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Guidelines & Requirements 2025

What is the conventional 97 loan program?

The Conventional 97 program permits property buyers to get a conventional mortgage loan with only 3% down.

The program is called for the 97% of the home worth that is funded by the lender after the buyer makes a 3% deposit.

The loan program can finance a single-family home or apartment system – as long as the buyer prepares to use the home as a primary residence.

Conventional 97 provides an alternative to FHA loans, which need a similar 3.5% deposit.

In this short article:

Conventional 97 loan standards
Credit history 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 conventional 97 guidelines

Aside from requiring only 3% down, Conventional 97 loans work a lot like other conventional mortgage loans.

But this loan program works only for newbie home buyers – defined as buyers who have not owned a home in the previous 3 years. For customers searching for a low deposit mortgage, it can be an excellent mortgage option.

Here are some other Conventional 97 loan certifications:

– The loan needs to be a fixed-rate mortgage
– The residential or commercial property must be a one-unit single-family home, co-op, PUD, or condominium
– A minimum of one purchaser needs to not have owned a home in the last 3 years
– The residential or commercial property should be the owner’s main house
– At least one borrower should take a property buyer education course
– The loan amount need to be at or below $806,500

These functions align well with the normal newbie homebuyer’s profile.

For example, most purchasers today are looking for a one-unit home – instead of a duplex or triplex – or a condominium that they prepare to live in as their main home. First-time buyers are also most 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 buyers.

By contrast, making a 20% down payment would require $70,000 upfront.

Check your eligibility for the traditional 97% LTV program. Start here (Aug 20th, 2025)

Conventional 97 credit requirements

Many homebuyers assume they need remarkable credit ratings to get approved 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 debtor can have a score as low as 620 and still get approved for a 3% down loan.

How is this possible? Private mortgage insurance coverage, or PMI, is one factor. When you put less than 20% down, you’ll pay these premiums which protect the loan provider in case you default.

This additional layer of protection for the lender makes it possible for the lender to provide 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 open decades of savings on interest for new house owners.

Yes, private mortgage insurance coverage would make the 3% down alternative more pricey on a regular monthly basis, at first.

But the customer’s deposit requirement is significantly lower, enabling them to buy a home much earlier – before house rates increase once again.

And remember, you can cancel PMI when the loan’s balance reaches 80% of the home’s value. Lenders call this 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 upon basic Fannie Mae rates, plus a slight rate boost.

However, this cost or rate increase is often minimal compared to the value added from earlier home purchasing.

Someone buying a $300,000 home would pay about $80 more per month by picking the 97% loan choice compared to a 5% down loan.

Yet, the purchaser reduces their total upfront home buying expenses by over $5,000.

The time it takes to conserve an extra 2% down payment could indicate greater real estate prices and tougher certifying down the road. For numerous buyers, it might show more affordable and quicker to select the 3% down mortgage right away.

Low down payment options 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 deposit loan picked an FHA loan.

FHA loans are still the very best option for a lot of buyers. The Federal Housing Administration, which insures these loans, requires 3.5% down for a lot of brand-new home purchasers, putting an FHA deposit in the neighborhood of a Standard 97’s.

But unlike standard loans, FHA loans allow credit history below 620 – and as low as 580. Plus, the FHA does not add Loan Level Price Adjustments like standard loans.

So, if your credit is borderline – just hardly great enough to receive a Conventional 97 – you might draw a better-rate loan from the FHA.

The catch is the FHA’s mortgage insurance. Unlike PMI on a traditional mortgage, FHA mortgage insurance premiums (MIP) won’t disappear unless you put 10% or more down. You’ll keep paying the yearly premiums till you pay off the loan or refinance.

The FHA also charges an in advance mortgage insurance premium. This one-time, in advance fee amounts to 1.75% of the loan amount for a lot of debtors.

Conventional 97 vs other government-backed loans

FHA isn’t the only government-backed loan program. Two other programs – USDA loans and VA loans – offer brand-new mortgage with no cash down.

Unlike FHA and standard loans, USDA and VA loans will not work for simply any debtor.

VA loans go to military members or veterans. They’re a perk for people who have served. And they’re an attractive perk. Along with putting no money down, VA borrowers will not pay yearly mortgage insurance – simply an in advance funding charge.

Zero-down USDA loans operate in rural and suburban locations and just for debtors who make less than 115% of their location’s median income. They likewise need a greater credit history – typically 640 or greater.

Conventional 97 vs other low down payment traditional 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 basic 3% down mortgage.

But some debtors may prefer:

Fannie Mae’s HomeReady: This 3% down loan is created for moderate-income debtors. If you earn less than 80% of your area’s median earnings, you might get approved for HomeReady. What’s so good about HomeReady? In addition to low deposits, this loan provides decreased PMI rates which can decrease your month-to-month payments
Freddie Mac’s Home Possible: This 3% down loan works a lot like HomeReady. It includes the ability to use sweat equity towards the deposit. This can get made complex, and you ‘d require the seller’s approval in advance. But it is possible.
Freddie Mac HomeOne: This 3% down loan looks like the basic Conventional 97 from Fannie Mae. Unlike HomeReady and Home Possible, there are no income limits to fret about.

Your loan officer can help determine the low deposit loan that works best for you.

Check your eligibility for a 3% down payment traditional mortgage. Start here (Aug 20th, 2025)

97% LTV Home Purchase FAQ

What is a Traditional 97 loan?

A Traditional 97 is a standard mortgage that needs only 3% down. It’s called for the staying 97% of the home’s worth that the mortgage will finance.

How do you qualify for Conventional 97?

Qualifying for a Conventional 97 loan needs a credit rating of a minimum of 620 in many cases. Debt-to-income ratio (DTI) need to also fall listed below 43%. There are no earnings limits. Borrowers who currently own a home or who have actually owned a home in the previous 3 years won’t qualify.

Do all loan providers offer Conventional 97?

Most loan providers use Conventional 97 loans. This product complies with Fannie Mae’s rules. Lenders that provide Fannie Mae loans will likely offer this 3% down product.

Can closing expenses be included in a conventional 97 loan?

No. As its name suggests, the Conventional 97 program can fund up to 97% of a home’s assessed worth. Rolling closing costs into the loan quantity would push the loan beyond this 97% threshold. However, many newbie property buyers certify for deposit and closing cost support grants and loans. Conventional 97 also enables present funds. This implies family members or friends could help you cover closing expenses.

Who offers Conventional 97 loans?

Most personal mortgage lenders – whether they’re online, downtown, or in your area – offer Fannie Mae conventional loans which consist of Conventional 97 loans.

Exists a minimum credit report for the 3% down payment program?

Borrowers require a credit rating 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 report. Mortgage loan providers can set their minimum credit report higher than 620. Some may require 640 or 660, for example. Be sure to consult your mortgage lending institution to find out for sure.

Can I use deposit present funds?

Yes. Fannie Mae mentions gift funds might be used for the down payment and closing expenses. Fannie does not set a minimum out-of-pocket requirement for the purchaser. You may likewise get approved for deposit help. Your mortgage officer can assist you find programs in your state.

Can I buy an apartment or townhome?

Yes. Buyers can purchase a condominium, townhouse, home, or co-op using the Conventional 97 program as long as it is only one unit.

Can I buy a manufactured home with 3% down?

No. Manufactured homes are not allowed with this program.

Can I purchase a second home or investment residential or commercial property?

No. The 97% loan program might be utilized just for the purchase of a primary residence.

I owned a home two years ago however have actually been leasing considering that. Will I certify?

Not yet. You should wait up until three years have actually passed given that you had any ownership in a residence. At that point, you are thought about a newbie home buyer and will be eligible to request a Traditional 97 loan.

Will mortgage insurance provider provide PMI for the 97% LTV mortgage?

Yes. Mortgage insurers 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?

Mortgage insurance varies widely based upon credit history, from $75 to $125 per $100,000 borrowed, per month.

Can I get a conforming jumbo loan with 3% down?

No. This program won’t let loan providers exceed adhering loan limits. At this time, high balance, also referred to as conforming jumbo loans – those over $806,500 – are not eligible.

I’m currently authorized putting 5% down, but I ‘d like to make a 3% down payment rather. Can I do that?

Yes. Even if you have actually already been through the underwriting procedure, your loan provider can re-underwrite your loan if it uses the Conventional 97 program. Keep in mind your debt-to-income ratio will increase 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 overall profile consisting of credit report identifies your DTI maximum. While there’s no hard-and-fast number, a lot of lending institutions set an optimum DTI at 43%. This means that your future principal, interest, tax, insurance, and HOA dues plus all other month-to-month debt payments (student loans, charge card minimum payments) can be no greater than about 43% of your gross earnings.

Can I use the 3% down program to re-finance?

Yes. If you have an existing Fannie Mae loan, you might have the ability to re-finance approximately 97% of the existing worth. Refinancing might allow debtors to lower their month-to-month payments or remove mortgage insurance coverage premiums.

Click on this link to find out more about the 97% LTV refinance program.

Why is the program just for newbie home buyers?

Fannie Mae’s research study discovered that the most significant barrier to homeownership for first-time property buyers was the down payment requirement. To spur more individuals to purchase their very first home, the minimum deposit was lowered.

Exist earnings limitations?

The basic 3% down program does not set limits on your earnings. However, the HomeReady 97% loan does require the debtor to be at or listed below 80% of the area’s typical earnings.

What is a HomeReady mortgage?

HomeReady is another program that needs 3% down. It has versatilities built-in, such as using earnings from non-borrowing family members to qualify.

To see if you get approved for the HomeReady program, see the total guidelines here.

What is the Home Possible Advantage program?

HomeReady is another program that needs 3% down. HomeReady loans have flexibilities integrated, such as using earnings from non-borrowing home members to qualify.

How to get a traditional 97 loan

The Conventional 97 mortgage program is available instantly from loan providers across the country. Talk with your lending institutions about the loan requirements today.