Low-down-payment loans: 0%, 3%, 3.5%, and 5% options compared
By Keith Lopez Mortgage Loan Originator · NMLS #2814077 Reviewed by Keith Lopez
Quick answer
What low-down-payment loan options can Carolina buyers use?
Carolina buyers commonly compare VA or USDA at $0 down when eligible, conventional options around 3% down, FHA around 3.5% down, and conventional choices at 5% or more. The best path depends on eligibility, credit, income documentation, the property, and how much cash you want left after closing.
- VA and USDA can allow $0 down for eligible buyers.
- Conventional first-time options may allow about 3% down.
- FHA commonly allows about 3.5% down.
- More down is not always better if it drains your reserves.
Most buyers do not need 20% down. The real question is which low-down-payment path fits your credit, income, property, and timeline. Here is a simple comparison of the options Carolina buyers ask about most.
Wondering how much cash you actually need? Start here. For first-time buyers, see the first-time buyer overview.
$0 down (when you qualify)
VA loans can allow $0 down for eligible veterans, active-duty service members, and qualifying spouses. There is typically no monthly mortgage insurance on a VA loan, which is a big part of why the program exists.
USDA loans can also allow $0 down for eligible buyers purchasing in USDA-designated areas, subject to income limits and property location rules. Parts of the Carolinas qualify. A downtown core often will not.
Neither program is automatic. Eligibility and underwriting still apply.
About 3% down (conventional)
Some conventional programs allow qualifying buyers, often first-time buyers, to put as little as about 3% down. Mortgage insurance is usually required until you reach a certain equity position. Guidelines and pricing vary by investor and your full file.
About 3.5% down (FHA)
FHA loans commonly allow about 3.5% down when minimum credit and other guidelines are met. FHA is often a strong path if you are still building credit or savings. Mortgage insurance works differently than on many conventional loans, so we will walk through the trade-offs in plain English before you choose.
About 5% down and up
Putting 5% or more down on a conventional loan can open more flexibility for some buyers, depending on credit, reserves, and the property. More down payment is not always "better." Sometimes keeping cash for closing costs and a cushion after move-in is the smarter plan.
The Four Low-Down Options Side by Side
Here is how the main low-down paths compare on the things that actually change your monthly payment and your cash to close. Program rules can change, so treat this as a map, not a quote.
- 0% down, VA: for eligible veterans, service members, and some surviving spouses. No monthly mortgage insurance. A one-time VA funding fee applies (2.15% of the loan for first use with less than 5% down), and veterans receiving VA disability compensation are exempt.
- 0% down, USDA: for homes in eligible rural and suburban areas with household income at or below the program limit. USDA charges a 1% upfront guarantee fee and a 0.35% annual fee, both usually lower than FHA's mortgage insurance.
- 3% down, conventional: available on certain first-time buyer and income-based options from Fannie Mae and Freddie Mac. Private mortgage insurance (PMI) applies below 20% down, priced mostly on credit score and down payment.
- 3.5% down, FHA: with a 580 or higher credit score. FHA charges an upfront mortgage insurance premium of 1.75% of the loan, which is usually financed, plus an annual premium that for most buyers putting less than 5% down on a 30-year loan is 0.55% of the loan.
- 5% down, conventional: the standard conventional path when you do not use a 3% option. PMI still applies, but typically costs less than at 3% down.
How Mortgage Insurance Differs (And Why It Matters Most)
The down payment gets the attention, but mortgage insurance is where these programs really separate over time.
Conventional PMI can come off. You can ask to cancel it once your loan balance reaches 80% of the home's original value, and federal law requires it to end automatically at 78% if you are current on payments. Many buyers also remove it sooner after their home gains value, with a new appraisal and lender approval.
FHA mortgage insurance is stickier. With less than 10% down, the annual premium generally stays for the life of the loan. With 10% or more down, it lasts 11 years. The usual way out is refinancing into a conventional loan once you have enough equity.
VA has no monthly mortgage insurance at all, only the funding fee, which is why VA is so hard to beat for eligible buyers. USDA's annual fee lasts for the life of the loan but is small.
A Worked Example (Hypothetical Numbers)
These numbers are made up to show the mechanics. Say you are buying a $325,000 home as your primary residence:
- VA or USDA (if eligible): $0 down
- Conventional at 3%: $9,750 down
- FHA at 3.5%: $11,375 down
- Conventional at 5%: $16,250 down
The down payment difference between 3% and 5% here is $6,500. That is real money, but it is not the whole story. The better question is which option gives you the lowest total cost over the years you expect to keep the loan, including mortgage insurance and whether it can be removed. I run that comparison with your actual credit score, because a strong score often makes conventional PMI cheaper than FHA, while a lower score can flip the answer.
Which Buyers Usually Land Where
- Strong credit, first home: conventional at 3% or 5% often wins because PMI is priced well and can be removed.
- Credit in the 580 to 660 range: FHA is often the better fit because its pricing is less sensitive to score.
- Eligible veterans: VA almost always comes first.
- Buying outside the metro core: check USDA eligibility by address. Many towns around Charlotte, Raleigh, Charleston, and Greenville have eligible areas.
State assistance can stack with several of these. See my North Carolina and South Carolina assistance pages, and for the full cash picture, how much down payment NC and SC buyers really need.
Common Mistakes With Low-Down Loans
- Choosing by down payment alone without comparing mortgage insurance
- Assuming FHA is always easier or cheaper
- Skipping the VA or USDA eligibility check
- Forgetting that closing costs are separate from the down payment
- Draining savings to reach 5% when 3% plus a cushion is safer
How to choose
Do not pick a percentage because a friend used it. Pick the program that matches:
- Your eligibility (especially VA or USDA)
- Your credit and income documentation
- The property you want
- How much cash you want left after closing
Next step
On a free Mortgage Strategy Session, we will line up the two or three options that actually fit your situation and show you the cash needed for each. No pressure, and no credit pull required just to start the conversation.
Compare the VA, USDA, conventional, and FHA pages, browse North Carolina, South Carolina, and Georgia, or start with the first-time buyer overview.
Frequently asked questions
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What is the lowest down payment available?
Eligible VA and USDA buyers may put $0 down. Other buyers often look at conventional options near 3% or FHA near 3.5%, subject to full underwriting and property eligibility.
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Does a lower down payment always mean a worse loan?
Not automatically. Lower down can preserve cash for closing costs and reserves. Mortgage insurance, pricing, and long-term cost still need a side-by-side comparison for your file.
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How should I choose among 0%, 3%, 3.5%, and 5% options?
Match eligibility first (especially VA or USDA), then credit and documentation, then the property, then how much cash you want left after closing. Do not pick a percentage because a friend used it.
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Is FHA or conventional cheaper with a low down payment?
It depends mostly on your credit score. With strong credit, conventional PMI is often cheaper than FHA mortgage insurance and can be removed later. With lower scores, FHA pricing is often better. I compare both with your actual numbers.
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Can mortgage insurance be removed?
Conventional PMI can be canceled at 80% of the original value on request and ends automatically at 78%. FHA's annual premium usually lasts for the life of the loan with less than 10% down, so most buyers remove it by refinancing. VA has no monthly mortgage insurance.
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Can I combine a low-down loan with down payment assistance?
Often, yes. NC and SC state programs work with several loan types, subject to credit, income, and program rules. Assistance can cover some or all of the down payment on a 3% or 3.5% loan.
Related reading
- First-Time Buyers FHA Down Payment in Richmond Hill, GA: What First-Time Buyers Need to Know FHA loans require as little as 3.5% down in Richmond Hill, GA, and down payment assistance programs may cover that cost. Here is what first-time buyers need to know before applying.
- Loan Programs FHA Loan Limits in South Carolina for 2026, by County HUD set the 2026 FHA loan limit at $541,287 for most South Carolina counties, with higher limits in the Charleston and Hilton Head MSAs. See every county's figures and learn what the limit actually caps.
- Loan Programs Conventional Loan Down Payment Requirements in North Carolina Conventional loans in North Carolina allow down payments starting at 3% for eligible buyers, but the right amount depends on your savings, PMI tolerance, and cash-to-close budget. Here is what you need to know before you decide.