Fortunately, it’s gotten easier again in recent years. Conventional mortgages are now available with down payments as low as 3% thanks to programs from Fannie Mae and Freddie Mac. You’ll probably have to pay private mortgage insurance (PMI) until your loan-to-value ratio drops below 80%, but this is a good option for borrowers who qualify.
To qualify for a loan with 3% down, you’ll need a credit score of at least 660, plus six months’ worth of mortgage payments in reserve. In addition, your total monthly debt payments — including your new mortgage payment — cannot be greater than 36% of your gross income. With a higher credit score, the reserve requirements can be relaxed and the debt-to-income maximum could be as high as 45%.