A conventional loan can put a city of Richmond home within reach with as little as 3% down. But conventional loan down payment requirements are not a one-number rule. Your minimum depends on whether you are a first-time buyer, how the property will be used, your credit profile, and how much mortgage insurance makes sense for your payment strategy.
For a buyer who wants program clarity before making an offer, the real question is not simply, “Can I put 3% down?” It is whether putting 3%, 5%, 10%, or 20% down creates the strongest combination of monthly payment, cash reserves, and long-term flexibility.
Table of Contents
- What conventional down payments really require
- How 3%, 5%, 10%, and 20% down compare
- A worked Richmond purchase example
- Conventional versus FHA financing
- Where down payment funds can come from
- Credit, reserves, condos, and investment properties
- Eight common questions
What are conventional loan down payment requirements?
For many owner-occupied purchases, the minimum conventional down payment is 3% for eligible first-time buyers. A first-time buyer generally means someone who has not owned a principal residence in the prior three years. Buyers who do not meet that definition can often use 5% down for a primary residence, assuming the file meets the lender’s credit, debt-to-income, and property standards.
Twenty percent down is not required. It is simply the point at which private mortgage insurance, commonly called PMI, is usually no longer required. That distinction matters. Waiting to save 20% can reduce your monthly payment, but it can also mean delaying a purchase while prices or rates change.
For Richmond buyers, the 2026 conforming loan limit is $832,750 for a one-unit property in the city. Source: published 2026 conforming loan-limit data for Richmond city. A purchase above that threshold may move into jumbo financing, where down payment, reserve, and underwriting rules can differ.
The practical down payment tiers
At 3% down, you preserve the most cash but generally carry the highest PMI cost. At 5% down, PMI can improve and the file may be more broadly eligible. At 10% down, the payment often becomes more comfortable while you still retain meaningful liquidity. At 20% down, PMI is typically eliminated, but tying up that much cash is not automatically the best decision.
A strong offer needs more than a down payment. You may also need funds for closing costs, prepaid taxes and insurance, inspection items, appraisal gaps if applicable, and post-closing reserves. The right number is the one that lets you close confidently without draining the savings you need after move-in.
A worked Richmond conventional loan example
Assume a city of Richmond buyer is purchasing a $350,000 primary residence with 5% down. The down payment is $17,500, creating a $332,500 loan amount. Using an illustrative 30-year fixed rate of 6.75%, the principal-and-interest payment is approximately $2,157.26 per month.
Because the buyer puts down less than 20%, assume PMI of 0.55% annually. That equals $1,828.75 per year, or $152.40 per month. The combined principal, interest, and PMI payment is therefore $2,309.66 monthly, before property taxes, homeowners insurance, and any HOA dues.
Now compare that with 20% down on the same $350,000 purchase. The down payment would be $70,000, the loan amount would be $280,000, and principal and interest at the same illustrative rate would be approximately $1,816.63 monthly. The buyer saves about $340.63 in principal and interest plus $152.40 in PMI each month, or $493.03 monthly.
Over five years, that payment difference equals $29,581.80 in cash-flow impact: $493.03 multiplied by 60 months. The trade-off is that the 20% down option requires an additional $52,500 at closing. This is why down payment strategy is a planning decision, not a contest to reach a certain percentage. Rates, PMI pricing, seller concessions, and your reserve position can change the answer.
Duane Buziak, NMLS #1110647
Conventional versus FHA: which fits your down payment?
FHA financing can be valuable for a buyer with a lower credit score, a higher debt ratio, or a need for a more forgiving approval path. Conventional financing often becomes more attractive when credit is stronger and the buyer wants PMI that can eventually be removed.
| Feature | Conventional Loan | FHA Loan |
|---|---|---|
| Minimum down payment | As low as 3% for eligible first-time buyers; often 5% otherwise | 3.5% for eligible borrowers |
| Credit profile | Typically rewards stronger credit with better PMI pricing | Can be more flexible for lower credit profiles |
| Mortgage insurance | PMI is generally removable once required equity and servicing rules are met | Includes upfront and monthly mortgage insurance requirements |
| Property use | Primary homes, second homes, and investment properties may qualify | Primarily owner-occupied principal residences |
| Seller concessions | Allowed limits vary by down payment and occupancy | Often allows more room for permitted seller-paid costs |
| Condo review | Project review standards apply and can be detailed | Project eligibility rules can be more restrictive in some cases |
A buyer with excellent credit may find that 5% down conventional financing produces lower monthly mortgage insurance than FHA. A buyer rebuilding credit may find FHA is the clearer path. Veterans should also compare VA home loans in Richmond Virginia, since eligible VA buyers can often finance with no down payment and no monthly mortgage insurance.
Where your conventional down payment can come from
Down payment funds do not always have to come only from a checking account. Savings, proceeds from selling another property, vested investments, retirement-account funds where permitted, and properly documented gift funds can all be possible sources.
The key is documentation. Large deposits that cannot be sourced can delay underwriting, even when the money is legitimate. If a family member plans to help, establish the gift structure early. A documented gift letter and a clean transfer trail are far easier than trying to explain a last-minute deposit after you are under contract.
Seller-paid closing costs can also preserve your cash. They do not replace the required down payment, but a negotiated credit may cover eligible closing expenses and prepaids. That can let you keep more funds in reserve while still making the down payment that best supports approval and payment goals.
Credit, property type, and occupancy change the answer
The advertised minimum is not always the best available option. Conventional underwriting looks at the full file: credit score, debt-to-income ratio, income stability, assets, loan size, occupancy, and property type. A 3% down primary-residence loan may be available, while a second home, investment property, or certain condo transaction may require more money down.
Condo buyers should avoid assuming that the unit alone determines approval. The association’s budget, insurance, litigation status, owner-occupancy ratio, and project eligibility can affect the financing path. A condo mortgage Richmond VA buyer should get the project review moving early, especially when there is a tight contract deadline.
Self-employed and nontraditional-income buyers have another layer to consider. The down payment may be available, but qualifying income must be documented in a way that supports the loan. Tax returns, business statements, and asset history should be reviewed before an offer rather than after one is accepted.
A NoTouch Credit Pull soft-pull pre-approval can help you evaluate conventional loan Richmond VA options without starting with a hard credit inquiry. That gives you a practical starting point for comparing a low-down-payment plan against a larger down payment and lower PMI.
Frequently Asked Questions
Can I get a conventional loan with 3% down?
Yes. Eligible first-time buyers purchasing a primary residence may qualify for 3% down, subject to credit, income, debt, and property requirements.
Do conventional loans always require 20% down?
No. Twenty percent down is usually the threshold for avoiding PMI, not the minimum required down payment.
Is 5% down better than 3% down?
It can be. Five percent down may lower PMI and improve approval options, but the better choice depends on your cash reserves and total payment.
Can gift funds be used for a conventional down payment?
Often, yes. The donor, transfer, and gift letter must be documented according to loan guidelines.
Can seller credits cover my down payment?
No. Seller credits can generally cover eligible closing costs and prepaids, but not the buyer’s required minimum down payment.
When does conventional PMI go away?
PMI can generally be canceled or automatically terminated after specific equity and payment-history requirements are met. The timing depends on your loan terms and servicing rules.
Are investment properties eligible for 3% down?
No. Investment-property conventional financing generally requires a larger down payment than a primary residence.
Does a larger down payment guarantee a lower interest rate?
Not always. A larger down payment can improve pricing, but credit score, loan type, occupancy, and overall risk profile also affect the rate.
The best down payment is the one that gets your offer accepted, protects your reserves, and keeps the payment aligned with your plans for the home. Start with the program, run the real numbers, and let the percentage follow the strategy.
Legal disclaimer: This article is for educational purposes only and is not a loan commitment, approval, or guarantee of financing. Loan programs, rates, mortgage insurance, credit standards, property requirements, and eligibility guidelines may change. Payment examples are illustrative and exclude taxes, insurance, HOA dues, and other possible costs. Consult a licensed mortgage professional for a review of your specific situation.
Duane Buziak, Mortgage Maestro | NMLS: 1110647 | Licensed in VA · FL · TN · GA | UWM PRO ELITE 2025 | UWM Top 20 Purchase LO Virgi