reserve after closing.
- Subtract your estimated Georgia closing costs, prepaid taxes and insurance, and moving costs.
- Set aside money for the first year of ownership: appliances, small repairs, window coverings, and anything the inspection turned up.
- What is left is your realistic down payment. Ask a lender to quote the monthly payment at that figure and at the next tier up (for example, 5% and 10%).
- Compare the extra monthly cost of the smaller down payment against the cash it lets you keep. Decide which you would rather have.
Two buyers, two right answers
A couple buying a starter home in Lawrenceville have enough saved to reach 15% down, but it would leave them with almost nothing after closing. They put 5% down, accept PMI, and keep a cushion for the water heater that the inspector said was near the end of its life. When their equity grows, they plan to ask the lender to cancel PMI.
A buyer moving up from a home they are selling in Marietta has the sale proceeds in hand. For them, 20% down is easy, ends PMI before it starts, and makes their offer cleaner in a competitive market. Both choices are sound; they just answer different questions.
Questions to ask a conventional lender
- Do I qualify for a 3% down program, and what are its income or first-time-buyer rules?
- What would PMI cost at 3%, 5%, 10% and 15% down with my credit score?
- Is borrower-paid monthly PMI or a single upfront premium better for how long I expect to own the home?
- At what point can I ask to cancel PMI, and will you require a new appraisal?
- Can my down payment include a family gift, and what documentation do you need?
Common questions
What is the minimum down payment for a conventional loan?
Some conventional programs allow 3% down, typically for first-time buyers or within income limits. 5% is a common minimum otherwise.
Is it better to put 20% down?
It avoids PMI and lowers your payment, but not at the cost of draining your emergency savings. Many buyers are better off with less down and cash in reserve.
Can my down payment be a gift?
Yes, from an acceptable donor such as a family member, with a gift letter and documentation of the transfer. Rules vary by program and occupancy.
Can I use Georgia down payment assistance with a conventional loan?
Some programs, including Georgia Dream, can pair with conventional loans as well as FHA, VA and USDA, through participating lenders. Each program sets its own income and price limits, so ask a participating lender which combinations you qualify for.
Does a bigger down payment get me a lower rate?
Often, a little — pricing typically improves at certain loan-to-value tiers. Ask your lender to quote at several down payments.
Read next
General information for Georgia home buyers, not legal, tax or lending advice. Loan programs, rates, limits, tax rates and insurance terms are set by lenders, agencies, counties and insurers and change — confirm current figures with them, and have your closing attorney review anything you sign.