Conventional loans are private‑sector mortgages that are not backed by the federal government. Lenders set down‑payment thresholds to protect themselves against the risk of borrower default. The larger the borrower’s equity stake at closing, the lower the lender’s exposure, which is why a higher down payment can reduce or eliminate the need for private mortgage insurance (PMI).

Typical Down‑Payment Levels

  • 3% minimum: Many lenders will accept as little as 3% of the purchase price, but a PMI premium will be required until the loan balance falls below 80% of the home’s value.
  • 5% common benchmark: A 5% down payment is often seen as a sweet spot for borrowers who want a lower upfront cost while still qualifying for most conventional loan programs. PMI still applies unless the loan-to-value ratio drops below the 80% threshold.
  • 20% to avoid PMI: Putting 20% or more down eliminates PMI altogether, which reduces monthly payments and can make the loan cheaper over its life.

Why the Requirements Exist

Lenders use the down‑payment amount as a proxy for borrower financial stability. A larger cash investment signals that the borrower has savings and is less likely to walk away if the market declines. PMI is a way for lenders to offset the higher risk when the borrower’s equity is low; the insurance protects the lender, not the borrower.

Virginia‑Specific Considerations

  • Many Virginia real‑estate transactions are closed by attorneys rather than title companies, which can affect closing‑cost timing and documentation.
  • The Virginia Housing Development Authority (VHDA) offers down‑payment assistance programs for eligible first‑time homebuyers. These programs can provide a grant or a low‑interest loan that helps cover part of the down payment, making the 3% or 5% thresholds more attainable.

This article provides general information about conventional loan down‑payment requirements in Virginia. It is not personalized financial advice, and you should consult a qualified mortgage professional for guidance specific to your situation.