Conventional loans are the most widely used mortgage program in Richmond, Virginia — and one of the biggest misconceptions buyers carry into the process is that they must put 20% down to qualify. That myth costs many Richmond homebuyers months or even years of unnecessary saving.
The reality is that Fannie Mae and Freddie Mac guidelines allow conventional financing with as little as 3% down, and there are multiple strategic paths between 3% and 20% depending on your credit profile, income, and long-term goals.
This guide walks through seven distinct conventional loan down payment strategies available to Richmond-area buyers in 2026 — from the minimum-down entry point to the full 20% that eliminates private mortgage insurance (PMI). Each strategy includes a worked dollar example using Richmond city-wide median home price data, so you can see exactly how the numbers play out at the price points you’re actually shopping.
Whether you’re a first-time buyer, a repeat purchaser, or a veteran weighing conventional versus VA financing, understanding your down payment options puts you in control of your purchase timeline and monthly budget.
Duane Buziak, NMLS #1110647, has originated conventional loans across Richmond and the surrounding metro for over 15 years and holds access to hundreds of wholesale lenders to find the right program fit for each buyer’s situation. Start exploring your options with a NoTouch Credit Pull — no hard inquiry required to see where you stand.
Table of Contents
1. The 3% Down Conventional Loan: HomeReady and Home Possible
2. The 5% Down Conventional Strategy: No Income Caps Required
3. The 10% Down Strategy: Meaningful PMI Reduction Without Waiting for 20%
4. The 20% Down Strategy: PMI Elimination and Rate Tier Optimization
5. Gift Funds as a Down Payment Source
6. Down Payment Assistance Layered with Conventional Financing
7. Conventional vs. VA Loan Down Payment: When Veterans Should Compare Both
8. Richmond Down Payment Comparison Table
9. Frequently Asked Questions
10. Your Next Step
1. The 3% Down Conventional Loan: HomeReady and Home Possible
The Challenge It Solves
Saving a large down payment in a competitive housing market takes time — time that often works against buyers as home prices continue to move. For buyers with solid credit and steady income but limited cash reserves, the 3% down conventional loan is the fastest on-ramp to homeownership without stepping into FHA territory.
The Strategy Explained
Fannie Mae’s HomeReady and Freddie Mac’s Home Possible programs both allow a 3% minimum down payment on conventional financing. Income limits apply: borrowers generally must fall at or below 80% of the Area Median Income (AMI) for the property location. HomeReady carries a 620 minimum credit score; Home Possible typically requires 660 for most scenarios.
PMI is required at this LTV tier, but the key advantage over FHA is that conventional PMI is cancelable. Under the federal Homeowners Protection Act, you have the right to request PMI cancellation when your loan balance reaches 80% of the original purchase price — and servicers must automatically cancel at 78% LTV. FHA mortgage insurance premium (MIP) does not cancel for most buyers who put less than 10% down, which makes the long-term cost picture meaningfully different.
Implementation Steps
1. Confirm your household income falls at or below 80% AMI for Richmond city using the Fannie Mae or Freddie Mac AMI lookup tools at their respective program pages.
2. Pull your credit scores and target a minimum 620 (HomeReady) or 660 (Home Possible) before applying — a NoTouch Credit Pull with Duane Buziak lets you review your profile without a hard inquiry hitting your report.
3. Document your down payment source: personal savings, gift funds, or eligible DPA — all are permitted under these programs.
4. Request a full side-by-side comparison of HomeReady vs. Home Possible PMI pricing, as rates vary by lender and credit tier.
Worked Dollar Example
Using a Richmond city-wide median home price of approximately $375,000 (verify current figure at Virginia REALTORS before closing on a purchase decision):
3% Down: $11,250 down payment | $363,750 loan amount | PMI required (rate varies by credit profile — contact for a personalized quote).
Rate and payment examples are illustrative only and do not constitute a rate quote or commitment to lend.
Pro Tips
HomeReady allows non-occupant co-borrower income to qualify — useful if a parent or family member wants to help you get approved without gifting cash. Also, both programs offer reduced PMI pricing compared to standard conventional PMI at the same LTV, which is a meaningful cost advantage worth asking your loan officer to quantify.
2. The 5% Down Conventional Strategy: No Income Caps Required
The Challenge It Solves
Not every buyer qualifies under the income restrictions tied to HomeReady and Home Possible. Dual-income households, repeat buyers, and higher earners who still want to preserve cash often find themselves priced out of the 3% programs on income alone — even though they’re financially strong borrowers.
The Strategy Explained
Standard conventional guidelines from Fannie Mae allow a 5% minimum down payment with no income caps whatsoever. This opens the program to a significantly broader buyer pool. PMI is still required, but the LTV is lower at 95% versus 97%, which translates to slightly reduced PMI pricing and a smaller loan balance from day one.
Loan Level Price Adjustments (LLPAs) — the credit-score-based pricing grid that Fannie Mae and Freddie Mac apply — are also more favorable at 95% LTV than at 97%, meaning your interest rate and PMI cost are both incrementally better at 5% down compared to 3% down for the same borrower profile. Source: Fannie Mae LLPA Matrix.
Implementation Steps
1. Confirm your income does not need to meet AMI restrictions — at 5% down on a standard conventional loan, there are no income caps to navigate.
2. Target a minimum 620 credit score, though stronger scores (740+) unlock meaningfully better LLPA pricing at this LTV tier.
3. Source your 5% from personal savings, gift funds, or eligible down payment assistance — conventional guidelines are flexible on sourcing at this LTV for primary residences.
4. Ask your loan officer to model the monthly payment delta between 3% and 5% down, factoring in both PMI and principal difference, to confirm which entry point makes more financial sense for your timeline.
Worked Dollar Example
5% Down on $375,000: $18,750 down payment | $356,250 loan amount | PMI required (PMI varies by credit profile; contact for a personalized quote).
Pro Tips
If you’re a repeat buyer who sold a prior home and received proceeds, 5% down on a conventional loan preserves more of your equity proceeds as liquid reserves — which can be a smart liquidity decision depending on your next financial priorities. Keeping reserves high also strengthens your overall loan file.
3. The 10% Down Strategy: Meaningful PMI Reduction Without Waiting for 20%
The Challenge It Solves
Buyers who can reach 10% down often feel stuck between two poles: they’re not at 20% yet, so they assume PMI is unavoidable and expensive. What many don’t realize is that the jump from 5% to 10% down triggers a significant PMI pricing reduction — and opens the door to lender-paid PMI (LPMI) as a viable alternative structure.
The Strategy Explained
At 90% LTV (10% down), conventional PMI rates drop meaningfully compared to the 95% LTV tier. The exact savings depend on your credit score — borrowers with 740+ scores see the most dramatic PMI cost reductions at this LTV. Additionally, 10% down makes lender-paid PMI a realistic option: the lender absorbs the PMI cost in exchange for a slightly higher interest rate, eliminating the separate monthly PMI line item entirely.
Whether borrower-paid or lender-paid PMI is the better structure depends on how long you plan to hold the loan. LPMI is built into the rate permanently; borrower-paid PMI cancels at 80% LTV. A loan officer should model both scenarios across your expected holding period before you decide.
Implementation Steps
1. Calculate whether 10% down is achievable within your current savings timeline — for many buyers, the PMI savings justify accelerating savings by a few months rather than buying at 5% down.
2. Request PMI quotes at both 95% and 90% LTV from your loan officer to quantify the monthly savings.
3. Ask specifically about lender-paid PMI at 90% LTV — compare the rate increase against the PMI elimination to determine your break-even point.
4. Factor in the NoTouch Credit Pull to get a full credit picture before committing to a down payment tier, since PMI pricing is credit-score-sensitive.
Worked Dollar Example
10% Down on $375,000: $37,500 down payment | $337,500 loan amount | PMI required at reduced rate vs. 5% down tier (PMI varies by credit profile; contact for a personalized quote).
Pro Tips
The 10% down tier is often the sweet spot for buyers who want to minimize monthly carry without depleting reserves. Putting 10% down while keeping 3-6 months of reserves in the bank is frequently a stronger financial position than putting 15% down and arriving at closing cash-light.
4. The 20% Down Strategy: PMI Elimination and Rate Tier Optimization
The Challenge It Solves
For buyers who have the savings or equity to reach 20% down, the math changes fundamentally. PMI disappears from the payment entirely, and the loan-level pricing adjustments that Fannie Mae and Freddie Mac apply become most favorable — meaning the combination of no PMI and a better rate tier can produce a meaningfully lower monthly payment than any sub-20% scenario.
The Strategy Explained
At 80% LTV or lower, conventional loans carry no PMI requirement. This is the threshold that eliminates one of the most misunderstood costs in mortgage financing. Beyond PMI elimination, the LLPA pricing grid rewards 80% LTV borrowers with better rate adjustments compared to higher-LTV tiers — particularly for borrowers with credit scores in the 700-739 range who see the most pronounced LLPA improvement when crossing from 80.01% to 80% LTV.
Repeat purchasers rolling equity from a prior home sale are the most natural fit for this strategy. If your sale proceeds cover 20% of your next purchase price, you enter the new loan in the most cost-efficient conventional structure available.
Implementation Steps
1. Confirm your available equity or savings cover 20% of your target purchase price plus closing costs — avoid depleting all reserves to hit 20% down.
2. Request a full payment comparison across 10%, 15%, and 20% down scenarios, factoring in PMI costs at each tier, to confirm 20% is the optimal choice for your cash position.
3. Verify the 2026 conforming loan limit of $832,750 (source: FHFA.gov) — at 20% down, a purchase price up to approximately $1,040,937 remains within conforming loan territory, avoiding jumbo pricing.
4. Time your sale and purchase close dates carefully if rolling equity — a bridge strategy or simultaneous close may be needed.
Worked Dollar Example
20% Down on $375,000: $75,000 down payment | $300,000 loan amount | No PMI | Best available LLPA pricing tier.
Pro Tips
Don’t treat 20% down as a universal goal — it’s the right move when you have the funds without compromising reserves. Buyers who stretch to 20% and arrive at closing with no emergency fund are in a riskier financial position than buyers who put 10% down and maintain healthy cash reserves.
5. Gift Funds as a Down Payment Source
The Challenge It Solves
Many buyers have strong income, excellent credit, and a clear ability to carry a mortgage payment — but haven’t had years to accumulate a large savings balance. This is especially common for younger buyers, recent graduates, or buyers who redirected savings toward other financial priorities. Gift funds bridge the gap between earning power and saved cash.
The Strategy Explained
Fannie Mae’s selling guide (B3-4.3-04) explicitly permits 100% gift funds for primary residence purchases at any LTV on conventional loans. The gift must come from an eligible donor — typically a relative — and must be documented with a gift letter confirming no repayment is expected. The donor may also be asked to provide evidence that the funds were transferred from their account to yours.
This means a buyer putting 3%, 5%, 10%, or even 20% down can source the entire amount as a gift with no personal contribution required for a primary residence. The documentation requirements are straightforward when handled correctly from the start.
Implementation Steps
1. Identify your eligible gift donor — Fannie Mae defines eligible donors as relatives, domestic partners, fiancés, or certain other parties with a defined relationship to the borrower.
2. Prepare a gift letter that includes the donor’s name, relationship to borrower, amount gifted, property address, and a statement that no repayment is required — your loan officer will provide the exact template.
3. Document the transfer: the donor’s bank statement showing the withdrawal and your bank statement showing the deposit are typically required.
4. Avoid commingling gift funds with personal funds for an extended period before closing — keep the paper trail clean and direct.
Worked Dollar Example
3% Down Gift on $375,000: $11,250 gifted by eligible donor | $363,750 loan amount | Full gift sourcing permitted under Fannie Mae guidelines for primary residence | PMI required (varies by credit profile).
Pro Tips
Start the gift fund conversation early — ideally 60 days before closing. Seasoned funds (those sitting in your account for 60+ days) typically require less documentation than freshly transferred gifts. Your loan officer should walk you through the sourcing requirements specific to your loan scenario before any money moves.
6. Down Payment Assistance Layered with Conventional Financing
The Challenge It Solves
Even a 3% down payment can feel out of reach for buyers in high-cost-of-living situations or those rebuilding savings after a major life event. Virginia Housing (formerly VHDA) and other approved down payment assistance programs can be structured alongside a conventional first mortgage — reducing or eliminating the out-of-pocket down payment requirement for qualifying buyers.
The Strategy Explained
Virginia Housing offers down payment assistance options that can be layered with a conventional first mortgage for eligible first-time homebuyers. These programs typically come in the form of a second mortgage or grant, and eligibility is based on income limits, purchase price limits, and first-time buyer status (defined as not having owned a home in the past three years in most cases).
It’s important to understand that DPA programs are structured as separate financing layers — they are not stacked grant programs and do not involve double-counting assistance sources. Each layer has its own terms, and your loan officer must confirm that the combined financing structure meets Fannie Mae or Freddie Mac overlapping program requirements before proceeding.
Implementation Steps
1. Confirm first-time buyer eligibility — most DPA programs define this as no ownership interest in a primary residence within the past three years.
2. Check income and purchase price limits for Virginia Housing programs at virginiahousing.com — limits vary by household size and location.
3. Work with a loan officer who is approved to originate Virginia Housing-backed loans — not all lenders offer these programs, and approval requires specific lender certification.
4. Request a full payment disclosure showing the combined first mortgage payment, any second mortgage payment, and total monthly obligation before committing to the structure.
Worked Dollar Example
DPA-Assisted Purchase on $375,000: If a DPA program covers the 3% down payment requirement ($11,250), the buyer’s out-of-pocket cash requirement at closing shifts primarily to closing costs — which may be addressed through seller concessions or no-out-of-pocket closing options depending on the transaction structure. Loan amount: $363,750. PMI required (varies by credit profile).
Pro Tips
DPA programs often carry income limits that disqualify higher earners — but they are worth checking even if you think you might be over the threshold. Limits are updated periodically and vary by household size. A quick eligibility check costs nothing and takes minutes when you use a NoTouch Credit Pull to review your full financial picture without triggering a hard inquiry.
7. Conventional vs. VA Loan Down Payment: When Veterans Should Compare Both
The Challenge It Solves
Veterans eligible for VA financing have access to one of the most powerful mortgage benefits available: zero down payment with no PMI. But the existence of a zero-down option doesn’t automatically make it the right choice in every transaction. There are specific scenarios where conventional financing at 5-10% down may produce a lower total cost of ownership — and every veteran deserves a side-by-side comparison before deciding.
The Strategy Explained
The VA loan’s primary advantages are no down payment required and no PMI — ever. Source: VA.gov Housing Assistance. However, VA loans carry a funding fee (ranging from 1.25% to 3.3% of the loan amount depending on down payment and prior use), which is financed into the loan in most cases. Conventional loans have no funding fee but do require PMI below 80% LTV.
The scenarios where conventional may outperform VA include: veterans with strong credit and 10%+ saved (where conventional PMI cost is lower than the VA funding fee amortized over a short holding period), condo purchases where VA approval is difficult to obtain, or transactions where seller concession limits make VA less competitive. The Dare to Compare approach — modeling both programs side by side with real numbers — is the only way to know which option wins for a specific buyer in a specific transaction.
Implementation Steps
1. Confirm your VA eligibility and remaining entitlement — your Certificate of Eligibility (COE) is the starting point and can be obtained through VA.gov or your loan officer.
2. Request a full side-by-side comparison: VA zero-down with funding fee vs. conventional at 5% or 10% down with PMI — modeled across 5, 7, and 10-year holding periods.
3. Check condo project approval status if purchasing a condo — VA-approved condo lists are more restrictive than conventional, and a non-approved project may make conventional the only viable path.
4. Factor in the VA funding fee exemption if you have a service-connected disability rating of 10% or higher — this changes the math significantly in favor of VA in almost every scenario.
Comparison Table: VA Loan vs. Conventional Loan on $375,000 Purchase
| Feature | VA Loan (Zero Down) | Conventional (5% Down) | Conventional (10% Down) |
|---|---|---|---|
| Down Payment | $0 | $18,750 | $37,500 |
| Loan Amount | $375,000 | $356,250 | $337,500 |
| PMI Required | No | Yes (cancelable at 80% LTV) | Yes (cancelable at 80% LTV) |
| VA Funding Fee | 1.25%–3.3% of loan (financed) | None | None |
| Income Cap | None | None | None |
| Disability Exemption | Funding fee waived at 10%+ rating | N/A | N/A |
| Condo Flexibility | VA-approved projects only | Broader project eligibility | Broader project eligibility |
| Best For | Veterans preserving cash; disability-exempt borrowers | Veterans with savings; non-VA-approved condos | Veterans minimizing PMI; strong credit profiles |
Pro Tips
Veterans with a disability rating should always lead with VA — the funding fee waiver alone makes VA the clear winner in virtually every scenario. For veterans without a disability rating who have 10% or more saved, the break-even calculation between VA funding fee and conventional PMI is worth running carefully. A NoTouch Credit Pull gives your loan officer the full picture needed to model both programs accurately before you commit to either path.
Richmond Down Payment Comparison Table: All Seven Strategies at a Glance
| Strategy | Down Payment % | Down Payment ($375K) | Loan Amount | PMI Required | Income Cap | Best For |
|---|---|---|---|---|---|---|
| HomeReady / Home Possible | 3% | $11,250 | $363,750 | Yes (cancelable) | Yes (80% AMI) | First-time buyers with income limits |
| Standard Conventional | 5% | $18,750 | $356,250 | Yes (cancelable) | None | Broader buyer pool; no income restrictions |
| Standard Conventional | 10% | $37,500 | $337,500 | Yes, reduced rate (cancelable) | None | PMI minimization; LPMI candidates |
| Standard Conventional | 20% | $75,000 | $300,000 | No | None | Repeat buyers; equity rollovers |
| Gift Funds | 3–20% (gifted) | Varies | Varies | Depends on LTV | None | Strong earners with limited personal savings |
| DPA + Conventional | 0–3% out-of-pocket | Reduced/eliminated | $363,750 | Yes (cancelable) | Yes (program limits) | First-time buyers; qualifying income tiers |
| VA vs. Conventional Compare | 0% (VA) or 5–10% (Conv.) | $0 or $18,750–$37,500 | Varies | No (VA); Yes (Conv.) | None | Veterans modeling both programs |
All figures based on a $375,000 illustrative purchase price. Verify current Richmond city-wide median at Virginia REALTORS. Rate and payment examples are illustrative only and do not constitute a rate quote or commitment to lend.
Frequently Asked Questions: Conventional Loan Down Payment in Richmond, VA
1. What is the minimum down payment for a conventional loan in Richmond, VA?
The minimum down payment for a conventional loan in Richmond, VA is 3%, available through Fannie Mae HomeReady or Freddie Mac Home Possible for borrowers who meet the income eligibility requirements (80% of Area Median Income). Standard conventional loans require a minimum of 5% down with no income restrictions.
2. Can I put 3% down on a conventional loan in 2026?
Yes. In 2026, Fannie Mae HomeReady and Freddie Mac Home Possible both allow 3% down on conventional loans for primary residence purchases, subject to income limits and a minimum credit score of 620 (HomeReady) or 660 (Home Possible) in most scenarios.
3. What credit score do I need for a conventional loan with 3% down?
Fannie Mae HomeReady requires a minimum 620 credit score for a 3% down conventional loan. Freddie Mac Home Possible typically requires 660 for most scenarios. Higher credit scores reduce PMI costs and improve loan-level pricing adjustments, so targeting 680+ is advisable when possible.
4. How much is PMI on a conventional loan with 5% down?
PMI on a conventional loan with 5% down varies by credit score, lender, and loan amount — it is not a fixed rate. Borrowers with higher credit scores pay less. Rather than providing a range that may not reflect your specific profile, contact Duane Buziak for a personalized PMI quote based on your actual credit and loan scenario.
5. When can I cancel PMI on a conventional loan?
Under the federal Homeowners Protection Act, you can request PMI cancellation on a conventional loan when your loan balance reaches 80% of the original purchase price, provided you have a good payment history. Servicers are required to automatically cancel PMI when the balance reaches 78% LTV. Source: CFPB.gov.
6. Can gift money be used for a conventional loan down payment?
Yes. Fannie Mae guidelines permit 100% gift funds for the down payment on a primary residence conventional loan at any LTV. The gift must come from an eligible donor (typically a relative), be documented with a gift letter, and include evidence of the fund transfer. No personal contribution is required for primary residence purchases.
7. Is a conventional loan better than FHA for a first-time buyer in Richmond?
Conventional is often the stronger choice for first-time buyers with credit scores above 680 because PMI is cancelable, whereas FHA mortgage insurance premium (MIP) does not cancel for most buyers who put less than 10% down. For buyers with lower credit scores or higher debt-to-income ratios, FHA may offer more flexible qualifying terms. A side-by-side comparison is the only way to confirm which program wins for your specific profile.
8. How does conventional loan down payment compare to a VA loan for veterans in Richmond?
VA loans require zero down payment and carry no PMI — significant advantages for eligible veterans. However, VA loans include a funding fee (1.25%–3.3% of the loan amount, depending on use and down payment) that conventional loans do not have. Veterans with a service-connected disability rating of 10% or higher are exempt from the funding fee, making VA the clear choice in nearly every scenario. Veterans without a disability rating who have 10%+ saved should model both programs side by side before deciding.
Your Next Step: Match Your Down Payment Strategy to Your Financial Position
Choosing the right conventional loan down payment strategy in Richmond isn’t about hitting a single magic number. It’s about matching your savings position, monthly budget, credit profile, and long-term equity goals to the option that makes the most financial sense for your specific situation.
A buyer with strong credit and limited savings may thrive at 3% down with HomeReady. A repeat purchaser rolling equity from a prior sale may find 20% down eliminates PMI and optimizes their rate tier. Veterans should always model conventional against VA financing before deciding — the VA’s zero-down structure is a powerful benefit that deserves direct comparison, not an assumption.
The most important next step is a no-pressure conversation about your numbers. Duane Buziak’s NoTouch Credit Pull lets you explore your conventional loan options — including down payment scenarios across all seven strategies outlined here — without a hard inquiry on your credit report. It’s a complete picture with zero commitment.
From there, the Dare to Compare pricing challenge invites you to stack Duane’s wholesale pricing against any other lender’s offer on the same program. Bring your best quote and see how it holds up against access to hundreds of wholesale lenders.
Ready to run your numbers? Connect with Duane today for a personalized consultation and discover the mortgage solution tailored to your unique goals in the Richmond area. You can also reach Richmond Home Loans directly at (804) 212-8663 or visit richmondhomeloans.com/contact/ to get started.