Who can put 3 percent down
A conventional purchase of a one-unit home you will live in can go to 97 percent loan-to-value.1 There are four ways in:
| Program | Who it is for | Income limit |
|---|---|---|
| Fannie Mae standard 97% | At least one borrower a first-time buyer | None |
| Fannie Mae HomeReady | First-time buyer not required | 80% of area median income |
| Freddie Mac Home Possible | First-time buyer not required | 80% of area median income |
| Freddie Mac HomeOne | At least one borrower a first-time buyer | None |
Sources for each row: Fannie Mae’s eligibility matrix and HomeReady guide, and Freddie Mac’s Home Possible and HomeOne program sheets.1,2,3,4
“First-time buyer” is broader than it sounds — it generally means you have not owned a home in the last three years, not that you have never owned one.
Where every buyer on HomeReady or Home Possible is a first-time buyer, a homeownership education course is required.2,3 It is short and online, and it is worth doing early so it is not the last item on the list the week of closing.
The waiver most buyers never hear about
Conventional pricing carries loan-level price adjustments: charges Fannie Mae adds for a lower credit score or a smaller down payment, which show up in your rate or your costs. At 3 percent down they are not small.
Fannie Mae waives every loan-level price adjustment on HomeReady loans, and on loans to first-time buyers whose qualifying income is at or below 100 percent of area median income — or 120 percent in high-cost areas.5
In much of Southern California, 120 percent of median is a solid household income. A lot of first-time buyers here qualify for this and are never told.
Three percent conventional, or 3.5 percent FHA?
The down payments are nearly the same. The difference is mortgage insurance. FHA charges an upfront premium and, at this down payment, an annual premium for the life of the loan. The conventional loan has no upfront premium, and its mortgage insurance comes off as you pay down the balance or the house appreciates.
Where FHA can still win is a lower credit score, where private mortgage insurance gets expensive and FHA’s premium does not change. With a solid score and a low down payment, the conventional loan is often the better deal, and the waiver above can widen the gap. We run both on your numbers — here is how that comparison works.
Sources
These references support the factual explanations above. Where this page states a preference rather than a fact, it says so — those are our editorial judgement, not a claim that any one channel always costs less.
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Conventional mortgage insurance, and how it endsUnlike FHA's, it is built to come off. There are three ways, and one kind that never does.Conforming, high-balance and jumboThe 2026 limits, and what actually changes as the loan gets bigger.Priced against your actual file
Mortgage insurance, loan-level adjustments and the loan limit all turn on your own numbers, and so does whether conventional or FHA comes out cheaper. Send us the basics and we’ll price both — no credit pull, and it commits you to nothing.