What is usually the minimum down payment for conventional loans that require PMI?

Conventional loans often require private mortgage insurance (PMI) when the borrower makes a down payment that is less than 20% of the home's value. This is because a smaller down payment indicates a higher risk for the lender, which is mitigated by obtaining PMI. The primary purpose of PMI is to protect the lender in case the borrower defaults on the loan.

In practice, many conventional loans allow for down payments as low as 3% to 5%, though the specifics may differ between lenders. This flexibility is important for first-time homebuyers or those who may not have saved enough for a larger down payment. The requirement for PMI highlights the increased risk associated with these lower down payments, as it gives lenders additional security while still providing opportunities for buyers to enter the housing market with minimal upfront costs.