First: what does “down payment” mean?
It’s the part of the home’s price you pay upfront. On a $300,000 home, 3% is $9,000, 3.5% is $10,500, and 10% is $30,000. Closing costs are separate. A smaller down payment means borrowing more, so compare your monthly cost as well as the cash you need today.
FHA: a government-insured option
A Federal Housing Administration (FHA) loan is made by an approved lender and insured by the government. It can be an option if you have less saved or a lower credit score.
- Credit score of 580 or higher: FHA’s minimum down payment can be 3.5%.
- Credit score from 500 to 579: FHA requires at least 10% down.
- These are FHA minimums, not an approval promise. Lenders can require higher scores and also review your income, debts, property, and other factors.
HUD’s published announcement explicitly confirms the 580 / 3.5% tier. FHA loans also have upfront and ongoing mortgage insurance premiums (MIP), even with a substantial down payment. Those costs follow different rules from conventional private mortgage insurance.
HomeReady: a low-down-payment conventional loan
Fannie Mae’s HomeReady program offers down payments as low as 3% for eligible buyers, with qualifying income generally limited to 80% of the area median income for the property’s location. Home-buyer education may be required. Ask a participating lender to check your income, credit, and property eligibility.
The October 2025 HomeReady eligibility snapshot cited a 620 minimum credit score. Treat that as a dated reference, not a guarantee of today’s rules. Credit requirements depend on the current underwriting method and lender; ask the lender to confirm the current requirement before applying.
Other options worth asking about
| Loan | In plain English | What to ask |
|---|---|---|
| Conventional | A mortgage not insured by a federal agency. Some programs allow 3% down. | Will I pay PMI? When can I request its removal? |
| VA | For eligible veterans, service members, and some surviving spouses. Often no down payment. | Am I eligible? Does a funding fee apply or can I qualify for an exemption? |
| USDA | For eligible buyers and properties in qualifying rural areas. A no-down-payment option may be available. | Do my income and the property qualify? What guarantee fees apply? |
Choose the full cost, not just the smallest deposit.
Ask at least three lenders for comparable Loan Estimates. Compare the rate, fees, mortgage insurance, monthly payment, and cash to close. A 20% down payment may avoid PMI on a conventional loan, but you also need money left for repairs and emergencies.
Check your state’s down payment assistance before choosing a loan. The calculator models a conventional loan estimate with optional PMI; ask a lender for an FHA, VA, or USDA quote with the right program fees.
Go straight to the source
- HUD: FHA policy announcement confirming the 580 credit score / 3.5% down payment tier (2010 historical source)
- HUD: FHA loans and current program guidance
- Fannie Mae: HomeReady mortgage and current eligibility
- Fannie Mae: HomeReady borrower eligibility in the current Selling Guide
- CFPB: Understand your loan options
Program rules can change. Source publication dates and any historical requirements are identified in the text.