What is the standard 97 loan program?
The Conventional 97 program allows property buyers to get a traditional mortgage loan with only 3% down.
The program is called for the 97% of the home worth that is financed by the lender after the purchaser makes a 3% deposit.
The loan program can finance a single-family home or condominium system - as long as the buyer prepares to use the home as a primary home.
Conventional 97 offers an alternative to FHA loans, which need a comparable 3.5% deposit.
In this article:
Conventional 97 loan guidelines
Credit score 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 requiring 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 borrowers trying to find a low down payment mortgage, it can be a good mortgage choice.
Here are some other Conventional 97 loan certifications:
- The loan needs to be a fixed-rate mortgage
- The residential or commercial property should be a one-unit single-family home, co-op, PUD, or condo
- A minimum of one buyer 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
- A minimum of one borrower needs to take a property buyer education course
- The loan amount must be at or listed below $806,500
These functions align well with the typical first-time property buyer's profile.
For example, most purchasers today are searching for a one-unit home - as opposed to a duplex or triplex - or an apartment that they prepare to reside in as their primary house. First-time buyers are likewise most likely to be looking for something with a lower purchase cost.
Today's average home cost is around $350,000 according to the National Association of Realtors, putting a Traditional 97's average down payment at $10,500 - within reach for numerous home consumers.
By contrast, making a 20% deposit would need $70,000 upfront.
Check your eligibility for the traditional 97% LTV program. Start here (Aug 20th, 2025)
Conventional 97 credit requirements
Many property buyers presume they need impeccable credit scores to receive a loan that needs 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 lending institution in case you default.
This extra layer of defense for the loan provider enables the lender 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 years of cost savings on interest for new homeowners.
Yes, private mortgage insurance would make the 3% down option more pricey on a monthly basis, at first.
But the customer's down payment requirement is considerably lower, permitting them to buy a home rather - before home costs increase again.
And keep in mind, 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 instantly drops off.
Conventional 97 rate of interest
Mortgage rates for the 3% deposit program are based on standard Fannie Mae rates, plus a small rate boost.
However, this fee or rate boost is frequently very little compared to the value added from earlier home buying.
Someone buying a $300,000 home would pay about $80 more each month by choosing the 97% loan option compared to a 5% down loan.
Yet, the buyer lowers their overall upfront home buying costs by over $5,000.
The time it requires to save an additional 2% down payment could mean greater realty prices and tougher qualifying down the roadway. For many buyers, it could show much less expensive and quicker to select the 3% down mortgage immediately.
Low deposit options to Conventional 97 loans
Conventional 97 loans vs FHA loans
Before Fannie Mae introduced 3% down payment conventional loans, more home buyers who required a low down payment loan selected an FHA loan.
FHA loans are still the very best choice for a great deal of purchasers. The Federal Housing Administration, which insures these loans, requires 3.5% down for the majority of new home purchasers, putting an FHA deposit in the community of a Standard 97's.
But unlike traditional loans, FHA loans allow credit rating listed below 620 - and as low as 580. Plus, the FHA doesn't add Loan Level Price Adjustments like conventional loans.
So, if your credit is borderline - simply hardly sufficient to certify for a Standard 97 - you may draw a better-rate loan from the FHA.
The catch is the FHA's mortgage insurance. 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 annual premiums until you settle the loan or re-finance.
The FHA likewise charges an upfront mortgage insurance premium. This one-time, upfront cost amounts to 1.75% of the loan quantity for many 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 - provide new mortgage with no cash down.
Unlike FHA and standard loans, USDA and VA loans will not work for simply any borrower.
VA loans go to military members or veterans. They're a perk for people who have served. And they're an attractive perk. In addition to putting no cash down, VA debtors won't pay yearly mortgage insurance coverage - just an in advance financing cost.
Zero-down USDA loans operate in rural and suburbs and just for borrowers who make less than 115% of their area's typical earnings. They also require a greater credit rating - usually 640 or greater.
Conventional 97 vs other low deposit standard loans
Fannie Mae and Freddie Mac offer more than one low down payment loan. Up until now in this post, we've been talking about Fannie's basic 3% down mortgage.
But some debtors may prefer:
Fannie Mae's HomeReady: This 3% down loan is designed for moderate-income borrowers. If you make less than 80% of your area's typical earnings, you may receive HomeReady. What's so great about HomeReady? In addition to low down payments, this loan offers reduced PMI rates which can lower your monthly payments
Freddie Mac's Home Possible: This 3% down loan works a lot like HomeReady. It adds the ability to utilize 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 earnings restricts to stress over.
Your loan officer can assist determine the low down payment loan that works finest for you.
Check your eligibility for a 3% deposit conventional 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 named for the staying 97% of the home's worth that the mortgage will finance.
How do you receive Conventional 97?
Getting approved for a Traditional 97 loan needs a credit rating of a minimum of 620 in many cases. Debt-to-income ratio (DTI) must likewise fall below 43%. There are no income limitations. Borrowers who already own a home or who have actually owned a home in the past 3 years will not qualify.
Do all lenders provide Conventional 97?
Most loan providers provide Conventional 97 loans. This product adheres to Fannie Mae's guidelines. Lenders that offer Fannie Mae loans will likely use this 3% down product.
Can closing costs be consisted of in a traditional 97 loan?
No. As its name shows, the Conventional 97 program can fund as much as 97% of a home's appraised worth. Rolling closing expenses into the loan amount would push the loan beyond this 97% threshold. However, lots of first-time homebuyers receive deposit and closing expense assistance grants and loans. Conventional 97 also enables present funds. This implies family members or friends could assist you cover closing costs.
Who uses Conventional 97 loans?
Most personal mortgage lending institutions - whether they're online, downtown, or in your area - deal Fannie Mae standard loans that include Conventional 97 loans.
Is there a minimum credit report for the 3% deposit program?
Borrowers require a credit report of at least 620 to get any Fannie Mae-backed loan. The exception would be those with non-traditional credit who have no credit report. Mortgage lending institutions can set their minimum credit rating greater than 620. Some might require 640 or 660, for example. Make sure to talk to your mortgage loan provider to find out for sure.
Can I utilize deposit gift funds?
Yes. Fannie Mae states present funds might be utilized for the deposit and closing expenses. Fannie does not set a minimum out-of-pocket requirement for the buyer. You might likewise get approved for deposit help. Your mortgage officer can assist you find programs in your state.
Can I buy a condo or townhome?
Yes. Buyers can acquire an apartment, townhouse, home, or co-op using the Conventional 97 program as long as it is only one system.
Can I purchase a manufactured home with 3% down?
No. Manufactured homes are not permitted with this program.
Can I buy a second home or investment residential or commercial property?
No. The 97% loan program might be utilized only for the purchase of a main house.
I owned a home 2 years ago however have actually been renting considering that. Will I qualify?
Not yet. You need to wait till three years have passed given that you had any ownership in a home. At that point, you are thought about a novice home purchaser and will be eligible to request a Standard 97 loan.
Will mortgage insurer supply PMI for the 97% LTV mortgage?
Yes. Mortgage insurance companies are on board with the program. You do not need to find a PMI business considering that your loan provider will purchase mortgage insurance for you.
How much is mortgage insurance coverage?
Mortgage insurance coverage varies widely based on credit rating, from $75 to $125 per $100,000 borrowed, each month.
Can I get an adhering jumbo loan with 3% down?
No. This program won't let loan providers surpass adhering loan limits. At this time, high balance, likewise known as adhering jumbo loans - those over $806,500 - are not qualified.
I'm currently approved putting 5% down, but I 'd like to make a 3% deposit instead. Can I do that?
Yes. Even if you've already been through the underwriting process, your loan provider can re-underwrite your loan if it uses the Conventional 97 program. Keep in mind your debt-to-income ratio will rise with the greater 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 loan providers set a maximum DTI at 43%. This means that your future principal, interest, tax, insurance, and HOA dues plus all other regular monthly debt payments (student 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 as much as 97% of the current worth. Refinancing may enable customers to decrease their month-to-month payments or get rid of mortgage insurance coverage premiums.
Click here for more information about the 97% LTV refinance program.
Why is the program just for novice home buyers?
Fannie Mae's research study discovered that the biggest barrier to homeownership for newbie property buyers was the down payment requirement. To spur more individuals to buy their first home, the minimum down payment was lowered.
Exist income limits?
The standard 3% down program does not set limits on your earnings. However, the HomeReady 97% loan does need the debtor to be at or listed below 80% of the location's median earnings.
What is a HomeReady mortgage?
HomeReady is another program that needs 3% down. It has versatilities integrated, such as utilizing income from non-borrowing home members to qualify.
To see if you get approved for the HomeReady program, see the total standards here.
What is the Home Possible Advantage program?
HomeReady is another program that needs 3% down. HomeReady loans have versatilities integrated, such as utilizing income from non-borrowing household members to qualify.
How to get a traditional 97 loan
The Conventional 97 mortgage program is available right away from lending institutions throughout the nation. Talk with your lending institutions about the loan requirements today.
