What is the conventional 97 loan program?
The Conventional 97 program permits homebuyers to get a conventional mortgage loan with only 3% down.
The program is named for the 97% of the home worth that is funded by the lender after the buyer makes a 3% down payment.
The loan program can fund a single-family home or apartment system - as long as the purchaser plans to utilize the home as a main residence.
Conventional 97 offers an alternative to FHA loans, which require a comparable 3.5% down payment.
In this post:
Conventional 97 loan standards
Credit report requirements
Conventional 97 mortgage rates
Conventional 97 vs FHA and other loan types
Conventional 97 loan FAQ
How to get a Conventional 97 Loan
2025 traditional 97 guidelines
Aside from needing just 3% down, Conventional 97 loans work a lot like other conventional mortgage loans.
But this loan program works only for newbie home purchasers - specified as purchasers who have not owned a home in the previous three years. For debtors searching for a low deposit mortgage, it can be an excellent mortgage choice.
Here are some other Conventional 97 loan credentials:
- The loan must be a fixed-rate mortgage
- The residential or commercial property must be a one-unit single-family home, co-op, PUD, or condominium
- At least one purchaser needs to not have owned a home in the last 3 years
- The residential or commercial property needs to be the owner's primary residence
- At least one customer should take a homebuyer education course
- The loan quantity need to be at or below $806,500
These features align well with the typical newbie homebuyer's profile.
For instance, many purchasers today are trying to find a one-unit home - rather than a duplex or triplex - or a condominium that they prepare to live in as their main home. First-time purchasers are also likely to be looking for something with a lower purchase rate.
Today's typical home price is around $350,000 according to the National Association of Realtors, putting a Traditional 97's average deposit at $10,500 - within reach for numerous home consumers.
By comparison, making a 20% deposit would require $70,000 upfront.
Check your eligibility for the standard 97% LTV program. Start here (Aug 20th, 2025)
Conventional 97 credit requirements
Many homebuyers presume they require impressive credit rating to certify for a loan that requires just 3% down. That's not the case.
According to Fannie Mae's Loan Level Price Adjustment (LLPA) chart, a borrower can have a score as low as 620 and still receive a 3% down loan.
How is this possible? Private mortgage insurance, or PMI, is one factor. When you put less than 20% down, you'll pay these premiums which secure the loan provider in case you default.
This additional layer of protection for the lending institution enables the loan provider to offer lower rates.
Check your 97% LTV rates. Start here (Aug 20th, 2025)
Is it worth paying PMI?
PMI gets a bum rap. But paying it can unlock decades of cost savings on interest for brand-new property owners.
Yes, personal mortgage insurance would make the 3% down alternative more costly on a monthly basis, at first.
But the borrower's deposit requirement is significantly lower, permitting them to purchase a home much sooner - before home prices increase once again.
And remember, you can cancel PMI when the loan's balance reaches 80% of the home's value. Lenders call this portion your loan-to-value ratio, or LTV.
When LTV is up to 78% of the residential or commercial property's value, PMI automatically drops off.
Conventional 97 rates of interest
Mortgage rates for the 3% deposit program are based on standard Fannie Mae rates, plus a slight rate increase.
However, this cost or rate boost is often very little compared to the value included from earlier home purchasing.
Someone purchasing a $300,000 home would pay about $80 more per month by selecting the 97% loan choice compared to a 5% down loan.
Yet, the buyer lowers their overall upfront home purchasing expenses by over $5,000.
The time it takes to conserve an extra 2% down payment might suggest higher real estate costs and tougher qualifying down the roadway. For lots of purchasers, it might show more affordable and quicker to go with the 3% down mortgage right away.
Low deposit alternatives to Conventional 97 loans
Conventional 97 loans vs FHA loans
Before Fannie Mae presented 3% deposit standard loans, more home buyers who needed a low down payment loan selected an FHA loan.
FHA loans are still the finest option for a lot of buyers. The Federal Housing Administration, which insures these loans, requires 3.5% down for many new home buyers, putting an FHA deposit in the community of a Traditional 97's.
But unlike traditional loans, FHA loans permit credit history below 620 - and as low as 580. Plus, the FHA does not add Loan Level Price Adjustments like conventional loans.
So, if your credit is borderline - just hardly sufficient to receive a Traditional 97 - you might draw a better-rate loan from the FHA.
The catch is the FHA's mortgage insurance coverage. Unlike PMI on a conventional mortgage, FHA mortgage insurance coverage premiums (MIP) won't go away unless you put 10% or more down. You'll keep paying the yearly premiums until you pay off the loan or refinance.
The FHA likewise charges an in advance mortgage insurance premium. This one-time, in advance fee amounts to 1.75% of the loan amount for most customers.
Conventional 97 vs other government-backed loans
FHA isn't the only government-backed loan program. Two other programs - USDA loans and VA loans - use brand-new mortgage with no cash down.
Unlike FHA and traditional loans, USDA and VA loans will not work for just any borrower.
VA loans go to military members or veterans. They're a perk for people who have actually served. And they're an attractive perk. Along with putting no cash down, VA borrowers will not pay yearly mortgage insurance coverage - just an in advance funding cost.
Zero-down USDA loans work in rural and suburbs and only for borrowers who earn less than 115% of their area's mean earnings. They also need a greater credit score - typically 640 or higher.
Conventional 97 vs other low down payment standard loans
Fannie Mae and Freddie Mac offer more than one low deposit loan. Up until now in this post, we have actually been discussing Fannie's standard 3% down mortgage.
But some debtors may choose:
Fannie Mae's HomeReady: This 3% down loan is developed for moderate-income debtors. If you make less than 80% of your location's average income, you may receive HomeReady. What's so good about HomeReady? In addition to low deposits, this loan provides decreased PMI rates which can decrease your regular monthly payments
Freddie Mac's Home Possible: This 3% down loan works a lot like HomeReady. It adds the ability to utilize sweat equity toward the down payment. This can get complicated, and you 'd need the seller's approval in advance. But it is possible.
Freddie Mac HomeOne: This 3% down loan looks like the standard Conventional 97 from Fannie Mae. Unlike HomeReady and Home Possible, there are no income limits to stress over.
Your loan officer can help determine the low deposit loan that works finest for you.
Check your eligibility for a 3% down payment conventional mortgage. Start here (Aug 20th, 2025)
97% LTV Home Purchase FAQ
What is a Traditional 97 loan?
A Traditional 97 is a traditional mortgage that needs just 3% down. It's called for the staying 97% of the home's value that the mortgage will fund.
How do you receive Conventional 97?
Getting approved for a Traditional 97 loan needs a credit report of a minimum of 620 in many cases. Debt-to-income ratio (DTI) ought to also fall below 43%. There are no earnings limitations. Borrowers who currently own a home or who have owned a home in the past three years will not qualify.
Do all loan providers offer Conventional 97?
Most lenders provide Conventional 97 loans. This product conforms to Fannie Mae's guidelines. Lenders that provide Fannie Mae loans will likely provide this 3% down item.
Can closing costs be included in a conventional 97 loan?
No. As its name indicates, the Conventional 97 program can finance approximately 97% of a home's appraised worth. Rolling closing expenses into the loan quantity would press the loan beyond this 97% limit. However, lots of first-time homebuyers get approved for deposit and closing expense help grants and loans. Conventional 97 also enables gift funds. This indicates member of the family or buddies might assist you cover closing costs.
Who provides Conventional 97 loans?
Most personal mortgage lending institutions - whether they're online, downtown, or in your community - deal Fannie Mae standard loans that include Conventional 97 loans.
Is there a minimum credit rating for the 3% down payment program?
Borrowers require a credit history of a minimum of 620 to get any Fannie Mae-backed loan. The exception would be those with non-traditional credit who have no credit history. Mortgage lending institutions can set their minimum credit scores higher than 620. Some might require 640 or 660, for example. Be sure to consult your mortgage lender to discover for sure.
Can I utilize down payment gift funds?
Yes. Fannie Mae states gift funds might be utilized for the down payment and closing costs. Fannie does not set a minimum out-of-pocket requirement for the buyer. You might also qualify for down payment support. Your mortgage officer can assist you discover programs in your state.
Can I purchase a condo or townhome?
Yes. Buyers can acquire a condo, townhome, house, or co-op utilizing the Conventional 97 program as long as it is only one unit.
Can I buy a made home with 3% down?
No. Manufactured homes are not permitted with this program.
Can I purchase a 2nd home or investment residential or commercial property?
No. The 97% loan program might be utilized only for the purchase of a main residence.
I owned a home 2 years ago however have been leasing since. Will I certify?
Not yet. You should wait until 3 years have actually passed because you had any ownership in a residence. At that point, you are considered a novice home purchaser and will be eligible to use for a Conventional 97 loan.
Will mortgage insurance companies offer PMI for the 97% LTV mortgage?
Yes. Mortgage insurance providers are on board with the program. You do not have to discover a PMI company considering that your lender will buy mortgage insurance for you.
How much is mortgage insurance coverage?
Mortgage insurance differs commonly based on credit history, from $75 to $125 per $100,000 borrowed, monthly.
Can I get a conforming jumbo loan with 3% down?
No. This program won't let lenders exceed adhering loan limitations. At this time, high balance, likewise referred to as conforming jumbo loans - those over $806,500 - are not eligible.
I'm currently authorized putting 5% down, however I 'd like to make a 3% down payment instead. Can I do that?
Yes. Even if you have actually already been through the underwriting process, your lender can re-underwrite your loan if it offers the Conventional 97 program. Keep in mind your debt-to-income ratio will rise with the higher loan quantity and potentially greater rate.
Check your mortgage rates. Start here (Aug 20th, 2025)
What's the optimum debt-to-income (DTI) ratio for the 97% LTV program?
Your total profile including credit rating determines your DTI optimum. While there's no unalterable number, the majority of loan providers set a maximum DTI at 43%. This indicates that your future principal, interest, tax, insurance coverage, and HOA charges plus all other month-to-month debt payments (trainee loans, credit card minimum payments) can be no greater than about 43% of your gross earnings.
Can I use the 3% down program to refinance?
Yes. If you have an existing Fannie Mae loan, you may be able to refinance approximately 97% of the existing value. Refinancing may enable customers to lower their regular monthly payments or remove mortgage insurance coverage premiums.
Click on this link for more details about the 97% LTV refinance program.
Why is the program only for first-time home purchasers?
Fannie Mae's research study discovered that the most significant barrier to homeownership for newbie property buyers was the down payment requirement. To stimulate more individuals to purchase their first home, the minimum deposit was decreased.
Are there earnings limits?
The standard 3% down program does not set limitations on your earnings. However, the HomeReady 97% loan does require the customer to be at or below 80% of the location's average income.
What is a HomeReady mortgage?
HomeReady is another program that needs 3% down. It has flexibilities built-in, such as using earnings from non-borrowing household members to certify.
To see if you receive the HomeReady program, see the complete guidelines here.
What is the Home Possible Advantage program?
HomeReady is another program that needs 3% down. HomeReady loans have flexibilities integrated, such as utilizing earnings from non-borrowing family members to qualify.
How to get a standard 97 loan
The Conventional 97 mortgage program is readily available right away from lenders throughout the country. Talk with your lending institutions about the loan requirements today.
