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Informational only. Not mortgage advice. Consult an NMLS-licensed loan officer for personalised guidance.
3 Percent Down Mortgage Pre-Approval 2026
Three conventional programs let qualified borrowers buy with 3 percent down: Conventional 97 (Fannie), HomeReady (Fannie), and Home Possible (Freddie). All three require 620+ FICO and price PMI based on a combination of credit, LTV, and AMI eligibility. This page maps which program fits which borrower, how the PMI math compares to FHA 3.5 percent down, and what the cash-to-close actually looks like.
All figures as of May 2026. Program details per Fannie Mae Selling Guide and Freddie Mac Single-Family Guide.
Quick Answer at 3% Down
On a $300K home: $9,000 down + ~$7,500 closing
Monthly PITI (680 FICO, HomeReady): ~$2,520
Assumes 6.85% rate, 1.1% property tax, $1,500/yr insurance, 0.85% annual PMI. As of May 2026.
The Three 3% Down Programs
Conventional 97 (Fannie Mae)
- Down payment: 3 percent of purchase price
- Credit minimum: 620 FICO
- Income cap: None
- First-time-buyer requirement: At least one borrower must not have owned a principal residence in past 3 years
- Property: 1-unit only, owner-occupied
- PMI: ~1.00-1.25% annual at 680, ~0.62% at 740
- LLPA: Standard credit-and-LTV pricing applies
HomeReady (Fannie Mae)
- Down payment: 3 percent of purchase price
- Credit minimum: 620 FICO
- Income cap: 80 percent of area median income (no cap in low-income census tracts)
- First-time-buyer requirement: None
- Property: 1-unit, owner-occupied (manufactured homes allowed with separate criteria)
- PMI: ~0.85% annual at 680, ~0.55% at 740 (cheaper than Conv 97)
- LLPA: Area-median LLPA waived; total LLPA capped at 1.500 points
- Other: Allows boarder income, accessory unit income, non-occupant co-borrower
Home Possible (Freddie Mac)
- Down payment: 3 percent of purchase price (5 percent on multi-unit)
- Credit minimum: 620 FICO
- Income cap: 80 percent of area median income
- First-time-buyer requirement: None
- Property: 1-4 unit owner-occupied (multi-unit at 5 percent down)
- PMI: Same as HomeReady pricing in practice
- LLPA: Similar treatment to HomeReady
- Other: Sweat equity allowed up to full down payment requirement
3 Percent Conventional vs 3.5 Percent FHA
$300,000 home, 680 FICO, 30-year fixed. PMI / MIP differences shown across the loan life.
| Metric | Conv 97 (3% down) | HomeReady (3% down) | FHA (3.5% down) |
|---|---|---|---|
| Down payment | $9,000 | $9,000 | $10,500 |
| Loan amount | $291,000 | $291,000 | $294,581 (incl 1.75% UFMIP) |
| Rate (~) | 6.85% | 6.85% | 6.50% |
| Monthly P&I | $1,907 | $1,907 | $1,861 |
| Monthly PMI/MIP | $245 | $206 | $135 |
| Property tax | $275 | $275 | $275 |
| Insurance | $125 | $125 | $125 |
| Total PITI | $2,552 | $2,513 | $2,396 |
| 10-yr PMI/MIP cost | $23,400 | $19,700 | $15,300+$5,156 (UFMIP) |
| PMI/MIP cancels? | Yes (78% LTV ~yr 11) | Yes (78% LTV ~yr 11) | No (stays for life) |
FHA wins on month-1 payment but loses on 10-year and lifetime cost because MIP never cancels. The breakeven point is around year 7-8.
The decision is largely a credit and AMI question. Below 680 FICO, FHA wins on monthly payment in early years. Above 680 with HomeReady-eligible income, HomeReady wins. Above 700 with no income cap, Conventional 97 is competitive with HomeReady and beats FHA decisively.
Cash Needed to Close at 3 Percent Down
| Home Price | 3% Down | Est. Closing Costs | Total Cash |
|---|---|---|---|
| $200,000 | $6,000 | $5,000-$6,000 | $11,000-$12,000 |
| $300,000 | $9,000 | $7,000-$9,000 | $16,000-$18,000 |
| $400,000 | $12,000 | $9,000-$12,000 | $21,000-$24,000 |
| $500,000 | $15,000 | $11,000-$15,000 | $26,000-$30,000 |
| $600,000 | $18,000 | $13,000-$18,000 | $31,000-$36,000 |
Closing costs include lender origination, title insurance, escrow deposit, recording fees, and pre-paid interest. Seller concessions (up to 3 percent of purchase price on 95.01-100% LTV per Fannie Selling Guide) can offset most of these.
Layering Down-Payment Assistance with 3% Down Conventional
One of the strongest features of HomeReady and Home Possible: down payment and closing costs can come entirely from grants, second-mortgage assistance, gift funds, or sweat equity. The borrower minimum contribution is zero on 1-unit primary residence purchases under both programs.
State Housing Finance Agency (HFA) programs routinely stack with HomeReady or Home Possible. Examples that work well: CalHFA MyHome (forgivable second mortgage covering 3-3.5 percent of purchase price), TSAHC Home Sweet Texas (down payment grant up to 5 percent), MassHousing DPA (forgivable up to $25,000 in eligible counties), and SONYMA Down Payment Assistance (up to $15,000 forgivable second).
The HUD-approved housing counsellor directory is the best free starting point for navigating state assistance. Most HFA programs require a HUD-certified first-time-buyer course (free or under $100, completes in 4-8 hours).
Frequently Asked Questions
Can I really get a conventional mortgage with 3 percent down in 2026?
Yes. Three Fannie Mae and Freddie Mac products allow 3 percent down: Conventional 97 (Fannie Mae, no income cap, first-time buyer required for at least one borrower), HomeReady (Fannie Mae, income at or below 80 percent of area median), and Home Possible (Freddie Mac, income at or below 80 percent of AMI). All three require 620 minimum FICO, full documentation, and PMI until the loan amortises to 78 percent of original value.
What is the difference between Conventional 97 and HomeReady?
Conventional 97 has no income cap but at least one borrower must be a first-time homebuyer (defined as someone who has not owned a principal residence in the past three years). HomeReady caps borrower income at 80 percent of area median for the property location and does not require first-time-buyer status. HomeReady prices PMI lower (around 0.85 percent vs 1.10-1.25 percent on Conventional 97 at the same FICO) and waives the area-median LLPA. If you fit the AMI cap, HomeReady is the cheaper choice.
How does 3% down conventional compare to FHA 3.5% down?
At 680+ FICO, 3% conventional with HomeReady or Conventional 97 usually beats FHA on monthly cost despite the 0.5% higher down payment. Conventional PMI cancels at 78 percent LTV through amortisation (no manual request needed), while FHA MIP stays for the life of the loan when you put less than 10 percent down. The lifetime advantage of conventional is typically $15,000-$25,000 over 10 years. Below 680 FICO, FHA at 3.5% wins on monthly payment but loses on lifetime cost.
How much cash do I actually need at 3 percent down?
On a $300,000 home, 3 percent down is $9,000. Add closing costs (typically 2-3 percent, or $6,000-$9,000), and the total cash needed is around $15,000-$18,000. Conventional 97 and HomeReady both allow the entire down payment and closing costs to come from gifts or grants, so a borrower with no savings but family support can sometimes close with $500-$1,000 of their own funds.
What is area median income (AMI) and how do I check mine?
AMI is calculated annually by the US Department of Housing and Urban Development at the metropolitan-statistical-area level. The Fannie Mae HomeReady eligibility lookup tool and the Freddie Mac Home Possible Income & Property Eligibility tool both accept a property address and return the applicable AMI thresholds. The 80 percent of AMI cap is what matters for HomeReady and Home Possible. Some low-income census tracts waive the AMI cap entirely.
What PMI will I pay on 3% down conventional?
PMI at 97 percent LTV is the most expensive PMI tier. On standard Conventional 97 at 680 FICO, expect annual PMI of roughly 1.05 percent. On HomeReady at 80 percent AMI and 680 FICO, expect roughly 0.85 percent. At 740 FICO the same loans price at 0.62 percent and 0.55 percent respectively. PMI cancels automatically at 78 percent LTV (around year 11 on a 30-year), or you can request cancellation at 80 percent LTV with a documented appraisal.
Can I use 3% down for a condo or 2-4 unit property?
Condos yes (with the project warranted by Fannie Mae or Freddie Mac, which takes a separate review process). 2-4 unit owner-occupied: HomeReady allows 3 percent down on 1-unit only; multi-unit requires 15 percent down minimum. Conventional 97 also restricts to 1-unit. For 2-4 unit purchases with low down payment, FHA at 3.5 percent is usually the better option, with FHA self-sufficiency rules applying to 3-4 unit purchases.