Conventional loans: down payments, PMI, and what to compare

Do you need 20% down?

No. Certain eligible primary-home programs allow as little as 3% down. HomeReady is one example with income and other eligibility requirements. A second home, rental property, or different loan structure may require more. On a $350,000 purchase, 3% is $10,500 and 20% is $70,000; these are down-payment examples only, before closing costs and reserves.

What will the lender review?

Expect a review of credit history, documented qualifying income, monthly debts, available funds, and the property. Debt-to-income compares monthly debt payments with qualifying gross monthly income. There is no single approval promise based on a credit score alone. Ask which requirements apply to the particular program and whether education, income limits, or additional reserves are required.

How does PMI work?

Private mortgage insurance is commonly required with less than 20% down and protects the lender, not your home equity. Its cost depends on the loan and borrower. For many covered mortgages, you can request cancellation at 80% of original value subject to conditions; automatic termination generally occurs at the scheduled 78% point if you are current. Ask the servicer for your loan’s rules.

Compare the full payment

Ask for principal and interest, property taxes, homeowners insurance, mortgage insurance, and any association charges. Compare fixed versus adjustable rates and the length of the loan. Keeping more cash after closing can be useful, but a smaller down payment may increase the payment and total borrowing cost. Choose a balance that leaves room for maintenance and unexpected expenses.

Conventional or FHA?

Compare actual offers for the same purchase price and timing. A lower rate does not automatically mean a lower total cost. Review cash needed at closing, monthly insurance, how long insurance lasts, and the cost over the years you expect to keep the loan. FHA and conventional underwriting may treat the same borrower differently.

Prepare for your conversation

Write down your comfortable monthly payment, available savings, property plans, and timing. Ask which documents are needed for your income type and use the secure application portal for financial records. For a home purchase, leave room in the budget for maintenance and expenses beyond the mortgage.

Questions worth asking

• What could change my eligibility or costs before closing?
• What cash will I need at closing, and what should remain afterward?
• Which alternative would you compare with this loan, and why?