Can I Buy a House With 5% Down? (2026 Guide)
Yes. Qualified buyers may be able to purchase a primary residence with 5% down using a conventional mortgage. You do not automatically need a 20% down payment, and low-down-payment financing is not limited to first-time homebuyers.
But having the down payment is only part of the picture. You also need to consider closing costs, the complete monthly payment, mortgage insurance, and the savings you will have left after closing.
I’m Paul Mattos with Refine Mortgage, serving homebuyers throughout North Carolina and South Carolina. When buyers ask whether they should put 5% down, my goal is to help them compare the numbers—not assume the smallest or largest down payment is automatically the right choice.
How Does Buying With 5% Down Work?
Your down payment covers part of the purchase price, and your mortgage finances the remaining portion, subject to the lender’s appraisal and loan requirements.
For example, 5% of a $400,000 purchase price is $20,000. That is a down-payment calculation only. It does not include closing costs, prepaid expenses, or additional funds that might be needed for the transaction.
With conventional financing, the lender reviews more than your available cash, including:
Credit history and scores.
Qualifying income and employment.
Existing debts and the proposed housing payment.
The source of your down-payment funds.
Property type, intended occupancy, and appraisal.
Any required savings remaining after closing.
A sufficient down payment does not guarantee approval. My guide to conventional home loans in NC and SC explains how these requirements fit together.
Which Loan Programs Allow a Low Down Payment?
Conventional Loans
Some conventional programs permit eligible buyers to purchase with as little as 3% down. Those options may have additional requirements involving first-time-buyer status, income, homebuyer education, or the property.
A 5% down payment may provide another option for qualified first-time or repeat buyers purchasing a primary residence. Private mortgage insurance generally applies when the down payment is below 20%.
Do not assume the same down payment works for a vacation home, rental property, jumbo mortgage, or every type of condominium. Those transactions need a separate review.
FHA Loans
FHA financing may allow eligible buyers to purchase a primary residence with as little as 3.5% down. Some borrowers need more based on their credit profile and lender requirements.
FHA loans have their own mortgage insurance structure. Putting 5% down on an FHA loan does not make its insurance work like conventional PMI.
VA Loans
Eligible veterans, service members, and certain surviving spouses may qualify for a VA purchase loan without a down payment, subject to entitlement, lender, and property requirements.
VA loans do not require monthly mortgage insurance. A funding fee may apply unless the borrower qualifies for an exemption, and closing costs still need to be addressed.
USDA Loans
USDA guaranteed loans may provide no-down-payment financing for eligible buyers purchasing a qualifying primary residence.
The property must be in an eligible location, and household income and other program requirements apply. Program fees and closing costs also need to be included in the comparison.
My home loan programs overview explains the differences among these options.
Is 5% Down the Same as Your Total Cash to Close?
No. Your down payment and your total cash needed to complete the purchase are different numbers.
In addition to the down payment, your transaction may involve:
Lender fees and other loan costs.
Appraisal, title, settlement, and recording charges.
Prepaid homeowners insurance and interest.
Initial deposits into an escrow account for taxes and insurance.
Inspections and other expenses paid before closing.
Your final cash to close also reflects applicable deposits already paid, eligible credits, and other transaction adjustments. Avoid counting an expense twice if it has already been paid and properly credited.
Keeping money available for moving, repairs, and emergencies is a separate part of the plan.
Can Seller Credits Help?
A negotiated seller credit may cover eligible closing costs and prepaid expenses within the loan program’s limits. On a conventional purchase, ordinary seller credits cannot satisfy your required down payment.
Seller credits are also not guaranteed. The seller must agree, and the loan must permit the proposed amount and use.
Will You Have PMI With 5% Down?
On a conventional mortgage, you will generally need private mortgage insurance when you put 5% down.
PMI protects the lender if the borrower defaults. Its cost can vary with your credit profile, loan-to-value ratio, loan amount, and insurance structure.
That is why I prefer an actual mortgage-insurance estimate over a generic calculator assumption.
When Can PMI Be Removed?
For many conventional mortgages with borrower-paid PMI:
You may request cancellation when the principal balance reaches 80% of the home’s original value, subject to applicable requirements.
Automatic termination generally occurs when the balance is scheduled to reach 78% of the original value, provided payments are current.
Removal based on an increase in the home’s value follows separate investor and servicer requirements.
Reaching an estimated equity level on a real estate website does not automatically cancel PMI. Ask your servicer about its process, documentation, and any valuation requirements.
My guide to PMI and how to remove it covers this topic in more detail.
Is It Better to Put Down 5% or More?
The answer depends on what changes in your actual loan comparison.
A Smaller Down Payment Preserves More Cash
Keeping additional savings may help you manage moving expenses, repairs, income interruptions, or other financial priorities.
However, borrowing more generally means a higher principal-and-interest payment when the interest rate and repayment term are otherwise the same. Mortgage insurance can add to the difference.
A Larger Down Payment Reduces the Amount Borrowed
Putting more down may reduce your payment, change mortgage-insurance costs, or affect loan pricing.
But a larger down payment does not guarantee a better interest rate, and using nearly all your savings can leave you with less flexibility after closing.
Compare the Complete Housing Budget
For a home in Charlotte, Fort Mill, Rock Hill, or elsewhere in the Carolinas, look beyond principal and interest.
Include property taxes, homeowners insurance, applicable mortgage insurance, HOA dues, and any required flood insurance. Also budget separately for maintenance and utilities.
The goal is a payment you can live with and a cash reserve you are comfortable keeping.
Can You Use Gift Funds for the Down Payment?
Eligible gift funds may cover some or all of the down payment on certain loans, depending on the program, property, donor, and any required contribution from your own funds.
The lender generally needs a gift letter confirming that repayment is not expected, along with acceptable documentation of the funds and their transfer.
Talk with your loan team before moving the money. A documented transfer is easier to review than an unexplained deposit.
Read more about using gift funds for a down payment.
What About Down Payment Assistance?
Assistance may be available to qualified buyers, but it should be compared with your other financing options.
Depending on the program, assistance can involve income limits, education requirements, repayment obligations, or conditions tied to selling or refinancing the home.
Compare the first mortgage, any assistance loan, the monthly payment, and the total cash needed. A smaller upfront contribution does not automatically mean a lower overall cost.
My first-time homebuyer programs guide explains how to approach that comparison.
Mistakes to Avoid When Planning Your Down Payment
Using Every Available Dollar
Separate the money needed to complete the purchase from the money you want available afterward. Required lender reserves and your personal emergency savings are related considerations, but they are not necessarily the same amount.
Comparing Only the Interest Rate
Review mortgage insurance, lender fees, credits, and the complete payment alongside the rate. A lower advertised rate may involve additional upfront costs.
Assuming More Down Guarantees Approval
A larger down payment does not replace the need for acceptable income, credit, debt levels, and property eligibility.
Depending on Future Appreciation or Refinancing
Make sure the loan is manageable under its current terms. Home values, future rates, and refinancing eligibility can change.
How I Help You Compare Down-Payment Options
We start with your buying timeline, available funds, preferred payment, and the amount you want to keep in savings.
Then I review your application and supporting documents to identify financing options that may fit your circumstances.
When useful, I prepare a side-by-side Total Cost Analysis showing:
Estimated cash needed at closing.
Principal and interest, mortgage insurance, and estimated property expenses.
Loan costs and applicable credits.
Estimated remaining loan balances and costs over a selected period.
The savings you would retain under each option.
The comparison uses stated assumptions and estimates so you can understand the trade-offs before choosing a structure.
Already have a Loan Estimate or mortgage quote? You can request a mortgage offer review to discuss the costs and available alternatives.
Let’s Find a Down Payment That Fits Your Plan
If you are buying in North Carolina or South Carolina, I can help you compare whether 5% down, a smaller eligible down payment, or a larger contribution makes sense for your goals.
Bring your questions, approximate savings, buying timeline, and preferred monthly budget.
Schedule a mortgage consultation or start your mortgage application.
Paul Mattos
Mortgage Broker | Refine Mortgage
NMLS# 2339069 | Licensed in NC and SC
Call or text: 980-221-4959
Email: paulm@refinemortgage.net
Refine Mortgage Inc. | NMLS# 2417960 | Equal Housing Lender. This article provides general educational information and is not a commitment to lend, a rate quote, or an offer of specific credit terms. Eligibility, down payments, mortgage insurance, fees, and program availability vary by lender, loan program, borrower, and property. All loans are subject to applicable credit, appraisal, title, and underwriting requirements. Not all applicants will qualify. Refine Mortgage is not affiliated with HUD, the Department of Veterans Affairs, the USDA, or any other government agency.
