5% Down Payment, Conventional Loan is BACK (temporarily)!

by Irene Moustakas on February 16, 2010

A 5% down payment conventional loan is available again!  There are some heavy restrictions, so please read the following stipulations:

  • Conforming loan ONLY (Maximum loan amount: $417,000)
  • Purchase only (no refinances)
  • Single-family home or detached PUDs only (no condos or attached PUDs)
  • Must be your primary residence
  • 760 minimum FICO (the middle FICO of all borrowers)
  • 41% maximum Debt-to-Income ratio

Please note this is for California real estate.  If you do not fit into these guidelines, then FHA is most likely the way to go, which is more flexible with credit and qualifying requirements, although more expensive than a conventional loan.

I do not know how long this will last, but 5% down has not been available for a year.

{ 13 comments… read them below or add one }

Dawn Thomas February 17, 2010 at 7:56 am

This is excellent news–especially for first time home buyers, Irene! Let’s just hope that everyone realizes this offering could be very temporary in an effort to stimulate purchasing while interest rates are still really low. Thank you for sharing!


loansbyirene February 17, 2010 at 10:30 pm

Exactly! When the 5% down option was discontinued, my very first statement was that I was surprised it had lasted as long as it had. And here we are now, and, in all honesty, I’m surprised it’s available.

Thank you!


Hong September 13, 2010 at 12:43 am

Is the 5% still available??


loansbyirene September 13, 2010 at 7:21 am

Hi Hong, yes, it’s still available, but there are restrictions. Send me an email directly if you have particular questions in mind.


Whitney Johnson November 2, 2010 at 10:28 pm

Hi Irene,
we currently own a home with a FHA loan and are looking to move and buy a bigger house and keep our current home as a rental property. We would like to do a conventional loan and we need to come up with 5 percent. What type of downpayment may we use for this. If we take out a personal loan and keep it in our bank for more than two months may we use this money towards a downpayment?


loansbyirene November 3, 2010 at 8:14 am

Hi Whitney, if you buy a new home that will 1) be your primary residence, 2) is a single family home, 3) your middle FICO scores are above 740, 4) the loan amount is no more than $417,000, and 5) and you qualify with both housing obligations/payments counted against you, then yes, you can qualify for putting down just 5% on the new purchase. The caveat is that the lender has to believe the new purchase will truly be your primary home. Usually this means that it is generally bigger or valued more and is in a better neighborhood or school district (if you have children and if that applies), or if you’re moving for a job, then that should be immediately believable.

Let me know if there’s something in particular I can help you with. Please note this applies for the state of California and I am unaware of other states’ rules. Thanks! Irene


Alida Villa October 12, 2011 at 12:05 pm

My husband and I are purchasing are first home. However, we are extremely concern with our 5% conventional loan. I would like to know if you must have PMI insurance when you go with the 5% conventional loan? Or, is there a way in which you do not have to get this.



Irene Moustakas October 12, 2011 at 12:15 pm

Hi Alida, there are two ways of avoiding paying monthly PMI. The latter way is a “workaround”.
1. If you purchase a Homepath property (Fannie-Mae owned home). Check out my blog regarding this program, its requirements, and searching for Homepath properties here: http://loansbyirene.com/2010/08/05/excellent-financing-program-for-fannie-mae-owned-homes/
Interest rates on Homepath financing with either 3% or 5% down payment are much higher, but it’s a very attractive program considering you do not have to pay any monthly MI.
2. Instead of selecting “Borrower Paid Mortgage Insurance” where you pay the amount monthly, some lenders offer “Lender Paid Mortgage Insurance” where you can roll in a lump sum into the interest rate. From a cash flow and monthly payment perspective, electing for LPMI makes much more sense, and you don’t feel the sting as much, although the MI is still technically being paid for.


cynthia November 3, 2011 at 8:23 am

Hi Irene
I just wanted to know is the 5% down conventional loan still available in california????


Irene Moustakas November 3, 2011 at 9:29 am

Hi Cynthia, yes, it is. Please call or email me directly to go over your scenario and what questions you have. Thank you!


ERICK JUAREZ December 13, 2011 at 12:53 am

Can I still get into the .5% program?


Irene Moustakas December 13, 2011 at 9:10 am

Hi Erick, the program is for 5.0% down payment, not 0.5%. If you still fall into the guidelines that I listed in my blog post and are purchasing in California, then yes, it is still available. I can’t speak for other states. Let me know if you have any specific questions for your scenario. Thanks!


Steve December 15, 2011 at 6:42 am

Hello Irene,

Your blog is very informative, I really enjoy reading it.
I have couple of questions for you if you don’t mind;
My wife and I own two properties; The house that we currently live in, we purchased two years ago and our goal was to rent it out at the beginning of the year and purchase a second property in our desired neighborhood. Well, we did almost as planned. We found a Duplex in a neighborhood that we really liked for a great price, so we bought it. The size of the place was perfect for us but week after the closing we found out that we were expecting. With the addition of another member to our family, we would not have had enough space would we have moved into the duplex. We rented out both sides, have great tenants and the property is cash flowing great. My question is, can we still qualify for another primary residence mortgage in order to move to the area that we want to live in? We can find a tenant for our primary residence easily, but I am not sure how the rental property would be looked at and if it would work against us.


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