The idea that you need to put 20% down to get a conventional loan for a home mortgage is largely a relic of the past. The down payment can be a significant obstacle for many home buyers, especially anyone saving for their first home.

While there are still advantages to a higher down payment, Quicken Loans offers an option that allows both first-time and repeat home buyers to get into a new home with as little as 3% down and some that require as little as 5% down.

If you’re looking to buy a home, this could be a great option for you. Let’s go over the details.

3% Down Payments

This option allows home buyers to get into a home with as little as 3% down for a single-family home used as a primary residence.

You have to have a median FICO® credit score of 620 or higher. If you have a higher credit score, great. That’s one of the things that can help you obtain a more favorable interest rate.

In general, you want to keep your debt-to-income (DTI) ratio – which compares monthly revolving and installment debts against income – as low as possible in order to give yourself the opportunity to qualify for the most loan options. Every loan is different, but 43% is a good DTI guideline.

This loan option, offered as a conventional loan, requires you to have income that’s no greater than the area’s median (in most areas). If you’re in a low-income area, limits may not apply.

If we check and your income doesn’t match up with the requirements of this program, we can keep looking until we find another option for you.

Multi-Unit Properties

If you’re looking to get a multi-unit property to live in one unit and rent out the others, you can purchase a two-unit property with as little as 5% down. If you would like to purchase a 3- to 4-unit property, it will require a 20% down payment.

If you need to refinance an existing 3- to 4-unit home, you need to leave 20% equity in the home.

High-Balance Loans

The normal loan limit for a typical conventional loan is $453,100. If you live in certain high-cost areas of the country, it’s possible you’ll need more money than that to get into a home.

For those areas that have higher property values, you can start the home buying process with as little as a 5% down payment.

Conventional vs. FHA Loan Options

Let’s wrap up this article by talking about these options in relation to another popular low down payment option: the FHA loan. FHA loans require a slightly higher down payment of 3.5% versus the 3% you can get with a conventional loan.

FHA loans have their advantages. From a credit perspective, you can qualify for this loan through Quicken Loans with a median FICO Score as low as 580. With a higher credit score, you can qualify even if you have slightly more debt and a higher DTI ratio.

In addition to a lower down payment, conventional loans from Fannie Mae and Freddie Mac have other advantages. To start with, on an FHA loan, if you pay only the minimum down payment, mortgage insurance sticks around for the life of the loan. Whereas, on a conventional loan, mortgage insurance can come off once you reach 20% equity in your home (verified by reappraisal).

You can also avoid a monthly mortgage insurance payment altogether by taking a look at a lender-paid mortgage insurance (LPMI) alternative like PMI Advantage: You can make a full or partial pay off of your mortgage insurance policy at closing in order to secure a standard interest rate. On the other hand, you can choose to lock a slightly higher rate (compared to another loan with a monthly mortgage insurance payment) but avoid monthly premiums altogether. If you need a primer, here are the important things to know on conventional mortgage insurance.

If any of these loan options sound right for you, you can get started online with Rocket Mortgage® by Quicken Loans or give one of our Home Loan Experts a call at (800) 785-4788. If you have any questions, let us know in the comments below.

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This Post Has 10 Comments

  1. For Multi-Unit Properties with 3-4 units, is the 25% down payment required wherever you get your loan from or is that only required with quicken loans

    1. Good morning, Josh:

      This article is just slightly out of date. You can now get a 3-4 unit property with as little as 20% down with Quicken Loans. I’m going to go get that fixed right now. In the meantime, you can get started online or give one of our Home Loan Experts a call at (888) 980-6716. Have a great day!

    1. Hi Jay:

      If UBER is your sole income, you’ll need to provide documentation that you’ve been consistently working for UBER for two years via W2’s, pay stubs, bank statements, etc. However, because UBER is considered self-employed, not having a fixed schedule or income, your lender might also request your UBER 1099 tax returns in order to verify your income. I did some research on UBER and it looks like UBER rideshare earnings have deductions that might lower your taxable income significantly and might change the amount you can qualify for in a loan. I would suggest speaking with a Home Loan Expert at (888) 980-6716. They’ll be able to speak to your income situation and let you know what you’ll need to purchase a home. I hope this helps!

    1. Hi Jesse:

      You must have received one of our marketing emails.

      In terms of your question on how long it takes to close, it depends on whether you’re trying to purchase or refinance.. Purchases typically take a little bit longer because there are appraisals and inspections after you find the house, but we try to close within 30 days or less. For refinances, the entire process can be as short as a couple weeks in some cases.

      When it comes to self-employment, there are many different types of documentation you could provide, but basically, what we’re looking for is evidence of employment as well as evidence of income from tax returns and/or other forms of proof. This blog post should get you started, but if you have further questions about the types of documents that are acceptable, I recommend speaking with one of our Home Loan Experts at (888) 980-6716. Hope this helps!

  2. Recently I tried to buy a house for my daughter in Plainfield, Chicago. I didn’t complete the process after learning that there is a practice to consider the transaction as an investment after learning that I would not live in the property. For a loan considered an investment minimum down was 20%. That down was approximately $40,000.00.

    My credit rating exceeds 740 and income over $145,000.00. Clarify if the information is the practice or just that financial institution approach to it.

    1. Hi José:

      I can tell you this is common practice. If you live there, you can get a home with as little as 3% down. If you’re not living there, it’s considered an investment property. The minimum down payment for us would be 15% for a one-unit property. If you have any interest, you can contact one of our Home Loan Experts at (888) 980-6716. Sorry I can’t give you better news.

    1. Hi Jeff:

      You’ve come to the right place! You can either get started online with a mortgage approval from Rocket Mortgage or one of our Home Loan Experts would be happy to take care of you at (888) 980-6716. Either way you go, you’ll be able to take advantage of our Power Buyer Process™. You’ll get a Verified Approval by sharing your information with us in order to check your credit as well as get your income and asset information. Once you’ve had this verified, you’ll also be able to take advantage of our RateShield Approval™ which allows you to lock your rate for 90 days while you shop for a home. If rates are higher by the time you find a home, you get your original rate. If they’re lower, you get the lower rate and you’re locked in until you close. Hope this helps!

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