Yes, you can buy a house by putting 5% down on a conventional mortgage, and on a one-unit primary residence some programs go as low as 3%. On a $400,000 home, 5% down means bringing $20,000 for the down payment itself, plus another 2% to 5% of the loan amount in closing costs.1Fannie Mae. Closing Costs Calculator Realistically, plan for $28,000 to $40,000 at the closing table once origination fees, title work, prepaid taxes, and insurance are added in. The tradeoff for the smaller down payment is private mortgage insurance and tighter qualification standards, but for buyers with steady income and limited savings, it is one of the most practical paths into homeownership.
A seller can help absorb some of that upfront cost. At 95% loan-to-value, Fannie Mae permits the seller to contribute up to 3% of the purchase price toward your closing costs — as much as $12,000 on a $400,000 home.2Fannie Mae. Interested Party Contributions (IPCs) In a buyer-friendly market, negotiating those concessions can meaningfully cut the cash you actually need on closing day.
Your loan amount also has to fit within the conforming limit. For 2026, that baseline is $832,750 for a single-unit home, rising to $1,249,125 in designated high-cost areas.3U.S. Federal Housing Finance Agency (FHFA). FHFA Announces Conforming Loan Limit Values for 2026 Above those figures, you are in jumbo loan territory, where down payment requirements climb.
Do You Qualify
Conventional mortgages at 5% down follow the standards set by Fannie Mae and Freddie Mac, the government-sponsored entities that buy most of these loans from lenders. Three numbers drive the decision:
- Credit score: at least 620 for fixed-rate loans and 640 for adjustable-rate mortgages.4Fannie Mae. General Requirements for Credit Scores
- Debt-to-income ratio: total monthly debt payments generally cannot exceed 45% of gross monthly income.5Fannie Mae. Eligibility Matrix
- Reserves: for a one-unit principal residence run through Fannie Mae’s automated underwriting, no reserves are required after closing. Two- to four-unit properties require six months of mortgage payments in reserve.6Fannie Mae. Minimum Reserve Requirements
Five percent down is available on one- to four-unit properties, as long as you live in one of the units.5Fannie Mae. Eligibility Matrix Investment properties and second homes carry higher down payment requirements. And if the loan is manually underwritten rather than run through the automated system, multi-unit properties require at least 15% down.
The 3% Option
Fannie Mae actually allows 3% down on a one-unit primary residence with a fixed-rate mortgage. For the standard 97% LTV program, at least one borrower must be a first-time homebuyer, meaning nobody on the loan has owned a home in the past three years.7Fannie Mae. 97% Loan to Value Options The HomeReady program drops the first-time buyer restriction but limits eligibility to borrowers earning 80% or less of the area median income. Either route frees up $8,000 in cash on a $400,000 purchase compared to 5% down.
Where the Down Payment Can Come From
Your 5% does not have to come entirely from your own savings.
Gift Funds
For a one-unit primary residence, the entire down payment can be a gift from a relative by blood, marriage, adoption, or legal guardianship. Multi-unit properties work differently: you must contribute at least 5% from your own funds, and any gift money has to sit on top of that minimum.8Fannie Mae. Personal Gifts
Every gift requires a signed letter from the donor stating the amount, confirming no repayment is expected, and listing the donor’s name, address, phone number, and relationship to you. The lender also needs to trace the money leaving the donor’s account and arriving in yours or at the closing agent.8Fannie Mae. Personal Gifts Skipping any part of that paper trail stalls loans in underwriting.
Down Payment Assistance
Many state and local housing agencies run grant or deferred-second-mortgage programs designed to cover the down payment on a conventional loan. Terms and income limits vary by location. Your lender or a HUD-approved housing counselor can point you to what is available in your area.
Private Mortgage Insurance
Any conventional mortgage with less than 20% down carries private mortgage insurance, which protects the lender if you default. Annual PMI typically runs 0.3% to 1.5% of the loan balance, driven mostly by your credit score and loan-to-value ratio. On a $380,000 loan (95% of a $400,000 purchase), that adds roughly $95 to $475 to your monthly payment.
PMI is not permanent, and that distinction matters. Federal law gives you two ways to end it:
- Borrower-requested cancellation at 80% LTV. Once your principal balance is scheduled to reach 80% of the home’s original value, or you pay down to that point faster, you can submit a written request. You need a solid payment history (no payments 60 or more days late in the prior two years and none 30 or more days late in the prior year), no second liens, and evidence the property’s value has not declined.9Office of the Law Revision Counsel. 12 US Code 4901 – Definitions
- Automatic termination at 78% LTV. If you never ask, the servicer must terminate PMI on the date the scheduled balance hits 78% of original value, provided you are current.10CFPB Consumer Laws and Regulations. Homeowners Protection Act (PMI Cancellation Act)
“Original value” means the lower of your purchase price or the appraised value at the time you bought the home.11Consumer Financial Protection Bureau. When Can I Remove Private Mortgage Insurance (PMI) From My Loan? On a 30-year loan at 7%, the gap between the 80% and 78% scheduled balances is about two years of extra PMI. Requesting cancellation at 80% rather than waiting for automatic termination can save hundreds or thousands of dollars.
What You’ll Need to Document
Because you are borrowing 95% of the home’s value, lenders verify your finances closely. Have these ready before you apply:
- Income: two years of federal tax returns, W-2s from each employer, and pay stubs covering at least the past 30 days.12Fannie Mae. Allowable Age of Credit Documents and Federal Income Tax Returns
- Assets: two to three months of statements for every checking, savings, and investment account. Lenders want to see that your down payment has been sitting in your accounts (called “seasoning”) rather than showing up as an unexplained recent deposit.
- Debts: the Uniform Residential Loan Application (Form 1003) asks for every monthly obligation, including car loans, student loans, credit card minimums, and lease payments.13Fannie Mae. Uniform Residential Loan Application Freddie Mac Form 65 – Fannie Mae Form 1003
If any of your down payment is a gift, add the gift letter and transfer documentation described above. Self-employed borrowers should expect requests for business tax returns and possibly a profit-and-loss statement on top of personal returns. A complete initial submission cuts down on the back-and-forth that adds days to your timeline.
How the Loan Moves to Closing
Once your file is together, the process runs in a predictable order, typically three weeks to two months.
You submit the application. Within three business days, the lender must send you a Loan Estimate laying out the projected interest rate, monthly payment, and closing costs.14Consumer Financial Protection Bureau. What Is a Loan Estimate? Get Loan Estimates from two or three lenders and compare them side by side. Small differences in rate or fees compound into real money over 30 years.
The lender orders an appraisal to confirm the home is worth at least the purchase price. Appraisals typically cost $350 to $600. If the number comes in low, the lender will not finance more than 95% of the appraised value, so you either renegotiate, add cash to cover the gap, or walk.
Underwriting comes next. An underwriter goes through your income, assets, credit, debts, the appraisal, and the property’s title. This is where unexplained bank deposits, employment gaps, or title issues turn into conditions you have to clear.
When underwriting clears, the lender issues a Closing Disclosure with the final terms. You must receive it at least three business days before closing.15Consumer Financial Protection Bureau. TILA-RESPA Integrated Disclosure FAQs At closing, you wire or bring a certified check for the down payment and closing costs (net of any seller concessions), sign the promissory note and the deed of trust or mortgage, and once the deed is recorded, the home is yours.
Alternatives With Less Cash Down
Five percent down on a conventional loan is not the only low-down-payment route. Depending on your situation, one of these may cost less or get you in with less cash.
FHA Loans
The Federal Housing Administration insures loans with as little as 3.5% down for borrowers with credit scores of 580 or higher. That lower credit floor helps buyers whose scores sit between 580 and 619. The catch is insurance cost: FHA charges an upfront premium of 1.75% of the loan amount plus an annual premium of 0.55% that lasts the life of the loan when you put down less than 10%. Conventional PMI, by contrast, drops off at 20% equity. Over the years you stay in the home, that permanent FHA premium adds up.
VA Loans
If you have served at least 90 continuous days of active duty or meet other service-period requirements, a VA loan allows zero down and carries no monthly mortgage insurance.16U.S. Department of Veterans Affairs. Eligibility for VA Home Loan Programs There is a one-time funding fee that can be financed into the loan. For eligible veterans and active-duty service members, a VA loan almost always beats a 5% down conventional loan on total cost.
USDA Loans
The USDA’s Single Family Housing program also requires no down payment, limited to designated rural areas and borrowers whose income falls at or below the low-income limit for their county.17U.S. Department of Agriculture. Single Family Housing Direct Home Loans The definition of “rural” is broader than most people expect, and plenty of suburban fringes qualify. If the location fits, zero down at below-market rates is hard to beat.