How We Bought with 5% Down and Still Won a Multiple-Offer Battle

When my partner and I decided to buy our first home, saving 20% felt impossible. We live in a high-cost market where starter homes hover near $720,000, and we didn’t want to spend another three years renting while prices climbed. Instead, we built a 5% down conforming strategy that won a multiple-offer situation and sailed through underwriting. Here’s how we did it.

Step 1: Budget backwards from the payment

Rather than picking a list price and hoping the payment worked, we opened a spreadsheet and reverse-engineered affordability. We entered the loan amount (95% of projected prices), current conforming rates, and estimated PMI premiums. We added taxes, insurance, HOA dues, and a buffer for maintenance. The target payment number told us the true maximum purchase price we could tolerate. That discipline prevented us from chasing homes that would have made every month feel tight.

Step 2: Build a PMI strategy

PMI was inevitable with 5% down, so we treated it like a tool, not a penalty. Our loan officer quoted both borrower-paid monthly PMI and single-premium options paid through lender credits. We chose monthly PMI because we plan to reach 80% LTV in five to six years and wanted the flexibility to drop it. Then we documented a path to removal: extra principal payments, projected appreciation, and a reminder to request a new appraisal when the time comes.

Step 3: Strengthen the file with reserves and explanations

Underwriters love reserves—assets left over after closing. We documented six months of reserves by showing 401(k) statements, brokerage accounts, and a small emergency fund. Even though retirement accounts require liquidation rules, listing them proved we weren’t scraping the barrel. We also wrote letters explaining one employment gap and clarifying a student loan deferment, attaching supporting documents. Clean narratives reduce follow-up questions later.

Step 4: Showcase appraisal confidence

Sellers worry that low-down-payment buyers will trigger appraisal issues. To ease concerns, we provided a letter from our loan officer confirming we were fully underwritten except for the property and we shared comparable sales our agent pulled. We also offered to increase our down payment by 1% if the appraisal came in slightly low, which demonstrated commitment without overpromising.

Step 5: Coordinate verification timelines

Because we put less than 20% down, the lender scrutinized our assets carefully. We kept funds in the same accounts for 60 days, avoided large cash deposits, and saved every document connected to earnest money transfers. When the processor requested updated statements, we added summary pages, activity pages, and explanation letters in one PDF so nothing was missing.

Step 6: Communicate like professionals

We treated the transaction like a job. Twice a week we emailed our agent and loan officer with updates: inspections completed, pay stubs uploaded, appraisal scheduled. When the underwriter asked for a letter about a $1,200 Venmo transfer, we responded the same day with a detailed explanation and supporting screenshots. That responsiveness kept the file at the top of the stack.

Step 7: Celebrate wins but stay disciplined post-closing

After closing, we set up automatic extra principal payments of $150 per month. We track equity through a shared spreadsheet that estimates when we’ll hit 80% LTV. We also monitor interest rates in case a future rate-and-term refinance can eliminate PMI faster. Buying with 5% down was never about settling for less; it was about using conforming guidelines intelligently.

Tips for other 5% down buyers

• Document everything early. Pay stubs, W-2s, bank statements, and letters of explanation should be ready before you even tour homes.
• Work with an agent who understands financing. Our agent highlighted our full underwriting approval in every offer, which helped sellers take us seriously.
• Know your PMI options. Split premium, single premium, and lender-paid PMI each carry pros and cons.
• Protect your credit. Pause new accounts, keep utilization low, and monitor for errors while under contract.
• Lean on education. The more you understand conforming rules, the more confidently you can answer seller and lender questions.

We may not have shown up with 20% down, but we arrived with preparation, transparency, and a plan. That combination can outshine a larger down payment when everyone at the table knows you’re ready to close.