Fannie Mae’s conventional 97 and HomeReady mortgage programs offer financing with down payments as low as 3%, plus you can use down payment assistance.
Jump to insightFreddie Mac’s conventional HomePossible and HomeOne programs also allow people to put only 3% down on a home purchase.
Jump to insightIn addition, the FHA, USDA and VA all offer government-backed loans featuring affordable down payments as low as 0% to 3.5%.
Jump to insight3% down mortgage programs
A 3% down mortgage simply means that instead of paying 10%, 20% or more upfront, you only need to contribute 3% of the purchase price as a down payment. This makes buying a home more accessible for people who may not have significant savings, though it often comes with requirements like mortgage insurance or homeownership education.
There are several types of mortgage programs that make it possible to buy a home with just 3% down. These options include conventional loans from Fannie Mae and Freddie Mac. Understanding the differences between these programs can help you decide which one best fits your financial situation and long-term homeownership goals.
Conventional 97 loan
A standard conventional 97 loan is offered by Fannie Mae and is intended to make it easier for borrowers to qualify for financing with as little as 3% down. To use the program, at least one of the borrowers must be a first-time homebuyer. Unlike many other low-down-payment loans, you don’t need a low income to be eligible for this program.
Conventional 97 loans work similarly to standard conventional loans. The interest rate you’ll pay is fixed, as it would be if you made a larger down payment. You’ll also be required to pay for mortgage insurance. However, there are a few extra criteria.
In situations where all the borrowers who will occupy the home are first-time homebuyers, at least one of the borrowers must complete homeownership education. This can be done by completing Fannie Mae’s HomeView training. This training is meant to help ensure these borrowers are prepared to manage their new mortgage.
This low-down-payment program is available for fixed-rate mortgages with repayment terms of up to 30 years. As an added benefit, if you’re required to have mortgage reserves (aka, cash reserves) to qualify for the loan, these reserves can be gifted to you. You can also get help from third parties to cover your down payment and closing costs.
You can apply for this loan with mortgage lenders that offer conventional loans using the same process as any other loan. This includes submitting an application and providing necessary documents (e.g., tax returns, income verification and bank statements) to your lender.
Pros
- Down payment assistance is allowed
- Mortgage reserve funds can be gifted
- You don’t need to be low-income to qualify
Cons
- Homeownership education is required
- At least one borrower must be a first-time homebuyer
- Mortgage insurance is required
HomeReady
The HomeReady mortgage is another loan offered by Fannie Mae that allows borrowers to put as little as 3% down. Unlike Fannie Mae’s conventional 97 program, the HomeReady program isn’t available only to first-time homebuyers. However, if all borrowers occupying the property are first-time homebuyers, at least one must complete homeownership education.
For you to be eligible for a HomeReady mortgage, your income cannot exceed 80% of the area median income (AMI) where you live. You can use Fannie Mae’s AMI Lookup Tool to see the income requirements for your area.
Additionally, risk-based pricing adjustments used on standard conventional loans don’t apply to this type of loan. Lenders typically use these pricing adjustments to apply higher rates to riskier loans (e.g., when the loan-to-value ratio is higher). This means you may be able to get a better rate on a HomeReady loan than you could otherwise.
Besides these benefits, mortgage insurance requirements are reduced for loans with loan-to-value (LTV) ratios of 90.01% to 97%. (This equates to equity of 3% to less than 10%.) In contrast, there’s no reduction to the mortgage insurance requirements for conventional 97 loans. So, a HomeReady loan may cost less if you’re eligible for it.
You can apply for this loan with mortgage lenders offering conventional Fannie Mae loans using the same application process as you would for any other mortgage.
Pros
- Mortgage insurance coverage is reduced for loans with low down payments (3% to less than 10%)
- You may receive better pricing with this loan than with a standard 3% down conventional loan
Cons
- You must meet low-income eligibility criteria
- Homeownership education is required if all occupying borrowers are first-time homebuyers
Home Possible
The Home Possible is a conventional loan from Freddie Mac that offers low-income borrowers a 3% down-payment mortgage. Freddie Mac has a tool you can use to see if you meet its low-income eligibility requirements based on the home's location.
Unlike some 3% down-payment loans, you don’t need to be a first-time homebuyer to be eligible for this loan. Plus, even if you already have a loan on another residential property, you may be able to get a Home Possible loan.
Additionally, down payments for this loan don’t need to come from cash you’ve saved. You can also use employer-assistance plans, gifts from family, other loans and even sweat equity from improvements you make to the home before the loan closes.
But remember that if your down payment is less than 20%, you’ll need to pay for mortgage insurance with this type of loan. Plus, if all borrowers are first-time homebuyers or you’ve qualified for the loan using nontraditional credit references, you must complete homeownership education before getting the loan.
You can apply for this type of loan with lenders offering conventional Freddie Mac loans just like you would for any other type of mortgage.
Pros
- You don’t have to be a first-time homebuyer to qualify
- Your down payment can come from gifts, help from third parties, loans and even sweat equity
- You can get this type of loan even if you have a mortgage on another residential property
Cons
- Only low-income borrowers are eligible
- Mortgage insurance is required for down payments of less than 20%
- Homeownership education is required for some borrowers
HomeOne
The HomeOne mortgage is another conventional Freddie Mac loan that offers a low 3% down payment to qualified first-time homebuyers. You don’t need to meet any income requirements to qualify for this loan. It’s open to any borrowers needing a low-down-payment mortgage option.
However, to be eligible, you can’t have owned a residential home during the three years preceding the purchase of the home you’re financing. All borrowers must also plan to live in the financed home as their primary residence.
Like many other 3% down-payment loans, if you and your co-borrowers are first-time homebuyers, you’ll need to complete homeownership education before you get the loan. Plus, you must pay mortgage insurance if your down payment or equity is less than 20%.
If you don’t have enough cash for the down payment, you may be able to use an Affordable Second loan to help fund the down payment and closing costs. This is a loan you get in addition to your mortgage from eligible credit unions or community development financial institutions (CDFIs).
You can apply for a HomeOne mortgage through lenders that offer conventional Freddie Mac loans just like you would for any other conventional loan.
Pros
- You don’t need to have a low income to use it
- You can use this loan program even if you’ve owned a home in the past
- Affordable Second loans may be used for the down payment and closing costs
Cons
- All borrowers must live in the home as their primary residence
- You can’t have owned a residential property in the previous three years to be eligible for this loan
- Mortgage insurance is required for low down payments
Other options for a low down payment loan
In addition to low-down-payment conventional loans, you might consider getting a government-backed loan. Some of the most common examples of these loans include FHA, USDA and VA loans.
FHA loans
Current homeowners and prospective buyers of residential properties are eligible for FHA loans. You can use FHA loans for various purposes, such as buying a home, refinancing a loan or renovating your home.
FHA loans feature down payments as low as 3.5%. Since a government guarantee backs the loan, qualifying for this type of loan is easier than a conventional loan. You may be able to qualify with a credit score as low as 580 with a 3.5% down payment. In contrast, you may need a credit score of at least 620 to qualify for a conventional loan.
» COMPARE: Best FHA loan lenders
USDA loans
You can see if you meet the USDA’s income requirements and if your area is considered rural by using the USDA’s online eligibility tool. With USDA loans, you typically don’t need a down payment. This can be an excellent option for those who can’t afford to make a standard down payment and live in a rural area.
» COMPARE: Best USDA lenders
VA loans
If you’re eligible for a VA loan, you may not need to make a down payment. This makes VA loans an exceptionally affordable option.
» COMPARE: Best VA loan lenders
How to qualify for 3% down mortgage programs
Qualifying for a 3% down mortgage involves meeting specific criteria set by lenders and the mortgage program you are applying for. These qualifications help ensure you are financially ready to take on a mortgage and can manage the ongoing costs of homeownership.
Typical requirements include:
- Credit score: Most programs require a minimum credit score of 620, though some lenders may have stricter requirements depending on your financial situation.
- Income stability: You need to demonstrate a steady source of income to show you can consistently make mortgage payments.
- Debt-to-income ratio: Lenders will review your debt-to-income (DTI) ratio to confirm you can handle the mortgage along with other debts.
- Primary residence: The property must usually be your primary residence to qualify for these low-down-payment programs.
- Homeownership education: Many first-time homebuyer programs require completion of an approved homeownership education course to ensure you understand the responsibilities of owning a home.
Should you put 3% down?
Ultimately, "The amount of money you should spend on a down payment depends on your situation,” said Ashley Moore, community lending manager with Chase Home Lending. Some factors to consider when determining your down payment size include your cash reserves, household income and debt-to-income (DTI) ratio.
If the only thing deterring you from buying a home is not having a big enough down payment, you shouldn’t let that stop you. Moore explained that this is especially true if you have sufficient household income — one of the approval criteria you’ll need to meet.
When qualifying you for a mortgage, lenders consider the size of the down payment, your job history and your DTI ratio. Most lenders want a DTI ratio of no more than 36% to 43%, but they may allow DTIs as high as 50%. If you can easily afford the mortgage payments with a smaller down payment, making a low down payment shouldn’t hold you back.
That said, you may only want to make a small down payment if doing so will not deplete your savings, Moore said. Not only is it wise to have savings in case of an emergency, but many lenders require you to have savings you can access if needed (otherwise known as cash reserves or mortgage reserves).
As you evaluate these factors, remember that you’ll pay more interest over time if you make a smaller down payment. For example, consider these mortgage costs for a home costing $300,000 with a 30-year term and a fixed interest rate of 7% with three different down payments:
| 3% down payment | 10% down payment | 20% down payment | |
|---|---|---|---|
| Cost of the home | $300,000 | $300,000 | $300,000 |
| Down payment | $9,000 | $30,000 | $60,000 |
| Mortgage amount | $291,000 | $270,000 | $240,000 |
| Monthly P&I payment | $1,936 | $1,796 | $1,597 |
| Total interest cost | $405,971 | $376,674 | $334,821 |
As you can see, your monthly principal and interest (P&I) payment would be $1,936 with a 3% down payment versus $1,597 with a 20% down payment. Plus, you would pay $405,971 in total interest costs over the 30-year mortgage term with a 3% down payment versus only $334,821 in total interest costs with a 20% down payment.
FAQ
What credit score is needed for a 3% down mortgage?
A credit score of around 620 or higher is generally needed for a 3% down mortgage. However, specific requirements may vary depending on the lender and other factors. For example, your lender may require a better credit score if you have a high DTI ratio or low mortgage reserves.
Can you buy a vacation home with 3% down?
No, it's generally not possible to buy a vacation home with only 3% down. Most lenders require higher down payments for second homes or investment properties. A down payment of 10% is commonly needed for these types of properties.
Can you get a jumbo loan with 3% down?
You’re unlikely to get a jumbo loan with only a 3% down payment. Some lenders may offer jumbo loans with down payments as low as 10%. However, jumbo loans typically require larger down payments, often around 20% or more.
Are there mortgages with 0% down?
Yes, some lenders offer mortgages with 0% down payment options, particularly for certain government-backed loan programs or first-time-homebuyer initiatives. For example, you may be able to get a VA loan with no down payment. However, eligibility criteria and terms may vary.
Bottom line
Various conventional mortgage programs offer 3% down-payment options, including Fannie Mae's Conventional 97 and HomeReady programs and Freddie Mac's HomePossible and HomeOne programs. Government-backed loans also offer affordable down payment options.
Whether you should consider making a 3% down payment depends on your individual circumstances, such as your cash reserves, household income and DTI ratio. Before making a decision, remember that while a smaller down payment may be easier to afford, it means higher total interest costs over the life of the loan.
Article sources
ConsumerAffairs writers primarily rely on government data, industry experts and original research from other reputable publications to inform their work. Specific sources for this article include:
- Fannie Mae, “97% Loan to Value Options.” Accessed Sept. 9, 2025.
- Fannie Mae, “HomeReady Mortgage.” Accessed Sept. 9, 2025.
- Freddie Mac, “Affordable Seconds.” Accessed Sept. 9, 2025.
- FreddieMac, “HomeOne.” Accessed Sept. 9, 2025.
- Freddie Mac, “Your Guide to the Home Possible Mortgage.” Accessed Sept. 9, 2025.
- U.S. Department of Agriculture - Rural Development, “Single Family Housing Direct Home Loans.” Accessed Sept. 9, 2025.
- U.S. Department of Housing and Urban Development, “Single Family Mortgage Programs.” Accessed Sept. 9, 2025.
- U.S. Department of Veterans Affairs, “VA Funding Fee and Loan Closing Costs.” Accessed Sept. 9, 2025.
- U.S. Department of Veterans Affairs, “VA Housing Assistance.” Accessed Sept. 9, 2025.
