Low Down Payment Mortgage Options Compared (3%, 3.5%, 5%, 10%)
Putting less money down can make buying a home feel more achievable - but the down payment alone doesn’t tell you whether a mortgage will actually fit your budget. Mortgage insurance, interest rates, and loan structure often matter more than the percentage you put down.
In this guide, we compare the most common low down payment mortgage options - 3%, 3.5%, 5%, and 10% - and explain how each choice affects your monthly payment, risk level, and long-term cost. The goal isn’t to find the smallest down payment, but the option that keeps your finances stable after you move in.
Which Down Payment Option Is “Best”?
There is no universally best down payment. The right option depends on your credit score, income stability, savings, and how comfortable you want your monthly payment to feel.
- 3% down: Lowest upfront cost, higher monthly risk.
- 3.5% down (FHA): Easier entry, higher insurance cost.
- 5% down: Often the best balance of payment and flexibility.
- 10% down: Lower insurance and more breathing room.
Instead of asking “How little can I put down?”, a better question is: “Which option lets me save, absorb surprises, and sleep at night?”
What Counts as a Low Down Payment Mortgage?
Any mortgage with less than 20% down is considered a low down payment loan. These loans usually require mortgage insurance, which protects the lender - not you - if the loan defaults.
It’s also important to separate your down payment from closing costs. Closing costs are additional cash expenses and are not covered by the down payment itself.
3% Down Mortgage Options (Conventional)
Conventional 3% down loans are designed primarily for first-time or moderate-income buyers with solid credit. These loans keep cash requirements low but typically come with private mortgage insurance (PMI).
Pros
- Lowest cash required to buy
- Preserves savings for emergencies
Cons
- Higher PMI cost
- Less cushion if taxes or insurance rise
3.5% Down FHA Loans
FHA loans allow a 3.5% down payment and are often used by buyers with limited credit history or lower scores. The tradeoff is mortgage insurance that can remain for many years.
FHA can be helpful when conventional pricing is punitive, but it is rarely the cheapest option long term unless refinancing is part of your plan.
5% Down Conventional Mortgages
For many buyers, 5% down is the “sweet spot.” Mortgage insurance is often cheaper than at 3%, and the payment feels more stable without draining savings.
If you can reach 5% down without sacrificing your emergency fund, this option often provides the best balance of flexibility and cost.
10% Down Mortgage Options
A 10% down payment reduces both your loan balance and mortgage insurance costs. It also provides a buffer if home values fluctuate.
The risk is tying up too much cash. A strong down payment should never leave you house-poor.
VA and USDA Loans: Zero Down Options
VA loans allow eligible service members and veterans to buy with no down payment, often with competitive rates. USDA loans also offer zero-down financing in qualifying areas.
These programs can dramatically reduce cash needed upfront, but eligibility requirements are strict.
PMI vs FHA Mortgage Insurance
PMI on conventional loans is usually tied to credit score and can be removed later. FHA mortgage insurance is structured differently and can last much longer.
This difference alone can swing the true cost of a low down payment mortgage.
How to Choose the Right Down Payment
- Start with a comfortable monthly payment.
- Stress-test taxes, insurance, and repairs.
- Protect your emergency fund.
- Compare total monthly cost - not just rate.
You can explore affordability in more detail in Home Buying Process & Affordability.
Real-Life Down Payment Scenarios
- Strong credit, limited savings → 3% vs 5%
- Moderate credit → FHA 3.5% vs 5%
- Veteran buyer → VA 0% vs 5%
Compare Down Payment Options With Calculators
Common Low Down Payment Mistakes
- Focusing only on down payment size
- Ignoring mortgage insurance costs
- Draining emergency savings
- Buying at the top of approval limits
Ready to Compare Your Down Payment Options?
Run side-by-side scenarios to see which down payment keeps your monthly payment comfortable.