5%-Down Conventional Loans for First-Time Buyers With 740+ Credit

Buying your first home is exciting—and if you have a credit score of 740 or higher, you’re in a great position to take advantage of 5%-down conventional loans. These low-down-payment mortgages are ideal for qualified buyers who want to step into homeownership without the steep upfront costs often associated with traditional financing.

In this guide, we’ll break down everything you need to know about 5% down conventional loans for first-time buyers, including benefits, requirements, and how to get started.

What Is a 5%-Down Conventional Loan?

A 5%-down conventional loan is a type of mortgage that requires just a 5% down payment from the homebuyer. Unlike government-backed loans (such as FHA or VA loans), these are conventional loans, meaning they are not insured or guaranteed by the federal government.

For first-time buyers with excellent credit—typically 740 or higher—this option can be especially appealing, thanks to lower interest rates and reduced private mortgage insurance (PMI) costs.

Benefits for Buyers With 740+ Credit

A high credit score opens doors to more favorable loan terms. Here are the key benefits if you qualify:

• Lower Interest Rates: Lenders view you as a low-risk borrower, which translates to better rates.
  
• Reduced PMI: With 740+ credit, PMI rates are significantly lower than average.
  
• Faster Approval: Your high score can streamline the underwriting process.
  
• Lower Monthly Payments: Thanks to lower interest and PMI, your total payment can be more affordable.
  

Take the next step: Get pre-approved for a 5% down conventional loan today

Eligibility Requirements

To qualify for a 5%-down conventional loan, you’ll need to meet these standard criteria:

• Minimum Credit Score: 740+ preferred for the best rates
  
• Income Verification: Stable employment and verifiable income
  
• Debt-to-Income Ratio: Typically no more than 45%
  
• Down Payment: Minimum of 5% of the purchase price
  
• Loan Limits: Must conform to current Fannie Mae and Freddie Mac limits
  

Note: Some lenders may offer slightly different criteria. Always check with your mortgage provider for exact qualifications.

How to Apply for a 5%-Down Loan

Here’s a quick step-by-step guide to getting started:

1. Check Your Credit Score
   Confirm you’re at 740 or higher using a reliable credit reporting service.
   
2. Gather Documentation
   You’ll need pay stubs, W-2s, bank statements, and ID.
   
3. Shop for Lenders
   Compare rates and terms from multiple lenders to find the best fit.
   
4. Get Pre-Approved
   Strengthen your offer with a lender’s pre-approval letter.
   
5. Find a Home and Apply
   Once you’ve found the right property, submit your full mortgage application.
   

Ready to start house hunting? Find out how much home you can afford

Internal Links to Explore

• Understanding PMI: What It Is and How to Reduce It
  
• First-Time Homebuyer Programs by State
  
• FHA vs. Conventional Loans: Which Is Right for You?
  

FAQ: 5%-Down Conventional Loans

Read Next

• How to Boost Your Credit Before Applying for a Mortgage
  
• Top 10 Mistakes First-Time Buyers Make—and How to Avoid Them
  
• How Much Down Payment Do You Really Need?
  

Final Thoughts

For first-time buyers with excellent credit, a 5%-down conventional loan is a powerful path to homeownership. You’ll benefit from lower rates, reduced PMI, and more manageable monthly paymentsall while keeping more money in your pocket upfront.